Category: Current Affairs

U.S.A. facts of the day

One in four young adults between the ages of 18 and 24 say they’ve considered suicide in the past month because of the pandemic, according to new CDC data that paints a bleak picture of the nation’s mental health during the crisis.

The data also flags a surge of anxiety and substance abuse, with more than 40 percent of those surveyed saying they experienced a mental or behavioral health condition connected to the Covid-19 emergency. The CDC study analyzed 5,412 survey respondents between June 24 and 30.

The toll is falling heaviest on young adults, caregivers, essential workers and minorities. While 10.7 percent of respondents overall reported considering suicide in the previous 30 days, 25.5 percent of those between 18 to 24 reported doing so. Almost 31 percent of self-reported unpaid caregivers and 22 percent of essential workers also said they harbored such thoughts. Hispanic and Black respondents similarly were well above the average.

Here is the full story, via the excellent Kevin Lewis.

What should I ask Edwidge Danticat?

I will be doing a Conversation with her, she is the famed Haitian author.  Here is her extensive Wikipedia page.  Or here is part of a shorter bio:

Author Edwidge Danticat was born on January 19, 1969 in Port-au-Prince, Haiti to André Danticat and Rose Danticat. In 1981, she moved to Brooklyn, New York, where she graduated from Clara Barton High School and received her B.A. degree in French literature from Barnard College in New York City in 1990; and her M.F.A. degree in creative writing from Brown University in Providence, Rhode Island in 1993.

In 1983, at age fourteen, Danticat published her first writing in English, “A Haitian-American Christmas,” in New Youth Connections, a citywide magazine written by teenagers. Her next publication, “A New World Full of Strangers,” was about her immigration experience and led to the writing of her first novel, Breath, Eyes, Memory in 1994. In 1997, she was named one of the country’s best young authors by the literary journal Granta. Danticat’s other works include, Everything Inside, Claire of the Sea Light, Brother, I’m Dying, Krik? Krik!, The Farming of Bones, The Dew Breaker, and Create Dangerously: The Immigrant Artist at Work.

Danticat has also taught creative writing at New York University and the University of Miami. She has worked with filmmakers Patricia Benoit and Jonathan Demme, on projects on Haitian art and documentaries about Haiti.

So what should I ask her?

Probabilistic profit from UFOs?

Let’s say the rest of the market was undervaluing the chance of UFOs being “something interesting.”  What might be the proper trade?  David S. emails me, and I will dispense with further indentation but what follows are his words not mine:

“Some potential food for thought:

– Going long volatility or long defense stocks seems like the most conventional answer.

– An even more conventional answer would be that it wouldn’t matter since any apocalypse means that even a correct bet is unlikely to have material redeemable value.

– Rather than framing the payout event as the binary of an actual UFO invasion, an alternative framing would be to bet on further government leaks causing the market to move it’s probability of invasion / apocalypse from 0.00% to 0.01%.

  • Should you at least shorten the duration of your holdings on the margin? With interest rates near zero and record(-ish) high PE multiples, shouldn’t you be (marginally) less willing to pay for far-out cash flows? Could this finally fuel a resurgence of the value factor vs the growth factor?
  • To take it a step further, should people consume more today and invest less given that the EV/NPV of these payouts will be somewhat lower?
  • Other than high-dividend stocks and cash, what other trades are short-duration without going to zero if the apocalypse fails to arrive on time?

– My contrarian approach would be to go very long due to the underrated potential of technology transfer and overrated potential of apocalypse (especially in the near-term).  For instance, if we found intelligent life on a planet like Mars (but less intelligent than humans), it would likely be decades between first contact and when humans would muster a military force to extinguish or fully dominate the other species (if ever).  Also, based on the continued existence of thousands of species (many of which are flourishing) on earth in parallel with human existence, its not clear why we would assume that a more intelligent form of life that engages with humans would even try to extinguish. Per Steven Pinker, more intelligent species would likely also be more moral and therefore less likely to be focused on zero-sum extinction.”

TC again: Obviously many short positions would be in order. In terms of longs, my intuitions would be to buy a very diverse bundle of natural resources.  Presumably the aliens have not brought many minerals with them, and they will need some minerals to do…whatever it is they plan on doing.  Maybe lots of minerals.  But you don’t know which ones.

My Conversation with Nicholas Bloom

Excellent and interesting throughout, here is the transcript, video, and audio.  Here is part of the summary:

He joined Tyler for a conversation about which areas of science are making progress, the factors that have made research more expensive, why government should invest more in R&D, how lean management transformed manufacturing, how India’s congested legal system inhibits economic development, the effects of technology on Scottish football hooliganism, why firms thrive in China, how weak legal systems incentivize nepotism, why he’s not worried about the effects of remote work on American productivity (in the short-term), the drawbacks of elite graduate programs, how his first “academic love” shapes his work today, the benefits of working with co-authors, why he prefers periodicals and podcasts to reading books, and more.

Here is an excerpt:

COWEN: If I understand your estimates correctly, efficacy per researcher, as you measure it, is falling by about 5 percent a year [paper here]. That seems phenomenally high. What’s the mechanism that could account for such a rapid decline?

BLOOM: The big picture — just to make sure everyone’s on the same page — is, if you look in the US, productivity growth . . . In fact, I could go back a lot further. It’s interesting — you go much further, and you think of European and North American history. In the UK that has better data, there was very, very little productivity growth until the Industrial Revolution. Literally, from the time the Romans left in whatever, roughly 100 AD, until 1750, technological progress was very slow.

Sure, the British were more advanced at that point, but not dramatically. The estimates were like 0.1 percent a year, so very low. Then the Industrial Revolution starts, and it starts to speed up and speed up and speed up. And technological progress, in terms of productivity growth, peaks in the 1950s at something like 3 to 4 percent a year, and then it’s been falling ever since.

Then you ask that rate of fall — it’s 5 percent, roughly. It would have fallen if we held inputs constant. The one thing that’s been offsetting that fall in the rate of progress is we’ve put more and more resources into it. Again, if you think of the US, the number of research universities has exploded, the number of firms having research labs.

Thomas Edison, for example, was the first lab about 100 years ago, but post–World War II, most large American companies have been pushing huge amounts of cash into R&D. But despite all of that increase in inputs, actually, productivity growth has been slowing over the last 50 years. That’s the sense in which it’s harder and harder to find new ideas. We’re putting more inputs into labs, but actually productivity growth is falling.

COWEN: Let’s say paperwork for researchers is increasing, bureaucratization is increasing. How do we get that to be negative 5 percent a year as an effect? Is it that we’re throwing kryptonite at our top people? Your productivity is not declining 5 percent a year, or is it? COVID aside.

BLOOM: COVID aside. Yeah, it’s hard to tell your own productivity. Oddly enough, I always feel like, “Ah, you know, the stuff that I did before was better research ideas.” And then something comes along. I’d say personally, it’s very stochastic. I find it very hard to predict it. Increasingly, it comes from working with basically great, and often younger, coauthors.

Why is it happening at the aggregate level? I think there are three reasons going on. One is actually come back to Ben Jones, who had an important paper, which is called, I believe, “[Death of the] Renaissance Man.” This came out 15 years ago or something. The idea was, it takes longer and longer for us to train.

Just in economics — when I first started in economics, it was standard to do a four-year PhD. It’s now a six-year PhD, plus many of the PhD students have done a pre-doc, so they’ve done an extra two years. We’re taking three or four years longer just to get to the research frontier. There’s so much more knowledge before us, it just takes longer to train up. That’s one story.

A second story I’ve heard is, research is getting more complicated. I remember I sat down with a former CEO of SRI, Stanford Research Institute, which is a big research lab out here that’s done many things. For example, Siri came out of SRI. He said, “Increasingly it’s interdisciplinary teams now.”

It used to be you’d have one or two scientists could come up with great ideas. Now, you’re having to combine a couple. I can’t remember if he said for Siri, but he said there are three or four different research groups in SRI that were being pulled together to do that. That of course makes it more expensive. And when you think of biogenetics, combining biology and genetics, or bioengineering, there’s many more cross-field areas.

Then finally, as you say, I suspect regulation costs, various other factors are making it harder to undertake research. A lot of that’s probably good. I’d have to look at individual regulations. Health and safety, for example, is probably a good idea, but in the same way, that is almost certainly making it more expensive to run labs…

COWEN: What if I argued none of those are the central factors because, if those were true as the central factors, you would expect the wages of scientists, especially in the private sector, to be declining, say by 5 percent a year. But they’re not declining. They’re mostly going up.

Doesn’t the explanation have to be that scientific efforts used to be devoted to public goods much more, and now they’re being devoted to private goods? That’s the only explanation that’s consistent with rising wages for science but a declining social output from her research, her scientific productivity.

And this:

COWEN: What exactly is the value of management consultants? Because to many outsiders, it appears absurd that these not-so-well-trained young people come in. They tell companies what to do. Sometimes it’s even called fraudulent if they command high returns. How does this work? What’s the value added?

Definitely recommended

Why herd immunity is worth less than you might think

That is the topic of my latest Bloomberg column.  The evidence in favor of at least partial herd immunity continues to pile up, but still don’t get too cheery.  One worry is that herd immunity might prove only temporary:

First, many herd immunity hypotheses invoke the idea of “superspreaders” — that a relatively small number of people account for a disproportionate amount of the contagion. Perhaps it is the bartenders, church choir singers and bus drivers who spread the virus to so many others early on in the pandemic. Now that those groups have been exposed to a high degree and have acquired immunity, it might be much harder to distribute the virus.

That logic makes some sense except for one issue: namely, that the identities of potential superspreaders can change over time. For instance, perhaps choir singers were superspreaders earlier in the winter, but with most choral singing shut down, maybe TSA security guards are the new superspreaders. After all, air travel has been rising steadily. Or the onset of winter and colder weather might make waiters a new set of superspreaders, as more people dine inside.

In other words, herd immunity might be a temporary state of affairs. The very economic and social changes brought by the virus may induce a rotation of potential superspreaders, thereby undoing some of the acquired protection.

In other words, the fight never quite ends.  Here is another and possibly larger worry:

Another problem is global in nature and could prove very severe indeed. One possible motivation for the herd immunity hypothesis is that a significant chunk of the population already had been exposed to related coronaviruses, thereby giving it partial immunity to Covid-19. In essence, that “reservoir” of protected individuals has helped to slow or stop the spread of the virus sooner than might have been expected.

There is a catch, however. If true, that hypothesis means that the virus spreads all the more rapidly among groups with little or no protection. (Technically, if R = 2.5, but say 50% of the core population has protection, there is an R of something like 5 for the unprotected population, to get the aggregate R to 2.5.) So if some parts of the world enjoy less protection from cross-immunities, Covid-19 is likely to ravage them all the more — and very rapidly at that.

Again, this is all in the realm of the hypothetical. But that scenario might help explain the severe Covid-19 toll in much of Latin America, and possibly in India and South Africa. Herd immunity, as a general concept, could mean a more dangerous virus for some areas and population subgroups.

There are further arguments at the link.

The classical theory of economic growth, by Donald J. Harris

By Donald J. Harris, here is the abstract:

Focused on the emerging conditions of industrial capitalism in Britain in their own time, the classical economists were able to provide an account of the broad forces that influence economic growth and of the mechanisms underlying the growth process. Accumulation and productive investment of a part of the social surplus in the form of profits were seen as the main driving force. Hence, changes in the rate of profit were a decisive reference point for analysis of the long-term evolution of the economy. As worked out most coherently by Ricardo, the analysis indicated that in a closed economy there is an inevitable tendency for the rate of profit to fall. In this article, the essential features of the classical analysis of the accumulation process are presented and formalized in terms of a simple model.

Here is the full piece.  Here are other pieces by Donald J. Harris, professor emeritus at Stanford, economist, and father of Kamala Harris.  Here is further background on him.

Coming soon, to a country near you

But let’s start with the UK:

The number of people in hospital with Covid-19 has fallen 96% since the peak of the pandemic, official data reveals.

Hospital staff are now treating just 700 coronavirus patients a day in England, compared to about 17,000 a day during the middle of April, according to NHS England.

Last week, some hospitals did not have a single coronavirus patient on their wards, with one top doctor suggesting that Britain is “almost reaching herd immunity”.

In a further sign of good news, the virus death toll in hospitals has also plummeted. On April 10, the day the highest number of deaths was announced to the nation, NHS England said 866 people had died. On Thursday last week, there were just five hospital deaths across the entire country. It represents a fall of more than 99% from the height of fatalities during the crisis.

Note that the pubs and many other venues have been open for over a month, and social distancing protections in the UK remain relatively weak, nor has individual or political behavior in the country been especially responsible.

Here is the Times of London piece (gated).

“Israel Versus Anyone”

That is the title of a new research paper by Kenneth S. Brower, focusing on the capabilities of the Israeli military against various potential adversaries.  I do not myself have particular opinions on these questions, but I found this piece interesting throughout.  Here is one excerpt:

The simple and unarguable truth is that for decades the US military has lacked the ability to quickly project conventional ground and air forces into the Middle East that would be able to successfully defend Israel. This has been true for about 50 years.

The US Army and US Marine Corps combined now have an active force structure of just 39 maneuver brigades, of which only about 13 are combat ready. It would require many weeks to bring a portion of the remaining 26 active maneuver brigades to combat ready status. Achieving this would require cannibalization of about 25% of the remaining active units in order to bring the others to full strength. US reserve National Guard maneuver brigades would each require about five months for mobilization, retraining, and deployment. These National Guard reserve units are thus irrelevant to any Israeli rescue scenario.

The ability of the US military to deploy forces over long distances has declined in the last 30 years because of a lack of investment in large specialized roll-on roll-off ships. Many of the existing US reserve merchant marine ships dedicated to military use are overage and have been poorly maintained. Based on the deployment times achieved during Operation Desert Storm, it is estimated that within about three weeks the US could project two light infantry paratroop brigades into Israel by air, plus one Marine infantry brigade transferred by forward deployed USN amphibious ships and pre-loaded forward-based maritime ships. Given about nine weeks, the US would likely be able to field nine maneuver brigades in the Middle East consisting of three paratroop, three Marine, and three heavy armored brigades. Consequently, it would require about nine weeks for the US military to generate roughly 15% of the IDF’s ground force mobilizable order of battle. These US forces would only deploy about 10% of the number of armored fighting vehicles the IDF can field.

The USAF has a very limited number of combat aircraft currently deployed in Europe. With air-to-air refueling, it is estimated that these aircraft might be able to sustain the generation of about 90 sorties a day in support of Israel. But these few sorties, which only  14 I Israel Versus Anyone: A Military Net Assessment of the Middle East represent 5% of Israeli wartime capability, could only be generated if the host country where these aircraft are based were to allow them to be operated in support of Israel. In the past, this approval has not always been provided. Neither the USN nor USMC currently have any operational combat aircraft based on aircraft carriers or large amphibious ships that are normally deployed in the Mediterranean within range of Israel.

Via Adam K.

Beware of coronavirus moralizing

That is the topic of my latest Bloomberg column, here is one excerpt:

Then there is the Swedish experiment, which has been the subject of a raging controversy. Here again, most moralizing is premature, even though the Swedes did make some clear mistakes, such as not protecting their nursing homes well enough. Sweden had a high level of early deaths, but both cases and deaths have since fallen to a very low level, even though Sweden never locked down. In the meantime, the Swedish economy has been among the least badly hit in Europe.

If the rest of Europe is badly hit by a second or third wave, and Sweden is not, Swedish policy suddenly will look much better. Alternatively, if Sweden experiences a second wave of infections as big as or bigger than those of its neighbors, it will look far worse.

In other words, it is too soon to tell.  I love to moralize about the moralizers!  Which I do more of at the link.

The YIMBYs win one, in the UK

The government is determined all the same, in keeping with the prime minister’s desire to “build, build, build”, to loosen our restrictive planning system. His proposed reforms will curb the ability of local politicians to slow down plans that have received initial approval. The requirements for developers to include cheaper housing on their sites will be relaxed. Land will be split into the three categories of growth, renewal, and preservation. Any school, shop or office which meets local design standards will be given an assumed permission to develop in the first two of these three categories. The aim will be for each area to agree a local plan in 30 months rather than the current average of seven years.

Here is more from Phillip Collins at the London Times (gated).  Do any of you know of a good ungated link on this?  Here is The Guardian, in unsurprising fashion, siding with NIMBY.  So far the BBC just doesn’t seem that interested.  Anywhere else to look?

Addendum: From Conor, here are some links:

–          Via CapX, which is a great aggregator plus original commentary: https://capx.co/these-profound-reforms-offer-a-chance-to-build-more-and-build-more-beautifully/

–          Via Conservative Home, here is the housing lead at Policy Exchange: https://www.conservativehome.com/platform/2020/08/ben-southwood-yes-the-current-planning-system-really-is-at-the-root-of-britains-housing-crisis.html

–          Twitter thread from Adam Smith Institute’s Matthew Lesh: https://twitter.com/matthewlesh/status/1291368548590379008

–          A summary and link to the full report itself: https://www.gov.uk/government/news/launch-of-planning-for-the-future-consultation-to-reform-the-planning-system

And longer reads, here are a couple of policy papers from the past that helped inform this report:

–          Policy Exchange paper: https://policyexchange.org.uk/wp-content/uploads/Rethinking-the-Planning-System-for-the-21st-Century.pdf

–          The Roger Scruton chaired Building Better, Building Beautiful Commission: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/861832/Living_with_beauty_BBBBC_report.pdf

What did the China hawks get right and wrong about China?

That is the topic of my latest Bloomberg column, here is part of the closing bit:

Where does all this leave U.S. China policy? As a rule of thumb: If it is of clear and limited scope and can be conducted technocratically, and can avoid both excess media coverage and political polarization — and, crucially, if it requires no obvious sacrifices from American citizens — then a policy stands a pretty good chance of succeeding. But that is not enough to justify a new global crusade. Over the last year or so, no matter what you might think of the government in Beijing, it has become clear that the government in Washington faces some real limits in responding to it.

I would stress that predictively, in their analysis of China, the hawks got almost everything right and the accommodationists got almost everything wrong.  There is just not so much we can do about that…

The Hawaii bastion has fallen

“We must accept the new reality: The virus is widespread on Oahu,” said Anderson, noting that it’s becoming increasingly difficult for contact tracers to pinpoint the source of infection as the virus grows more and more prevalent.

Hawaii now has seen 2,448 positive cases of coronavirus since state health officials started reporting testing results in March. More than 500 of those cases were reported in the last seven days, and most of them are on Oahu.

Historically, about 1% to 2% of tests conducted in Hawaii have come back with positive COVID-19 results. But in recent days that percentage has crept up close to 5%.

“Any time it gets over 5%, there’s reason for concern,” Anderson said. “Some of the states where they’re having large outbreaks have high rates of over 10%. And, obviously, we don’t want to be there.”

The growing prevalence of COVID-19 in Hawaii could jeopardize the state’s ability to reopen public schools, bring college students back to campus and invite visitors to return to Hawaii, said Hawaii Gov. David Ige.

Here is the full story.  Of course it is much better to have cases now — when superior treatments are available — than back in March or April.  Still, the containment strategies that are supposed to work for the most part…do not in fact work.

Why do some states have such low unemployment rates?

That is for June, Kentucky is at 4.3 percent but West Virginia at 10.4?  Here are the underlying BLS data.  Here is some description of Kentucky in June.  Note that Kentucky cases are now rising rapidly.  Here is the case pattern for Idaho.  The three states with the highest unemployment rates — New York, New Jersey, and Massachusetts — have been moving toward relative safety after some very tough times early on.  One interpretation of these numbers is that serious lockdowns were necessary to stem the virus, but those lockdowns caused high unemployment.  More plausible to me is the view that a high initial virus burden led to high unemployment — consumers were scared — but also superior case and death results later on.

Via Nick Clerkin.

The Great Psychometric test continues (U.K. fact of the day)

And the results ain’t always pretty:

The number of high-risk drinkers nearly doubled in lockdown and was worst in groups of higher social class, a government report shows.

Here is the (gated) Telegraph article.  Part of the mechanism of course may be that the “groups of higher social class” have not experienced the most severe income hits.  But I wonder if there is not more at work here.  These same “groups of higher social class” are also those who went around to parties to be feted, traveled the world, gave talks at conferences, “did deals,” dominated meetings and grabbed the good seat, and through various other means received big in-person ego boosts in pre-Covid times.  Now those ego boosts are gone, and…what do they do?  Some of them do very fine things indeed.

Pandemics and persistent heterogeneity

It has become increasingly clear that the COVID-19 epidemic is characterized by overdispersion whereby the majority of the transmission is driven by a minority of infected individuals. Such a strong departure from the homogeneity assumptions of traditional well-mixed compartment model is usually hypothesized to be the result of short-term super-spreader events, such as individual’s extreme rate of virus shedding at the peak of infectivity while attending a large gathering without appropriate mitigation. However, heterogeneity can also arise through long-term, or persistent variations in individual susceptibility or infectivity. Here, we show how to incorporate persistent heterogeneity into a wide class of epidemiological models, and derive a non-linear dependence of the effective reproduction number R_e on the susceptible population fraction S. Persistent heterogeneity has three important consequences compared to the effects of overdispersion: (1) It results in a major modification of the early epidemic dynamics; (2) It significantly suppresses the herd immunity threshold; (3) It significantly reduces the final size of the epidemic. We estimate social and biological contributions to persistent heterogeneity using data on real-life face-to-face contact networks and age variation of the incidence rate during the COVID-19 epidemic, and show that empirical data from the COVID-19 epidemic in New York City (NYC) and Chicago and all 50 US states provide a consistent characterization of the level of persistent heterogeneity. Our estimates suggest that the hardest-hit areas, such as NYC, are close to the persistent heterogeneity herd immunity threshold following the first wave of the epidemic, thereby limiting the spread of infection to other regions during a potential second wave of the epidemic. Our work implies that general considerations of persistent heterogeneity in addition to overdispersion act to limit the scale of pandemics.

Here is the full paper by Alexei Tkachenko, et.al., via the excellent Alan Goldhammer.  These models are looking much better than the ones that were more popular in the earlier months of the pandemic (yes, yes I know epidemiologists have been studying heterogeneity for a long time, etc.).