Category: Current Affairs

The *Love Letter* has a P.S.

As people start reacting to Covid-19, they are looking mostly to the larger businesses for assistance. Costco and Walmart are packed. Amazon and UPS are delivering our packages. For entertainment at home, Americans are relying on Netflix and the cable companies. For information on Covid-19, Twitter is a very useful stop. As hospitals become overcrowded, CVS and Rite Aid may become important as local health centers and sources of community information.

It turns out that the larger, more profitable businesses are the ones that have the talent, the command of public attention and the financial resources to adjust to these changing conditions.

Big business also has been ahead of the curve when it comes to prediction and adjustment. The NBA postponed its season before most politicians, including the president, realized the gravity of the situation.

Only a month ago, there were headlines mocking Silicon Valley for being overly concerned with Covid-19 and for avoiding handshakes. The tech community had a high degree of advance awareness of Covid-19 problems, and it was ready with telework and other adjustments when the time came. The tech world’s penchant for carrying what seemed to be absurdly large surpluses of cash — last year Apple had over $100 billion in cash reserves — now also seems prescient. Apple’s stores are currently closed in most parts of the world.

And this:

Larger businesses are also easier to assist if necessary. Whatever you think of the forthcoming bailout of the major U.S. airlines, logistically it will not be very difficult to pull off, since the targets are large and obvious and relatively easy to monitor. Banks are willing to lend to them, because they know the government does not contemplate a world without major airlines.

It is much more difficult to bail out the millions of small and medium-sized enterprises around the world that will demand assistance. How do you find and track them? How can you tell which have no chance of bouncing back? Government bureaucracies cannot easily deal with those problems, and in turn private banks do not perceive governments to be making credible commitments to these small businesses. By contrast, there are numerous precedents for governmental aid or loans to airlines or other major businesses.

That is all from my latest Bloomberg column, much more at the link.  One problem Italy has, of course, is a fairly high reliance on small business.

Bill Dupor of the St. Louis Fed on fiscal remedies

The entire piece is interesting, here are two highlights:

Subsidize COBRA Continuation Coverage Employer -provided health insurance is commonplacein the United States. Laid off (or furloughed) workers, even if they receive higher UI replacement rates, would (or at least could) lose their health insurance. The federal government already has the COBRA program to allow for continuation of coverage for workers losing their jobs. This program, however, requires worker-paid premiums. These premiums increase the relative cost of engaging in nonmarket activities. To reduce that cost, the federal government might temporarily cover 70 percent of the COBRA premiums for the unemployed or furloughed. Calculating an appropriate size of such a program, even in a rough sense, is difficult at this stage. For a baseline, suppose the allocation were $25 billion, which was the value of a similar program implemented under the 2009 Recovery Act.

And here is another way to get cash into people’s hands quickly:

Penalty-Free Withdrawals from Individual Retirement Accounts

Many Americans hold tax-deferred individual retirement accounts. Individuals can withdraw funds on retirement (and a few other special situations) or any time they wish if they pay a 10 percent penalty. This 10 percent penalty is in addition to the taxes that are due on the withdrawal. In the event of a severe viral outbreak, the federal government could temporarily remove this 10 percent penalty up to a certain dollar amount and for a preset length of time. Since the initial contribution to the retirement fund was tax deferred, taxes would need to be paid on the withdrawal even if the additional penalty was waived.

Recommended.

The best economic plan against the coronavirus

I have produced a 7 pp. document, mostly micro- rather than macroeconomics, leaving the pure health and health care issues aside, you will find it here (link is now corrected).  Intended for policymakers.  Here is the opening bit:

“We need a series of policies to achieve some rather complex ends, and in conjunction. Other than the obvious goals (“minimize human suffering”), these ends are:

  1. Scale down economic activity in a rapid way to keep people at home, but without devastating the physical, cultural, or organizational capital that will be needed to restore growth and normality.

  2. Boost the confidence of markets — both retail and financial markets — by showing progress in limiting the spread of the disease. (But note that merely slowing the spread of the disease may not help the economy, as uncertainty would linger for longer periods of time.)

  3. Keep business in a position to rebound.

  4. Create incentives for production to bounce back once that is appropriate.

You will notice a tension between #1 and #2-4, which is what makes this policy issue so difficult. The ideal policy mix should both lower and raise output, and at just the right speed. No one ever taught us how to do that.

Furthermore, policymakers need to figure out which sectors a) we wish to keep up and running (food, health care), b) which sectors we want to contract rapidly but bounce back rapidly as well (education), and c) which sectors we do not want to protect at all and would be willing to see perish (e.g., cruise ships, note that most operate under foreign flags and employ mainly non-Americans). 

Those classes of sector may require very different economic policies, most of all we should not waste aid on the latter class of sectors. Be nervous of general proposals for “the economy.”

Again, here is the link, please do leave your suggestions in the comments section of this blog post.  I thank Patrick Collison for some writing and editing assistance with this document, though of course he is not liable for its final contents or conclusions.

Mercatus call for short papers

Today, the Mercatus Center put out a call for policy briefs related to the COVID-19 pandemic. We hope to gather short, actionable analyses for decision makers in the public, civil society, and private sectors regarding both immediate response (what’s working or could be done immediately), as well as in the medium term (what do we need to be thinking about now so that we’re prepared in six to twelve months).

More information can be found here.

Papers will be published quickly (within 24 hours in most cases), and authors will receive a $1,000 honorarium.

The list of possible topics is advisory and by no means comprehensive; our goal is to assemble the smartest actionable analyses as quickly as possible.

Hedgehogs in particular: what do you know here that the foxes should hear?

Note that research need not directly relate to public policy, but also how the business sector and civil society can and should respond.

A report from the hospital front, from a reliable source

I visited *** Health Center in ***.  They are not a hospital, more like an urgent care clinic funded by the city and state. They act as triage for three area hospitals, take vital signs, can write prescriptions and send serious cases to Hospital ERs.  They have been overwhelmed with people worried about COVID-19…They had been testing people for the virus; they have run out of re-agent so they have stopped that….If they were provided with isolation beds and ventilators, could they take 20 patients?  No, it is not in their license and an application to change their license takes two years. When NYC reaches maximum hospital capacity, this clinic will not be part of the solution.

I visited [underfunded public health consortium] in ***, which was at the forefront of the response to H1N1 in 2009 and Sandy in 2012.  They typically see 150 ER patients a day; during H1N1 they averaged 350 at the peak; they think they will be over 1000 during COVID-19….There is no such thing as a “test kit” which tests for the virus; when people talk about those kits, such as those dropped onto that cruise ship, they are talking about a nasal swab packaged with some reagent, which is then mailed to a facility with a Polymerase Chain Reaction Machine that can look for the RNA from the virus.

You can find PCR machines on eBay for $25,000; such a machine is labor intensive and can do maybe 10 tests a day.  The hospital complex I visited, which has been designated a testing center, has been swabbing about 200 people a day and receiving multiples of that number from other hospitals. The vast majority they are sending off to a federal lab.  Two weeks ago the turnaround time was three days; now it is five to six.

There are much faster machines.  The Roche Cobas 6800 can do 3000 tests a day with very little human interaction; it costs $500k a year to rent, which is way outside a poor hospitals’s budget (while still not providing sufficient testing for the receiving area in the coming months.) Outside their budget until today, when we gave that money (I specified first year only, though they should be sure to ask in a year) as part of a larger check.  We also gave money for 10 transport ventilators with two ports, 20 isolation beds, the money to hire 14 nurses for round the clock coverage of those beds for 6 weeks, and other things that they need.  Overall it was a $1 million check, with a promise to talk to them in a week to cover anything we might have missed and to talk to them whenever they ask during the crisis.  Overall, I was pretty happy with the visit.  They were stunned, they work in a bureaucracy where everything takes 3 years.

One thing that they can’t get enough of is N-95s [face masks]. The first thing that almost every doctor I talked to mentioned was the frustration at having to re-use N-95’s, not for multiple patients, but for multiple days.

Again, here are the Emergent Ventures prizes to encourage work to support work to fight the coronavirus, and please support them if you can.

Robert Browning and Ingmar Bergman in a Bloomberg column

With all those fools going to bars and concerts, or running marathons, it is evident we still need to solve the problem of entertainment, as I argue in my new Bloomberg column.

It is instructive to look back to the days of World War II. The U.S. government played a critical role in encouraging Hollywood to make cheery movies, and it helped by not trying to force every actor into the armed services. Major league baseball, the national pastime of the era, continued to hold a regular season and a World Series, again to distract people from wartime worries. Many top players, such as Ted Williams, were away fighting, but there were adequate replacements. The government knew that wartime drama could not be the only drama on tap.

With Covid-19, the goal is to keep people at home, at least if they are not essential workers. But if staying at home is too boring, cabin fever will take over and people will run out to social gatherings when they ought to be staying put. So solving the entertainment problem is one very real piece of the puzzle for minimizing the effects of the coronavirus and keeping Americans not just in good spirits but healthy.

The very worst scenario is that the coronavirus itself — how it is playing out, how officials and celebrities and neighbors are reacting — becomes our main entertainment. It could become an ongoing horror show that drives us crazy and makes people even more cynical about politics.

To avoid such a mix of frustration and terror, I have a modest proposal: We should restructure a few of our traditional entertainments to be safe from the coronavirus.

As suggested on Twitter, how about inducing a few of the cable providers to offer free streaming for a few months?  The Met has announced a big increase in opera streaming.  And:

Or how about proceeding with some version of the NBA Finals? Take a subset of the best qualifying teams, test every player for coronavirus, isolate them in a remote area with a college gymnasium, and have them proceed with a shortened version of the real thing in front of only a TV crew. With so many other public events closed down, television viewership would probably reach an all-time high, and the sense of drama would be incredible. It would be one NBA Finals we would never forget, and the quality of play would respond to the very high psychological stakes.

Ben Golliver serves up a concrete NBA proposal.  You’ll have to click through to get to the Browning and Bergman parts, the latter being Easter egg.  At least the Candidate’s Tournament still seems to be on in chess, you can all watch that for the next few weeks, starts Tuesday I believe, try www.chessbomb.com.

Lecturing alone won’t work: we really do need to make it more fun for people to stay at home!

How can you best volunteer?

David Brooks writes:

If you know someone who lives alone ask them to join NextDoor, which is Facebook for neighborhoods. It helps them stay in touch with those right around them. Vital in a crisis.

I am not familiar with that project, but I would trust David’s judgment in such matters.  How else can people volunteer usefully, especially if they do not wish to leave their homes?  Keep in mind that useful volunteering is also a good way to keep people occupied and at home!

Please do leave your suggestions in the comments.  if nothing else, even “placebo volunteering” could be highly worthwhile.  I will put up some of the best ideas in a later post.

What US Government should do regarding Covid-19

This is (by far) the best document I have seen on what to do on the medical side.  It is about 3 pp. long and I believe it will be updated periodically.  Excerpt:

  • Consider guaranteeing top tier treatment and ICU beds for people directly working on treatments or vaccines. We need to keep relevant science labs open. (They’re likely to be closed as things stand.)
    • No doubt logistically challenging but may be necessary. Can you get scientists to keep going without this?
  • Announce $10B prizes for first vaccine and for first cure.
    • Think about mechanics. Should there be awards for second place, too? How should collaboration be factored in?
  • Issue $1B of research grants to all competent labs and organizations that could plausibly use them. They just have to report on progress every 30 days and require that they actively share all progress with other labs.
    • Proposed structure: $100M to each of 5 companies.
    • $10M to each of 40 labs.
      • Remainder based on discretion.
    • Take what’s required for treatment cases and make an “open source” version whose bill of materials costs less than $1,000. Commit to purchasing at least 100k. Even if US turns out not to need them, donate to other countries.

The author is anonymous, but I know that he/she has followed the issue very closely from the beginning, and his/her predictions have been largely on the mark.  If you are in USG I am happy to put you in touch, just write me.

Again, here is the document, highly recommended.

A 21st Century Jobs Program

Sick pay pays sick people to stay home but to defeat the virus we also want lots of healthy people to stay home. We also want to support people who are at home because they can’t find work. We can accomplish these goals by subsidizing work using services like Upwork or Mechanical Turk. Jobs on platforms like Upwork are the shovel-ready work of the 21st century. A 21st century jobs program would pay people to stay home and isolate, support people without work, and produce some useful output all at the same time.

Instead of paying people to dig and then fill ditches we could pay people to help train machine-learning apps, enter data, subtitle videos. take surveys, maybe even fold proteins to disrupt viruses.

More generally, how about paying people to take online courses? i.e. an income support program and a human capital investment program at the same time. Of course, not everyone would do well and people would cheat but think of these programs as a combination of paying people to isolate, maintaining aggregate demand and providing a source of income when low-wage restaurant and other service-jobs are declining but with a work requirement.

Hat tip: Discussion with Nate Baker. See also John Horton and Arindrajit Dube.

Should we ration coronavirus testing by price?

This is making the rounds on Twitter:

Just went to Seattle’s UW Medical Center to ask how much patients are being charged for a coronavirus test. $100-$500 if they have insurance. $1,600 if they don’t.

Put your emotions aside and ask the logical question: since the number of tests falls short of current demand, how should we ration those tests?  I would think we most wish to test potential super-spreaders, so they can self-quarantine or otherwise be isolated or avoided.  A priori, I would expect potential super-spreaders to be those who work in service jobs connected to many other people.  Individuals who suspect they already have the disease are also more likely to be super-spreaders, if only because there is a decent chance they actually do carry the disease.

Now at a price say of $500, you will rule out some of the poor, some of the “frivolous testers” (there are people who will try anything that is new), but you don’t rule out many of the middle class people — or wealthier people — who think they might have the coronavirus.

You end up targeting potential superspreaders by “those who think they have it,” but not by “those who work in service jobs where they come in contact with a lot of people.”

An imperfect solution, but not an entirely bad one either.  It is probably better than random allocation.  And still all of the available tests get used.

How about a government price of zero, combined with rationing?  Of course it depends what the principle of rationing would be.  From other countries, “I came into contact with a traced person” seems to be one standard, noting that the United States has nothing close to Singapore’s surveillance mechanism in this regard.  So you would get a very loose version of that standard, with many flu-laden nervous nellies taking the test, claiming they came in contact with a sick person.

That could perform either better or worse than the market solution.  In Singapore it is probably better than the market solution, but I am not sure for the United States.  My intuition would opt for the market prices, but I admit that is not verified by either model or data.

A separate issue, hard to judge from current information, is whether there is any positive supply elasticity at the higher price.  Of course if there is, that will make the higher price look better, but perhaps other regulatory and pipeline restrictions on testing will mean the higher price won’t matter.

And note that as the supply of tests becomes much greater, as is happening right now, the case for those high market prices becomes much, much weaker.  Zero price and no rationing is where we would like to end up, and I think we will.

I find that this problem, and how you tackle it, is a good test for whether or not you think like an economist consistently.

The Danes wish to know more about the coronavirus

From Martin Permin, for formatting reasons I have imposed no further indentation:

“Thanks for the excellent coverage on MR.

I lead a small team of tech workers in Copenhagen, who are donating our time and money towards building a covid-19 self-reporting tool for those citizens not (yet) in contact with health care services.

As countries shift from containment to “flatten the curve” strategies, authorities lose track of the number of non-critical cases, and to which degree people adhere to social distancing dictums. This makes it hard to predict the number if ICU beds needed a few days into the future. We’re aiming to solve this by asking all Danes for daily status updates.

Denmark is a good testing ground, but we’ll open source everything, and are building with developing countries in mind. We’re aiming to launch Monday — currently working on a green light from local health authorities.

We’re determining which data to collect. We’d love it if you’d help by asking your audience: “What daily self reported measures would you most like to see from the complete population Denmark?” (or some variation thereof).

There is of course a tradeoff between data fidelity and engagement.

What we’re considering:

  • Symptoms
    • Binary
    • Type
    • Severity
  • Whereabouts
    • Degree of social distancing
    • Hygienic measures
  • Moral
    • How concerned are you
    • Do you know anyone who’s been sick”

Are there comparable efforts to do this elsewhere?

The British approach to coronavirus

Not sure how aware you are of what’s happening here but the British government is taking a decidedly different approach to most other nations. They are not shutting schools or cancelling large gatherings or recommending self-isolation. They’re taking a longer view and saying if that happens it will be a way off yet. The policy is led by the scientists.

It’s a very bold approach, the govt is coming under a lot of pressure to do what other nations are doing, there’s a lot of shouting to DO MORE, but so far they’re ignoring it. It’s kind of fascinating to see it play out. If you have time, today’s press conference is really worth a watch, the chief scientific and health advisers give a pretty detailed explanation of what they’re doing (Johnson introduces and then the scientists start talking at 31.50). They don’t say this explicitly but their bet is that what China and South Korea are doing is not economically or psychologically sustainable and will just lead to another peak. (My friend has drawn a cute visual explanation of the thinking here).

In this press conference they also make a pretty persuasive case that cancelling large gatherings is pointless and may be counter-productive.

…One more thing – good summary of the arguments the govt scientists made in that press conference, in this Guardian report. eg “closures would have to be at least 13 weeks long to reduce the peak of Covid-19 by 10-15%. Measures such as self-isolation for seven days for those with symptoms … have been modelled and are shown to be much more effective”

That is from an Ian Leslie email.  I am skeptical about this approach (is it politically sustainable?), but we will know more soon.  Here is another good explanation, by another guy named Ian:

3. A UK starting assumption is that a high number of the population will inevitably get infected whatever is done – up to 80%. As you can’t stop it, so it is best to manage it. There are limited health resources so the aim is to manage the flow of the seriously ill to these.

4. The Italian model the aims to stop infection. The UKs wants infection BUT of particular categories of people. The aim of the UK is to have as many lower risk people infected as possible. Immune people cannot infect others; the more there are the lower the risk of infection

And here is a polemic critique of the British strategy.  Continuing…

$1 million plus in Emergent Ventures Prizes for coronavirus work

I believe that we should be using prizes to help innovate and combat the coronavirus. When are prizes better than grants? The case for prizes is stronger when you don’t know who is likely to make the breakthrough, you value the final output more than the process, there is an urgency to solutions (talent development is too slow), success is relatively easy to define, and efforts and investments are likely to be undercompensated. All of these apply to the threat from the coronavirus.

\We do not know who are the most likely candidates to come up with the best tests, the best remedies and cures, the best innovations in social distancing, and the best policy proposals. Anyone in the world could make a contribution to the anti-virus effort and it won’t work to just give a chunk of money to say Harvard or MIT.

Progress is urgent. I am still keen on talent development for this and other problems, but the situation is worse every week, every day. It is important to incentivize those who are working on these problems now.

The innovators, medical professionals and policy people at work on this issue are unlikely to receive anything close to the full social value of their efforts.

I therefore am grateful that I have been able to raise a new chunk of money for Emergent Ventures — a project of the Mercatus Center — for ex post prizes (not grants) for those who make progress in coronavirus problems.

Here are the newly established prizes on offer:

1. Best investigative journalism on coronavirus — 50k

2. Best blog or social media tracking/analysis of the virus — 100k

3. Best (justified) coronavirus policy writing — 50k

4. Best effort to find a good treatment rapidly — 500k, second prize 200k

5. Best innovation in social distancing — 100k

6. Most important innovation or improvement for India — 100k

What might be an example of a winning project?  What if this attempt to build scalable respirators succeeded?  That would be a natural winner.  Or a social distancing innovation might be the roll out of more meals on wheels, little libraries, online worship, easier ways to work from home, and so on.  The vision is to give to people whose work actually will be encouraged, not to give to Amazon (sorry Jeff!), no matter how many wonderful things they do.

These are not prizes you apply for, they will be awarded by Emergent Ventures when a significant success is spotted.  (That said, you still can propose a coronavirus-related project through normal channels, with discretionary amounts to be awarded as grants per usual procedures.)  And typically the awards will apply to actions taken after the release of this announcement.

I would love to be able to offer more second and third prizes for these efforts, and also to increase the amounts on offer, and perhaps cover more countries too. Or perhaps you have an idea for an additional category of prize. So if you are a person of means and able to consider making a significant (tax-deductible) contribution, please email me and we can discuss.

In the meantime, the rest of you all need to get to work.