I will debating/discussing the topic “Does coronavirus mean the end of traditional education?” @ the Cambridge Union. A bit disappointing not to be in the hallowed hall but should be interesting nonetheless. The debate will be live-streamed at 2pm ET on Wednesday.
Will a move towards digital, decentralised teaching transform a model that once seemed so entrenched? Will the loss of exams become permanent for many? In an online panel with the Cambridge Union, four world-renowned figures share their perspective on what the future holds for education in the wake of the coronavirus pandemic.
Justine Greening served as Secretary of State for Education under Theresa May, following stints at International Development and Transport. Having left Parliament, Greening now chairs the Social Mobility Pledge.
Stephen Toope is Vice-Chancellor of the University of Cambridge. He previously held the same position at the University of British Columbia, and is perhaps best known for his regular emails to the Cambridge student body.
Alex Tabarrok is a Professor of Economics at George Mason University. Together with Tyler Cowen, he is best known as the co-founder of Marginal Revolution University, a free online platform for studying economics.
Shirley M. Tilghman was the nineteenth President of Princeton University, serving for twelve years until 2013. She is globally recognised for her scholarship in molecular biology.
Lord David Willetts, former Minister of State for Universities and Science under David Cameron in the UK.
a Federalist plan to move from lockdown to liberty. You won’t be surprised to learn that it involves testing, testing, testing. I know, you have testing fatigue. So do I. It’s important, however, to not give up on testing too early. We are really only 6-8 weeks into the US crisis and while everyone is frustrated at the slow pace I think we will start to see leaps in capacity soon as major labs come online.and I have a piece in the Washington Post talking about
The piece makes two points. First moving too quickly can kill grandma and the economy:
The dangers of reopening without disease control — or a coronavirus vaccine or therapeutic breakthrough — are illustrated by events at the Smithfield Foods meatpacking plant in Sioux Falls, S.D. Smithfield offered workers a bonus if they showed up every day in April. Normally, bonus pay would increase attendance. But in a pandemic, encouraging the sick to haul themselves into work can be disastrous. The plan backfired. Hundreds of Smithfield employees were infected, forcing the plant to shut down for more than three weeks. If we stay the current course, we risk repeating the same mistake across the whole economy.
Second, we need a Federalist approach to testing.
The only way to restore the economy is to earn the confidence of both vulnerable industries and vulnerable people through testing, contact tracing and isolation.
There is already a bipartisan plan to achieve this; we helped write it. The plan relies on frequent testing followed by tracing the contacts of people who test positive (and their contacts) until no new positive cases are found. It also encourages voluntary isolation, at home or in hotel rooms, to prevent further disease spread. Isolated patients would receive a federal stipend, like jurors, to discourage them from returning to workplaces too soon.
But our plan also recognizes that rural towns in Montana should not necessarily have to shut down the way New York City has. To pull off this balancing act, the country should be divided into red, yellow and green zones. The goal is to be a green zone, where fewer than one resident per 36,000 is infected. Here, large gatherings are allowed, and masks aren’t required for those who don’t interact with the elderly or other vulnerable populations. Green zones require a minimum of one test per day for every 10,000 people and a five-person contact tracing team for every 100,000 people. (These are the levels currently maintained in South Korea, which has suppressed covid-19.)
Most Americans — about 298 million — live in yellow zones, where disease prevalence is between .002 percent and 1 percent. But even in yellow zones, the economy could safely reopen with aggressive testing and tracing, coupled with safety measures including mandatory masks. In South Korea, during the peak of its outbreak, it took 25 tests to detect one positive case, and the case fatality rate was 1 percent. Following this model, yellow zones would require 2,500 tests for every daily death.
…A disease prevalence greater than 1 percent defines red zones. Today, 30 million Americans live in such hot spots — which include Detroit, New Jersey, New Orleans and New York City. In addition to the yellow-zone interventions, these places require stay-at-home orders.
One virtue of this plan is that conforms with the common sense of people where they live. People in New York have seen their friends die and understand that stricter rules make sense. People in Montana haven’t seen the crisis up close and so their common sense and our testing strategy require less stringent rules.
We do need testing even in low-prevalence areas, however, and we need to be able to mobilize a lot of testing and tracing quickly to cap flare ups.
One danger of the current situation is that many of the places which have not yet been hit hard by COVID-19 are also the places with the most natural danger as they have lots of elderly with comorbidities.
Read the whole thing.
My long-running skepticism about the safety and efficacy of the FDA is fast becoming conventional wisdom. Even normal people can’t believe what they are doing. This piece on the FDA in the New York Times reads like something I might have written for CATO.
An innovative coronavirus testing program in the Seattle area — promoted by the billionaire Bill Gates and local public health officials as a way of conducting wider surveillance on the invisible spread of the virus — has been ordered by the federal government to stop its work pending additional reviews.
…the program, a partnership between research groups and the Seattle and King County public health department that had been operating under authorization from the state, was notified this week that it now needs approval directly from the federal government. Officials with the Food and Drug Administration told the partnership to cease its testing and reporting until the agency grants further approval.
…the Seattle program …has wide backing, including from public health leaders, the Fred Hutchinson Cancer Research Center and Mr. Gates, whose foundation has been deeply involved in fighting the pandemic. The Centers for Disease Control and Prevention also provided an in-person technical adviser to the project.
Dr. Eric Topol, the director of the Scripps Research Translational Institute, who is not involved in the Seattle group, said it had “emerged as leading lights in this whole Covid-19 crisis.” He said it was “bizarre” that the F.D.A. would halt such a project.
By the way, Dr. Helen Chu, one of the leaders of the Seattle project, was one of the first Emergent Ventures prize winners for her work fighting the coronavirus (excellent pick, Tyler!). As you may recall, Chu started testing for coronavirus in an already running flu study without permission. Until she was shut down.
To repurpose the tests for monitoring the coronavirus, they would need the support of state and federal officials. But nearly everywhere Dr. Chu turned, officials repeatedly rejected the idea, interviews and emails show, even as weeks crawled by and outbreaks emerged in countries outside of China, where the infection began.
By Feb. 25, Dr. Chu and her colleagues could not bear to wait any longer. They began performing coronavirus tests, without government approval.
Federal and state officials said the flu study could not be repurposed because it did not have explicit permission from research subjects; the labs were also not certified for clinical work. While acknowledging the ethical questions, Dr. Chu and others argued there should be more flexibility in an emergency during which so many lives could be lost. On Monday night, state regulators told them to stop testing altogether.
The failure to tap into the flu study, detailed here for the first time, was just one in a series of missed chances by the federal government to ensure more widespread testing during the early days of the outbreak, when containment would have been easier. Instead, local officials across the country were left to work in the dark as the crisis grew undetected and exponentially.
History repeats itself, first as tragedy then as farce.
Addendum: I see now that Tyler covered this a bit earlier in the post below. I’ll leave this post up, however, as I have more details including Tyler’s connection.
I always assumed that for all its failings the US government was good at blowing things up. Now, I am not so sure. We did better than I expected in Desert Storm and I don’t blame the military for failures in Iraq and Afghanistan but those were not exactly major powers. I certainly don’t want war but could we handle one if it came to us? David Ignatius writing in the Washington Post says no:
What if we develop a vaccine for COVID-19 but can’t find enough patients to run a randomized clinical trial? It sounds absurd, but this problem has happened in the past. Ebola was identified in 1976, and candidate vaccines were proven safe and effective in mice and primates in 2004 and 2005, respectively. But no human vaccine was produced [at that time] because it was extremely difficult, bordering on impossible, to trial an Ebola vaccine. The problem? Ebola is so deadly that people take precautionary measures long before a vaccine can be tested.
A few pieces have been written about human challenge trials, clinical trials in which healthy people are infected with a disease in order to see if a treatment or vaccine works, but most of them focus on the ethical issues. I don’t think there are serious ethical issues so writing at The National Interest I focus on why challenge trials are useful statistically and why they may even be necessary.
Even health care workers, however, have a low enough infection rate that you either need many months to determine if there is a significant effect, or you need large populations. In Italy, about 6,000 doctors were infected over two months, out of a population of about 241,000 Italian doctors. This is a monthly infection rate of 1.2 percent. If the vaccine is 50 percent effective, then to detect this within a month, you need a sample size of 7,776 people equally divided between a vaccinated group and a non-vaccinated group. You could run the test in a smaller sample of 1,322 but then the trial would take six months. A more effective vaccine would make detecting an effect easier, but flu vaccines work at 40 to 60 percent effectiveness, so an assumption of 50 percent is not unreasonable.
But will Italian doctors still be getting infected at a rate of 1.2 percent per month when a vaccine becomes available for trial in six months or a year? We hope not. The hope is that social distancing and the use of personal protective equipment will have greatly lowered the infection rate. A low infection rate is great, unless you want to properly test a vaccine.
…The virtue of a challenge trial is that the results would be available very quickly, within a few weeks, and using only a small population. If the vaccine is 50 percent effective, for example, then we would need around 100 volunteers or perhaps even fewer depending on how many people exposed to the virus in laboratory conditions contract the disease.
By advancing a vaccine by many months, a challenge trial could save many thousands of lives and spare the world the huge economic costs of the lockdowns and social distancing that we will be using to combat the virus.
Challenge trials, however, don’t solve all problems. In particular, to limit the risk we would want to restrict the patients in a challenge trial to be young and healthy. But that raises a problem of external validity. We also want the vaccine to be safe and effective in less healthy and elderly people which requires secondary challenge trials or field testing in that population. Nevertheless, as Athey, Kremer, Synder and myself argue in our NYTimes op-ed, the high risk of vaccine failure means that we would like 15-20 vaccine candidates and challenge trials could help us whittle this number down to the best two to three substantially speeding up the vaccine discovery process.
One more point is worth bearing in mind.
[A]n ordinary vaccine trial is not without risk—a vaccine could backfire and make the disease worse—so exposing fifty or so volunteers to the virus in a challenge trial must be balanced against exposing thousands to a potentially dangerous vaccine in an ordinary clinical trial.
Thus, the total risk may be lower with a combination of challenge trials and longer, larger field trials.
Challenge trials have a long history in medicine and their statistical advantages make them powerful and even necessary. As The Guardian notes:
Scientists, however, increasingly agree that such trials should be considered, and the WHO is the latest body to indicate conditional support for the idea.
“There’s this emerging consensus among everyone who has thought about this seriously,” said Prof Nir Eyal, the director of Rutgers University’s Center for Population-Level Bioethics in the US.
I argued earlier that if we have Immunity Passes they Must Be Combined With Variolation because “the demand to go back to work may be so strong that some people will want to become deliberately infected. If not done carefully, however, these people will be a threat to others, especially in their asymptomatic phase.” Thus, if we have immunity passes we must also have controlled infection.
In a new paper, Daniel Hemel and Anup Malani run the numbers and verify the intuition:
…Our topline result is that strategic self-infection would be privately rational for younger adults under a wide range of plausible parameters. This result raises two significant concerns. First, in the process of infecting themselves, younger adults may expose others—including older and/or immunocompromised individuals—to SARS-CoV-2, generating significant negative externalities. Second, even if younger adults can self-infect without exposing others to risk, large numbers of self-infections over a short timeframe after introduction of the immunity passport regime may impose significant congestion externalities on health care infrastructure. We then evaluate several interventions that could mitigate moral hazard under an immunity passport regime, including the extension of unemployment benefits, staggered implementation of passports, and controlled exposure of individuals who seek to self-infect. Our results underscore the importance of careful planning around moral hazard as part of any widescale immunity passport regime.
The internet has performed incredibly well in the crisis. Charles Fishman, at the Atlantic, gets an inside picture from AT&T:
The surge in traffic, on the internet as a whole and on AT&T’s part of the network, is extraordinary in a way that the phrase 20 percent increase doesn’t quite capture. AT&T’s network is carrying an extra 71 petabytes of data every day. How much is 71 petabytes? One comparison: Back at the end of 2014, AT&T’s total network traffic was 56 petabytes a day; in just a few weeks, AT&T has accommodated more new traffic every day than its total daily traffic six years ago. (During the pandemic, the AT&T network has been carrying about 426 petabytes a day—one petabyte is 1 million gigabytes.)
It’s not an accident. Like HEB in Texas
…AT&T rehearses for disaster. Last May, the company ran an internal war game on how a pandemic would affect its ability to keep phone and internet service running. The company does these exercises routinely to try to get ready—to build teams of people and their reflexes, and also to understand what they will need on the ground.
Tom Hazlett at City Journal points out that the strength of the American internet in particular has been due to greater investment and non network-neutrality.
The payoff is that Netflix (or Hulu, Amazon, or YouTube) have forged bargains with ISPs: if you subscribe to Comcast, you might notice that Netflix is so integrated into its network that a button on your cable TV remote clicks you right from CNBC (owned by Comcast) to Netflix—away from the cable operator’s shows and onto a streaming “over-the-top” media platform. These non-neutral arrangements, along with side payments between the companies, fundamentally support Internet growth.
So while Netflix and Amazon have been throttling their video services in Europe, reducing their customers’ data consumption by one-fourth in response to surging demand, high-definition streaming, following a long trend, remains the U.S. norm. In a 2012 paper in the Journal of Law & Economics, Michal Grajek and Lars-Hendrik Röller found that higher levels of regulatory control (with rules designed to force network sharing) undermined investment incentives, reducing information infrastructure across Europe by 23 percent….U.S. network investments are higher than in Europe, accounting for population and relative economic output.
Despite arguments that the U.S. is falling behind, these network investments pay off. American Internet users consume considerably more data than do Europeans on a per-capita basis. According to Cisco, ISP end-users in the U.S. and Canada stream 115.6 gigabytes of data per month, compared with 43.8 gigabytes in Western Europe and 10.6 gigabytes in Asia Pacific.
Hat tip: Stephen Landry.
…the U.S. is, by far, the world’s largest producer of alcohol. That distinction is a result of the Energy Policy Act of 2005, which required fuel producers to blend four billion gallons of corn ethanol into their gasoline by 2006 and 7.5 billion by 2012. The immediate result was a spike in the price of corn and an increase in food prices world-wide. U.S. farmers soon solved this problem by diverting millions of acres of land to growing corn. Ironically, this increased overall CO2 emissions, much to the chagrin of the environmentalists who had championed the mandate as a way of fighting global warming.
Long before policy makers had seen their error, however, farm states had so fallen in love with ethanol that they successfully lobbied the federal government to raise the mandate to 32 billion gallons a year by 2022. Keep in mind that the oil industry would gladly pay billions of dollars in extra taxes each year not to use it.
The negative effects of this forced usage of corn-based ethanol in refined petroleum include higher gas prices (alcohol costs more than oil per British thermal unit) and more than 30 million acres lost to subsidized corn production — an area that vastly exceeds all the land lost to urban, suburban and exurban “sprawl” over the past century. And while the U.S. now has inordinate supplies of excess alcohol, fuel producers can’t use it, since adding any more to gasoline will damage car engines.
Surely now, with people clamoring for germ-sanitizing alcohol, this excess supply can be put to good use. Not so fast. The Food and Drug Administration and Bureau of Alcohol, Tobacco, Firearms and Explosives have prohibited the use of ethanol in place of isopropyl alcohol even though both are equally effective as germ-killers.
On April 3 the FDA announced that “ethanol made at plants producing fuel ethanol can be used as rubbing alcohol if it contains no additional additive or chemicals from the plants and they can ensure water purity and proper sanitation of equipment.” But it’s unclear how much supply will increase, since the FDA also stated that it would “consider each plant on an individual basis and grant approval only if a plant meets quality control specifications.”
Worse yet, the FDA reversed course on April 16, announcing additional restrictions that effectively prevent any sales, even though ethanol companies had already produced and shipped millions of gallons of high-grade alcohol for hand sanitizer. With U.S. ethanol inventories at all-time high of about 900 million gallons, you’d think the FDA would let us have a little for our hands.
The meat supply is starting to fail. Meat processing factories seem especially susceptible to COVID-19 probably because of mist, chilled air circulation, the creation of aerosols and close worker contact. What other industries could be affected? What would happen if the energy, transportation, or pharmaceutical sector failed? We aren’t even sure which industries are critical. Who would have thought that nasal swabs would be a critical industry? In researching vaccine production I was stunned to learn that glass vials may be a bottleneck. Glass vials! How then do we best protect the workers in our critical industries? Should everyone else practice social distancing, closing of non-essential firms and work from home or should everyone else return to work as if everything were normal?
Social distancing, closing non-essential firms and working from home protect the vulnerable but these same practices protect workers in critical industries. Thus, the debate between protecting the vulnerable and protecting the economy is moot. “Lockdowns” protect vulnerable people and protect vulnerable industries. Save grandma, save the economy.
The point is simple but made formally in Social Distancing and Supply Disruptions in a Pandemic by Bodenstein, Corsetti and Guerrieri.
Abstract: Drastic public health measures such as social distancing or lockdowns can reduce the loss of human life by keeping the number of infected individuals from exceeding the capacity of the health care system but are often criticized because of the social and economic costs they entail. We question this view by combining an epidemiological model, calibrated to capture the spread of the COVID-19 virus, with a multisector model, designed to capture key characteristics of the U.S. Input Output Tables. Our two-sector model features a core sector that produces intermediate inputs not easily replaced by inputs from the other sector, subject to minimum-scale requirements. We show that, by affecting workers in this core sector, the high peak of an infection not mitigated by social distancing may cause very large upfront economic costs in terms of output, consumption and investment. Social distancing measures can reduce these costs, especially if skewed towards non-core industries and occupations with tasks that can be performed from home, helping to smooth the surge in infections among workers in the core sector.
Addendum: I wrote “lockdowns” because I am in favor of getting back to work with mass testing and safety protocols so I don’t think that a “lockdown” is necessarily the optimal policy. Indeed, I think we could get the meat processors back up and running with testing at the door and safety protocols. But we are not having a rational discussion about the tools and the investments that we need to reopen the economy. Instead, the people protesting to reopen the economy are also protesting against the use of a key tool to reopen the economy, masks! Welcome to crazy town.
My viewing habits are less hi-brow than Tyler’s, perhaps especially now when I am seeking escape and mind rest. Here’s a few things I have enjoyed and some that I have not.
DEVS on Hulu. If you know what the Everett interpretation is you will probably enjoy this science-fiction drama with big ideas on quantum computing and free will but also enough suspense, action and human relationships to drive the drama forward. From the director of Ex Machina. Sonoya Mizuno steals the show, super charismatic in an off beat way.
Westworld on HBO. A few interesting scenes but mostly disappointing.
Formula 1: Drive to Success on Netflix. I have no real interest in car racing but this documentary–each season is a season–is very well produced. Great shots from within the cars and each episode is tightly crafted, dare I say formulaic, so you want to watch the next. Popcorn but good popcorn. An extended version of Rush. I had no idea a team can cost $300-$500 million a year.
Bosch on Amazon. A police noir set in the real Los Angeles. Bosch is the Sisyphus of police detectives, driven to find justice for the victims but the victims never thank him, justice doesn’t bring them back and each day brings another. A study in character.
Extraction on Netflix. Awful. Brainless. If you want action, watch Fauda about a special Israeli Defense Unit. It’s well done and you will learn something even if what you will learn is how decent people turn into terrorists in an endless cycle of retribution and misery.
Impostors on Neflix: A light con-woman caper. Good for one season but harder to sustain once you’ve seen behind the curtain.
Beforeigners on HBO: My only share with Tyler. I look forward to a second season.
Top Chef on Amazon (I bought the new Season). Still my go to for competence-porn and don’t we all need some of that? Plus makes me look forward to restaurants.
The COVID-19 crisis is accelerating a long-term trend, the shift to online education. I’ve long argued that online education is superior to traditional models. In an excellent essay in the New York Times, Veronique Mintz, an eighth-grade NYC student agrees:
Talking out of turn. Destroying classroom materials. Disrespecting teachers. Blurting out answers during tests. Students pushing, kicking, hitting one another and even rolling on the ground. This is what happens in my school every single day.
You may think I’m joking, but I swear I’m not…during my three years of middle school, these sorts of disruptions occurred repeatedly in any given 42-minute class period.
That’s why I’m in favor of the distance learning the New York City school system instituted when the coronavirus pandemic hit.
…Distance learning gives me more control of my studies. I can focus more time on subjects that require greater effort and study. I don’t have to sit through a teacher fielding questions that have already been answered.
…This year I have struggled with math. The teacher rarely had the patience for questions as he spent at least a third of class time trying to maintain order. Often, when I scheduled time to meet with him before school, there would be a pileup at his door of students who also had questions. He couldn’t help us all in 20 minutes before first period. Other times he just wouldn’t show up….With distance learning, all of that wasted time is eliminated. I stop, start and even rewind the teacher’s recording when I need to and am able to understand the lesson on the day it’s taught.
Veronique’s online courses were put together in a rush. Imagine how much more she will learn when we invest millions in online classes and teach at scale. The online classes that Tyler and I teach, using Modern Principles and the Sapling/Achieve online course management system, took years to produce and feature high quality videos and sophisticated assessment tools including curve shifting (not just multiple-choice), empirical questions based on FRED, and adaptive practice–plus the videos are all subtitled in multiple languages, they can be sped up or slowed down, watched at different times of the day in different time zones and so forth. Moreover, technology is increasing the advantages of online education over time.
Today in the New York Times I have an op-ed with Susan Athey, Michael Kremer and Christopher Snyder. We argue for a big program to invest in vaccine capacity before any vaccine is tested and approved. We agree with Bill Gates that we want the vaccine factories to be warmed up by the time a vaccine is approved. We can’t leave it all to Gates, however. The US economy is hemorrhaging $150-$350 billion a month so the benefits of a vaccine to society are huge and we should go big.
Today, the U.S. government could go big and create a Covid-19 vaccine A.M.C., guaranteeing to spend about $70 billion on new vaccines — enough to make direct investments to support capacity installation or to repurpose capacity and to pay, say, $100 per person for the first 300 million people vaccinated.
An investment of that size can anticipate and overcome several challenges typical of vaccine development. If we want to achieve a 90 percent probability of success, we must take into account historical rates of success from publicly available data; doing that suggests that we need to actively pursue not two or three vaccine candidates, but 15 to 20.
…Usually, to avoid the risk of investing in capacity that eventually proves worthless, firms invest in large-scale capacity only after the vaccine has proved effective. But in the middle of a pandemic, there are huge social and economic advantages to having vaccines ready to use as soon as they have been approved. If we leave it entirely to the market, we will get too little vaccine too late.
An advance market commitment for Covid-19 should combine “push” and “pull” incentives. The “pull” incentive is the commitment to buy 300 million courses of vaccine at a per-person price of $100, for vaccines produced within a specified time frame. If multiple vaccines are developed, the A.M.C. fund will have authority to choose products to purchase based on efficacy, the availability of sufficient vaccine for timely vaccination or suitability for different population groups. So firms compete to serve the first 300 million people with the most attractive vaccines, and the “pull” component provides strong incentives for both speed and quality.
The “push” incentive guarantees firms partial reimbursement for production capacity built or repurposed at risk and partial reimbursement as they achieve milestones. The partial reimbursement ensures that manufacturers have “skin in the game,” while inducing them to build large-scale capacity before approval is certain.
More than usual, read the whole thing and please do help to circulate the ideas by posting and tweeting.
The op-ed draws on the work of a large team of economists and statisticians who have been working days and nights for weeks. You can find out more at AcceleratingHT where we will soon be posting additional analysis and tools.
It’s a great privilege for me to be working with this group. One day I will write the story but for now let me just say that I have never seen such a brilliant and dedicated group come together to apply their skills to a problem of such importance and urgency.
The Coronavirus Pandemic may be the most warned about event in human history. Surprisingly, we even did something about it. President George W. Bush started a pandemic preparation plan and so did Governor Arnold Schwarzenegger in CA but in both cases when a pandemic didn’t happen in the next several years those plans withered away. We ignored the important in favor of the urgent.
It is evident that the US government finds it difficult to invest in long-term projects, perhaps especially in preparing for small probability events with very large costs. Pandemic preparation is exactly one such project. How can we improve the chances that we are better prepared next time?
…we would like organizations tasked with protecting the public from low-probability, high-cost events to be funded on a permanent basis that is not subject to budgetary discretion or degradation. Instead of yearly appropriations, it’s preferable to have a one-time appropriation to finance a stream of investments. The financial means of doing this is to buy a bond with an earmarked revenue stream. That is, instead of selling bonds the government buys long-term safe bonds which pay out dividends that are earmarked to a program, in this case to pandemic preparation.
There is a well-known example of such a financing scheme, the social security trust fund. The social security trust fund was established in 1937. It buys long-term safe bonds that pay dividends that are used to finance social security payments. Unlike the pandemic trust fund I propose, the Social Security Trust Fund buys bonds on an ongoing basis but that is a relatively unimportant difference.
The Social Security Trust Fund buys the safest form of government bonds, which has given rise to a long-standing controversy over whether the trust fund is a “fiction.”10Of course, the trust fund is a kind of fiction but so are federalism, checks and balances, and the Constitution. Fictions can be powerful because they create shared understandings that govern behavior and determine equilibrium action. The trust fund does what it says—it increases trust by indicating that Social Security payments are higher in creditor priority than other spending. Just as Section 507 of the Bankruptcy Code increases trust by indicating that secured bondholders get paid before unsecured creditors such as a company’s suppliers. Since 1937, the Social Security Trust Fund has always held net assets, and when it briefly ran deficits in the 1970s and early 1980s, the Greenspan commission was established to shore up the system.11 That is, the simple existence of the Trust Fund as an accounting entity created an awareness, which made it easier to act to maintain the Fund.
A Pandemic Trust Fund would begin with a $250 billion investment in bonds earmarked to pandemic preparations. At current effective rates of interest of about 3%, this is enough to support spending of $7.5 billion annually.12 Note that $7.5 billion is nowhere near enough to address the current pandemic, but that is because we did not invest enough in pandemic preparation. Had we invested $7.5 billion in pandemic preparation every year for the last two decades, for example, we would be in much better shape today. The $7.5 billion is for annual ongoing preparation.
…A Pandemic Trust Fund invested in $250 billion of government bonds is an accounting fiction that may be readily agreed upon today at the height of the crisis because it has few current costs. Yet, as we have discussed, accounting fictions can have real power in changing the future allocation of resources.
Read the whole thing, it is also includes some interesting info on clever DOD contracts that have advanced pandemic preparations.
NYTimes: Around the world, scientists are racing to develop and mass produce reliable antibody tests that public health experts say are a crucial element in ending the coronavirus lockdowns that are causing economic devastation. But that effort is being hamstrung, scientists say, by a shortage of the blood samples containing antibodies to Covid-19, the disease caused by the virus, that are needed to validate the tests.
Recognizing a rare opportunity, some companies are seeking to cash in on the shortages, soliciting blood donations and selling samples at rich markups in a practice that has been condemned by medical professionals as, at the very least, unethical.
“I’ve never seen these prices before,” said Dr. Joe Fitchett, the medical director of Mologic, one of the British test manufacturers that was offered the blood samples. “It’s money being made from people’s suffering.”
I am reminded of Walter Williams who asks his students whether it is wrong to profit from the misfortune of others:
But I caution them with some examples. An orthopedist profits from your misfortune of having broken your leg skiing. When there’s news of a pending ice storm, I doubt whether it saddens the hearts of those in the collision repair business. I also tell my students that I profit from their misfortune — their ignorance of economic theory.
A price is a signal wrapped up in an incentive so if you want a strong signal and a strong incentive you need to let prices rise. The prices in this case don’t even seem that high:
From March 31 to April 22, prices asked by Cantor BioConnect for its cheapest samples — always sold by the milliliter, the equivalent of less than a quarter of a teaspoon — rose more than 40 percent, to $500 from $350.
Bear in mind the costs of collecting the sample, including nurse time and PPE. Some samples which are especially rich in antibodies, do sell for prices that are well above cost which is not surprising as those samples are in high demand as they may offer a cure.
Do the firms willing and able to pay the highest prices necessarily have the best science? No, not necessarily, but on balance the decentralized allocation process offered by markets and civil society will likely be far more effective than centralized, political allocation. We also know from field experiments around the world that higher prices for blood increase supply, a key consideration.
As Hayek said the moral rules of the tribe which appear natural to us–like don’t profit from misery–cannot maintain a civilization so we struggle between what we think is right and what actually works to prevent misery.
There can be no doubt that our innate moral emotions and instincts were acquired in the hundreds of thousand years—probably half a million years—in which Homo sapiens lived in small hunting and gathering groups and developed a physiological constitution which governed his innate instincts. These instincts are still very strong in us. Yet civilization developed by our gradually learning cultural rules which were transmitted by teaching and which served largely to restrain and suppress some of those natural instincts.