Month: December 2021

Some simple game theory of Omicron

Let’s say that everyone is totally reckless, and they go to Christmas Eve “Omicron parties.”  A week or two from now the virus has cleared their systems and I, who stay at home and blog, can then go out and frolic.  Even if they stay sick, or if they die, they are removed as sources of potential infections for others (see below for new variants, possibly from the immunocompromised).

If I know that is happening, I find it easy to stay at home for a week.  I look forward to my pending freedom.  In other words, right now my behavior becomes safer.  I engage in intertemporal substitution.

Alternately, let’s say that quite a few people decide to behave more safely.  They stay at home and avoid the Omicron parties, and furthermore they go about with a mask in Whole Foods and don’t go to bars at all.  The Omicron pandemic, instead of being over in two weeks, can run on for months, depending on the exact numbers of course.  There is a ready stock of “not yet infected with Omicron” potential victims to keep the virus circulating.  And that means ongoing risk for me.

Returning to my decision calculus, I can wait a week but I cannot stay at home for a month or two.  So I know I am going to go out, and I expect I am going to get Omicron.  So I might as well go out now.  My behavior becomes riskier.

Get the picture?  If one set of people behave more safely, another set takes more risks.  And vice versa.

This is one reason why moral exhortation, or for that matter policy interventions, may be less than effective in our current moment.

It is also a reason why telling people “don’t worry about it!” doesn’t fully translate at the collective level either.

Of course you can modify these scenarios with reinfection risk, new variants, and other factors.

Friday assorted links

1. “Winning bidder of this lot will have until July 2022 to decide between keeping the NFT or exchanging it for the physical artwork it represents. Only one can be kept, the other one will be destroyed.

2. My Bloomberg column on why America should have more people, and a hat tip here to Matt Yglesias and his book on one billion Americans.

3. Does Merleau-Ponty just suck?

4. The public health experts’ letter to Pfizer — well-argued or not?  If it were a short undergraduate essay submission, what grade would you give it?

5. Review of the new Apichatpong Weerasethakul movie (NYT).

Hunting smaller animals: is this also a theory of early economic growth?

We found that weighted mean body mass declined log-linearly through time. Mean hunted animal masses 10,500 years ago, were only 1.7% of those 1.5 million years ago. Neither body size at any period, nor size change from one layer to the next, were related to global temperature or to temperature changes. Throughout the Pleistocene, new human lineages hunted significantly smaller prey than the preceding ones. This suggests that humans extirpated megafauna throughout the Pleistocene, and when the largest species were depleted the next-largest were targeted. Technological advancements likely enabled subsequent human lineages to effectively hunt smaller prey replacing larger species that were hunted to extinction or until they became exceedingly rare.

Here is the full paper by Jacob Dembitzer,, via Kobi Haron.

*The Man From the Future*

That is the new biography of John von Neumann, by Ananyo Bhattacharya, highly recommended, probably the best book about him.  Here is one short bit:

Von Neumann himself attributed his generation’s success to ‘a coincidence of some cultural factors’ that produced ‘a feeling of extreme insecurity in the individuals, and the necessity to produce the unusual or face extinction’. In other words, their recognition that the tolerate climate of Hungary might change overnight propelled some to preternatural efforts to succeed…Moreover, one could reasonably hope that good work in these fields would be fairly rewarded. The truth of general relativity was established through experiment and was not contingent on whether the person who developed the theory as Jew or Gentile.

By the way, a lot of those famous mathematicians thought their high school was crap.  And here is another excerpt:

Equally, von Neumann had no interest in sport and, barring long walks (always in a business suit), he would avoid any form of vigorous physical exercise for the rest of his life.  When his second wife, Klari, tried to persuade him to ski, he offered her a divorce. ‘If being married to a woman, no matter who she was, would mean he had to slide around on two pieces of wood on some slick mountainside,’ she explained, ‘he would definitely prefer to live alone and take his daily exercise, as he put it, “by getting in and out of a pleasantly warm bathtub.”.

I believe my original pointer here came from Tim Harford.

Mary C. Daly understands the median voter theorem

Ms. Daly…has shifted her tone particularly dramatically in recent weeks…

As recently as mid-November, she had argued that the Fed should be patient in removing its support, avoiding an overreaction to inflation that might prove temporary and risk unnecessarily slowing the recovery of the labor market. But incoming data have confirmed that employers are still struggling to hire even as consumer prices are rising at the fastest clip in nearly 40 years. Rising rents and tangled supply chains could continue to push up inflation. And she’s running into more people like that woman in Walgreens.

“My community members are telling me they’re worried about inflation,” Ms. Daly said last week.

Here is the NYT story, and note she is not the most right-leaning member of the FOMC.  This, in a nutshell, is why I think inflation will converge to a reasonable level, albeit with a possibly high degree of pain along the way.

New Buenos Aires notes

My last and rather lengthy Buenos Aires notes are from 2006, still worth a read.  This time my visit was much shorter, but I had three dominant impressions.  First, the city seems more “normal” and less Argentine than in times past.  The nicer parts of town, as you might find in or near Palermo, seemed more “Pan-Latin” than anything else, as you might find in comparable parts of Mexico City or Bogotá.  More hipster.  More Brooklyn even.  The whole “invisible stories about weird librarians obsessed with their cats” side of the city seems weaker these days.  And along similar lines, traditional Argentinean food is harder to find.

Second, the talent of Argentina has been liberated from the country itself.  Argentina has more unicorns — eleven! — than any other Latin American nation, though it is not close to tops in population.  Yet for the most part these unicorns exist beyond the confines of Argentina.  The top talents of Argentina seem to have used the internet more effectively to integrate into global markets than the top talents of other Latin countries.  In contrast, Brazilian commercial talent seems best suited to…the rules of the game in Brazil.

Third, the country no longer seems to alternate between glorious hope and extreme despair.  It seems more accepted that the country is not going to solve its fiscal or monetary problems, and instead will alternate between “OK enough” periods and “uh-oh inflation is really pretty high now” periods.  Currently rates of price inflation are running at about fifty percent, and the black market exchange rate is about two times as favorable for the dollar as the official exchange rate.  No one seems very surprised by this, nor is there much uncertainty about how things will end, nor is there great hope that “the reformers” will solve the problems.  Yet a bounceback is likely to follow as well, sooner or later.  The cyclical nature of the Argentine economy seems more accepted and enshrined in expectations.  And the elite are more insulated from it than ever before, through a mix of Miami-based dollar accounts and crypto, and here are some tactics for the middle class (Bloomberg).

Fortunately, the economy is growing at an annualized rate of over eleven percent, though the year before it contracted by more than ten percent.  None of that will end the cycle.

Buenos Aires remains one of the very best cities in the world, most of all in their summer.

Wednesday assorted links

1. Stephen Carter best books of the year list (Bloomberg).

2. Malcolm Gladwell on Bulletin on Paul Simon.

3. Should we have octopus farms?

4. Against proof of stake (you need to scroll down a bit to get to the interesting part).  Is this the best piece on crypto and public choice/constitutional economics questions?

5. Eric Topol on the lame Biden response.

6. Somaliland Taiwan markets in everything.

ProPublica on the FDA and Rapid Tests

Lydia DePillis has written the best piece on the FDA that I have ever read in a mainstream news publication. It gets everything right and yes it frankly verifies everything that I have been saying about the FDA and rapid tests for the last year and a half. I wish it had been written earlier but I suppose that illustrates how difficult it is to radically change people’s mindset from the FDA as protector to the FDA as threat. The sub head is:

Irene Bosch developed a quick, inexpensive COVID-19 test in early 2020. The Harvard-trained scientist already had a factory set up. But she was stymied by an FDA process experts say made no sense.

The piece recounts how cheap, rapid tests could have been approved in March of 2020! Here’s the opening bit:

When COVID-19 started sweeping across America in the spring of 2020, Irene Bosch knew she was in a unique position to help.

The Harvard-trained scientist had just developed quick, inexpensive tests for several tropical diseases, and her method could be adapted for the novel coronavirus. So Bosch and the company she had co-founded two years earlier seemed well-suited to address an enormous testing shortage.

E25Bio — named after the massive red brick building at MIT that houses the lab where Bosch worked — already had support from the National Institutes of Health, along with a consortium of investors led by MIT.

Within a few weeks, Bosch and her colleagues had a test that would detect coronavirus in 15 minutes and produce a red line on a little chemical strip. The factory where they were planning to make tests for dengue fever could quickly retool to produce at least 100,000 COVID-19 tests per week, she said, priced at less than $10 apiece, or cheaper at a higher scale.

“We are excited about what E25Bio is capable of shipping in a short amount of time: a test that is significantly cheaper, more affordable, and available at-home,” said firm founder Vinod Khosla. (Disclosure: Khosla’s daughter Anu Khosla is on ProPublica’s board.)

On March 21 — when the U.S. had recorded only a few hundred COVID-19 deaths  Bosch submitted the test for emergency authorization, a process the Food and Drug Administration uses to expedite tests and treatments.

You know how the story ends but really READ the WHOLE THING.

Stablecoin sentences to ponder

The real reason people use stablecoins is regulations make it difficult to convert crypto assets to traditional assets. Stablecoins are a creature of regulation in the same sense that money market funds were created in the 1970s to get around government limits on interest banks could pay retail depositors while the economy was running at double-digit inflation.

That is from Aaron Brown at Bloomberg.

Cognitive uncertainty in intertemporal choice

This paper studies the relevance of cognitive uncertainty – subjective uncertainty over one’s utility-maximizing action – for understanding and predicting intertemporal choice. The main idea is that when people are cognitively noisy, such as when a decision is complex, they implicitly treat different time delays to some degree alike. By experimentally measuring and manipulating cognitive uncertainty, we document three economic implications of this idea. First, cognitive uncertainty explains various core empirical regularities, such as why people often appear very impatient, why per-period impatience is smaller over long than over short horizons, why discounting is often hyperbolic even when the present is not involved, and why choices frequently violate transitivity. Second, impatience is context-dependent: discounting is substantially more hyperbolic when the decision environment is more complex. Third, cognitive uncertainty matters for choice architecture: people who are nervous about making mistakes are twice as likely to follow expert advice to be more patient.

Here is the full paper by Benjamin Enke and Thomas Graeber, this one seems to me a significant breakthrough on some longstanding puzzles of choice.

From the comments

If it is indeed the case (very plausible) that the current crypto prices are highly overvalued but web3/crypto adoption becomes very mainstream and the gains do not accrue significantly to holders of many crypto assets that would redirect the investor energy towards Bitcoin aka “digital gold” by these investors and push the price of Bitcoin very high.

This would be a funny way how the Bitcoin maximalists win.

That is from Naveen K.

Tuesday assorted links

1. Ethiopian government using foreign drones to turn the tide in the conflict (NYT).

2. “Taken together, these results suggest social scientists can learn a great deal by adding pulse rates to the metrics they use when evaluating people’s wellbeing.

3. Brian Eno on NFTs and also economics.

4. Andrew Lilley on Omicron severity.  And more Zvi on severity, including his own, which seems to be OK.

5. The surge of talent into crypto (NYT).

6. log4j summary.