Our regulatory state is failing us, installment #1437

The Trump administration has stumbled in its initial push to implement the $2 trillion coronavirus aid package, with confusion and fear mounting among small businesses, workers and the newly unemployed since the bill was signed into law late last month.

Small-business owners have reported delays in getting approved for loans without which they will close their doors, while others say they have been denied altogether by their lenders and do not understand why. The law’s provision to boost unemployment benefits has become tangled in dated and overwhelmed state bureaucracies, as an unprecedented avalanche of jobless Americans seeks aid.

Officials at the Internal Revenue Service have warned that $1,200 relief checks may not reach many Americans until August or September if they haven’t already given their direct-deposit information to the government. Taxpayers in need of answers from the IRS amid a rapidly changing job market are encountering dysfunctional government websites and unresponsive call centers that have become understaffed as federal workers stay home.

Here is the full piece by Jeff Stein.  And here is me in WaPo:

Cowen said it’s inexplicable why the federal government, given all the warnings and evidence from China of a spreading pandemic, did not move more rapidly.

“You know, Trump was terrible, but you can’t just pin it on him. It’s far more systemic than that. The NBA [which suspended its season on March 11] really gets so much credit. I would put the NBA in charge of fighting climate change at this point.”

The piece there is by Dan Balz.

Why I do not favor variolation for Covid-19

Robin Hanson makes the strongest case for variolation, here is one excerpt:

So the scenario is this: Hero Hotels welcome sufficiently young and healthy volunteers. Friends and family can enter together, and remain together. A cohort enters together, and is briefly isolated individually for as long as it takes to verify that they’ve been infected with a very small dose of the virus. They can then interact freely with each other, those those that show symptoms are isolated more. They can’t leave until tests show they have recovered.

In a Hero Hotel, volunteers have a room, food, internet connection, and full medical care. Depending on available funding from government or philanthropic sources, volunteers might either pay to enter, get everything for free, or be paid a bonus to enter. Health plans of volunteers may even contribute to the expense.

Do read the whole thing.  By the way, here is “Hotel Corona” in Tel Aviv.  Alex, by the way, seems to endorse Robin’s view.  Here are my worries:

1. Qualified medical personnel are remarkably scarce right now.  I do not see how it is possible to oversee the variolation of more than a small number of individuals.  Furthermore, it is possible that many medical personnel would refuse to oversee the practice.  The net result would be only a small impact on herd immunity.  If you doubt this, just consider how bad a job we Americans have done scaling up testing and making masks.

The real question right now is what can you do that is scalable?  This isn’t it.

I recall Robin writing on Twitter that variolation would economize on the number of medical personnel.  I think it would take many months for that effect to kick in, or possibly many years.

2. Where will we put all of the Covid-positive, contagious individuals we create?  What network will we use to monitor their behavior?  We have nothing close to the test and trace systems of Singapore and South Korea.

In essence, we would have to send them home to infect their families (the Lombardy solution) or lock them up in provisional camps.  Who feeds and takes care of them in those camps, and what prevents those individuals from becoming infected?  What is the penalty for trying to leave such a camp?  Is our current penal system, or for that matter our current military — both longstanding institutions with plenty of experienced personnel — doing an even OK job of overseeing Covid-positive individuals in their midst?  I think not.

Under the coercive approach, what is the exact legal basis for this detention?  That a 19-year-old signed a detention contract?  Is that supposed to be binding on the will in the Rousseauian sense?  Where are the governmental structures to oversee and coordinate all of this?  Should we be trusting the CDC to do it?  Will any private institutions do it without complete governmental cover?  I don’t think so.

If all this is all voluntary, the version that Robin himself seems to favor, what percentage of individuals will simply leave in the middle of their treatment?  Robin talks of “Hero Hotels,” but which actual hotels will accept the implied liability?  There is no magic valve out there to relieve the pressure on actual health care systems.  Note that the purely voluntary version of Robin’s plan can be done right now, but does it seem so popular?  Is anyone demanding it, any company wishing it could do it for its workforce?

3. The NBA has an amazing amount of money, on-staff doctors, the ability to afford tests, and so on.  And with hundreds of millions or billions of dollars at stake they still won’t restart a crowdless, TV-only season.  They could indeed run a “Heroes Hotel” for players who got infected from training and play, and yet they won’t.  “Stadium and locker room as Heroes Hotel” is failing the market test.  Similarly, colleges and universities have a lot at stake, but they are not rushing to volunteer their dorms for this purpose, even if it might boost their tuition revenue if it went as planned (which is not my prediction, to be clear).

The proposal requires institutions to implement it, yet it doesn’t seem suited for any actual institution we have today.

4. Does small/marginal amounts of variolation do much good compared to simply a weaker lockdown enforcement for activities that involve the young disproportionately?  Just tell the local police not to crack down on those soccer games out in the park (NB: I am not recommending this, rather it is the more practical version of what Robin is recommending; both in my view are bad ideas.)  Robin’s idea has the “Heroes Hotel” attached, but that is a deus ex machina that simply assumes a “free space” (both a literal free space and a legally free space) is available for experimentation, which it is not.

5. Society can only absorb a small number of very blunt messages from its leaders.  You can’t have the President saying “this is terrible and you all must hide” and “we’re going to expose our young” and expect any kind of coherent response.  People are already confused enough from mixed messages from leaders such as presidents and governors.

6. There is still a chance that Covid-19 causes or induces permanent damage, perhaps to the heart and perhaps in the young as well.  That does not militate in favor of increasing the number of exposures now, especially since partial protective measures (e.g., antivirals, antibodies) might arise before a vaccine does.  This residual risk, even if fairly small, also makes the liability issues harder to solve.

7. The actual future of the idea is that as lockdown drags on, many individuals deliberately will become less careful, hoping to get their infections over with.  A few may even infect themselves on purpose, one hopes with a proper understanding of dosage.  One can expect this practice will be more popular with the (non-obese) young.  The question is then how to take care of those people and how to treat them.  That debate will devolve rather rapidly into current discussions of testing, test and trace, self-isolation, antivirals, triage, and so on.  And then it will be seen that variolation is not so much of a distinct alternative as right now it seems to be.

8. The main benefit of variolation proposals is to raise issues about the rates at which people get infected, and the sequencing of who is and indeed should be more likely to get infected first.  Those questions deserve much more consideration than they are receiving, and in that sense I am very happy to see variolation being brought (not much risk of it happening as an explicit proposal).  That said, I don’t think Heroes Hotel, and accelerating the rate of deliberate, publicly-intended infection, is the way to a better solution.

Soon I’ll write more on what I think we should be doing, but I would not put explicit variolation above the path of the status quo.

Pickles are underrated

You are going to be running to the refrigerator for snacks anyway, so why not make the most of it?  Pickles are cool, fresh, delicious, and just the right size for snacking.  At the same time, they are not too delicious, and they are pretty good for you, more so than say chips or candy.  They store well too.  I have been ordering from Number One Sons (kimchee too, and they deliver in my area), while one very smart reader (Alex R.) recommends Oregon Brineworks, especially the spicy ones.

Soon I’ll be turning to books and movies for your lockdown.

Sunday assorted links

1. “As of Wednesday, women and men in Panama are under different quarantine schedules.

2. Banerjee and Duflo give their take.

3. On the decline of “Bridge Over Troubled Water.”  (I myself prefer “Cloudy,” among many other S&G songs.)

4. Does financial stress spur entrepreneurship?

5. “We find that firms that had more connections on the eve of the 1929 financial market crash have higher 10-year survival rates during the Great Depression. Consistent with a financing channel, we find that the results are particularly strong for small firms, private firms, cash-poor firms, and firms located in counties with high bank suspension rates during the crisis. Moreover, connections to cash-rich firms are stronger predictors of survival, overall and among financially constrained firms.”  Link here.

6. Is classical music becoming culturally more central under the lockdown?

7. 1957 flu memories, that was then this is now.

8. Roger Congleton model of the pandemic, the link downloads it rather than opening it up.

9. Maybe shaky as evidence, but this paper argues that thinking about coronavirus makes people more right-wing.

10. New site/model on estimating the number of infections.

11. How to do express loans for small businesses.

12. The impact on Native Americans.

Stopping time plus hazard pay?

You’ve previously publicized the clever solution to the Corona-crisis of “stopping time.”  As others have pointed out, a drawback is that we can’t stop time for everyone.  In particular, we need essential services to continue.

Separately, there is a significant case for hazard pay.  In principle we could let the market sort this out.  But in practice, we don’t want to spend the next month getting to the equilibrium with health care workers.

The current round of government interventions entail mounting distortions.

So perhaps a more efficient solution to all of this would be:
–stop time, but
–government sends everyone checks that can be used for food and gas and directly pays for essential services (public safety, medical, utilities)

The net effect is hazard pay for essential workers—they continue to draw income, but their rent/mortgage/loan/utility obligations are frozen just like everyone else’s.

As a ballpark cost: if 25% of the economy is essential, this is about $400B/month.

Expensive, but much cheaper than alternatives.

That is from an email from Philip Bond, University of Washington.

Nils Karlson on the Swedish strategy (from an email forwarded to me)

Dear [redacted],

The strategy chosen by Sweden is of course discussed, but I would still say that there is a broad consensus across the political spectrum viewing the strategy, at least so far, as being wise.

I think this can be explained by at least the following five factors:

1. The high horizontal trust and the high vertical trust in Swedish society. In Swedish culture we usually trust that our peers will behave a responsible way and respect the integrity of others. Moreover, we usually trust our authorities, not only politicians but also the public administration. As a consequence “recommendations” for how to behave in regards to Covid-19 has so far been enough.

2. The long tradition of administrative independence. Since the 17th century we have an administrative system where the central governmental agencies such as the National Health Agency is independent. It is a quiet unique system of division of power, where the implementation of laws and regulations is entrusted to the bureaucracies rather than the politicians. As a result the experts rather the politicians have the say, make recommendations and the like, even in a situation like this. And their recommendation has been to not close down the whole society, but to avoid social contacts and to totally refrain from interact with people older than 70 years.

3. An attempt to reach group or mass immunity. As I interpret these experts the attempt is to reach group or mass immunity, 60 – 70 percent, of the population without reaching the limits of intensive care and by protecting the elderly. Also the ambition is to have the staff at hospitals on the job. Hence, child care and schools for children up to high school s still open as usual, shops, restaurants are still open, even if I many of them have very few customers.

4. As strong belief across the political parties to keep the economy going. There is wide consensus in Sweden about the value of work and to have jobs available, and in particular to keep the important export sector intact. I think especially the experience of the deep crisis we had in the early 1990s is important here. But perhaps also that the current prime minister has a back ground as the chairman of the metal workers union.

5. A long tradition of peace. A last factor I believe is that Sweden has stayed out of wars for over 200 years, Hence, we really do not think that disaster can happen to us. This in contrast to for example Denmark, Norway and Finland, who in fact have chosen very different strategies.

More generally, here is Dan Klein on Sweden.  Rolander and Daly (Bloomberg) wonder if Sweden will reverse its experiment.

Sentences to ponder, Mencius Moldbug coronavirus edition

“Anyone repeating lines like “the Trump administration has failed” is spreading an Orwellian lie. There is no “Trump administration.” There is an elected showman and his cronies, fronting for an unaccountable permanent government. The celebrities are neither in charge of the bureaucrats, nor deserve to be. Anyone can be excused for thinking either team is worse than the other. No one can be excused for confusing the two.”

That is from Mencius Moldbug, on the coronavirus, interesting throughout, though some of it quite off base I think.

That was then, this is now — Pushkin under lockdown

In autumn 1830, Pushkin was confined by a cholera outbreak to the village of Boldino, his father’s remote country estate in southeastern Russia. Desperate to return to Moscow to marry, he wrote to his fiancée: “There are five quarantine zones between here and Moscow, and I would have to spend fourteen days in each. Do the maths and imagine what a foul mood I am in.”

Pushkin went on complaining bitterly but, with nothing else to do, he produced an astonishing number of masterpieces — short stories, short plays, lyric and narrative poems, and the last two chapters of his verse novel Eugene Onegin — in a mere three months.

Here is the full FT piece by Robert Chandler.

Saturday assorted links

Tethered pairs and locational extremes

Let us assume that you, for reasons of choice or necessity, are spending time in close quarters with another person.  You are then less inclined to visit corona-dangerous locations.  In part you are altruistic toward the other person, and in part for selfish reasons you do not wish to lower the common standard of care.  If you go to a dangerous location, the other person might decide to do the same, if only out of retaliation or frustration.

In essence, by accepting such a tethered pair relationship, you end up much closer (physically, most of all) to one person and much more distant from the others.  You are boosting your locational extremes.

The physically closer you are to the other person, the more easily you can tell if he or she is breaking the basic agreement of minimal risk.  That tends to make the tethered pairs relatively stable.  Monitoring is face-to-face!

Tethered pairs also limit your mobility, because each of the two parties must agree that the new proposed location is safe enough.

People who live alone, and do not know each other initially, might benefit from accepting a tethered pair relationship.  The other person can help them with chores, problems, advice, etc., and furthermore the other person may induce safer behavior.  (Choose a carpenter, not a specialist!)  Many people will take risks if they are the only loser, but not if someone else might suffer as well.

A tethered triplet is harder to maintain than a tethered pair.  For one thing, the larger the group the harder it is to monitor the behavior of the others.  Furthermore, having a third person around helps you less than having a second person around (diminishing marginal utility, plus Sartre).  Finally, as the group grows large there are so many veto points on what is a safe location ( a larger tethered pair might work better with a clear leader).

Yet over time the larger groups might prove more stable, even if they are riskier.  As more things break down, or the risk of boredom and frustration rises, the larger groups may offer some practical advantages and furthermore the entertainments of the larger group might prevent group members from making dangerous trips to “the outside world.”

There is an external benefit to choosing a tethered pair (or triplet, or more), because you pull that person out of potential circulation, thus easing congestion and in turn contagion risk.  Public spaces become safer.

As you choose a tethered pair initially, the risk is relatively high.  The other member of the pair might already be contagious, and you do not yet have much information about what that person has been up to.  As the tethered pair relationship proceeds, however, it seems safer and safer (“well, I’m not sick yet!”), and after two weeks of enforced confinement it might be pretty safe indeed.

Very often married couples will start out as natural tethered pairs.  At the margin, should public policy be trying to encourage additional tethered pairs?  Or only in the early stages of pandemics, when “formation risk” tends to be relatively low?  Do tethered pairs become safer again (but also less beneficial?), as a society approaches herd immunity?

It may be easier for societies with less sexual segregation to create stable tethered pairs, since couple status is more likely to overlap with “best friend” status.

One advantage of good, frequent, and common testing is that it encourage the formation of more tethered pairs.

You can modify this analysis by introducing children (or parents) more explicitly, or by considering the varying ages of group members.  You might, for instance, prefer to be a tethered pair with a younger person, but not everyone can achieve that.

World 2.0 — “There are decades where nothing happens, and weeks where decades happen”

This is from a very able and perceptive correspondent:

World 1.0 World 2.0
110 successive months of job growth 10 million jobless claims in 2 weeks
10 year bull market across sectors Winners and losers with extreme outcome inequality
Full employment 30% unemployment
Base rate thinking First principles thinking
Physical Digital
Office by default Remote by default
Office for work Office for connection, community, ecosystem, makerspaces
Suit, tie, wristwatch, business card Good lighting, microphone, webcam, home office background
Commute + traffic jams Home + family
Last mile Only mile
Restaurants Groceries + delivery
$4 toast Sourdough starter
Walkscore Speedtest
Cities Internet
$100k for college Not paying $100k for a webinar
City Countryside
YIMBY NIMBY
Internal issues Exogenous shock
Lots of little problems One big problem
Stupid bullshit Actual issues
Too much technology Too little technology
Complacency Action
Years Days
Policy Capacity
Ideology Competence
Assume some government competence Assume zero government competence
Institutions Ghost ships
WHO Who?
Trusted institutions Trusted people
Globalization Decoupling
Just-in-time Stockpile
Tail risk is kooky Tail risk is mainstream
NATO Asia
Boomers most powerful Boomers most vulnerable
Productivity growth collapse Economic collapse
Social services Democrat UBI Communist
Propaganda Propaganda
Deficit hawks MMT
Corporate debt Government debt
Techlash Tech a pillar of civilization and lifeline to billions
Break up Amazon Don’t break up Amazon!!!
Avoiding social issues Avoiding layoffs
Sports Esports
Phone is a cigarette Phone is oxygen
Resource depletion $20 oil, $0.75 watt solar, <$100/kwh batteries
Stasis Change
Low volatility High volatility
Design Logistics
Extrovert Introvert
Open Closed
20th century 21st century

Measuring the Cost of Regulation: A Text-Based Approach

We derive a measure of firm-level regulatory costs from the text of corporate earnings calls. We then use this measure to study the effect of regulation on companies’ operating fundamentals and cost of capital. We find that higher regulatory cost results in slower sales growth, an effect which is mitigated for large firms. Furthermore, we find a one-standard deviation increase in our preferred measure of regulatory cost is associated with an increase in firms’ cost of capital of close to 3% per year. These findings suggest that regulatory risk is a major cost to firms, but the largest firms are able to manage that risk better.

That is the abstract of a new NBER paper by Charles W. Calomiris, Harry Mamaysky, Ruoke Yang, a piece written in pre-Covid-19 times.  It has never been more relevant, except that the estimates for regulatory costs turn out to be far too low (no criticism of the authors is intended here).  To repeat my earlier point, America’s regulatory state is failing us.

Friday assorted links

1. Scott Alexander reviews Toby Ord’s The Precipice, about existential risk.

2. Pooled testing in Germany.

3. A critique of the Paycheck Protection Program — it might help already stable restaurants the most.  See also this tweet storm.

4. Should we pivot to a service trade agenda?

5. Full paper assessing health care capacity in India.

6. Claims about Covid and the future economics of cultural institutions.

7. I could link to Matt Levine every day, but do read this one on liquidity transformation.

8. How is the cloud holding up?  A good post.

9. Immunity segregation comes to Great Britain.

10. Robin Hanson on the variance in R0 and how hard it is to halt the spread of the virus.

11. New program for on-line “Night Owls” philosophy by Agnes Callard.

12. The true story of the toilet paper shortage: it’s not about hoarding, rather a shift of demand away from the commercial sector into the household sector (you are doing more “business” at home these days).

13. “U.S. ALCOHOL SALES INCREASE 55 PERCENT IN ONE WEEK AMID CORONAVIRUS PANDEMIC.

14. Fan, Jamison, and Larry Summers 2016 paper on the economics of a pandemic.  I wrote at the end of the blog post: “In other words, in expected value terms an influenza pandemic is a big problem indeed.  But since, unlike global warming, it does not fit conveniently into the usual social status battles which define our politics, it receives far less attention.”

15. Buying masks from China just got tougher.

16. How to produce greater capacity flexibility for hospitals.

17. Paycheck Protection Program is steeped in chaos.

That was then, this is now: Palantir privacy edition

Data-analytics company Palantir Technologies Inc. is in talks to provide software to governments across Europe to battle the spread of Covid-19 and make strained health-care systems more efficient, a person familiar with the matter said.

The software company is in discussions with authorities in France, Germany, Austria and Switzerland, the person said, asking not to be identified because the negotiations are private…

European Union Commissioner Thierry Breton said Monday that the bloc is collecting mobile-phone data to help predict epidemic peaks in various member states and help allocate resources.

Palantir has signed a deal with a regional government in Germany, where it already has a 14 million euro ($15 million) contract with law enforcement in North Rhine-Westphalia, the person said. Palantir is also seeking a contract at a national level, the person said, but talks have stalled, the person added.

When a nation or company buys access to Palantir, it can use the data analytics software to pull far-flung digital information into a single repository and mine it for patterns.

Here is the full story.  From a distance it is difficult to evaluate these deals, but I will stick with my general claim that the anti-tech intellectuals have become irrelevant, and for the most part they know it.

How many lives is hospitalization saving in the pandemic?

Do we have evidence that hospitalization of COVID19 patients is actually saving significant numbers of lives?

I’ve now seen multiple studies suggesting that up to 80 or 90 percent of patients who end up on ventilators ultimately die.  At this point, I guess there’s no way to know if the other 10 percent would have lived without the ventilators.  From what I can tell, most other hospitalized patients are getting supplemental oxygen, IV fluids and antibiotics.  I have not seen any evidence on the effectiveness of these treatments.  Many of those patients live, but we don’t know whether they would have recovered without hospitalization.  It would obviously be impossible to do a RCT on that at the moment.

Answering the question about the efficacy of hospitalization would seem to be critical, though, since, as best I can tell, the main justification for shutting down society now is to prevent our health care system from being overwhelmed – especially the supply of ventilators.  If our hospitals are overwhelmed, not only COVID19 patients, but others with treatable injuries/diseases might die.  But if hospitalization is not actually saving COVID19 patients in large numbers, then all the costly social interventions we are implementing now are mostly just delaying the spread of infection.  Still, I recognize that it’s possible that this delay could save lives in one of two ways (or maybe there are more I’m not thinking of?).

1. We use the time to get better at testing.  Then, when we lift the social distancing measures in a month or two, we have the ability to quickly test and isolate infected individuals and their close contacts.  Maybe we also have anti-body tests so we can avoid quarantining immune individuals.  This keeps the rate of spread relatively low until we have better treatments or a vaccine for those who haven’t been infected yet.  It’s possible that “at-risk” groups will have to stay isolated during this time until we get effective treatments/vaccine.  I haven’t seen any estimates of how effective this kind of strategy might be – i.e., over a course of 18 months (the time to develop/deploy a vaccine) how many infections would this prevent?

2. We could keep the social distancing policies in place until we get a vaccine/treatment.  But if estimates of 18+ months to a vaccine are correct, I suspect the economic costs will be too high to bear to wait it out this way.  So this is probably not in the cards.

If the number of lives we can save with #1 is relatively low (I have no idea what the number is), and if #2 is off the table, then we are really just delaying most deaths, at great social cost.  It might be better to prevent our hospitals from being overwhelmed by doing better triage for admission – especially to ICU beds and ventilators (what percent of people over age 75 survive after going on a ventilator?), and working on getting people other treatments (oxygen, etc.) at home.  At a minimum, it seems like the intense energy and resources focused on ventilators now might be misplaced.

For what it is worth, I’m not a skeptic of the current social distancing policies.  I’m pretty sure I’d be doing all this and more if I were in charge.  But I’d also be looking for evidence that what we are doing is the best course of action, given the massive costs.

That is an email from a very smart person.  To that tally we also must add the negative that hospitals often become a vector for the further spread of the virus.

So what does the best evidence say here?