Month: January 2021

The wisdom of Conor Sen

But this is probably a damned-if-you-do, damned-if-you-don’t situation. It’s easy to imagine a scenario where RobinHood lets things play out on their own, and for all we know stocks like GameStop might have doubled or tripled from here. But inevitably, whenever this trend ended, there would be stories of working parents who bought call options because they saw everyone else doing it and lost everything, or people thrown out of work as the bursting bubble had broader economic consequences. Why,  members of Congress will ask, were inexperienced retail investors allowed to speculate in complex derivative contracts at all? So while these preemptive decisions may result in negative consequences for RobinHood and others, the bursting of a bigger bubble would be worse.

RobinHood did the right thing here, but they shouldn’t expect any thank you’s.

Here is more at Bloomberg.  (And very good Matt Levine commentary.)  The simple “the market put in place this restriction, this is right, platforms and exchanges reserve the right to restrict value-destroying trading, as indeed they always have” approach is very much underrated these days.

Pascal Soriot on First Doses First

Pascal Soriot, CEO of AstraZeneca, in an interview:

I think the UK one-dose strategy is absolutely the right way to go, at least for our vaccine. I cannot comment about the Pfizer vaccine, whose studies are for a three-week interval….First of all, we believe that the efficacy of one dose is sufficient: 100 percent protection against severe disease and hospitalisation, and 71-73 percent of efficacy overall.

The second dose is needed for long term protection. But you get a better efficiency if you get the 2nd dose later than earlier. We are going to do a study in the US and globally to use two-month dose interval to confirm that this is indeed the case, there are many reasons to believe it is the case with our vaccine. We have a different technology. First of all, when you look at level of antibody production, this is higher if you give the second dose three months or two months later than one month later. Also, if you look at Ebola, its vaccine, which is also using the Adenoviral vector like the Covid one, the second dose needs to be given eight weeks later. Finally, the J&J vaccine with Adenoviral vector also are performing studies on a two-month interval. And J&J has the same technology as ours. Therefore, for our vaccine, there is no doubt in my mind that the way the UK is going is the best way, because right now you have a limited amount of vaccine, but also you have a limited number of doctors and nurses able to inject people. So you maximize the number of people who get one dose. You give them enough protection for two or three months, then you give them the second dose after 3 months.

By the way, the US failure to authorize the AstraZeneca vaccine in the midst of a pandemic when thousands are dying daily and a factory in Baltimore is warmed up and ready to run is a tragedy and dereliction of duty of epic proportions. The AZ vaccine should be given an EUA immediately and made available in pharmacies for anyone who wants it while continuing to prioritize Moderna and Pfizer for the elderly and essential workers.

To Every One Who Has, More Will Be Given

From an email to Fairfax County teachers:

Due to a decrease in vaccine allocation, we are temporarily reducing appointment availability over the coming weeks. Vaccine supply is fluid across the country, and we are matching currently scheduled appointments to anticipated inventory.

We are pleased to share that more than 22,000 Fairfax County Public Schools teachers and employees have already been able to schedule their first shot.  At this time we are honoring those who have current appointments. Should our vaccine supply not be sufficiently replenished, we will suspend initial appointments (first doses) for eligible individuals in 1b and prioritize those who require their second vaccine dose in the weeks to come.

It’s really quite stunning when you think about it.

Hat tip: Max.

My Conversation with Benjamin Friedman

Here is the audio, transcript, and visual. Here is part of the CWT summary:

Benjamin Friedman has been a leading macroeconomist since the 1970s, whose accomplishments include writing 150 papers, producing more than dozen books, and teaching Tyler Cowen graduate macroeconomics at Harvard in 1985. In his latest book, Religion and the Rise of CapitalismBen argues that contrary to the popular belief that Western economic ideas are a secular product of the Enlightenment, instead they are the result of hotly debated theological questions within the English-speaking Protestant world of thinkers like Adam Smith and David Hume.

Ben joined Tyler to discuss the connection between religious belief and support for markets, what drives varying cultural commitments to capitalism, why the rate of growth is key to sustaining liberal values, why Paul Volcker is underrated, how coming from Kentucky influences his thinking, why annuities don’t work better, America’s debt and fiscal sustainability, his critiques of nominal GDP targeting, why he wouldn’t change the governance of the Fed, how he maintains his motivation to keep learning, his next big project on artificial intelligence, and more.

Here is one excerpt about religion:

COWEN: If we think of the most influential advocates for capitalism in the mid–20th century, there’s Hayek, I would say Keynes at most phases of his career — maybe not all, Milton Friedman. They seem to be largely secular rather than religious. If we look at theologians — while there’s a great diversity of views, on average, they seem to be left-leaning. So why is it the religious thinkers lean towards socialism, and the economists are quite secular?

FRIEDMAN: I think there’s a part of the story that you’re missing, and that has to do with the coming together at mid–20th century in America, of religious conservatism and economic conservatism. I think the catalyst that brought them together was the existential fear of world communism. Here we are — call it 70 years later, and it’s difficult to put ourselves back in the shoes of Americans in the 1950s, but that was a real fear.

Communism, at least as advocated at that time, had a unique feature of being simultaneously the existential enemy of lots of things that we hold dear. It was the enemy of Western-style political democracy, but it was also the enemy of Western-style market capitalism, and importantly for purposes of this line of argument, it was the enemy of Western-style religion.

I think the religious conservatives and the economic conservatives realized that they had an enemy in common, and they took the threat seriously, and this led them to come together.

And about macro:

COWEN: Pandemic aside, if, on average, G is greater than R, can’t we just grow our way out of the debt? As you mentioned, now borrowing rates are negative in real terms, right? Economic growth, on average, is positive, so just keep on plowing straight ahead. Let the clock tick.

FRIEDMAN: There are two parts of the sustainability question, and you hit one of them correctly. If your economy is growing in real terms faster than the debt, then you can grow your way out of any debt. But there’s another side of it, and that’s how rapidly are you taking on new debt?

Let’s take your question seriously and say we’re going to put the pandemic aside. In the year before the pandemic — we’re talking about the government’s fiscal year 2019, so ended September 30, 2019 — none of us had talked about pandemics yet. In that year, the US government spent $4.5 trillion, and it only took in, in revenues, $3.5 trillion.

That $1 trillion deficit, even at a time of a fully employed economy and, of course, before the pandemic hit, that was nearly 5 percent of our national income — even though our economy was growing nicely, more rapidly than the rate of interest that the government was paying on the debt, we were on the other side of the equation, adding new debt so rapidly that the debt-to-income ratio was going up instead of down.

So simply pointing to the so-called R-minus-G factor, I think, is a very incomplete way to look at the question of sustainability.

Recommended, and here is Ben’s new and very interesting book Religion and the Rise of Capitalism.

The culture that is Japan

A contentious requirement for Japan-specific trials has delayed the rollout of Covid-19 vaccines in Asia’s largest advanced economy and threatened the Tokyo Olympics.

Small clinical trials that demonstrate the vaccines generate a similar level of antibodies when used in Japan are the main outstanding condition for approval of the jabs from BioNTech/Pfizer and several other companies.

Japan’s demand for proof that safety and efficacy do not differ in the country means that it will not start vaccinations until the end of February — three months after the earliest rollouts and fewer than five months before the delayed Tokyo Olympics are due to start.

Here is the full FT article.  Via the Approve AstraZeneca wisdom that is Garett Jones.

Wednesday assorted links

Preparing for a Pandemic: Accelerating Vaccine Availability

In Preparing for a Pandemic, (forthcoming AER PP), by myself and a host of worthies including Susan Athey, Eric Budish, Canice Prendergast, Scott Duke Kominers, Michael Kremer and others equally worthy, we explain the model that we have been using to estimate the value of vaccines and to advise governments. The heart of the paper is the appendix but the paper gives a good overview. Based on our model, we advised governments to go big and we had some success but everywhere we went we were faced with sticker shock. We recommended that even poor countries buy vaccines in advance and that high-income countries make large investments in vaccine capacity of $100b or more in total.

It’s now obvious that we should have spent more but the magnitudes are still astounding. The world spent on the order of $20b or so on vaccines and got a return in the trillions! It was hard to get governments to spend billions on vaccines despite massive benefit-to-cost ratios yet global spending on fiscal support was $14 trillion! Even now, there is more to be done to vaccinate the world quickly, but still we hesitate.

I went over the model for Jess Hoel’s class and we also had a spirited discussion of First Doses First and other policies to stretch the vaccine supply.

LBRY in NYTimes

Last week I wrote about Elrond, yesterday another one of the blockchain firms that I advise, LBRY, made the NYTimes. LBRY is YouTube on the blockchain and it’s not just a White Paper but a working product and potentially serious competitor to YouTube. The piece by Nathaniel Popper, however, is swarmy with a lot of bullshit innuendo like this:

Minds, a blockchain-based replacement for Facebook founded in 2015, also became an online home to some of the right-wing personalities and neo-Nazis who were booted from mainstream social networks, along with fringe groups, in other countries, that have been targeted by their governments. Minds and other similar start-ups are funded by prominent venture capital firms like Andreessen Horowitz and Union Square Ventures.

Get it? Without exactly lying, Popper associates venture capital with supporting neo-Nazis. Garbage reporting. It’s like saying last year 75% of neo-Nazis ate at McDonald’s, their favorite all-American restaurant. Or, neo-Nazis have been known to use Apple phones to arrange their rallies. Or neo-Nazis often pay for their purchases using a private, untraceable means of payment marked by strange symbols and widely used to illegally purchase drugs, guns, and prostitutes.

Surprisingly, the real story is in the sub-head, “companies inspired by cryptocurrency are creating social networks, storing online content and hosting websites without any central authority.”

And do check out LBRY, a platform from which you cannot be deplatformed.

What I’ve been reading

1. Danielle Dreilinger, The Secret History of Home Economics: How Trailblazing Women Harnessed the Power of Home and Changed the Way We Live.  A pathbreaking book that unearths and presents part of the “hidden” history of economics, in this case as practiced largely by women, and often black women at that.  Think of it as the science and craft of Beckerian household production but with a managerial emphasis.  If you like books on paths not taken, this one is for you.

2. David M. Carballo, Collision of Worlds: A Deep History of the Fall of Aztec Mexico and the Forging of New Spain.  I never tire of books on this topic, but that should tell you something about the topic, right?  This one is written by an archaeologist, and you can think of it as unearthing the different layers of Aztec culture more effectively than most competitor books.

3. Avi Loeb, Extraterrestrial: The First Sign of Intelligent Life Beyond Earth.  The Oumuamua book, by the former chair of the Harvard astronomy department.  I am not able to judge the scientific claims about comets, light refraction, travel spin, and the like, but too much of the book felt like “argument from elimination” to me.  “Well it can’t be this, and can’t be that, and thus it is likely to be…”  That works well for phenomena we understand!  But it can lead you into dangerous traps when you apply it to mysteries.  I get nervous when I read sentences like “Shmuel and I went down a logical path.”  The book is well-written and plenty clear, and can be usefully supplemented with this podcast with the author.  In any case, I find alien origin unlikely, but still see a one percent chance as more than sufficient to justify this entire line of inquiry.

4. Bryn Rosenfeld, The Autocratic Middle Class: How State Dependency Reduces the Demand for Democracy.  When is it the middle class that contributes to the resilience of autocracy, rather than its breakdown?  A very interesting book, highly relevant to China among other places.

Sad pictures

Utilization adjusted total factor productivity. Eli is tracking. And here is Eli on how to fix it with a new, progressive supply-side economics. I also like this:

We must reject the Gordon/Vollrath view that stagnation is normal, healthy, and a sign of success. It is a sign of dysfunction. The US is still a dirt poor country compared to what is possible. We have not already discovered all the useful inventions.

Why U.S. Immigration Barriers Matter for the Global Advancement of Science

From Ruchir Agarwal, Ina Ganguli, Patrick Gaule, and Geoff Smith:

This paper studies the impact of U.S. immigration barriers on global knowledge production. We present four key findings. First, among Nobel Prize winners and Fields Medalists, migrants to the U.S. play a central role in the global knowledge network— representing 20-33% of the frontier knowledge producers. Second, using novel survey data and hand-curated life-histories of International Math Olympiad (IMO) medalists, we show that migrants to the U.S. are up to six times more productive than migrants to other countries—even after accounting for talent during one’s teenage years. Third, financing costs are a key factor preventing foreign talent from migrating abroad to pursue their dream careers, particularly talent from developing countries. Fourth, certain ‘push’ incentives that reduce immigration barriers – by addressing financing constraints for top foreign talent – could increase the global scientific output of future cohorts by 42% percent. We conclude by discussing policy options for the U.S. and the global scientific community.

Via the excellent Kevin Lewis.

Tuesday assorted links

Our Virginia regulatory state is failing us

As of tomorrow, hospitals in Virginia will no longer be able to administer COVID-19 vaccines. Thousands of elderly people are having their vaccine appointments canceled. From now on, all COVID-19 vaccines will go to the local health departments and none directly to hospitals.

Virginia Hospital Center had been running clinics all day every day to give people the vaccine. Appointments there for all 1st dose vaccines have been canceled because the hospital will no longer be able to get the vaccines.

Northam’s health department has also forbidden people from crossing county lines to get the vaccine. If the county next to you has an abundance of the vaccine, you can’t get it. Only residents of that county may get their vaccine.

These new rules will result in many people either having their vaccination appointment canceled or delayed for months. Currently, 7.5 million people in Virginia, Maryland, and DC qualify to get the vaccine, if only they had access to it. The new rules limit the options citizens have for getting the shot. Everyone MUST go through their local health department to be vaccinated. That means in a county such as Loudoun, with a population of over 420,000, and two health department locations to receive the vaccine, will continue to inoculate 400 to 900 people a day. There are no other options. The Loudoun health department has said they are trying to open a third location for vaccinations (possibly at Dulles Town Center) but that could take months. If Loudoun continues at its current pace it will take well over a year for the local health department to inoculate all those who want vaccines. If Loudoun hospitals were allowed to open clinics for vaccines, many more people could be inoculated every day but the Northam administration will not permit it.

Here is the link, via Hans.  In general, Virginia is a fairly well-run state, but as of late it has not been cracking the top 40 for vaccine distribution.