Category: Current Affairs

My Conversation with Mark Carney

Here is the audio, video, and transcript, definitely recommended.  Here is part of his closing statement:

COWEN: Last question. You wake up each morning. Surely you still think about central banking. What for you is the open question about central banking, where you don’t know the answer, that you think about the most?

CARNEY: I gave a speech at Jackson Hole on this issue, and I started — which is the future of the international monetary system and how we adjust the international monetary system.

I’ll say parenthetically that we’re potentially headed to another example of where the structure of the system is going to cause big problems for the global economy. Because it’s quite realistic, sadly, that we’re going to have a fairly divergent recovery with a number of emerging, developing economies really lagging because of COVID — not vaccinated, limited policy space, and the knock-on effects, while major advanced economies move forward. That’s a world where rates rise and the US dollar strengthens and you get this asymmetry, and the challenge of the way our system works bears down on these economies. I think about that a lot.

And this:

COWEN: If you’re speaking in a meeting as the central bank president, do you prefer to speak first or speak last?

CARNEY: I prefer — I tend to speak early. Yes, I tend to speak early. I’m not sure that’s always the best strategy, but I tend to speak early. I will say, one thing that’s happened over the years at places like the G20, I noticed, is the prevalence of social media and devices. The audience drifts away over time, even at the G20, even on a discussion of the global economy.

And from the horse’s mouth, so to speak, do note this:

CARNEY: …I think you’re absolutely right on that, there wasn’t. It is revealed that there wasn’t a liquidity trap.

Rooftops!  Finally, on more important matters:

COWEN: Are the Toronto Raptors doomed to be, on average, a subpar NBA team due to higher taxes?

And:

COWEN: What’s the best Clash album?

CARNEY: Fantastic question. London Calling, and one of my best memories — I was very fortunate; they came to Edmonton when I was in 12th grade in high school. I went to the concert and that was fantastic, yes.

COWEN: I also saw them, I think in what would have been 12th grade had I been in school that year. But London Calling is too commercial for me. I much prefer the Green album, like “Career Opportunities,” “Janie Jones.”

CARNEY: Well, “I Fought the Law” was the best song at the concert. I have to say, they had got to Combat Rock by this time, which was relative — [laughs] Combat Rock was more commercial, I thought, than London Calling, although they threw it all out the door with Sandinista!

Again, here is Mark’s new book Value(s): Building a Better World For All.

Vaccine wastage, toward a general theory of multilateral institutions

South Sudan, for instance, recently destroyed nearly 60,000 doses it received from Covax; Malawi destroyed 20,000. Neither were able to distribute their entire allotments before the vaccines expired. Kenya, with more than 50 million people, received over a million doses from Covax in early March, but had used less than one-fifth by late April. The Ivory Coast similarly distributed less than a quarter of the over 500,000 doses it received in late February, raising fears that doses will expire before they are used. The problem goes beyond lower-income countries. More than 600,000 Covax-provided AstraZeneca vaccines sit in Canada at risk of spoilage, while Canadians debate whether it is safe to use them. Vaccinations can begin to confer meaningful protection in under 14 days. Freed from freezers, these vaccines could have saved many lives in Peru, India or Brazil, where the pandemic is raging.

Here is more from Zeke Emanuel and Govind Persad (NYT).

Staple a Lottery Ticket to Every Vaccination Card

I’ve been promoting stapling a lottery ticket to every vaccination card for some time, so it was good to see Ohio followed by New York, Maryland and Oregon introduce vaccine lotteries. Moreover, the program appears to be working as noted by Philip Bump in the Washington Post:

The seven-day average number of Ohioans getting their first shots increased the day after DeWine’s announcement and continued heading up through Sunday. It’s worth noting that this happened while the number of vaccinations nationally remained flat, suggesting that the trend in Ohio was driven by something different. It’s also worth pointing out that the number of Ohioans completing their vaccinations continued to slip lower, again reinforcing that these were people newly seeking out the vaccine. (In two or three weeks it will be interesting to see if more people are completing their vaccinations.)

Sadly, some politicians are now introducing legislation in Ohio to stop the program. Thus, it’s worthwhile recapping why we expect a lottery program to work. Most people think first about behavioral or psychological explanations. A vaccination is all about immediate costs and future benefits and it’s more difficult to act on future benefits than immediate costs, ala hyperbolic discounting. A free beer, donut, or lottery ticket provides an immediate benefit to offset the immediate cost and so may encourage vaccination, especially for those who are very present oriented. Note, however, that a lottery ticket might be expected to be less beneficial than an equivalent-cost donut because the donut is truly immediate while the lottery ticket is not. On the other hand, if vaccine hesitancy is driven by over-estimated fear of rare side-effects then perhaps a lottery ticket balances with an over-estimated hope of rare-benefits.

Even within a risk-neutral, rational model, however, there are good reasons to tie public goods to lotteries (ungated). Charities, for example, often use lotteries or raffles to fund public goods. Why? The reason is that a lottery is a natural counter to free-riding. Imagine that there is a public good but no one contributes because they each hope to free ride off other people’s contributions. As a result, the public good is not provided. Now introduce a fixed prize lottery. If no one else contributes then a contributor wins the lottery for certain so it can’t be an equilibrium for everyone to free ride (reminiscent of my dominant assurance contract mechanism for producing public goods). Note that the lottery in this model can’t just be a regular lottery ticket where you have to match X numbers to win. It has to be a raffle where the probability of winning is 1/N where N is the number of contributors. Thus, the Maryland and Ohio vaccine lotteries, which draw winners from the vaccinated, are much better than New York version which just hands out free lottery tickets. Thus, I expect the Ohio and Maryland versions to be more successful than the New York version.

Hat tip: Casey Mulligan for reference to the Morgan paper.

San Francisco fact of the day

At a board of supervisors hearing last week, representatives from Walgreens said that thefts at its stores in San Francisco were four times the chain’s national average, and that it had closed 17 stores, largely because the scale of thefts had made business untenable.

Brendan Dugan, the director of the retail crime division at CVS Health, called San Francisco “one of the epicenters of organized retail crime” and said employees were instructed not to pursue suspected thieves because encounters had become too dangerous.

“We’ve had incidents where our security officers are assaulted on a pretty regular basis in San Francisco,” Dugan said.

And yes incentives matter:

The retail executives and police officers emphasized the role of organized crime in the thefts. And they told the supervisors that Proposition 47, the 2014 ballot measure that reclassified nonviolent thefts as misdemeanors if the stolen goods are worth less than $950, had emboldened thieves.

Here is more from the NYT, via Ilya Novak.

What is holding back employment?

The White House and congressional Democrats have argued for weeks that the lack of child care services poses a major obstacle to the economic recovery, pressing for a massive and immediate investment to get parents back to work.

But a new economic analysis led by a prominent White House ally concludes that school and daycare closures are not driving low employment levels — blunting a key Biden administration argument in favor of its American Families Plan and undercutting the view of some Democrats that investing in child care is crucial for the country to climb out of the coronavirus recession.

“School closures and lack of child care are not holding back the recovery,” said Jason Furman, a Harvard professor who chaired the Council of Economic Advisers in the Obama administration and co-authored the analysis. “And conversely, we shouldn’t expect a short-term economic bump from reopening schools and making child care more available.”

The study — which found that the employment rate for parents of young children actually declined at a lower rate than for those without kids — adds fuel to an intense national debate about what is behind a suspected worker shortage and what policy changes are needed to accelerate Americans’ return to work as the pandemic subsides.

Here is the full Politico article by Megan Cassella and Eleanor Mueller.

Emergent Ventures winners, 14th cohort

Center for Indonesian Policy Studies, Jakarta, to hire a new director.

Zach Mazlish, recent Brown graduate in philosophy, for travel and career development.

Upsolve.org, headed by Rohan Pavuluri, to support their work on legal reform and deregulation of legal services for the poor.

Madison Breshears, GMU law student, to study the proper regulation of cryptocurrencies.

Quest for Justice, to help Californians better navigate small claims court without a lawyer.

Cameron Wiese, Progress Studies fellow, to create a new World’s Fair.

Jimmy Alfonso Licon, philosopher, visiting position at George Mason University, general career development.

Tony Morley, Progress Studies fellow, from Ngunnawal, Australia, to write the first optimistic children’s book on progress.

Michelle Wang, Sophomore at the University of Toronto, Canada, to study the causes and cures of depression, and general career development, and to help her intern at MIT.

Here are previous cohorts of winners.

Inflation and the Fed

Federal Reserve officials were optimistic about the economy at their April policy meeting as government aid and business reopenings paved the way for a rebound — so much so that and “a number” of them began to tiptoe toward a conversation about dialing back some support for the economy.

Here is more (NYT).  That is yet another sign that our government (treating fiscal and monetary as a consolidated entity) made a mistake in applying too much demand stimulus.  Hardly anyone said this at the time except Summers and Blanchard, and since then few have been willing to come out and admit error.  There is an ex post attempt to redefine the debate by insisting inflation will not spiral out of control.  Quite possibly not, but whatever your view on that question, don’t let it distract you from the actual mistake.  Virtually all macroeconomic commentators in the public sphere were wrong for not realizing and stressing that too much demand stimulus was being applied.  Furthermore, we ended up spending $1 trillion (!) in ways that were pretty far from optimal.

Got that?  People, the rooftops are waiting.

My Conversation with Pierpaolo Barbieri

Here is the audio, visual, and transcript.  Here is part of the summary:

Pierpaolo joined Tyler to discuss why the Mexican banking system only serves 30 percent of Mexicans, which country will be the first to go cashless, the implications of a digital yuan, whether Miami will overtake São Paolo as the tech center of Latin America, how he hopes to make Ualá the Facebook of FinTech, Argentina’s bipolar fiscal policy, his transition from historian to startup founder, the novels of Michel Houellebecq, Nazi economic policy, why you can find amazing and cheap pasta in Argentina, why Jorge Luis Borges might be his favorite philosopher, the advice he’d give to his 18-year-old self, his friendship with Niall Ferguson, the political legacy of the Spanish Civil War, why he stopped sending emails from bed, and more.

Here is just one bit:

COWEN: Why did Argentina’s liberalization attempt under Macri fail?

BARBIERI: That’s a great question. There’s a very big ongoing debate about that. I think that there was a huge divergence between fiscal policy and monetary policy in the first two years of the Macri administration.

The fiscal consolidation was not done fast enough in 2016 and 2017 and then needed to accelerate dramatically after the taper tantrum, if you want to call it, or perceived higher global rates of 2018. So Macri had to run to the IMF and then do a lot of fiscal consolidation — that hadn’t been done in ’16 and ’17 — in’18 and ’19. Ultimately, that’s why he lost the election.

Generally speaking, that’s the short-term electoral answer. There’s a wider answer, which is that I think that many of the deep reforms that Argentina needed lack wide consensus. So I think there’s no question that Argentina needs to modify how the state spends money and its propensity to have larger fiscal deficits that eventually need to be monetized. Then we restart the process.

There’s a great scholar locally, Pablo Gerchunoff, who’s written a very good paper that analyzes Argentine economic history since the 1950s and shows how we move very schizophrenically between two models, one with a high exchange rate, where we all want to export a lot, and then when elections approach, people want a stronger local currency so that we can import a lot and feel richer.

The two models don’t have a wide acceptance on what are the reforms that are needed. I think that, in retrospect, Macri would say that he didn’t seek enough of a wider backing for the kind of reforms that he needed to enact — like Spain did in 1975, if you will, or Chile did after Pinochet — having some basic agreements with the opposition that would outlive a defeat in the elections.

And:

COWEN: The best movie from Argentina — is it Nine QueensNueve reinas?

BARBIERI: It is a strong contender, but I would think El secreto de sus ojos, The Secret in Their Eyes, is my favorite film about Argentina because of what it says about the very difficult period of modernization, and in particular, the horrors of the last military regime that marked us so much that it still defines our politics 50 years since.

Recommended.

It feels like we are living in a science fiction novel

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

Now, for the first time in my life, I feel like I am living in a science fiction serial.

The break point was China’s landing of an exploratory vehicle on Mars. It’s not just the mere fact of it, as China was one of the world’s poorest countries until relatively recently. It’s that the vehicle contains a remarkable assemblage of software and artificial intelligence devices, not to mention lasers and ground-penetrating radar.

There is a series of science fiction novels about China in which it colonizes Mars. Published between 1988 and 1999, David Wingrove’s Chung Kuo series is set 200 years in the future. It describes a corrupt and repressive China that rules the world and enforces rigid racial hierarchies.

It is striking to read the review of the book published in the New York Times in 1990. It notes that in the book “the Chinese somehow regained their sense of purpose in the latter half of the 21st century” — which hardly sounds like science fiction, the only question at this point being why it might have taken them so long. The book is judged unrealistic and objectionable because its “vision of a Chinese-dominated future seems arbitrary, ungrounded in historical process.” The Chung Kuo books don’t reflect my predictions either, but it does seem that reality has exceeded the vision of at least one book critic.

I also consider Asimov, Dogecoin, and Stephenson at the link.

Lies vs. silence?

That is the contrast in my latest Bloomberg column.  The claims about the Republicans are more widely circulated in educated circles, so here is the section on the Democrats:

Given the greater deployment of intellectual argument, smart, educated people are exposed to a more persuasive case for Democratic positions. But there is a danger in this asymmetry: when Democratic ideas are not working or are poorly designed.

Rather than constructing brazen untruths, the Democratic intelligentsia remains largely silent when it is unhappy. President Joe Biden’s recent Buy American plan is similar to protectionist ideas from Trump, but it doesn’t come in for heavy criticism on social media. If asked about it, most Democratic-leaning economists would be (correctly) critical. Yet for them this shortcoming isn’t that big a deal, given what are perceived to be the greater sins of Republicans, including their “big lie” strategy.

The continuing problems of migrant children cut off from their parents at the border receive some criticism — but the noise machine is nothing close to what it was under Trump. The new inflation data seem to indicate that Larry Summers’s criticisms of Biden’s stimulus program were largely correct, yet few if any commentators are apologizing to him on Twitter.

There is much more at the link, including about Republicans.  And to be clear, when it comes to the Democrats, the “in fact this wasn’t left wing enough” is an almost obligatory form of self-criticism, serving also as a kind of repeated affirmation of relative moral superiority.  Or the “I/we was even more right than I had thought” criticism is common as well.  The actual self-criticism of “our value schema led us astray on this issue altogether”? — you almost never hear that one.

What should I ask Alexander the Grate?

No typo there, nor has backward time travel been invented.  I will be doing a Conversation with him, and here is a brief summary:

He has lived on various heating grates in Southwest D.C. for almost all of his homeless life, which is why he introduced himself as “Alexander the Grate,” when he and I first met in 1983. Several years ago, he told me this: “The bottom line is that the urban homeless in Washington, D.C., don’t create structures. We can’t because of the restrictions. Rather, we impose ourselves into the interstices of the infrastructure.”

So what should I ask him?

India Delays the 2nd Dose; Delaying 2nd Dose Improves Immune Response; Fractional Dosing

India has delayed the second dose to 12-16 weeks.

In other news, delaying the second dose of the Pfizer vaccine appears to improves the immune response (as was also found for the AstraZeneca vaccine). The latter is a news report based on a press release so some caution is warranted but frankly this was always the Bayesian bet since most vaccines have a longer time between doses as that helps the immune system. As Tyler and myself both argued, the short gap between the first and second dose was chosen to speed up the clinical trials not to maximize immunity. That was the right decision in the emergency but it was never the case that following the clinical trial regimen was “going by the science” no matter what Fauci said.

Many lives have been lost by not going to first doses first earlier, both here and in India.

Every country should move to a regimen in which the second dose comes at 12-16 weeks, even the United States, as this may improve the immune response and help other countries get a little bit ahead in their vaccine drives.

May I now also beat the drum some more on fractional dosing? Many people (not everyone) report that the second mRNA dose packs a wallop. I suspect that a half dose at 12-16 weeks would be plenty and that would free up significant capacity to vaccinate more people with first doses. We could also run some trials on half-doses for the young as a way to balance dosing and risk. Again this will matter for the rest of the world more than the United States but stretching doses in the United States will help the rest of the world and the arguments against stretching doses are now much diminished.