Category: Current Affairs

My Conversation with Ross Douthat

We do another CWT, here is the audio and transcript (link corrected), a very good installment in the series.  Here is part of the summary:

Ross joined Tyler to discuss why he sees Kanye as a force for anti-decadence, the innovative antiquarianism of the late Sir Roger Scruton, the mediocrity of modern architecture, why it’s no coincidence that Michel Houellebecq comes from France, his predictions for the future trajectory of American decadence — and what could throw us off of it, the question of men’s role in modernity, why he feels Christianity must embrace a kind of futurist optimism, what he sees as the influence of the “Thielian ethos” on conservatism, the plausibility of ghosts and alien UFOs, and more.

A welcome relief from Covid-19 talk, though we did cover Lyme disease.  Here is one excerpt:

COWEN: Does the Vatican have too few employees? There’s a Slate article — it claimed in 2012, the Roman Curia has fewer than 3,000 employees. Walmart headquarters at the time had 12,000. If the Church is a quite significant global operation, can it be argued, in fact, that it’s not bureaucratic enough? They don’t actually have state capacity in the sense that state capacity libertarianism might approve of.

DOUTHAT: Right. State capacity libertarianism would disapprove of the Vatican model. And it reflects the reality that media coverage of the Catholic Church doesn’t always reflect, which is that in Catholic ecclesiology and the theory of the institution, bishops are really supposed to be pretty autonomous in governance. And the purpose of Rome is the promotion of missionary work and the protection of doctrine, and it’s not supposed to be micromanaging the governance of the world Church.

Now, I think what we’ve seen over the last 30 years — and it’s been thrown into sharp relief by the sex abuse crisis — is that the modern world may not allow that model to exist; that if you have this global institution that has a celebrity figure at the center of it, who is the focus of endless media attention, you can’t, in effect, get away with saying, “Well, the pope is the pope, but sex abuse is an American problem.”

And to that extent, there is a case that the Church needs more employees and a more efficient and centralized bureaucracy. But then that also coexists with the problem that the model of Catholicism is still a model that was modern in the 16th century. It’s still much more of a court model than a bureaucratic model, and pope after pope has theoretically tried to change this and has not succeeded.

Part of the reality is, as you well know, as a world traveler, the Italians are very good at running courts that exclude outsiders and prevent them from changing the way things are done. Time and again, some Anglo-Saxon or German blunderer gets put in charge of some Vatican dicastery and discovers that, in fact, the reforms he intends are just not quite possible. And you know, in certain ways, that’s a side of decadence that you can bemoan, but in certain ways, you have to respect, too.

Definitely recommended, a very fun CWT with lots of content.  And again, here is Ross’s (recommended) book The Decadent Society: How We Became a Victim of Our Own Success.

New York Will Try Convalescent Blood Therapy

On March 17 I wrote:  “A simple and medically feasible strategy is available now for treating COVID-19 patients, transfuse blood plasma from recovered patients.” New York, with other states following closely behind, is now trying the idea.

NBC News: Hoping to stem the toll of the state’s surging coronavirus outbreak, New York health officials plan to begin collecting plasma from people who have recovered and injecting the antibody-rich fluid into patients still fighting the virus.

Gov. Andrew Cuomo announced the plans during a news briefing Monday. The treatment, known as convalescent plasma, dates back centuries and was used during the flu epidemic of 1918 — in an era before modern vaccines and antiviral drugs.

Some experts say the treatment, although somewhat primitive, might be the best hope for combating the coronavirus until more sophisticated therapies can be developed, which could take several months.

The FDA acted quickly to approve the therapy on an emergency case-by-case basis, although it’s not clear to me that legally they should be involved at all given the therapy seems more like an off-label use of blood plasma than a new drug.

Lydia Laurenson interviews me

Here is the link, from a few weeks ago, far-ranging, but includes cultural predictions about the coronavirus.  And this:

I’d love to see a study measuring the decisions people who identify as rationalist make in their romantic personal lives, for example — how rational those decisions are, compared to other individuals. I suspect they’d come out slightly below average.

And this:

Some people will say, “I’m spiritual but not religious.” I would sooner say, “I’m religious but not spiritual.” My cosmology is maybe agnostic, tending not to believe that there’s a God as commonly understood, but I have this core American idea that you have values, you go out, you build things, you do things. You take on projects, and those projects should help other people. You’re very committed to this, you see it through. I’m a big believer in that…

Obviously each religion is different and contains many strands, but it’s not an accident that those are the stickiest ideas, right? Those are what carry culture more effectively than, say, political philosophy or the great books of the ancients.

There is much more at the link, and at the end I make the case for optimism.

Stock Buybacks are Fine

Ted Frank writes:

Let’s start with what a buyback is, since even many financial journalists do not understand this: A corporation purchases stock from its shareholders. It’s economically indistinguishable from a special dividend, where a corporation pays out money to every shareholder, except it permits shareholders to elect their own tax consequences, unlike a dividend that creates a tax event immediately.

…Proposals to ban buybacks are effectively proposals to demand corporations hold such huge stockpiles of cash, depriving shareholders of investment choices. Such proposals will backfire by slowing down the economic recovery when money that could be invested is instead held in corporate bank accounts, doing nothing.

I agree. Buybacks are just not a big deal.

FDA Stops At-Home Tests

TechCrunch…the U.S. Food and Drug Administration (FDA) has updated its Emergency Use Authorization guidelines to private labs that specifically bar the use of at-home sample collection. This means startups, including Everlywell, Carbon Health and Nurx, will have to immediately discontinue their testing programs in light of the clarified rules.

The FDA issued the updated guidance on March 21, and though some of the companies had already begun to ship their sample collection kits to people, and even begun to receive samples back to their diagnostic laboratory partners, even any samples in-hand will not be tested, and will instead be destroyed in order to comply with the FDA’s request

The tests are collected at home but the tests themselves are done in certified labs under quality-control standards (CLIA). It is of course possible, even likely, that tests collected at home are not as accurate as those collected by a trained nurse. But we don’t want trained nurses to be testing everyone–they have other things to do right now. Furthermore, some of these errors will be detected at the lab and can be fixed with a retest. False negatives are possible but going to a hospital or standing in line to get a test also comes with risk. False negatives will also become apparent to the extent that symptoms worsen at which time patients can seek medical assistance. Yes, of course, delay and false reassurance are also not without risk. Welcome to the world of tradeoffs. But at this point in time we need to unleash American ingenuity and enterprise and evolve our way to the frontier as conditions improve.

We need to learn now, regulate later.

A new idea for small business lending and support

From my email, from Amanda Brown, she is developing this plan with Ben Laufer:

I am a master’s student at Stanford in Management Science & Engineering and a fan of your blog Marginal Revolution. I have been following it more closely in the midst of COVID-19, especially the conversations about small business financing during the crisis (e.g. today’s post about bridge loans).

I was hoping to get feedback on an idea for a new small business lending platform which would allow community members to fund fractional amounts of a business loan. The thesis is that fractional loan contributions from local supporters would give institutional lenders confidence to fund the full requested loan amount (and that the total amount contributed by peers would supplement traditional measures of borrower creditworthiness, such as FICO score, cash flow, etc., when setting the interest rate). For example, 10% of the principal might come from all the peer investors combined, and the remaining 90% from a single big lender. To my knowledge, nothing quite like this exists. In the wake of COVID-19 shutdowns, it seems especially important for small businesses at the heart of our communities to be getting access to low-interest financing based on peer endorsement.

Adding the “peer staking” element to a small business loan signals to investors that the local community believes in the future success of the business and the borrower’s likelihood of repaying (and peers would also be able to earn the same interest rate return on the principal as the majority funder… so it’s not like crowdfunding, where you contribute but won’t see your dollar again…). The design also increases accountability without the need for a collateral since borrowers would feel a personal responsibility to repay their peer debt-holders, who may be friends, family or customers.

I am wondering what your thoughts are on the idea (and its relevance at this time). If you think it is worthwhile, perhaps you would consider sharing this 5-minute survey with your followers to collect feedback on the idea:

https://forms.gle/Tk2Gweqa5frTacid9

Amanda Brown (aclairebrown@hotmail.com)

Ben Laufer (ben.laufer@gmail.com)

The Fed is not asleep — open season on asset purchases and more

Here is the press release.  And:

In addition to the steps above, the Federal Reserve expects to announce soon the establishment of a Main Street Business Lending Program to support lending to eligible small-and-medium sized businesses, complementing efforts by the SBA.

Are those last five words Straussian satire?  If so, bravo.

Zachary Booker on bridge loans and bankruptcy

This is an email, all from him, I won’t add in any other formatting:

“Like you, I have an extraordinarily deep concern about the capacity for businesses – not only SMBs, but also larger, capital-intensive firms – to weather this path of suppression. I was quite surprised to hear Russ take a lighter note.

…I am deeply sceptical of the efficacy of bridge loans that you spoke about early this morning. While Brunnermeier, Landau, Pagano, and Reis have laid out the best transmission mechanism, I can not possibly envision it will move the needle enough for the majority of those businesses while also not leaving a wake of loss provisions for future generations. I suppose you could say I am partial to point two in your piece.

I also simply can’t understand the legal logistics of bridge loans in this scenario. Most companies will have a capital structure of some kind (perhaps without the most sophisticated lenders). How are you cramming down those who you are priming in the capital structure? You need consent. Who will be managing this incredibly laborious process of gaining consent and creating the terms? Cash grants are one thing, but bridge loans that aren’t unsecured at the bottom of the capital structure are an entirely different matter.”

“While the benefit of hindsight can be a hindrance to pontificating on novel circumstances, it strikes me as unequivocally true that the GFC had a much simpler – intellectually, if not politically – solution. Namely a solution that at its core involved taking known, marketable securities out of the system at haircuts or depressed valuations to abate panic, settle markets, and of course eventually sell at a profit.

In short, I’m partial to the view that mark-to-market accounting was both a central impetus for why the crisis was so severe and why action could be taken so decisively without burdening tax payers for generations to come (see Ball’s very good book here and Fragile by Design, both of which you’re likely familiar with). This crisis provides no such “simple” solutions that can be concentrated against a singular sector of the economy by taking decisive action.

I, of course, have no grand unified theory to share with you. However, I did want to pass along some thoughts I had upon reading your bridge loan piece that came to mind.

Like you, I am also worried about how broad the demand shock is currently and will be moving forward. Affecting not only every industry severely, but also every locality in the economy (e.g. leaving no state or municipality without deep, painful bruises). This raises the question of how the economy – when this is all said and done – reconstitutes itself in an orderly, efficient fashion.

While I’m partial…I believe one of the incredible strengths of the United States is its bankruptcy code. In particular, the out-of-court and Chapter 11 processes.

I would perhaps mull over how the United States can leverage the bankruptcy code to provide support, both out-of-court (e.g. before filing) and to expedite the process while in-court (e.g. by utilizing pre-packs, which are very popular, very quick, and incredibly effective at providing sustainable balance sheets).

The United States could explore offering – or backstopping – DIP Financing for firms that file Chapter 11 (see explainer on DIP financing from Davis Polk here). DIP Financing has been around for many decades, is incredibly safe, and deeply effective.

  1. The US could offer DIP Financing at favourable terms directly and automatically under preset conditions (e.g. a firm that was FCF positive in 2018 with EBITDA +$[10]mln, but needing to file Chapter 11 in 2020, would immediately get a facility at L+[100]). This would also give the US the highest seniority in the cap stack with very favourable terms upon a potential future Chapter 11 (Chapter 22) or a future Chapter 7 (liquidation). For firms that have not been in distress prior to the crisis, this would have the US assuming very little real credit risk. 
  2. The US could backstop private DIP providers – to get credit rolling again – by guaranteeing [95] cents on the dollar for any facility extended within the next [X] months. Historically, DIPs have returned much more than this so this is reasonably safe from a credit perspective. Note: this could also be done for TL1s or revolvers out-of-court. Same principle applies regarding seniority, lessened credit risk, etc. although you’d need consent down the capital structure.
    1. The United States could explore offering participation in pre-packs whereby:
      1. The US would inject $[X]mln in senior secured notes if;
      2. Existing Senior Secured take a [5]% haircut
      3. Unsecured take a [15]% haircut
      4. Equity take a [50]% haircut
      5. Again, the idea would be for pre-packs to be, well, pre-done. The idea would be that if your business is hurling towards bankruptcy, it may be best to bite the bullet and recapitalize (via the US notes) while re-working your balance sheet right now. If your firm meets the FCF, EBITDA, or whatever criteria is determined then the US would offer this package automatically. Contingent only on those within the capital structure consenting to taking at least [X]% haircuts (as consent is required by law). Note: you may want to say that any financing put in – or backstopped by – the US will not be additive to the covenant ratios underpinning the rest of the capital structure (or these covenants can just be amended, if necessary, to allow for this new capital injection as is commonplace anyway).

One would hope that if The United States does something like this it could serve three useful functions:

  1. Providing confidence to market participants that there will be a financing backstop – for otherwise healthy firms blindsided by COVID-19 – by the United States, which will likely have the paradoxical affect of freeing up credit from private participants and stopping the explosion in credit spreads and the halting of credit extension we’re currently seeing.
  2. Allowing firms, without much relative credit risk to the United States, to obtain a runway through the fresh injection of capital along with a modest restructuring that will help them weather the storm if it is to be prolonged.
  3. Providing an automatic, guaranteed solution that is widely accessible to firms as all qualifications and terms would be preset and thus remove any uncertainty as to what firms would be able to qualify for or ultimately obtain.

Using the bankruptcy code in this way would allow the United States to help firms (albeit, likely slightly larger ones than mom-and-pops) in a predictable, known, guaranteed way while also protecting tax payers from taking significant downside risk positions in an ad-hoc and convoluted matter via bridge loans (if they are feasible at all, which I doubt). In short, the United States would leverage the incredibly strong institutional and intellectual framework of its existing bankruptcy code.

I believe – as I believe you do as well – that we are in for a much lengthier protraction than many anticipate…I do not believe Goldman’s forecast…that we’ll see 13% GDP growth in Q3. I do not believe demand will return so quickly or in such force, because I do not believe we will return to normalcy as quickly as we have just departed it.

As I said previously, I have no grand unified theory to get American business through this crisis. However, we both agree in the general goodness of Big Business as a driver of America. What I’ve just laid out is perhaps the most politically palpable solution (because it involves bankruptcy, even if only in name only) that can give a strong life line to those currently in need while not exposing taxpayers to absurd (albeit still large) credit risk. This solution also can be worked to protect pension liabilities and other essential worker benefits.

I think it’s inevitable that we have mass insolvencies, dislocations, and mismatches moving forward. For small businesses, there are solutions around the edges, but I simply cannot comprehend how the United States would be able to figure out and then extend the appropriate levels of credit via bridge loans en masse to these folks. It is surreal to imagine it possibly working and I worry deeply about what such a program – if tried, almost certainly with less dollars than would be required – would do to the social fabric and psyche of the American people when firms inevitably still buckle and break.

I haven’t given much thought to how to leverage the institutional framework of America to best ameliorate this crisis, but I’ve seen no one speak much about how out-of-court or in-court restructuring could be a partial solution. So I figured I’d pass this along as something to keep in the back of your mind and mull over.”

Zachary tells me you can reach him at Zachary.Booker@mail.McGill.ca.

The Internal Contradictions of Segregating the Elderly

There are two problems, even internal contradictions, with segregating the elderly and letting others return to work. The first is fairly well known. When you run the numbers, as the British did, you find that a lot of young people would die. If we return to work too quickly it could easily happen that 20-40% of the US population gets COVID-19. Suppose 20% of the population gets it–that’s 66 million people. And let’s suppose the death rate is on the low end because healthy, young people get it rather than the elderly, say half of one percent, .005, then we have 330,000 deaths of healthy, young people.

Moreover, the numbers I just gave are conservative and don’t make a lot of sense because if 330,000 die then the hospital system is going to be overwhelmed and the death rate will be higher than .005. An internal contradiction.

The second internal contradiction is less well known. We probably can’t segregate the elderly because the more young people get COVID-19 the less realistic protecting a subset of the population becomes. In other words, the premise of the segregation argument is that we can protect the elderly but that premise becomes less plausible the more COVID-19 spreads but allowing it to spread is why we were locking down the elderly. An internal contradiction.

Are there some scenarios where all this works out? Probably but I wouldn’t bet on hitting the trifecta. The lesson of COVID-19 is that like it or not we are all in this together.

Bridge loans for economically troubled firms

Andrew Ross Sorkin explains (NYT):

The fix: The government could offer every American business, large and small, and every self-employed — and gig — worker a no-interest “bridge loan” guaranteed for the duration of the crisis to be paid back over a five-year period. The only condition of the loan to businesses would be that companies continue to employ at least 90 percent of their work force at the same wage that they did before the crisis. And it would be retroactive, so any workers who have been laid off in the past two weeks because of the crisis would be reinstated.

Strain and Hubbard call for $1.2 trillion in lending to smaller businesses (Bloomberg).  John Cochrane considers a version of the plan.  Here is Brunnermeier, Landau, Pagano, and Reis.  I have been pondering the following points:

1. If you are an optimist about the cycle of recovery, this is very likely a good idea.  If you let those companies fall apart, there is a significant loss of organizational capital and the matching problems in the labor markets have to be solved all over again.  Recent experience on that front is not so encouraging.

2. If you are a pessimist about the cycle of recovery, I am less sure how well this will work.  Let’s say a vaccine is difficult and there a few waves of the virus.  Many of the smaller or even larger businesses may be going under anyway, as they cannot live off aid forever.  In the meantime, you might actually want those resources to be reallocated to good transport, biomedical testing, and so on.  If the wartime analogy is apt, you don’t want to freeze the previous capital structure into place, unless of course you get lucky and win the war early.

3. If you a pessimist about the solvency of banks (have you ever seen a stress test for 30% unemployment?), you have not gotten the government out of the business of capital allocation.

4. The bridge loans might work especially poorly for start-ups.  Yes, StubHub or some company like that is around for the long run, and if the bridge loans can keep them up and running until concerts return, so much the better.  But what about the eighty wanna-bees next in line, most of whom are likely to fail?  Do they too get bridge loans?  (Do note the ecosystem as a whole is yielding positive value.)  The market itself chose the venture capital financing form for those entities, not debt.  And yet now the government is stepping in and propping them up with debt, even though we know virtually all of them are likely to fail (even pre-coronavirus that was the case).  You might think “well, we will know not to do that.”  But on what legal basis would those other “likely to fail start-ups” be excluded from the bridge loans?

4b. Is it all about “banks decide”?  How do we stop banks from simply hoarding the new money?  (The Fed already has flooded the banking system with liquidity.)  Just loaning the money to super-safe firms for de facto negative rates?  What exactly are the regulatory requirements here?  To the extent the loans are de facto guaranteed, won’t banks lend to a large number of lemons?  What do the interest rates and collateral requirements look like on these loans and how are those set in what is now a non-competitive setting?

5. Overall my sense is that American policy, if only for cultural reasons, has to proceed on an optimistic basis.  It is not clear what the relevant alternative is, and I do not oppose bridge loans.  Nonetheless I am seeing too many people jump uncritically at bridge loans with a “throw everything at the wall” approach and not thinking hard enough about their possible downsides.  At the very least, being critical about bridge loans will help us make bridge loans better.

6. No, I don’t favor governmental bridge loans for non-profits.  De facto, that this means this is a huge relative shift of resources away from non-profits and toward businesses.  YMMV.

7. I have received numerous reader emails telling me how bad, slow, and cumbersome is the Small Business Administration process for getting loans.  Will this new regime do better?

8. It is the same government that could not organize testing and mask production that we are expecting to run what might amount to a $1 trillion plus bridge loans program.

Have a nice day.

Angela Merkel’s German deficit spending

Angela Merkel’s cabinet is meeting on Monday to approve new borrowing of €356bn — equivalent to nearly 10 per cent of Germany’s gross domestic product — marking a new era in fiscal policy and a radical departure from Berlin’s long-held aversion to debt.

Here is the FT piece, but this is being covered everywhere.  (Imagine a day where this isn’t even necessarily the biggest story, and here we are.)  Of course the content of the spending matters a great deal, but this is in principle the right thing to do.  But here is the catch: out on social media, and in the old days of the blogosphere, there was so much Merkel hatred: “the austerity queen who killed thousands,” etc.  But now she has been vindicated.  We all can agree that a government should (on average) run surpluses in good times and deficits in bad times.  Well…2011-2012…those were the good times.  Yikes.

Merkel goes up in status with this, big time.  And of course it is no surprise that a bunch of Germans would have a better sense of what the bad times really can look like.

Emergent Ventures prize winners for coronavirus work

I am happy to announce the first cohort of Emergent Ventures prize winners for their work fighting the coronavirus.  Here is a repeat of the original prize announcement, and one week or so later I am delighted there are four strong winners, with likely some others on the way. Again, this part of Emergent Ventures comes to you courtesy of the Mercatus Center and George Mason University. Here is the list of winners:

Social leadership prizeHelen Chu and her team at the University of Washington.  Here is a NYT article about Helen Chu’s work, excerpt:

Dr. Helen Y. Chu, an infectious disease expert in Seattle, knew that the United States did not have much time…

As luck would have it, Dr. Chu had a way to monitor the region. For months, as part of a research project into the flu, she and a team of researchers had been collecting nasal swabs from residents experiencing symptoms throughout the Puget Sound region.

To repurpose the tests for monitoring the coronavirus, they would need the support of state and federal officials. But nearly everywhere Dr. Chu turned, officials repeatedly rejected the idea, interviews and emails show, even as weeks crawled by and outbreaks emerged in countries outside of China, where the infection began.

By Feb. 25, Dr. Chu and her colleagues could not bear to wait any longer. They began performing coronavirus tests, without government approval.

What came back confirmed their worst fear. They quickly had a positive test from a local teenager with no recent travel history. The coronavirus had already established itself on American soil without anybody realizing it.

And to think Helen is only an assistant professor.

Data gathering and presentation prize: Avi Schiffmann

Here is a good write-up on Avi Schiffmann, excerpt:

A self-taught computer maven from Seattle, Avi Schiffmann uses web scraping technology to accurately report on developing pandemic, while fighting misinformation and panic.

Avi started doing this work in December, remarkable prescience, and he is only 17 years old.  Here is a good interview with him:

I’d like to be the next Avi Schiffmann and make the next really big thing that will change everything.

Here is Avi’s website, ncov2019.live/data.

Prize for good policy thinking: The Imperial College researchers, led by Neil Ferguson, epidemiologist.

Neil and his team calculated numerically what the basic options and policy trade-offs were in the coronavirus space.  Even those who disagree with parts of their model are using it as a basic framework for discussion.  Here is their core paper.

The Financial Times referred to it as “The shocking coronavirus study that rocked the UK and US…Five charts highlight why Imperial College’s research radically changed government policy.”

The New York Times reportedWhite House Takes New Line After Dire Report on Death Toll.”  Again, referring to the Imperial study.

Note that Neil is working on despite having coronavirus symptoms.  His earlier actions were heroic too:

Ferguson has taken a lead, advising ministers and explaining his predictions in newspapers and on TV and radio, because he is that valuable thing, a good scientist who is also a good communicator.

Furthermore:

He is a workaholic, according to his colleague Christl Donnelly, a professor of statistical epidemiology based at Oxford University most of the time, as well as at Imperial. “He works harder than anyone I have ever met,” she said. “He is simultaneously attending very large numbers of meetings while running the group from an organisational point of view and doing programming himself. Any one of those things could take somebody their full time.

“One of his friends said he should slow down – this is a marathon not a sprint. He said he is going to do the marathon at sprint speed. It is not just work ethic – it is also energy. He seems to be able to keep going. He must sleep a bit, but I think not much.”

Prize for rapid speedy responseCurative, Inc. (legal name Snap Genomics, based in Silicon Valley)

Originally a sepsis diagnostics company, they very rapidly repositioned their staff and laboratories to scale up COVID-19 testing.  They also acted rapidly, early, and pro-actively to round up the necessary materials for such testing, and they are currently churning out a high number of usable test kits each day, with that number rising rapidly.  The company is also working on identifying which are the individuals most like to spread the disease and getting them tested first.  here is some of their progress from yesterday.

Testing and data are so important in this area.

General remarks and thanks: I wish to thank both the founding donor and all of you who have subsequently made very generous donations to this venture.  If you are a person of means and in a position to make a donation to enable this work to go further, with more prizes and better funded prizes, please do email me.

Super spreader immunity vs. herd immunity, from Paul Seabright

Dear Tyler,

I’ve read the comments section of your post on herd immunity pretty carefully and a point nobody has yet brought out is the importance of variance in R0. Suppose that an average R0 of 2.72 is made up of a) a low spreader subset of 90% of the population with R0 of 0.8 and b) 10% of super spreaders with an R0 of 20.

If what makes super spreaders different from the rest is just some invisible genetic factor, then using the average R0 of 2.72 in simulations may be a good approximation, and relaxing social distancing after the first wave may indeed lead to a large second wave.

But if what makes super spreaders different is a behavioral characteristic that also makes them much more likely to be infected than the rest of the population during the first wave, then the effect of the first wave may be much more permanent than the average R0 of 2.72 can capture.

Suppose the first wave infects 5% of low spreaders and 50% of high spreaders. Then after the first wave the uninfected population consists of a much smaller proportion of super spreaders than before and R0 for that population drops dramatically (to 1.86 in this example).

More generally if there is variance in systematic individual characteristics that affect R0 (and not just chance factors particular to the first wave), then stopping the epidemic requires only that enough of the high R0 individuals acquire immunity. That may happen naturally in the first wave, or it might be something that policy could influence. We may soon be able to test this by looking for a second wave in China as restrictions are relaxed.

An even more general point is that, unlike in many other familiar contexts, inequality in R0 is really good news. It reduces the size of the set of individuals whose behavior you need to influence. The more inequality the better!

The Coronavirus Killed the Progressive Left

That is the topic of my latest Bloomberg column.  Yes trolling, but trolling with the truth.  Here are scattered excerpts:

— The egalitarianism of the progressive left also will seem like a faint memory. Elites are most likely to support wealth redistribution when they feel comfortable themselves, and indeed well-off coastal elites in California and the Northeast are a backbone of the progressive movement. But when these people feel threatened in their lives or occupations, or when the futures of their children suddenly seem less secure, redistribution will not be such a compelling ideal…

— The case for mass transit also will seem weaker, because subways and buses will be associated with the fear of Covid-19 transmission. In a similar fashion, the forces of NIMBY will become stronger, relative to those of YIMBY, because people secure in their isolated suburban homes will feel less stressed than those in densely packed urban apartment buildings.

— There is likely to be much more government intervention in some parts of the health-care sector, but it will focus on scarce hospital beds and ventilators, and enforce nasty triage, rather than being a benevolent move toward universal coverage. If anything, it will drive home the message that supply constraints are binding and America can’t have everything — hardly the traditional progressive message.

— — The climate change movement is likely to be another victim. How much have you heard about Greta Thunberg lately? Concern over the climate will seem like another luxury from safer and more normal times. In addition, the course of anti-Covid-19 efforts may not prove propitious for the climate change movement. If the fight against Covid-19 suddenly improves (perhaps a vaccine working very quickly?), Americans may come to expect the same in the fight against climate change.

There is much more at the link, of course some of you will hate it.  And of course Sanders and Warren did not exactly dominate voter sentiment, and that was largely pre-Covid.