Category: Current Affairs

China estimate of the day

by  Tyler Cowen in

“Only 30 percent of small and medium businesses nationwide have resumed work,” Shu Chaohui, an official at the Ministry of Industry and Information Technology, told reporters Tuesday. “It’s a pretty severe situation.”

…A nationwide survey led in February by Peking University found half the country’s small businesses will run out of cash within three months, and 14 percent might not survive past mid-March. Unlike large state conglomerates or multinational companies that could weather the storm, China’s small businesses say they simply do not have cash reserves to continue paying wages and rent.

And while manufacturing giants that mass-produce gadgets such as Apple iPhones can rely on the government to charter buses and trains to shuttle migrant workers back to their factories, nearly 40 percent of smaller businesses say they cannot get their workers back to Chinese cities because of transportation bottlenecks and quarantine restrictions, according to the Peking University study.

Here is more from Gerry Shih.

The WHO Report on COVID-19

by  Alex Tabarrok in

The Report of the WHO-China Joint Mission on Coronavirus Disease 2019 (COVID-19) is the best source of information on COVID-19 that I have seen.

The Joint Mission consisted of 25 national and international experts from China, Germany, Japan, Korea, Nigeria, Russia, Singapore, the United States of America and the World Health Organization (WHO). The Joint Mission was headed by Dr Bruce Aylward of WHO and Dr Wannian Liang of the People’s Republic of China.

Some of the language is more pro-China than is usual in an academic report but the report is full of credible data.

The bottom line is that there is good news and bad news. The good news is that due to extraordinary intervention the epidemic in China has been brought under control and is slowing to manageable levels.

In the face of a previously unknown virus, China has rolled out perhaps the most ambitious, agile and aggressive disease containment effort in history. The strategy that underpinned this containment effort was initially a national approach that promoted universal temperature monitoring, masking, and hand washing. However, as the outbreak evolved, and knowledge was gained, a science and risk-based approach was taken to tailor implementation. Specific containment measures were adjusted to the provincial, county and even community context, the capacity of the setting, and the nature of novel coronavirus transmission there.

…. China’s bold approach to contain the rapid spread of this new respiratory pathogen has changed the course of a rapidly escalating and deadly epidemic. A particularly compelling statistic is that on the first day of the advance team’s work there were 2478 newly confirmed cases of COVID-19 reported in China. Two weeks later, on the final day of this Mission, China reported 409 newly confirmed cases. This decline in COVID-19 cases across China is real.

… Based on a comparison of crude attack rates across provinces, the Joint Mission estimates that this truly all-of Government and all-of-society approach that has been taken in China has averted or at least delayed hundreds of thousands of COVID-19 cases in the country. By extension, the reduction that has been achieved in the force of COVID-19 infection in China has also played a significant role in protecting the global community and creating a stronger first line of defense against international spread. Containing this outbreak, however, has come at great cost and sacrifice by China and its people, in both human and material terms.

The bad news is that the WHO is worried that other countries do not have the capability or will to implement some of the same policies as China did.

Much of the global community is not yet ready, in mindset and materially, to implement the measures that have been employed to contain COVID-19 in China. These are the only measures that are currently proven to interrupt or minimize transmission chains in humans. Fundamental to these measures is extremely proactive surveillance to immediately detect cases, very rapid diagnosis and immediate case isolation, rigorous tracking and quarantine of close contacts, and an exceptionally high degree of population understanding and acceptance of these measures.

.. COVID-19 is spreading with astonishing speed; COVID-19 outbreaks in any setting have very serious consequences; and there is now strong evidence that non-pharmaceutical interventions can reduce and even interrupt transmission. Concerningly, global and national preparedness planning is often ambivalent about such interventions. However, to reduce COVID-19 illness and death, near-term readiness planning must embrace the large-scale implementation of high-quality, non-pharmaceutical public health measures. These measures must fully incorporate immediate case detection and isolation, rigorous close contact tracing and monitoring/quarantine, and direct population/community engagement.

I don’t think the WHO is the final authority on what to do, public health is their hammer. I have been dismayed, however, at the failure of the CDC, which surely prior to this crisis one would have rated as one of the best US organizations. As the NYTimes wrote:

The Centers for Disease Control and Prevention botched its first attempt to mass produce a diagnostic test kit, a discovery made only after officials had shipped hundreds of kits to state laboratories.

A promised replacement took several weeks, and still did not permit state and local laboratories to make final diagnoses. And the C.D.C. essentially ensured that Americans would be tested in very few numbers by imposing stringent and narrow criteria, critics say.

The failure of the CDC, which is a failure of the US government at the deepest levels, not just rot from the top, meant that we lost several weeks that we may have needed to avoid more stringent measures. We will know more in a week.

Read the whole thing.

A coronavirus conundrum, on the percentage of asymptomatic cases

by  Tyler Cowen in

New reports suggest that the coronavirus has been spreading in Washington state for at least six weeks, infecting hundreds or maybe more.  At the same time, other reports suggest a high “R0 value,” sometimes 3 or more, reflecting that the coronavirus is highly contagious and it spreads very quickly.

It is then possible to have hundreds of cases in Washington state if most cases are asymptomatic, or with only slight symptoms.  Yet when we look at the experiences of the coronavirus cruise ships, it seems a reasonable number of cases have symptoms of distress.  For instance, on the Diamond Princess six people died and only about half are listed as having the virus but asymptomatic (see the previous link on the rhs).  So many others seem to have reported being sick or requiring treatment.

So what gives?  I see a few options, none of them obviously convincing:

1. People on the cruise ship were hit especially hard.

2. Significantly different strains of the virus are circulating (all of the sequence that has been done seems to run counter to this).

3. Washington state local public health infrastructure has in fact been overwhelmed as of late, we just thought it was all a very bad flu season.

4. Many of the people on the cruise ship who showed symptoms “thought they were supposed to” but were not actually so sick.

5. Most of the detected cases on the cruise ship in fact were asymptomatic, but the media has been misreporting the extent of actual illness among the passengers.

Any other suggestions?  It is quite likely the cruise ship people are older than usual, but will that make up for the entire difference?  People, what do you think is going on here?

Please restrict your comments to attempting to resolve this particular issue, as you can put your more general coronavirus observations on other posts.

Why have stock markets been falling so much?

by  Tyler Cowen in

That is the topic of my latest Bloomberg column, note first of all that the virus is a kind of referendum on global response capabilities, and so far we have been failing (with Singapore as a possible exception).  Here is another bit:

…investors now have a better sense of what other investors think about risk. Before Covid-19, investors did not have much direct information about what other investors thought about the robustness of the global economy. Their expectations were not seriously being tested.

When a new shock to the system comes along, however, everyone gets to observe everyone else’s selling behavior. And investors have learned that the faith of their fellow investors is not as strong as they had thought. That raises the risk premium on holding stocks, and in turn causes share prices to fall more. Given how much this pandemic is a truly new event, and that the process of trading itself generates information about the forecasts of other investors, price volatility can be expected to continue.

And this:

The stock market is scared by the fact that it took so long for the stock market to be scared.

Developing…

Emergent Ventures winners, seventh cohort

by  Tyler Cowen in

Nicholas Whitaker of Brown, general career development grant in the area of Progress Studies.

Coleman Hughes, travel and career development grant.

Michael T. Foster, career development grant to study machine learning to predict which politicians will succeed and advance their careers.

Evan Horowitz, to start the Center for State Policy Analysis at Tufts, to impose greater rationality on policy discussions at the state level.

John Strider, a Progress Studies grant on how to reinvent the integrated corporate research lab.

Dryden Brown, to help build institutions and a financial center in Ghana, through his company Bluebook Cities.

Adaobi Adibe, to restructure credentialing, and build infrastructure for a more meritocratic world, helping workers create property rights in the evaluation of their own talent.

Shrirang Karandikar, and here (corrected link), to support an Indian project to get the kits to measure and understand local pollution.

Jassi Pannu, medical student at Stanford, to study best policy responses to pandemics.

Vasco Queirós, for his work on a Twitter browser app for superior threading and on-line communication.

My 2013 NYT column on pandemics

by  Tyler Cowen in

The government should resist the strong temptation to skimp on rewards. Many health care breakthroughs come through university research programs and government grants, but bringing an innovation to fruition and managing wide and rapid distribution usually requires the profit-seeking private sector. In any single instance, the government could save money by confiscating rights, but in the longer run this would discourage the search for additional remedies.

If anything, the American government — or, better yet, a consortium of governments — should pay more for pandemic remedies than what market-based auctions would yield. That’s because, if a major pandemic does arise, other countries may not respect intellectual property rights as they scramble to copy a drug or vaccine for domestic distribution. To encourage innovations, policy makers need to bolster the expectation of rewards.

I agree with the circulating critiques of current Trump administration policy, but the Democrats are no angels in this matter either.  For instance:

Unfortunately, the United States lacks strong political coalitions for many beneficial public health measures. The Democratic Party has focused on insurance coverage and Medicaid expansion as political issues, while often wishing to lower prices of drugs or to weaken patent protection. The Obama administration’s new budget lowers spending on pharmaceuticals by an estimated $164 billion over 10 years, mostly through bargaining down Medicare drug prices. That makes it hard for the Democrats to embrace lucrative rewards for pharmaceutical companies or vaccine producers.

Here is the full column.

How the coronavirus is changing the culture of science and publication

by  Tyler Cowen in

A torrent of data is being released daily by preprint servers that didn’t even exist a decade ago, then dissected on platforms such as Slack and Twitter, and in the media, before formal peer review begins. Journal staffers are working overtime to get manuscripts reviewed, edited, and published at record speeds. The venerable New England Journal of Medicine (NEJM) posted one COVID-19 paper within 48 hours of submission. Viral genomes posted on a platform named GISAID, more than 200 so far, are analyzed instantaneously by a phalanx of evolutionary biologists who share their phylogenetic trees in preprints and on social media.

“This is a very different experience from any outbreak that I’ve been a part of,” says epidemiologist Marc Lipsitch of the Harvard T.H. Chan School of Public Health. The intense communication has catalyzed an unusual level of collaboration among scientists that, combined with scientific advances, has enabled research to move faster than during any previous outbreak. “An unprecedented amount of knowledge has been generated in 6 weeks,” says Jeremy Farrar, head of the Wellcome Trust…

The COVID-19 outbreak has broken that mold. Early this week, more than 283 papers had already appeared on preprint repositories (see graphic, below), compared with 261 published in journals. Two of the largest biomedical preprint servers, bioRxiv and medRxiv, “are currently getting around 10 papers each day on some aspect of the novel coronavirus,” says John Inglis, head of Cold Spring Harbor Laboratory Press, which runs both servers. The deluge “has been a challenge for our small teams … [they] are working evenings and weekends.”

Here is the full story, via Michael Nielsen.

Inequality protest sentences to ponder

by  Tyler Cowen in

In countries that did experience mass protests (Chile, Colombia, Ecuador and Bolivia) on the other hand, inequality was either constant or continued to decline in the last few years for which data is available.

Here is the full World Bank blog post by Francisco Ferreira and Marta Schoch.  That is via Gonzalo Schwarz of the Archbridge Institute, Gonzalo just wrote this excellent piece on economic mobility.

My Conversation with Garett Jones

by  Tyler Cowen in

Here is the transcript and audio, here is part of the opening summary:

Garett joined Tyler to discuss his book 10% Less Democracy, including why America shouldn’t be run by bondholders, what single reform would most effectively achieve more limited democracy, how markets shape cognitive skills, the three important P’s of the repeated prisoner’s dilemma, why French cuisine is still underrated, Buchanan vs. Tullock, Larry David vs. Seinfeld, the biggest mistake in Twitter macroeconomics, the biggest challenges facing the Mormon church, what studying to be a sommelier taught him about economics, the Garett Jones vision of America, and more.

Here is one bit:

COWEN: But let’s say it’s the early 1990s. Eastern European countries are suddenly becoming free, and they ask you, “Garett, what electoral system should we have?” What do you say?

JONES: What I really would go for is presidential systems, if you can handle it, something like a first-past-the-post system, where those people elected from local districts focused on local problems — which have less of a free-rider problem involved — go up to the parliament and actually argue their case. The presidential element is less important than the parliamentary idea of the single-district voting. I tend to think that creates more accountability on the part of the government.

And more:

COWEN: For the United States, what is the most effective way, in your view, that you would want us to have 10 percent less democracy? What’s the one thing you would change?

JONES: I would change the House of Representatives to a six-year term. I picked that because it’s not outside the range of plausibility, and because I think people would instantly understand what it accomplishes — not because it has the highest payoff, but because it balances payoff with plausibility in a democracy.

And on boosting IQ:

COWEN: But what’s the key environmental lever? Whatever Ireland did [to have induced an IQ rise], it’s not that people were starving, right? That we understand.

JONES: No, true.

COWEN: So why don’t we do more of whatever they did, whatever was done to the East Germans, everywhere?

JONES: Exactly.

COWEN: But what is that lever? Why don’t we know?

JONES: I would say that thing is the thing we call capitalism.

COWEN: Capitalism is a big, huge thing. Not all of capitalism makes us smarter.

JONES: Yeah, that’s the thing — figuring out which things within capitalism — what is it about living in a free society with competitive markets where, at least in our youth and middle age, we feel a need to sell ourselves as valuable creators. There’s something about that that probably is what’s most valuable for boosting cognitive skills. It’s a sort of demand-side desire to try to use our minds in socially productive ways. And I think in communism, we can —

COWEN: So marketing makes us smarter?

JONES: That’s what I would say, yeah.

There is much more at the link, an excellent Conversation.  Here you can order Garett’s book 10% Less Democracy: Why You Should Trust the Elites a Little More and the Masses a Little Less.  You can read the introduction to the book on-line.

All Praise the Fist Bump

by  Alex Tabarrok in

Handshaking spreads germs and is a bad method of greeting. I prefer an elegant namaste but that is slightly hard to coordinate on when the other person sticks out their hand. The fist bump is a little smoother and has a greater chance of being adopted.

A study by Mela and Whitsworth in the American Journal of Infection Control found that fist bumps transferred one-quarter as much bacteria as a moderate handshake and even less compared to a strong handshake. Fist bumps are better because of lower contact times and lower contact area.

Here’s Tom Hanks showing you how it’s done.

Hat tip: Bryan Caplan for always asking for the numbers.

How robust are supply chains?

by  Tyler Cowen in

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

Consider the supply chain of the Apple iPhone, which stretches across dozens of companies and several continents. Such complex cross-national supply chains generate relatively high profits, giving them a kind of immunity to small disruptions. If there is an unexpected tax, tariff or exchange movement, the supply chain can generally swallow the costs and move on. Profits will be lower within the supply chain, but production will continue, as it is too lucrative to simply shut everything down.

Do not be deceived, however: Supply chains are not indestructible. If the new costs or risks are high enough, the entire structure will be dismantled. By their nature, supply chains do not fall apart slowly, because each part of the chain relies upon other parts to add its value. It does not help much to have the circuit components of the iPhone lined up, for instance, if you cannot also produce the glass screens. In this way, these supply chains are less robust under extreme conditions.

Global supply chains have yet to come apart mostly because trade and prosperity generally have been rising. But now, for the first time since World War II, the global economy faces the possibility of a true decoupling of many trade connections.

It is not sufficiently well understood how rapid that process could be. A complex international supply chain is fragile precisely for the same reasons it is valuable — namely, it is hard to construct and maintain because it involves so many interdependencies.

The nature of the cross-national supply chain makes it especially vulnerable to shocks coming from the coronavirus. These supply chains do not adapt so well to complete cutoffs in materials or labor, as may happen if Chinese coronavirus casualties continue and workplaces find it hard to operate effectively.

Imagine that closed Chinese factories cannot produce the components of many American medicines. It is not a question of the supply chain simply losing some profits; rather, some critical pieces of the production process are missing. The medicines won’t work without these inputs. The U.S. medical establishment might try to source those components elsewhere, but it isn’t easy for other suppliers to produce enough of them at sufficient scale and quality.

U.S. medical producers might try to bid more for the Chinese medicine components, but if the workers are prohibited from even showing up at the factory, no feasible market clearing price can make this arrangement work. Production just won’t be possible. Fashionable practices of near-zero inventories can make these shortages appear all the more rapidly. About 80% of the active pharmaceutical ingredients in U.S. medicines rely on Chinese or Indian components, so this does represent a very real public health risk for the U.S., even if the coronavirus itself does not.

You will note that when it comes to ex ante planning, companies do not in general internalize the costs of a supply chain cut-off to their customers, since consumer surplus for the infra-marginal buyers exceeds market price.  Supply chain are thus too fragile relative to an optimum, though that matters only under very limited circumstances, as we may be seeing right now.