Friday assorted links
2. Don Boudreaux open letter to me. Here is my original post, and here is AIER being useful. If the GBD had been this second link here, I would be wrong. But it wasn’t.
3. Chinese to vaccinate 50 million for lunar new year.
4. Model and evidence for the IPO market being efficient.
5. Why Iger is a bad pick for ambassador to China.
6. Whether you agree or not, the method and approach of the government/CDC here on vaccine allocation are so low quality as to almost defy belief. Again, whether or not you are convinced by Matt Yglesias, his simple Substack on this same question did a better job (and at a profit, presumably!). A useful reminder for those of you who “blame the CDC problems on Trump.” Here is related NYT coverage. And never forget Glazer. Why do we not prioritize men, who are at higher risk? And from “an expert in ethics.”
8. “Atlantic City has launched an auction in which the winner will get to virtually push the button that starts the long-anticipated implosion of the former Trump Plaza Hotel and Casino building.” Link here.
That was then, this is now, Malthus and Ireland edition
In the present wreck of empires, and under the extinction of all international law, no small state can hope to maintain its independence. Great Britain and Ireland, from their situation, their language, and their mutual necessities, seem naturally destined to support each other’s strength, and supply each other’s wants; and we are quite convinced, that nothing but extreme misgovernment can separate them. Heavy indeed, then, will be the responsibility of those men, under who administration, or by whose previous unconciliatory measures such a separation is effected — whether the immediate cause of it be foreign conquest, or internal commotion.
That is Thomas Robert Malthus, “On the State of Ireland (II), published in the Edinburgh Review in 1809. It made perfect sense back then — and today — and yet for entirely different and indeed almost opposite reasons.
The very very best books of 2020
You may recall I already posted my best non-fiction books and best fiction books of 2020. But, unlike on previous lists, I didn’t pick a very best book of the year because in my gut I felt it had not yet arrived. Now I have a top three, all of which came after I posted my original list. Here are my top three picks for the year:
David S. Reynolds. Abe: Abraham Lincoln in His Times. At some point I vowed never to read another Lincoln biography, but this one won me over with its readability and also grasp of the broader cultural and political context. You may know Reynolds from his excellent Walt Whitman book — could there be a better background to write on Lincoln? Conceptual throughout. At 932 pp. every page of this one is instructive, even if you feel sated in Lincoln as I did.
Heather Clark, Red Comet: The Short Life and Blazing Art of Sylvia Plath. This is like the Lincoln biography — I was convinced I didn’t want to read a thousand pages about her (though I am a fan). And yet I keep on reading, now at about the halfway mark and I will finish with joy. This is one of the best and most gripping biographies I have read, covering growing up as a brilliant young woman in the 1950s, poetry back then, dating and gender relations amongst the elite at that time, how mental health problems were dealt with, and much more.
Jan Swafford, Mozart: the Reign of Love. Self-recommending. A wonderful biographer covers one of the most important humans, to produce the best Mozart biography of all time. You may recall I also had high praise for Swafford’s Beethoven biography from 2014.
Those are my top three books of the year. I think you can make a good case for Joe Henrich’s WEIRD book having the most important ideas of the year in it, but, perhaps because I already had read much of the material in article form, I didn’t love it as a book the way I do these.
Finally, I will note that the “best books lists” of other institutions have grown much worse, even over the last year. A good list has never been more valuable, and please note my recommendations are never done to fill a quota, “achieve balance,” right previous wrongs, or whatever. They are what I think are the best books. Scary how rare that has become.
Covid-19 is also not so great for young people
Young adults are dying at historic rates. In research published on Wednesday in the Journal of the American Medical Association, we found that among U.S. adults ages 25 to 44, from March through the end of July, there were almost 12,000 more deaths than were expected based on historical norms.
In fact, July appears to have been the deadliest month among this age group in modern American history. Over the past 20 years, an average of 11,000 young American adults died each July. This year that number swelled to over 16,000.
The trends continued this fall. Based on prior trends, around 154,000 in this demographic had been projected to die in 2020. We surpassed that total in mid-November. Even if death rates suddenly return to normal in December — and we know they have not — we would anticipate well over 170,000 deaths among U.S. adults in this demographic by the end of 2020.
That is from Jeremy Samuel Faust, Harlan M. Krumholz and at the NYT. To be clear, this is not the main problem, but it is not a nothingburger either. 3,656 deaths per day right now, no matter what the ages how many other American catastrophes can rival that? #1 cause of death in the country right now, bar none.
I am not so worried about inflation
I have pondered this matter further, and have upon reflection abandoned my previous concern with the high M2 figures. Here is one excerpt from my latest Bloomberg column:
To understand forthcoming inflation rates further, consider why monetary aggregates such as M2 have been rising so rapidly. It is not that the U.S. Federal Reserve wishes to relive the experience of the 1970s. It’s that many businesses have been borrowing while they can, fearing they may end up strapped for cash as the pandemic continues.
From that point onward, there are two possible paths. The first is that businesses will actually need that extra cash, due to low consumer demand and a stalled recovery. In that case, the potentially inflationary boost from a higher money supply would be offset by lower demand elsewhere in the economy. The velocity of money would be weak, and there would be no reason to expect major inflationary pressures.
The second possible path is that the recovery will proceed at a rapid clip, and businesses will have extra cash on their hands for a while. That likely would translate into lower borrowing for the rest of the year and a smoothing of monetary flows — and no major increase in inflationary pressures.
There will, however, be some areas of the economy in which inflation will likely be high. Consider a sector in which demand is largely seasonal and has been stifled by the pandemic, and supply in the short run is inelastic. One obvious example is summer vacation travel.
You also might say that I am agreeing with the market forecasts embedded in interest rates, indexed securities prices, and so on.
Thursday assorted links
1. Those new service sector jobs: death witnesses (Canada).
2. The culture that is Dodge City.
3. An NPR segment with Cardiff Garcia and me: after the Great Stagnation ends, what will be overrated and underrated?
4. Will there be a tobacco vaccine?
Are IPO price pops signs of market irrationality?
Maybe not, or so I argue in my latest Bloomberg column. As you may know, the first day price pops for Airbnb and Doordash were considerable, Airbnb more than doubling in its first day of trading: Here is one excerpt:
On IPO day, each prospective buyer is wondering what the shares will be worth, and to a great extent looking to the judgment of the other investors. A buyer might start the day willing to pay $60 a share, but upon seeing that many others are willing to pay more, maybe she will, too. It is like Keynes’s famed “beauty contest,” where investors are guessing as much about each other as about the company.
In such a setting, prices can rise or fall extremely quickly, as the very process of trading reveals information about the stock’s value. That in turn makes it possible for the share price to soar on the first day of trading, creating the “pop.”
Now consider this scenario from the perspective of the issuing investment bank. If it sets the IPO price too high, it may set off a downward spiral of negative enthusiasm. Traders will see that most of the other traders think it is overpriced, leading to a plunge.
It’s all a bit like a restaurant on a Saturday night. If the place is seen as “cool” — whether because of its food and service (the product), its setting (the physical asset) or its ambience (the brand) — there will be a line out the door. Otherwise it will be fairly empty. Furthermore, the presence of a line will draw continued interest over time. It is hard or maybe even impossible to set prices so that every table is filled yet there is no line. To deploy some technical language, the demand curve may be discontinuous.
In this position, the IPO issuer likely will set the initial price too low — leading to a “line,” excess demand, and a big run-up in price on the first day. If the price is super-high in the first place, the market mood would be nervousness rather than eagerness, and most investors wouldn’t be able to see the surges in demand visible in lower price ranges.
Keep in mind that this surge in buying interest only has to make investors modestly more enthusiastic about the quality of the firm to generate a potentially big increase in final valuation.
All this said, in the current case, there is the question of why the initial prices were so low. Several theories present themselves: The markets for DoorDash and Airbnb might be more “winner take all” than usual. The value of those companies might be more closely linked to the value of their intangible assets. Or maybe the future of online services might be especially hard to predict in the midst of a pandemic, thus inducing larger bandwagon effects.
It is worth noting that differing auction systems for IPOs have not produced obviously superior results.
From David Splinter, from my email
This is all David:
A related paper by BEA came out today with their updated distributional estimates of personal income. Marina Gindelsky has done a lot of work to produce these estimates.
I have a couple new papers on tax progressivity and redistribution that may be of interest to you. Both used CBO data to avoid the PSZ-AS differences. Abstracts below.
The first paper is about the ends of the distribution: tax progressivity has increased significantly since 1979 (and steadily since 1986) due to more generous tax credits for the bottom, while average tax burdens of the top have been relatively unchanged because lower marginal rates were offset by decreased use of tax shelters. The online appendix shows why the CBO estimates differ from those of Saez and Zucman (see Fig. B7 at the end; it’s mostly due to refundable credits at the bottom and imputed income at the top) and the Heathcote et al. paper you blogged about a couple months ago (it’s technical differences and their inclusion of some transfers, but their most similar measure of tax progressivity was not flat—it increased 21 percent since 1979).
The second paper, with Adam Looney and Jeff Larrimore, is about the middle of the distribution. Since 1979, we found that non-elderly middle-class market income increased 39 percent in real per person terms. The increase was 57 percent when accounting for taxes and transfers. This seems to fit with the “updated” view of stagnation—expanding male wages to also look at untaxed compensation and including female compensation and taxes/transfers shows larger median growth. But there was a structural break in 2000. Before then, middle-class incomes grew at the same rate before and after taxes and transfers, and since then income after taxes and transfers grew three times faster (Fig. 6 on page 19). We don’t discuss the recent market income slowdown (maybe related to the debated labor share break around 2000), but we show that the additional fiscal support that filled the gap looks like an unsustainable way to boost middle-class disposable incomes going forward.”
Wednesday assorted links
My Conversation with John O. Brennan
Here is the audio, video, and transcript — we are both Irish-Americans who were born in Hudson County, New Jersey, and who spent most of our lives working in northern Virginia, the CIA in his case. Here is part of the CWT summary:
John joined Tyler to discuss what working in intelligence taught him about people’s motivations, how his Catholic upbringing prepared him for working in intelligence, the similarities between working at the CIA and entering the priesthood, his ability to synthetize information from disparate sources, his assessment on the possibility of alien life, the efficacy of personality tests and polygraphs, why CIA agents are so punctual, how the CIA plans to remain a competitive recruiter for top talent, the challenges that spouses and family members of intelligence workers face, the impact of modern technology on spycraft, why he doesn’t support the use of enhanced interrogation techniques, his favorite parts of Cairo, the pros and cons of the recent Middle Eastern peace deal brokered by Jared Kushner, the reasons he thinks we should leverage American culture more abroad, JFK conspiracy theories, why there seemed to be much less foreign interference in the 2020 election than experts predicted, what John le Carré got right about being a spy, why most spies aren’t like James Bond, what he would change about FISA courts, and more.
Here is one excerpt:
COWEN: Are CIA agents more punctual than average?
BRENNAN: Some certainly are. Many of them need to be if you’re going to have a rendezvous, a clandestine rendezvous with a spy from overseas, one of your assets or agents. You have worked for hours to get clean so that you make sure that the local security services are not onto you and surveilling you, and your agent has done the same thing so that when you meet at the designated place at a designated hour, you can quickly then have either a brush pass or a quick meeting or whatever.
If you’re not punctual, you can put that agent’s life in danger. I think it’s instilled in CIA, certainly case officers, that time is of the essence, and you need to be able to follow the clock.
Also, I remember when I was CIA director and I would go down to the White House for an executive council meeting or a principals committee meeting. Jim Clapper, the director of National Intelligence, and myself would always be the first ones there because we were always very punctual. I think sometimes the policymakers would look at the clock not as carefully as we would.
COWEN: If you’re hiring for punctuality, and obviously, you would expect employees to show an extreme degree of loyalty, do you worry that you’re not hiring for enough of what’s called disagreeability in the personality literature: people who will contradict their superiors, people who will pick fights? They’re a pain to work with, but at the end of the day, they bring up points that other people are afraid to say or won’t even see.
BRENNAN: We’re not looking to hire just a bunch of yes people. To me, I don’t think punctuality means that you’re looking to instill discipline in an organization. You’re trying to ensure that you’re taking advantage of —
COWEN: But that and loyalty — it would seem to select against disagreeability.
BRENNAN: There’s loyalty to the Constitution. There’s loyalty to the oath of office. To me, there shouldn’t be loyalty to any individuals, including inside the CIA. I would like to think that CIA recruiters would be looking for individuals who are intellectually curious, have critical thinking skills, and mainly have also, I think, some degree of contrariness because you don’t want people just to accept as gospel what it is that they are being told, especially if they’re going to be interacting with spies overseas.
Definitely recommended, fascinating throughout. And here is John’s new book Undaunted: My Fight Against America’s Enemies, At Home and Abroad.
John O. Brennan on UFOs
I thought I would give this segment its own post, again here is the audio, video, and transcript of my Conversation with John O. Brennan, head of the CIA for four years under President Obama:
BRENNAN: I’ve seen some of those videos from Navy pilots, and I must tell you that they are quite eyebrow-raising when you look at them. You try to ensure that you have as much data as possible in terms of visuals and also different types of maybe technical collection of sensors that you have at the time.
Also, I believe, it’s important to reach out into other environments and find out, were there any type of weather phenomena at that time that might have, in fact, created the appearance of the phenomenon that you’re looking at? Were there some things that were happening on the ground, or other types of phenomena that could help explain what seems to be quite a mystery as far as what is there?
I think an important thing for analysts to do is not to go into this type of challenge either discounting certain types of possibilities or believing in advance that it is likely X, Y, or Z. You really have to approach it with an open mind, but get as much data as possible and get as much expertise as possible brought to bear.
COWEN: At the end of all that sifting and interpreting, what do you think is the most likely hypothesis?
BRENNAN: [laughs] I don’t know. When people talk about it, is there other life besides what’s in the States, in the world, the globe? Life is defined in many different ways. I think it’s a bit presumptuous and arrogant for us to believe that there’s no other form of life anywhere in the entire universe. What that might be is subject to a lot of different views.
But I think some of the phenomena we’re going to be seeing continues to be unexplained and might, in fact, be some type of phenomenon that is the result of something that we don’t yet understand and that could involve some type of activity that some might say constitutes a different form of life.
The major reason I take UFO reports seriously is simply the “gradient” of other people who take them seriously — the people with the very highest security clearances! It is not just Brennan and Harry Reid, there are others too, namely people with the very highest level of security clearance who believe these issues deserve further investigation, and are not just weather phenomena, instrument mistakes, weather balloons, etc.
The ideological shift of the libertarian movement on pandemics
In the midst of his libertarian phase, Milton Friedman wrote:
As already noted, significant neighborhood effects justify substantial public health activities: maintaining the purity of water, assuring proper sewage disposal, controlling contagious diseases.
Yet today many libertarians shy away from the actual execution of this for Covid-19.
Here is a 2014 Reason magazine symposium on Ebola, by . Of those four I know Bailey a wee bit (not well), but from the entries and bylines and the very title of the feature — “What Is the Libertarian Response to Ebola? How a free society should respond to a communicable disease outbreak” — they would indeed seem to be self-described libertarians.
All four, as I read them, are willing to accept the idea of forced quarantine of individuals. Not just in extreme lifeboat comparisons, but in actual situations that plausibly might have arisen at that time. If you don’t already know, Reason, while not mega-extreme, typically would be considered more libertarian in orientation than most of the libertarian-leaning think tanks.
Maybe I was napping at the time, but I don’t recall any mega-scandal resulting from those proclamations.
Here is my earlier Bloomberg column rejecting the notion of forced quarantine of individuals for Covid-19, mostly on rights grounds, though I add some consequentialist arguments. I would not trade in the American performance for the Chinese anti-Covid performance if it meant we had to weld people inside their apartments without due process, for instance, as the Chinese (and Vietnamese and others) did regularly.
To be clear, Ebola and Covid-19 have very different properties, and you might favor forcible quarantine for one and not the other. Whether those differences in properties should matter for a rights perspective is a complex question, but still I am surprised to see that quarantine was — not long ago — considered so acceptable from a libertarian point of view, given the current pushback against pandemic-related restrictions.
(Speaking of shifts, here is Will Wilkinson on GBD. While I agree with many of his points, I am curious where Will stands on forcible quarantine of individuals on a non-trivial scale. He does say he favors a “supported isolation program,” so maybe he favors coercive quarantine but he doesn’t quite commit to that view either?)
I am surprised most of all how little interest current libertarians seem to have in the following “line”:
“A unregulated Covid-19 response would have been much, much better. We would have had a good vaccine right away, and tested it rapidly with a Human Challenge Trial. It would be sold around the world at a profit, with much quicker distribution and pandemic resolution than what we are seeing today. This pandemic was awful, but the market would have kicked butt cleaning it up.”
I am not here claiming that view is correct, only that a strong libertarian ought to be amenable to it. And yet I hear it remarkably infrequently, even though I think most committed libertarians would agree if you posed it to them as a direct question.
It is at least 20x more fashionable to obsess over the costs of lockdowns, combined with various denialist claims about the severity of the problem.
As for masks, how about this?:
“Masks? Masks are great, of course they are a public good. Markets are great at producing and maintaining value-maximizing voluntary norms such as mask-wearing!”
I cannot help but think that the views above in quotation marks would have been the dominant libertarian response in the 1980s or 1990s, and that the various brews appearing today are yet another sign of our Douthatian decadence.
China fact of the day
The investigation by the BBC uncovered documents and satellite imagery that suggest large numbers of the persecuted Uighur Muslim minority are being forced by the Communist Party to pick cotton or work in textile factories linked to detention camps. About a fifth of the world’s cotton supply comes from Xinjiang and it is widely used in the fashion trade.
Here is the Times of London story, via TEKL.
Inelastic demand
Last Thursday, Dale Mclaughlan bought a Jet Ski.
On Monday, the 28-year-old Scotsman was sentenced to four weeks in jail.
What happened on the three days in between, according to court documents, may be one of the more unusual instances of rule-flouting during the coronavirus pandemic.
The day after purchasing the watercraft, Mr. Mclaughlan set off at 8 a.m. for what he thought would be a 40-minute trip from the southwestern coast of Scotland to his girlfriend’s home on the Isle of Man, between England and Ireland. He later told the authorities that he had never ridden a Jet Ski before and that bad weather on the Irish Sea caused the trip to stretch to four and a half hours.
Mr. Mclaughlan finally reached his girlfriend on Friday night, after walking 15 miles from the Isle of Man’s coast to her home in its capital, Douglas. The couple spent the weekend enjoying the city’s nightlife, but their reunion was cut short, when he was arrested and later charged with one count of violating the Isle of Man’s coronavirus restrictions.
On Monday, he received a four-week jail sentence.
Here is the full NYT story. The Isle of Man keeps out visitors, and has managed to keep out the coronavirus as well.
Tuesday assorted links
1. A game design take on QAnon.
2. Is it counterproductive to pay people to take the vaccine? (NYT) And it seems the EU is moving up its vaccine approval meeting to the 21st, they must be as reckless as the Canadians and the German Bundesministerium für Gesundheit. More here, from someone who should know. And Ryan Bourne on who should be vaccinated first.
3. “Dr. honorific obligation for thee but not for me…”?
4. How much will facial recognition be regulated in 2021?
5. Does the new history of corn involve early trade with South America!?