Category: Current Affairs
Larry Summers on the cash payments
The data are striking. Total employee compensation is now running only about $30 billion per month behind the pre-Covid baseline. Measures in the congressional stimulus bill to strengthen unemployment insurance and to support business will add about $150 billion a month to household income in order to replace all this loss.
The question is whether there is a rationale for further tax rebate of more than $200 billion a month over the next quarter. This would represent additional support equal to an additional seven times the loss of household wage and salary income over the next quarter.
Here is the full Bloomberg piece, file under “questions that are rarely asked.”
How to improve and speed up vaccine allocation, from my email
One issue I haven’t seen discussed is slow throughput of the Vaccine administration, due to a combination of inefficient binning/allocation of distributed vaccines, hesitation to take the vaccine, lack of a central database of available appointments for vaccination, and those time slots potentially going empty if a front line worker misses their appointment, and when there’s no standby/waitlist for people to receive it.
These seems like a use case for a priority queue/heap, which would allow high priority folks to join the queue late but be bumped up to their appropriate priority if they wanted the vaccine, while also allowing those who want the vaccine but are not currently prioritized to get it if there are unallocated supplies.
If prioritization is done (cdc guidelines or not) by restricting who can get it during a particular time period, then it’s guaranteed that throughout won’t be maximized, as all appointment slots won’t be necessarily filled (given the hesitance I’ve heard from people across different levels of education and socioeconomic status) by the allowed demographics at each office where vaccines are available. Meanwhile, there will be those who would gladly take it in an instant who aren’t allowed.
I worry that slow throughput and bad prioritization vaccine administration will keep hospitals indefinitely full, hemorrhaging money, and will thus require a bailout, which I expect will come with medicare4all-style strings attached.
That is from Abhi C., a loyal MR reader.
What should I ask John Cochrane?
I will be doing a Conversation with him. Just in case you don’t know him, here is basic information about his work. So what should I ask?
UK fact of the day, those not always so new service sector jobs
Britain’s fishing industry adds less value to the UK economy than the Harrods department store. But its importance to coastal communities almost prevented a Brexit trade deal between the UK and EU.
Here is the full FT story, via Adam Tooze.
The age of polarization ended some while ago
The coronavirus-relief bill racing through Congress contains a fair amount of economic relief as well as a wide array of unrelated measures that were thrown into the bill with little or no public debate. Included in the latter category is something shocking: a huge package of energy reforms that will result in major greenhouse-gas reductions.
How big a deal are the climate provisions? The World Resources Institute has called the bill “one of the most significant pieces of climate legislation that Congress has passed in its history.” Grant Carlisle, a senior policy adviser at the Natural Resources Defense Council, says, “This is perhaps the most significant climate legislation Congress has ever passed.”
To be sure, the “most significant climate legislation Congress has ever passed” designation is a little bit misleading. Congress hasn’t passed much climate legislation. The climate provisions in the coronavirus-relief bill might add up to more than President Obama’s 2009 stimulus bill, which included $90 billion in green-energy subsidies and helped seed the boom in wind, solar, batteries, and other tech over the past decade. They likely won’t be as significant as the 1970 Clean Air Act, which created the regulatory authority that does most of the heavy lifting in reducing carbon pollution.
But the amount of good climate policy in this bill is shocking, especially given the fact that it is about to be signed by Donald J. Trump. The major provisions include: a $35 billion investment in new zero-emission energy technology (including solar, wind, nuclear, and carbon-capture storage); an extension of tax credits for wind and solar energy, which were set to expire; and, most significantly, a plan for phasing out hydrofluorocarbons, a small but extremely potent greenhouse gas used as a coolant.
The rhetoric, however, will continue. That article is from Jonathan Chait. And here is my March 2019 Bloomberg column on polarization:
If I had to describe 2019 so far, I would characterize it as The Year Political Polarization Started to Erode. I know that sounds counterintuitive — aren’t partisans at each other’s throats on social media all the time? — but bear with me.
There is some data to support my point. A recent poll about regulating the tech industry, an issue which could prove to be one of the most important of our time, asked: “Do you agree or disagree that tech companies have too much power and should be more regulated?” Some 16 percent of Republicans said they “strongly agree,” while 13 percent of Democrats did. And combining those who “strongly agree” and “somewhat agree” gives an identical figure for both parties — 46 percent. This is the near-opposite of polarization.
More generally, both parties also seem to have converged in thinking that fiscal deficits are fine and more government spending is a good thing.
Ahem.
The median voter theorem remains underrated
Arts relief in the stimulus bill
For the music venue owners, theater producers and cultural institutions that have suffered through the pandemic with no business, the coronavirus relief package that Congress passed on Monday night offers the prospect of aid at last: it includes $15 billion to help them weather a crisis that has closed theaters and silenced halls.
That is from the NYT, here is the key shift in relative prices:
But the leaders of some large nonprofit cultural organizations worried that the way the bill is structured — giving priority to organizations that lost very high percentages of their revenue before considering the rest — could put them at the back of the line for grants, since they typically get a significant portion of revenues through donations.
I would say the priorities here are the right ones, as it is easier for donors to make up on the giving side than it is for customers to make up on the patronage side, if only because performances are some mix of not allowed and highly risky to attend. Making a donation, however, never has been easier and arguably there is an implicit heightened subsidy to donations, given that other fun ways to spend your money are hard to come by.
Progress on Nuclear Power
In the last year two new nuclear reactor designs have been approved, the first time this has happened in a generation. In September, the NRC approved NuScale’s small modular reactor (SMR) and a few days ago they approved GE-Hitachi’s SMR. The Trump administration has also invested billions in nuclear power research and in 2018 passed the Nuclear Energy Innovation Capabilities Act.
President Donald Trump signed into a law new legislation that will speed up the development of advanced reactors in the United States.
The Nuclear Energy Innovation Capabilities Act (NEICA) eliminates some of the financial and technological barriers standing in the way of nuclear innovation.
It also represents a strong commitment by the government to support the commercial nuclear sector, ensuring that the U.S. maintains its leadership around the globe.
Nuclear pairs extremely well with hydrogen, a carbon-free near pollution-free fuel, and nuclear also works great with solar (to smooth out capacity).
Will President Trump be remembered as the environmental president? Probably not. You can read dozens of pieces on Trump’s environmental policies (“rollbacks,” “reversals”) including this long Wikipedia article that never once mention nuclear, despite the fact that nuclear remains a leading technology for making progress on climate change.
First Dose First
Writing on twitter Keith Klugman, world expert on infectious diseases and director of the Gates Foundation Pneumonia program, supports a policy I have argued for–First Doses First.
First doses of Pfizer/Moderna vaccines are 90%+ effective after 14 days. Most high risk lives will be saved by giving all these limited early supplies of vaccine as first doses – second doses can be given later if first dose effectiveness wanes or when supply improves
Here’s a way of thinking about this policy. Suppose you are scheduled for your second dose of the Pfizer or Moderna vaccine but you have the option of giving your second dose to your spouse as their first dose. Would you?
If the answer is yes then can you ethically deny this to someone else’s spouse?
Keep in mind that we have at least three more vaccines that could be available in as little as 12 weeks, Astra-Zeneca, Johnson & Jonson and Novavax. We are also pushing for more doses from Pfizer and we should be willing to pay top-dollar for those doses. As those vaccines come online we can deliver second doses.
Addendum: If you are 75 and your spouse is 25 then maybe you wouldn’t give your second dose to your spouse and that too ought to help us think about the larger questions of allocation.
The Tremendous Success of Operation Warp Speed
I am annoyed at Fauci for the second time, this time for dissing the AZ vaccine:
But even if the vaccine ends up being approved, it will probably only have an efficacy of 60 to 70 percent. “What are you going to do with the 70 percent when you’ve got two (vaccines) that are 95 percent? Who are you going to give a vaccine like that to?” Anthony Fauci, the leading American expert on vaccines, recently wondered.
This attitude is counter-productive. As I wrote earlier:
In the big picture, the efficacious of a vaccine doesn’t matter per se what matters is getting to herd immunity. If you have a less efficacious vaccine you need to vaccinate more people but herd immunity is herd immunity, i.e. vaccines mostly protect people not because they are efficacious but because we reach herd immunity.
As a result, it can be much better to start vaccinating now with a 70% efficacious vaccine than wait for a 95% efficacious vaccine–thus, we need to encourage early vaccination. Indeed the AZ vaccine ought to be approved immediately (I predict the UK will approve by next week) and be made available to anyone who doesn’t want to wait for another vaccine.
For the next year or two, we will be operating under conditions of scarcity and we need to use every tool at our disposal. A 70% effective vaccine is great, well above what the FDA required and better than the flu vaccine. If you live in a country in which everyone has been vaccinated you won’t give a damn whether they were vaccinated with a 95% effective vaccine or a 70% effective vaccine–both will give you nearly 100% safety and allow life to return to normal.
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.
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.
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.