MRU introduces a new series, Economists in the Wild. In this series, we talk with economists in widely varying fields about their cutting edge research. First up in the series is David Autor on the rise of superstar firms and the fall of the labor share.
More great material for your online economics seminars and a great resource to use with Modern Principles!
Mitch Daniels, the President of Purdue, has outlined a preliminary plan to reopen involving test, trace and supported isolation on campus.
We intend to know as much as possible about the viral health status of our community. This could include pre-testing of students and staff before arrival in August, for both infection and post-infection immunity through antibodies. It will include a robust testing system during the school year, using Purdue’s own BSL-2 level laboratory for fast results. Anyone showing symptoms will be tested promptly, and quarantined if positive, in space we will set aside for that purpose.
We expect to be able to trace proximate and/or frequent contacts of those who test positive. Contacts in the vulnerable categories will be asked to self-quarantine for the recommended period, currently 14 days. Those in the young, least vulnerable group will be tested, quarantined if positive, or checked regularly for symptoms if negative for both antibodies and the virus.
This paper provides details on transforming a university lab into a testing center. In essence, a major university with a hospital (which Purdue doesn’t have) should be able to do it technically but to work to reopen for students it probably has to be a university located outside of a major urban area. Here are a few possibilities:
- Baylor University
- Vanderbilt University
- University of Michigan, Ann Arbor
- University of Virginia
- University of Iowa
- University of Utah
- University of Alabama
Mitch Daniel also notes:
Our campus community, a “city” of 50,000+ people, is highly unusual in its makeup. At least 80% of our population is made up of young people, say, 35 and under. All data to date tell us that the COVID-19 virus, while it transmits rapidly in this age group, poses close to zero lethal threat to them.
which does seem to miss (ahem) an important group necessary for reopening.
Many people claim that commodification, transforming a good or activity into a commodity bought and sold on a market, corrupts that good or activity. As Michael Sandel puts it:
Putting a price on the good things in life can corrupt them. That’s because markets don’t only allocate goods; they express and promote certain attitudes toward the goods being exchanged.
But few people have tested this idea which is why I loved Stephen Clowney’s Does Commodification Corrupt? Lessons from Paintings and Prostitutes. Clowney does something simple. He interviews art appraisers and male escorts, people who live with commodification, and asks them about art and sex. In short he uses the “lived experiences of those affected by commodification” to test whether commodification corrupts.
Does appraising art, for example, reduce the appraiser’s appreciation for art the way working in a pork factory might reduce a worker’s appetite for bacon?
Scott Altman, a legal scholar who has studied commodification, perfectly captures the standard market skeptic position: “[s]omeone who spends all day estimating the value of art might eventually have difficulty appreciating art in any way other than as worth a certain amount.”
What does Clowney find?
Of the twenty assessors interviewed for this study, not one reported that market work disfigured their ability to enjoy the emotional, spiritual, and aesthetic qualities of artistic masterworks. In fact, most appraisers insisted they can easily and completely compartmentalize their professional duties from their private encounters with art. This finding challenges the panicked rhetoric of many anti-commodification theorists who continue to insist that commerce diminishes the meaning of sacred things. Contrary to the predictions of market skeptics, the appraisers in this study spoke with joyful enthusiasm about their experiences viewing exceptional works of art. Even the most senior appraisers—those who have monetized thousands and thousands of objects—remain passionate consumers of art in their personal lives.
…Jane C.H. Jacob, an appraiser with thirty-five years of experience, explained, “[the appraisal work] does not corrode my enjoyment at all. I never get tired of looking at art. Never bored. I love art more now than I did 20 years ago.” She continued, “[f]or me, the joy is being able to experience it and inspect it. Listen, I don’t love art because of the price, but because of the way I respond to it. When I see [Monet’s] Water Lilies I never don’t get excited. A tear comes to my eye.”
In fact “a majority of the assessors stated that ascribing values to art actually increased their admiration for paintings, photographs, sculptures, and other creative work.”
But how could that be so? Given the widely reported dangers of commodification, how could non-instrumental values blossom in the hard soil of the marketplace? Anti-commodification scholars, it seems, have failed to appreciate that market work is a powerful educational agent that breaks the stale cake of ignorance, turns apathy into understanding, and nurtures new insights about the sacred. Imagine, for example, an appraiser confronted with attaching value to Mary Cassatt’s painting, Young Mother Sewing. Anyone attempting to price such an object must, at the outset, become well-versed in the artist’s career, the provenance of the work, and the ethos of the larger impressionist movement. Then, the appraiser must probe to explain whether the painting is a “good, better, or best” example of Cassatt’s work.
… Arch-anti-commodificationist Elizabeth Anderson even suggests that those who engage in ranking and valuation of art are “philistines, snobs, and prigs, precisely those least open to a free exploration and development of their aesthetic sensibilities.” But that is quite wrong. Commodification does not render these artworks flat and fungible. And it is not carried out by Philistines. Just the opposite. Putting an accurate price on sacred objects demands education, rigorous training, and cultivation of the eye. Appraisers must understand the objects on an intimate level in order to properly evaluate their quality and make suitable comparisons between seemingly disparate works. Such knowledge only enhances appreciation for the way that creative work can exhilarate, sooth, baffle, enlighten, and uplift.
See also Tyler’s classic In Praise of Commercial Culture on these points.
What about sex?
In a sprawling literature, commentators have argued that exchanging sex for money “commodif[ies] sexuality,” degrades intimacy, “impedes human flourishing,” and foments attitudes that undermine the sacredness of the body. In short: market skeptics believe that prostitution corrupts the meaning of sex.
Clowney interviewed male escorts because he argues that the market in male escorts is freer and more developed. Male escorts, for example, are less likely to be abused by the police or pimps. Some will question that choice but for the purposes of the commodification theory it should still be the case that commodification degrades sex for the male escorts. Does it?
…the escorts I interviewed insisted that selling physical intimacy did not corrupt their understanding of sex. While the physical demands of the job often left the interviewees feeling exhausted, each of the prostitutes revealed that they continued to experience the loving (and joyfully profane) virtues of the sexual act. Indeed, a majority of escorts confided that their market work positively impacted their private lives—commercial sex honed their sexual skills, boosted their confidence, and deepened their understanding of other men.
… For these men, sex remained a joyful and cherished activity, even after years of selling their bodies.… A strong majority of the escorts reported that engaging in commercial sexual activities actually improved the quality of their private lives and their appreciation for sacred things.Just as appraisal work revealed new insights about the creative process, prostitution taught the interviewees about the complexity of desire, gave them a deeper understanding of the sexual act, and enhanced their ability to satisfy a private partner.
… Thus, far from turning sex into a flat and interchangeable commodity, market work deepened the escorts’ understanding of physical intimacy. Sex work instilled the importance of honest communication between partners, revealed that men have many different (and often colorful) needs, and showed that not all fantasies can be met by working off the same script. On these points, the market is an exacting teacher.
Clowney’s paper is a highly original, major new work in the commodification literature and contains much more of interest. Read the whole thing.
The latest relief bill contains another $320 billion in small business relief and $25 billion for testing. Finally, we get some serious money to actually fight the virus. But as Paul Romer pointed out on twitter, this is less than half of what we spend on soft drinks!!! (Spending on soft drinks is about $65 billion annually). Soda is nice but it is not going to save lives and restart the economy. Despite monumental efforts by BARDA and CEPI we are also not investing enough in capacity for vaccine production so that if and when when a vaccine is available we can roll it out quickly to everyone (an issue I am working on).
The failure to spend on actually fighting the virus with science is mind boggling. It’s a stunning example of our inability to build. By the way, note that this failure has nothing to do with Ezra Klein’s explanation of our failure to build, the filibuster. Are we more politically divided about PCR tests than we are about unemployment insurance? I don’t think so yet we spend on the latter but not the former. The rot is deeper. A failure of imagination and boldness which is an embarrassment to the country that put a man on the moon.
In Launching the Innovation Renaissance I said the US was a welfare/warfare state and no longer an innovation state. The share of R&D in the Federal Budget, for example, has diminished from about 12% at its height in the NASA years to an all time low of about 3% in recent years. We are great at spending on welfare and warfare but all that spending has crowded out spending on innovation and now that is killing us.
For 28 days, they did not leave — sleeping and working all in one place.
In what they called a “live-in” at the factory, the undertaking was just one example of the endless ways that Americans in every industry have uniquely contributed to fighting coronavirus. The 43 men went home Sunday after each working 12-hour shifts all day and night for a month straight, producing tens of millions of pounds of the raw materials that will end up in face masks and surgical gowns worn on the front lines of the pandemic.
…Nikolich said the plants decided to launch the live-ins so employees could avoid having to worry about catching the virus while constantly traveling to and from work, and so the staff at the factory could be closed off to nonessential personnel.
The article also indicates why price increases are critical to increase supply:
They were paid for all 24 hours each day, with a built-in wage increase for both working hours and off time, the company said. It did not disclose the specific percentages.
Hat tip: Jonathan Meer.
Earlier I suggested that that we offer unemployed people jobs that could be done from home:
A 21st century jobs program would pay people to stay home and isolate, support people without work, and produce some useful output all at the same time.
Writing at Brookings, Apurva Sanghi and Michal Lokshin provide some more ideas:
Another high-potential area is document digitization: Only 10 percent of the world’s books are digitized. Even with the current level of optical character recognition (OCR) technology, for a book to be digitized, an independent person needs to check it for errors, problems with tables and images, tagging, and oversee the look of the resulting text. Handwritten documents, images, and tables, even in printed books, require manual processing, proofreading, careful checking, and quality control. A person would receive scanned images of, let’s say, old letters to decipher and type into the electronic document. Comparing the results of several independent people working on the same document would assure the quality of transcription.
I want to add one more item to the list: contact tracing. In addition to tracing apps, we are going to need hundreds of thousands of people doing contact tracing and most of it can be done with email and phone from home. Two birds, one stone.
Rapid and accurate SARS-CoV-2 diagnostic testing is essential for controlling the ongoing COVID-19 pandemic. The current gold standard for COVID-19 diagnosis is real-time RT-PCR detection of SARS-CoV-2 from nasopharyngeal swabs. Low sensitivity, exposure risks to healthcare workers, and global shortages of swabs and personal protective equipment, however, necessitate the validation of new diagnostic approaches. Saliva is a promising candidate for SARS-CoV-2 diagnostics because (1) collection is minimally invasive and can reliably be self-administered and (2) saliva has exhibited comparable sensitivity to nasopharyngeal swabs in detection of other respiratory pathogens, including endemic human coronaviruses, in previous studies. To validate the use of saliva for SARS-CoV-2 detection, we tested nasopharyngeal and saliva samples from confirmed COVID-19 patients and self-collected samples from healthcare workers on COVID-19 wards. When we compared SARS-CoV-2 detection from patient-matched nasopharyngeal and saliva samples, we found that saliva yielded greater detection sensitivity and consistency throughout the course of infection. Furthermore, we report less variability in self-sample collection of saliva. Taken together, our findings demonstrate that saliva is a viable and more sensitive alternative to nasopharyngeal swabs and could enable at-home self-administered sample collection for accurate large-scale SARS-CoV-2 testing.
The FDA has also just approved an at-home test collected by nasal swab, a saliva test should not be far behind.
Hat tip: Cat in the Hat.
Led by Danielle Allen and Glen Weyl, the Safra Center for Ethics at Harvard has put out a Roadmap to Pandemic Resilience (I am a co-author along with others). It’s the most detailed plan I have yet seen on how to ramp up testing and combine with contact tracing and supported isolation to beat the virus.
One of the most useful parts of the roadmap is that choke points have been identified and solutions proposed. Three testing choke points, for example, are that nasal swaps make people sneeze which means that health care workers collecting the sample need PPE. A saliva test, such as the one just approved, could solve this problem. In addition, as I argued earlier, we need to permit home test kits especially as self-swab from near nasal appears to be just as accurate as nasal swabs taken by a nurse. Second, once collected, the swab material is classified as a bio-hazard which requires serious transport and storage safety requirements. A inactivation buffer, however, could kill the virus without killing the RNA necessary for testing and thus reduce the need for bio-safety techniques in transportation which would make testing faster and cheaper. Finally, labs are working on reducing the reagents needed for the tests.
Understanding the choke points is a big step towards increasing the quantity of tests.
In a post titled Defensive Gun Use and the Difficult Statistics of Rare Events I pointed out that it’s very easy to go wrong when estimating rare events.
Since defensive gun use is relatively uncommon under any reasonable scenario there are many more opportunities to miscode in a way that inflates defensive gun use than there are ways to miscode in a way that deflates defensive gun use.
Imagine, for example, that the true rate of defensive gun use is not 1% but .1%. At the same time, imagine that 1% of all people are liars. Thus, in a survey of 10,000 people, there will be 100 liars. On average, 99.9 (~100) of the liars will say that they used a gun defensively when they did not and .1 of the liars will say that they did not use a gun defensively when they did. Of the 9900 people who report truthfully, approximately 10 will report a defensive gun use and 9890 will report no defensive gun use. Adding it up, the survey will find a defensive gun use rate of approximately (100+10)/10000=1.1%, i.e. more than ten times higher than the actual rate of .1%!
Epidemiologist Trevor Bedford points out that a similar problem applies to tests of COVID-19 when prevalence is low. The recent Santa Clara study found a 1.5% rate of antibodies to COVID-19. The authors assume a false positive rate of just .005 and a false negative rate of ~.8. Thus, if you test 1000 individuals ~5 will show up as having antibodies when they actually don’t and x*.8 will show up as having antibodies when they actually do and since (5+x*.8)/1000=.015 then x=12.5 so the true rate is 12.5/1000=1.25%, thus the reported rate is pretty close to the true rate. (The authors then inflate their numbers up for population weighting which I am ignoring). On the other hand, suppose that the false positive rate is .015 which is still very low and not implausible then we can easily have ~15/1000=1.5% showing up as having antibodies to COVID when none of them in fact do, i.e. all of the result could be due to test error.
In other words, when the event is rare the potential error in the test can easily dominate the results of the test.
Addendum: For those playing at home, Bedford uses sensitivity and specificity while I am more used to thinking about false positive and false negative rates and I simplify the numbers slightly .8 instead of his .803 and so forth but the point is the same.
Here’s the latest video from MRU where I cover some interesting papers on the effect of pollution on health, cognition and productivity. The video is pre-Covid but one could also note that pollution makes Covid more dangerous. For principles of economics classes the video is a good introduction to externalities and also to causal inference, most notably the difference in difference method.
Might I also remind any instructor that Modern Principles of Economics has more high-quality resources to teach online than any other textbook.
I was surprised when Trump won. The economy was doing well, Trump had charisma but was erratic and made what seemed like many missteps (like disparaging people in the military) that it didn’t seem plausible he could win. Yet, he plowed through the Republican primaries and gathered such a large and powerful base of support that people like Ted Cruz and Lindsey Graham, who have good reasons to hate his guts, even they kowtowed. I don’t want to revisit the debates about why Trump won but one of the reasons was that his base felt disrespected by coastal and media elites–their religion, their guns, their political incorrectness, their patriotism, their education, their jobs–all disrespected.
And now maybe it is happening again. From the point of view of the non-elites, the elites with their models and data and projections have shut the economy down. The news is full of pleas for New York, which always seemed like a suspicious den of urban iniquity, but their hometown is doing fine. The church is closed, the bar is closed, the local plant is closed. Money is tight. Meanwhile the elites are laughing about binging Tiger King on Netflix. It doesn’t feel right. I can understand that or feel that I must try to understand that.
Here’s a picture from a protest in Ohio. It wasn’t a large protest, about 100 people, but they look pretty angry. They want to reopen the economy.
Photo: Joshua Bickel.
Columbus Dispatch: Kevin Farmer of Cincinnati climbed to the top of the Statehouse steps with his bullhorn to lead the protesters in a series of chants.
“Some say that we’re actually causing havoc or putting lives in danger right now — but actually they’re putting my livelihood in danger and others because we’re laid off during this pandemic,” Farmer said to the crowd.
Farmer told The Dispatch that he has been laid off from his job at Cincinnati Metropolitan Housing, and said his employer will contact him when it is OK to return to work.
Farmer said he hoped DeWine would see the dissent caused by the demonstration, and allow Ohioans to get back to their jobs.
“Don’t Mike DeWine supposed to be a Republican (sic)? Don’t he believe in less government? Small government?” Farmer said.
“He has an obligated right to get us back to work, because if not, what do you think Americans are gonna go through?”
Farmer also led the demonstrators in a series of “When I say tyrant, you say Mike DeWine” chants, among others.
Another demonstrator, John Jenkins of Pleasantville, was bearing an upside down American flag, traditionally a distress signal.
“Ohio is currently under distress,” Jenkins said. “The United States is generally under distress.”
…Joe Marshall, who did not identify where he was from, said he was representing Anonymous Columbus Ohio.
Marshall said he chose to demonstrate against DeWine because he believes DeWine and Acton are being led astray by the World Health Organization, which he said is corrupt and peddling false information to local governments.
“Their numbers here are what these clowns are going by,” Marshall said. “Even if they are right, they don’t justify” enforcing a stay-at-home order.
“These are common sense things,” Marshall said. “The problem is, Mr. DeWine doesn’t want to do common sense things, he wants to listen to Amy [Ohio Health Director Dr. Amy Acton, AT], and Amy gets her orders from the World Health Organization.”
Another protestor from a follow-up:
Columbus Dispatch: “We have children to feed, businesses to run, employees to pay, and Ohio must end this shutdown now. Those with high-risk categories and compromised immune systems can shelter safely at home while the rest of us can exercise our constitutional liberties to work and take care of our businesses and children.
“Patriots who love and respect our liberties and the Constitution are sick and tired of the fear-mongering while the governor and (state Health Director) Dr. (Amy) Acton continue to hide the numbers from the public.”
As Tyler put it yesterday, “America is a democracy, and the median voter will not die of coronavirus.” Solve for the equilibrium.
Addendum: In an excellent historical piece, Jesse Walker at Reason notes that cholera riots were common in Europe in the 19th century. Respect also played a role:
The more high-handed the ruling classes were, the more likely they were to be targeted by rumors and revolt. The riots persisted longest, Cohn writes, “where elites continued to belittle the supposed ‘superstitions’ of villagers, minorities, and the poor, violated their burial customs and religious beliefs, and imposed stringent anti-cholera regulations even after most of them had been proven to be ineffectual. Moreover, ruling elites in these places addressed popular resistance with military force and brutal repression.
Ryan Peterson, Flexport Founder and CEO, has an excellent piece on Why There Aren’t Enough Masks, and How to Get More. One part of the problem is a lack of working capital brought about in part by a fear of raising prices:
Typically, buyers of PPE, whether hospitals or medical distributors, expect to place purchase orders and only pay for products upon delivery, or even later.
But when demand surges by 20x, vendors simply don’t have the money required to scale production. Factories need money to add production lines, buy raw materials, and hire workers. They need down payments so they can move.
Buyers prefer to pay upon receipt of goods for two reasons. The first is to ensure quality: They can refuse payment if the goods they receive don’t meet their standards. The second reason is they prefer to keep cash on their balance sheets, rather than paying vendors in advance.
In ordinary times, sellers will accept this. But with the entire world desperate to buy PPE, manufacturers know they can ask for a down payment and get it. Other more aggressive entities are paying down payments, so if US buyers won’t, they don’t get the supply.
American medical distributors, governments, and even hospital chains, by contrast, have been less willing, or less able, to adapt to the new reality of paying vendors upfront, at higher prices than they’d contracted.
At the same time, US distributors can’t pass higher prices through to hospitals in the midst of the crisis, for fear of being accused of profiteering. Foreign governments and healthcare systems have been less encumbered by this, showing a willingness to pay more and pay faster to get first in line.
There was a recent debate on twitter about so-called price-gouging. It was said that the argument for raising prices is weak when the elasticity of supply is low. That’s not necessarily true. First, in an emergency even a small increase in quantity can be very valuable so high prices can have high utility payoffs. Second, vendors face credit market frictions and capital constraints. Borrowing in an emergency is often not possible–this means that asset balances matter and transferring wealth from buyers to firms can ease financial constraints. Put another way, it’s the short run increase in price which allows long run elasticities to increase. Elasticity is endogenous to pricing.
Hat tip: Paul Graham.
One silver lining of the crisis is that the country has been getting rid of a lot of regulations that slow things down. CA, however, has decided to slow things down even more.
Included in the council’s rules was a blanket extension of deadlines for filing civil actions until 90 days after the current state of emergency ends. Ominously for housing construction, this extended statute of limitations applies to lawsuits filed under the California Environmental Quality Act (CEQA).
That law requires local governments to study proposed developments for potentially significant environmental impacts. CEQA also gives third parties the power to sue local governments for approving a construction project if they feel that a particular environmental impact wasn’t studied enough.
The law has become a favored tool of NIMBYs and other self-interested parties to delay unwanted developments or to extract concessions from developers. Anti-gentrification activists use CEQA to stop apartment buildings that might cast too much shadow. Construction unions use the law as leverage to secure exclusive project labor agreements.
Under normal circumstances, these CEQA lawsuits have to be filed within 30 or 35 days of a project receiving final approval.
Notice that the law doesn’t say the NIMBYs get an extra 30 or 35 days to file. It says that NIMBYs get to file until 90 days “after the current state of emergency ends.” In other words, no one can know when they are free to build so the law could put every CA construction project that hasn’t already past CEQA review into limbo.
“If I’m a builder I can’t move forward with my project until the [CEQA] statute of limitations has expired. The reason why I can’t do that is because if you do move forward, courts have the authority to order you tear down what you’ve built,” Cammarota tells Reason, explaining that “lenders today are unwilling to fund those loans for construction until the statute of limitations has expired.”
Hat tip: Carl Danner.
I talk COVID-19 with David Beckworth on the latest episode of Macro Musings. We cover quite a bit of material including the real Corona threat that we are totally unprepared for and no one is talking about. Self-Recommending.
These estimates are from the Centre for the Mathematical Modelling of Infectious Diseases at the London School of Hygiene & Tropical Medicine. More details here.