Month: February 2021
3. How to get cancelled in Iceland, alternatively what not to look for in your supermarket’s PR director.
5. Vitalik on prediction markets, smart contract risk, epistemic humility, and more. Like most Vitalik, it is too good to excerpt.
6. Ezra Klein on work and child allowances (NYT). I agree with some but not all of this, in any case it is already obvious how much Ezra is in the very top tier of NYT columnists after only a few pieces. Every part of it is an actual argument, supported by evidence of some kind or another.
Do voters effectively hold elected officials accountable for policy decisions? Using data on natural disasters, government spending, and election returns, we show that voters reward the incumbent presidential party for delivering disaster relief spending, but not for investing in disaster preparedness spending. These inconsistencies distort the incentives of public officials, leading the government to underinvest in disaster preparedness, thereby causing substantial public welfare losses. We estimate that $1 spent on preparedness is worth about $15 in terms of the future damage it mitigates. By estimating both the determinants of policy decisions and the consequences of those policies, we provide more complete evidence about citizen competence and government accountability.
From the now classic paper of the same title by Andrew Healy and Neil Malhotra. As Neil said on twitter “It becomes depressing tweeting out this article after every instance of government failure,” but there you go.
…With such a highly protective first dose, the benefits derived from a scarce supply of vaccine could be maximized by deferring second doses until all priority group members are offered at least one dose. There may be uncertainty about the duration of protection with a single dose, but the administration of a second dose within 1 month after the first, as recommended, provides little added benefit in the short term, while high-risk persons who could have received a first dose with that vaccine supply are left completely unprotected. Given the current vaccine shortage, postponement of the second dose is a matter of national security that, if ignored, will certainly result in thousands of Covid-19–related hospitalizations and deaths this winter in the United States — hospitalizations and deaths that would have been prevented with a first dose of vaccine.
Danuta M. Skowronski, M.D.
British Columbia Centre for Disease Control, Vancouver, BC, Canada
Gaston De Serres, M.D., Ph.D.
Institut National de Santé Publique du Québec, Quebec City, QC, Canada
That’s from a letter to the NEJM which also includes a debate on delaying the second dose and a poll (vote for delaying the second dose!). What I want to point out today is that the authors are experts from Canada. I believe that first doses first will save lives in the US but delaying the second dose and other dose-stretching policies are even more vital in countries where vaccines supplies are more limited than in the United States.
Diem has been through several iterations since it was first announced in June 2019, with adjustments not being limited to just a change of name. Now those behind the project are beginning to reveal where they expect Diem to sit within financial markets and how the stablecoin will overcome regulatory and structural hurdles as it enters use.
On 11 February, an OMFIF audience heard Diem’s plans of becoming a bridge between traditional banking and new, digital assets. Christian Catalini, chief economist at the Diem Association and co-creator of Diem, tackled many of the concerns surrounding it, presenting it as a tightly regulated organisation that is also incorporating some of the best features of new digital currencies.
Diem had already made the transition to focus on single currency stablecoins fully backed by reserves, concentrating on the Diem dollar initially and abandoning a move toward a permissionless system in the future. Catalini went further at the OMFIF meeting, detailing how Diem will not allow the stablecoin to be fractionalised or leveraged elsewhere.
In his session with OMFIF’s Digital Monetary Institute, Catalini also gave new insights into the ongoing regulatory process. Diem, in its payment license application, is essentially being treated as a new bank by its regulator, the Swiss Financial Market Supervisory Authority, Catalini said. Diem’s reserves follow closely Basel III’s capital requirements and incorporate additional buffers to account for redemptions…
Diem has always maintained that there will be no fractionalisation of reserves, but concerns about how to enforce this have lingered. Even without lending by the issuer, virtual asset service providers, such as wallet suppliers or operators, could engage in fractional reserve banking with the coins as collateral. Catalini revealed that Diem will address this risk with new requirements for these service providers to back liabilities fully with Diem coins.
This makes ‘Diem different relative to any stablecoin today’, Catalini said.
Developing…one lesson is never underestimate projects initiated or sponsored by Facebook! And more generally, the continued interest in stablecoins (which are not appreciating, by definition) shows there is very real interest in some kind of direct digital transfer mechanism, call it money if you wish. So I am happy to see some major players moving to fill this space and in a manner designed not to collapse once the regulators get their paws on it.
Here is the full story and further detail.
Here is another request:
What is the hardest manual labor you’ve ever done? I love intellectual policy wonk commentary, but I can’t help but feel some small amount of disdain for people who SEEM (a possibly faulty assumption) to have never really suffered trying to solve problems in the physical realm. There’s so much abstract data/policy up for debate, but how many talking heads have even replaced a toilet or turned a wrench in their lives?
From ages 16 through 18 I worked in the produce department of a supermarket, and that involved a fair amount of lifting of heavy boxes and additional physical labor, though nothing as hard as digging ditches or as unpleasant as cleaning toilets. My first job was at Hillsdale Valley Fair, where at the same time James Gandolfini (Sopranos star) was a shopping cart fetch boy. My second job was at Hillsdale Stop & Shop, again in the produce department.
These were fundamental experiences for my core outlook, for these reasons and more:
1. I learned that earning money is very good for people’s psyches. No amount of money, neither large nor small, ever should be taken for granted because somewhere along the way someone earned it. At the time I felt very rich.
2. The people slated to fail in life might be just as intelligent as those set to succeed. And often they are funnier and more fun to hang around with and sometimes in these kinds of jobs more productive as well. Yet somehow they do not have the conceptual frameworks that might put them on the road to success, nor could they acquire such frameworks easily.
3. It is not that easy to find a good produce department manager. Really quite a few skills are required, not the least of which is the ability to handle and motivate the junior staff. The most difficult quality to find in the produce managers, however, was the discipline to avoid saying “**** you” to the store bosses, who were always busting their chops.
4. They all thought I was weird. It was periodically remarked that I didn’t smile very much. Yet most of the time I was having a blast. I was producing stuff.
4b. I learned that being called “****head” a few times a week is not such a terrible thing. Sometimes it made me smile.
4c. I had to wear a tie or they would send me home. That seemed just to me.
5. I continued working several nights a week for the first half of my freshman year at Rutgers Newark. After I got back from the long drive to classes (I lived at home still), accompanied by Bruce Springsteen music, I would either wrap lettuce or go read Nassau Senior and Malthus.
6. Back then they did not hire women to work in the backrooms of the produce department, so it was quite a “guys club” in terms of rhetoric and ethos. I remained polite.
7. It was stupid that they ever wrapped bananas in clear wrap in the first place, and I was relieved when they stopped the practice. Plums were by far the most fun fruit to wrap into packages.
Schools in Oregon, Washington, and much of the west coast are slow to reopen, even with teachers getting vaccinated:
Marguerite Roza, a Georgetown University school finance expert based in Seattle, points out that Washington, Oregon and California “all have more left-leaning leadership that is cozier with the unions.” But Boston, Chicago and New York also have strong public employee unions.
Those Eastern cities also have mayoral control of the school systems. Elected school boards govern the districts on the West Coast, and in most, teachers’ unions are strong political players, particularly in major cities such as Portland, Seattle, Los Angeles and San Francisco.
I guess you could say that the mayors have more “inclusive” constituencies? Here is the full NYT article, depressing throughout.
2. SSC on vitamin D. He is fairly skeptical, I am more skeptical yet. The macro correlations that are there could be the result of many different forces, there is not much reason in theory to attribute such power to vitamin D.
4. Human challenge trials coming to the UK. And a brief but important comment: “This is most important experiment on COVID not yet done anywhere in the world. Can give us badly-needed data points on viral load, transmission and infection progression. Can later be used for vastly accelerated trials for vaccines, therapeutics and preventative approaches.”
6. Cowen’s Second Law: “Accuracy of Urologic Conditions Portrayed on Grey’s Anatomy.”
7. Kalshi: real money prediction markets coming later this spring (WSJ).
Canada has made some smart moves with the Novavax vaccine. First, they initiated a rolling review of the Novavax vaccine in late January which suggests that they might authorize the vaccine based on the British trial before the US trial is concluded. The FDA will probably wait until the US trial is concluded. Second, Canada also signed a production agreement to bring some capacity online in Canada, although that will take time. That agreement, however, is on top of an advance purchase of 52 million doses with an option on another 24 million doses.
In short, if they act quickly, Canada could approve the Novavax vaccine before the United States and get a jump on its own vaccination efforts.
The U.S. government distributed millions of fast-acting tests for diagnosing coronavirus infections at the end of last year to help tamp down outbreaks in nursing homes and prisons and allow schools to reopen.
But some states haven’t used many of the tests, due to logistical hurdles and accuracy concerns, squandering a valuable tool for managing the pandemic. The first batches, shipped to states in September, are approaching their six-month expiration dates.
At least 32 million of the 142 million BinaxNOW rapid Covid-19 tests distributed by the U.S. government to states starting last year weren’t used as of early February, according to a Wall Street Journal review of their inventories…
“The demand has just not been there,” said Myra Kunas, Minnesota’s interim public health lab director.
…the tests are piling up in many states, the Journal found.
Here is more from Brianna Abbott and Sarah Krouse at the WSJ. You may recall the discussions of demand-side issues from my CWTs with Paul Romer and Glen Weyl. The envelope theorem remains underrated.
Tony O’Connor requests I cover this:
A few times you have said that the important thinkers of the future will be the religious ones. It would be interesting to hear more about what led you to this conclusion.
Concretely, I wonder if this would arise because religious populations within liberal polities are expanding over time (due to higher birth rates), or because there could be a shift from the non-religious population into religion. The potential causes of the latter would be interesting to hear about, if that is your belief.
First of all, I was led to the point by example. For instance, Ross Douthat and Peter Thiel are two of the most interesting thinkers as of late and they are both religious and Christian. I am also struck by the enduring influence of Rene Girard. I am never quite sure “how intellectually Jewish” are our leading Jewish intellectuals, but somewhat to be sure. Even if they are atheists, they are usually strongly influenced by Jewish intellectual and theological traditions, which indicates a certain power to those traditions. In fiction, Orson Scott Card is one of the intellectually most influential writers in the last few decades and he is a Mormon. Knausgaard is drenched in the tradition of the Christian confessional memoir, and Ferrante is about as Catholic a writer as you will find, again even if “the real Ferrante” is a skeptic. Houellebecq I don’t even need to get into.
Second, I see that both secular “left progressive” and “libertarian” traditions — both highly secular in their current forms — are not so innovative right now. I don’t intend that as criticism, as you might think they are not innovative because they are already essentially correct. Still, there is lots of recycling going on and their most important thinkers probably lie in the past, not the future. That opens up room for religious thinkers to have more of an impact.
Third, religious thinkers arguably have more degrees of freedom. I don’t mean to hurt anybody’s feelings here, but…how shall I put it? The claims of the religions are not so closely tied to the experimental method and the randomized control trial. (Narrator: “Neither are the secular claims!”) It would be too harsh to say “they can just make stuff up,” but…arguably there are fewer constraints. That might lead to more gross errors and fabrications in the distribution as a whole, but also more creativity in the positive direction. And right now we seem pretty hungry for some breaks in the previous debates, even if not all of those breaks will be for the better.
Fourth, if you live amongst the intelligentsia, being religious is one active form of rebellion. Rebelliousness is grossly correlated with intellectual innovation, again even if the variance of quality increases.
Fifth, I have the general impression that religious idea rise in importance during unstable and chaotic times. Probably the current period is less stable than say 1980-2001 or so, and that will increase the focality of religious ideas, thereby making religious thinkers more important.
Sixth, religious and semi-religious memes are stickier than secular ones. Maybe not on average, but the most influential religions have shown an incredible reach and endurance.
If you are reading a secular thinker, always ask yourself: “what is this person’s implicit theology?” No matter who it is. There are few more useful questions at your disposal.
4. How to reopen your schools?: “Crazy slow spend out rate for the education provisions of the Biden plan. Only $12 billion (7%) of the $168bn set aside for elementary/secondary/higher ed relief fund will get spent this fiscal year”. And Vox on teacher’s unions. And state of Virginia now has a $730 million budget windfall. C’mon people, yes there are still some significant state budget problems, but it is time to put down your Progressive catnip and contorted rationalizations and admit that Larry was right about this one.
5. Further Bloomberg coverage of the China hack. I genuinely do not know what is the bottom line here, but interesting to see that the story still is alive.
6. On late bloomers.
Our baseline results show welfare losses as large as 15% in parts of Africa and Latin America but also high heterogeneity across locations, with northern regions in Siberia, Canada, and Alaska experiencing gains. Our results indicate large uncertainty about average welfare effects and point to migration and, to a lesser extent, innovation as important adaptation mechanisms.
A few points:
1. Average global welfare loss is about six percent. The discount rate is 0.9%, and yes those are welfare losses. Losses as a percent of gdp are somewhat lower, because amenity costs are a factor with global warming.
2. About half of the global losses stem from the negative effects on productivity. For Africa, amenities losses are especially important. Overall the biggest losers are Central America, India, Brazil, and Africa. Many colder regions are better off.
3. The model allows for many margins of adjustment, including migration. Cheaper/freer migration is a good way of limiting the costs from global warming.
4. Subsidies to green energy don’t help very much, because of Jevons-like effects, namely that energy becomes cheaper and total energy use rises.
5. A carbon tax postpones fossil fuel use but in the long run it doesn’t help much, unless the delay in fossil fuel extraction is used to buy effective abatement measures.
Of course the assumptions in such papers always can be challenged, but this is one case where the authors think like economists throughout the entire exercise. It seems to be one of the best such studies.
My net conclusion (not theirs) is that the paper shows why serious action has been so slow in coming. The world as a whole might lose about two years worth of economic growth, with most of the losses concentrated in countries that are not calling the shots. Let’s say a poor country loses fifteen percent of welfare and about ten percent of gdp. Isn’t that somewhat similar to many of the losses caused by the current pandemic? Circa early 2021, how many vaccines are we sending to those places?
I do fully agree that we should be more cosmopolitan, but first to fix the malady we must understand it.
The most frequently upvoted request was this, noting that I will add in numbers so you may follow my replies:
1. Looking back on your history of blogging, what were you most right about? And what were you most wrong about? Are there any posts you regret?
2. If you were to go back in time and choose a profession other than economics, what field would you choose, and why?
3. What important questions are the least answerable empirically, and how should these questions be approached?
4. What questions would benefit most from better empirical evidence?
5. A number of years ago, I recall you saying something like “Bloggers get the commenters that they deserve.” Do you regret saying this? (Sorry–ha ha).
Thinking back on the history of MR, here are my answers:
1. I believe I was right (and proven right) about the Great Stagnation, a controversial proposition at the time. I also believe I have been right about many aspects of the Covid crisis, as Alex has been as well. See also my earlier writings.
I still like last year’s blog post on State Capacity Libertarianism.
Perhaps two things I was right about, but still not recognized as correct are: 1) post-2012 or so (but not earlier), unemployment was fundamentally a re-matching problem, and would not have been helped much by nominal decisions by the Fed, and 2) we could have done much better than Obamacare and no I don’t mean single payer.
Two of my more obvious errors were dismissing the notion of a major financial crisis in the early days, as I didn’t see that a bursting real estate bubble would wreck the shadow banking system, rather I expected (at worst) something like the recession of the early 1990s.
I also was wrong to think that Greece and Italy would leave the eurozone after the crisis of 2011. I thought deposits would be more mobile across borders than they turned out to be, thus crushing domestic banking systems and requiring a breaking with par.
I was originally wrong in calling bitcoin a bubble, though I improved and earlier yet MR was one of the first outlets to call attention to bitcoin; see also this earlier 2007 post, when I wrote: “…monetary economics will end up as a special case of a more general theory of encryption. One day they’ll solve Riemann’s Hypothesis and the price level will just go poof…!”
I am pleased to have played early roles boosting ngdp work, especially in free market circles, and standing firm on the need for some kind of green energy policy, though neither involved any originality on my part. I see both decisions as vindicated.
That all said, I regret the post where I wrote “Bloggers get the commenters that they deserve.” Even if it is true.
2. if my current profession were inaccessible to me, I would be either a philosopher or a legal academic, but trying to replicate the essential features of my current life as I know it. I feel I would be much less effective in either venue, however.
3. “What important questions are the least answerable empirically, and how should these questions be approached?” Maybe that is too broad a question, but two responses. First, I am not sure we ever will understand “culture,” as more empirical work perhaps will broaden the concentric circles of our ignorance and create more open questions, by both teaching us more detail and showing how much context-dependence matters. Second, I am increasingly skeptical that we will ever find “the theory of everything” in physics. Maybe it is all just a sprawling mess that resists systematization and comprehension by our feeble little brains. How well do felines grasp Keynesian macroeconomics?
That said, approach these dilemmas by fighting to understand and indeed doubling down.
4. “What questions would benefit most from better empirical evidence?” Well, many of them, but be ready to deal with this notion of broadening and expanding the concentric circles of our knowledge — and ignorance — at the same time. In many, many areas that is at least as likely as convergence on a definite set of answers.
Do commenters get the bloggers they deserve? I don’t think so.
The mere passage of time as an explanatory factor is underrated in public choice and regulatory economics, though Mancur Olson understood it well. Here is an update on the new CDC guidelines for school reopening:
But the much-anticipated guidelines released Friday were, in fact, more measured than some expected, with full in-person schooling recommended only when levels of community transmission are quite low, a standard that almost no place in the U.S. meets today.
Here is the full article. The American Federation of Teachers is happy, but six feet between all students for virtually all districts is a non-starter. No matter what you think of the substance of the school reopening issue, it takes only a modicum of sense to realize if you tell people that six feet of distance is needed, in essence you are saying that a safe reopening is impossible altogether. Here is the rant of a “progressive” parent.
You will notice that these regulatory factors are another reason why the speed premium during a pandemic is so high — if you wait too long to fix the core problem, the regulators, slow though they may be, will encumber just about everything.
1. Profile of Caroline Shaw, who is good (Atlantic).