Category: Current Affairs

Failure is the Mother of Success

New paper from Jeffrey E. Harris:

The decades-long effort to produce a workable HIV vaccine has hardly been a waste of public and private resources. To the contrary, the scientific know-how acquired along the way has served as the critical foundation for the development of vaccines against the novel, pandemic SARS-CoV-2 virus. We retell the real-world story of HIV vaccine research – with all its false leads and missteps – in a way that sheds light on the current state of the art of antiviral vaccines. We find that HIV-related R&D had more than a general spillover effect. In fact, the repeated failures of HIV vaccine trials have served as a critical stimulus to the development of successful vaccine technologies today. We rebut the counterargument that HIV vaccine development has been no more than a blind alley, and that recently developed vaccines against COVID-19 are really descendants of successful vaccines against Ebola, MERS, SARS-CoV-1 and human papillomavirus. These successful vaccines likewise owe much to the vicissitudes of HIV vaccine development.

In Praise of Tyler Cowen and Patrick Collison

Here’s a great video on FastGrants, the fast funding-institution started by Tyler and Patrick Collison to fund COVID research at a speed that could make a difference on the ground. And it did.

Lots of other people stepped in with funding including Arnold Ventures, The Audacious Project, The Chan Zuckerberg Initiative, John Collison, Crankstart, Jack Dorsey, Kim and Scott Farquhar, Paul Graham, Reid Hoffman, Fiona McKean and Tobias Lütke, Yuri and Julia Milner, Elon Musk, Chris and Crystal Sacca, Schmidt Futures, and others.

The list of funded people and projects is long and impressive and while the grants were fast, the payoff is going to last well beyond the pandemic.

Thanks, Tyler and Patrick!

In praise of Alex Tabarrok

Here’s a question I’ve been mulling in recent months: Is Alex Tabarrok right? Are people dying because our coronavirus response is far too conservative?

I don’t mean conservative in the politicized, left-right sense. Tabarrok, an economist at George Mason University and a blogger at Marginal Revolution, is a libertarian, and I am very much not. But over the past year, he has emerged as a relentless critic of America’s coronavirus response, in ways that left me feeling like a Burkean in our conversations.

He called for vastly more spending to build vaccine manufacturing capacity, for giving half-doses of Moderna’s vaccine and delaying second doses of Pfizer’s, for using the Oxford-AstraZeneca vaccine, for the Food and Drug Administration to authorize rapid at-home tests, for accelerating research through human challenge trials. The through line of Tabarrok’s critique is that regulators and politicians have been too cautious, too reluctant to upend old institutions and protocols, so fearful of the consequences of change that they’ve permitted calamities through inaction.

Tabarrok hasn’t been alone. Combinations of these policies have been endorsed by epidemiologists, like Harvard’s Michael Mina and Brown’s Ashish Jha; by other economists, like Tabarrok’s colleague Tyler Cowen and the Nobel laureates Paul Romer and Michael Kremer; and by sociologists, like Zeynep Tufekci (who’s also a Times Opinion contributor). But Tabarrok is unusual in backing all of them, and doing so early and confrontationally. He’s become a thorn in the side of public health experts who defend the ways regulators are balancing risk. More than one groaned when I mentioned his name.

But as best as I can tell, Tabarrok has repeatedly been proved right, and ideas that sounded radical when he first argued for them command broader support now. What I’ve come to think of as the Tabarrok agenda has come closest to being adopted in Britain, which delayed second doses, approved the Oxford-AstraZeneca vaccine despite its data issues, is pushing at-home testing and permitted human challenge trials, in which volunteers are exposed to the coronavirus to speed the testing of treatments. And for now it’s working: Britain has vaccinated a larger percentage of its population than the rest of Europe and the United States have and is seeing lower daily case rates and deaths.

Here is more from Ezra Klein at the New York Times.

Mistrust of the CBO is unfortunately a growing bipartisan avocation

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

Recently the CBO issued a working paper considering what would happen if U.S. government expenditures were to consume an additional 5% to 10% of GDP. The results are pretty grim: By 2030, because of higher taxes and higher borrowing, the level of GDP would be 3 to 10 percentage points lower. The largest losses are suffered by young Americans, who would go through more of their lives with a lower capital stock, leading to lower wages. Worse yet, the losses are highest when the spending is financed by progressive taxation — a very popular idea in today’s Democratic Party.

As with the CBO’s minimum-wage analysis, you may not agree with every aspect of this study. The authors themselves note that it neglects any productivity gains that might follow from the expenditures. Still, these estimates represent a real challenge to those who favor more government spending.

This analysis has mostly been ignored rather than attacked, which is unfortunate for those of us who would prefer a robust debate. In the meantime, “If you can’t even convince the CBO” seems like a good standard of proof for Democrats to accept — and one they themselves insisted on not very long ago.

For the pointer to the new CBO study I thank Corey Frederick Kallen.

Personal bankruptcies have declined during the pandemic

The number of people seeking bankruptcy fell sharply during the pandemic as government aid propped up income and staved off housing and student-loan obligations.

Bankruptcy filings by consumers under chapter 7 were down 22% last year compared with 2019, while individual filings under chapter 13 fell 46%, according to Epiq data. After holding above 50,000 filings a month in 2019 and in the first quarter of 2020, bankruptcy filings have remained below 40,000 a month since last March when the pandemic hit.

By contrast, commercial bankruptcy filings rose 29%, with more than 7,100 businesses seeking chapter 11 protection last year, according to Epiq…

Economists and bankruptcy lawyers say federal suspensions of evictions, home foreclosures and student-loan obligations have helped limit bankruptcies—though they worry bankruptcy rates could go up after aid ends. Household spending also dropped as people stayed home, canceled travel and socially distanced to avoid the coronavirus. Several rounds of government aid padded incomes with direct payments to households and enhanced unemployment benefits. The personal saving rate rose.

Here is more from the WSJ.

What should I ask Pierpaolo Barbieri?

I will be doing a Conversation with him, here is the opening part of his Wikipedia page:

Pierpaolo Barbieri (Buenos Aires, May 17, 1987) is an economic historian, researcher, Executive Director at Greenmantle[and founder of Ualá, an Argentina-based personal financial management mobile app. He is the author of the book Hitler’s Shadow Empire: The Nazis and the Spanish Civil War. He has been featured in publications like Financial Times, New York Times, Foreign Affairs, El País, and The Wall Street Journal.

Ualá has been highly successful as of late in the payments space, including with the unbanked, and here is Pierpaolo on Twitter (mostly Spanish language).

So what should I ask him?

How might depopulation reverse itself?

That is the topic of my latest Bloomberg column, drawing upon an earlier discussion by Robin Hanson.  The problem is this: if families find that having three or four kids just isn’t that fun, and women wish to focus more on their careers, which forces might be capable of reversing that trend?:

One possibility is that a shrinking population itself will bring self-reversing mechanisms. For instance, a Japanese population half its current size would make Japan an emptier place, presumably lowering land prices. Some families would find it easier to afford a larger apartment in central Tokyo and perhaps decide to have more children.

But that mechanism seems more likely to reduce population decline than to reverse it. Living space is only one of many factors behind decisions about family size. And as population declines, the stock of houses and apartments will decline too, so in the longer run the amount of space per family may not increase by very much…

Another factor in declining fertility, especially in the U.S., is single parenthood. If a potential mother is facing a fertility decision without another full-time parent on the scene, she is more likely to choose to have fewer children. As population falls, will single-parent families become less common? It is hard to see why. Whether the issue is a lack of marriageable men, unstable family norms or women who simply prefer to go it alone, there is no particular reason to think those factors will disappear in an era of population decline.

And:

What might be some other intervening factors to restore fertility? Perhaps tender and loving robots will make it much easier to raise young children. Or maybe, as populations fall to much lower levels, a sense of moral panic will set in. Families might decide to have more children, feeling that the very survival of their country is at stake. A more elaborate and dystopian scenario would be that corporations take over empty parts of the globe and pay for the raising of children there, in return for a share of their future income.

Here is Ross Douthat’s Sunday column on broadly similar issues, each column was written independently of the other.  As I interpret his discussion, he is more (potentially?) optimistic about ideological and religious forces reversing the decline than I am, in any case an interesting contrast of approach.  By the way, here is Robin Hanson’s proposal for how to escape the problem, more economistic than either Ross or myself.

A quiet war, with mutual option values on both escalation and further Clubhouse comments

‘Neither Israel nor Iran want to publicly take responsibility for the attacks because doing so would be an act of war with military consequences,’ Hossein Dalirian, a military analyst affiliated with Iran’s Islamic Revolutionary Guards Corps, told The New York Times in a Clubhouse discussion on Thursday.

Here is the full NYT article.

Supply chain sentences to ponder

Khanna says these intricacies mean that brash political talk about reshoring operations is naive. “Even the supply chain has a supply chain,” he says.

A dose of the BioNTech/Pfizer vaccine, for example, requires 280 components from multiple countries, according to the company. The idea of moving from what Okonjo-Iweala calls “just in time to just in case to just at home” is harder than it looks.

Here is more from David Pilling and co-authors at the FT.

Charter city finally in Honduras?

Próspera is the first project to gain approval from Honduras to start a privately governed charter city, under a national program started in 2013. It has its own constitution of sorts and a 3,500-page legal code with frameworks for political representation and the resolution of legal disputes, as well as minimum wage (higher than Honduras’s) and income taxes (lower in most cases). After nearly half a decade of development, the settlement will announce next week that it will begin considering applications from potential residents this summer.

The first colonists will be e-residents. Próspera doesn’t yet have housing ready to be occupied. But even after the site is built out, most constituents will never set foot on local soil, says Erick Brimen, its main proprietor. Instead, Brimen expects about two-thirds of Prósperans to sign up for residency in order to incorporate businesses there or take jobs with local employers while living elsewhere…

After years of debate, Próspera will be the first real-world test of a divisive libertarian idea, says Beth Geglia, an anthropologist who studies charter cities. “There was a noticeable lull in the startup city movement in general until the Próspera Zede project got off the ground,” she says. “It’s ground zero.”

There is considerably more at the link, if this continues on track I will gladly visit and report back.

Focus on the supply side

The biggest question in the U.S. right now is how rapidly vaccinations will proceed. Yet only 8.5% of the new appropriations — under the most generous calculations — are directed toward vaccine supply and anti-Covid-19 efforts.

The biggest question for the world is whether the wealthier nations will put up the estimated $25 billion needed to jump-start a global vaccination campaign in a (relatively) timely manner. So far it appears that they will not — again, a supply-side issue. There did not seem to be much interest in putting such an expenditure into the American Rescue Plan, even though the resulting resumption of trade and migration would undoubtedly have benefited the U.S. by far more than $25 billion.

Major stories about supply-side problems receive only fleeting notice in the U.S. media. Poor infrastructure and distribution are making it difficult for the 270 million inhabitants of Indonesia to get vaccinated, yet very few Americans are paying attention. Indonesia is not usually the focus of attention — and people are not sufficiently obsessed with the supply side.

In the corporate world, there was the big announcement that Intel plans to move full speed ahead to produce more high-quality semiconductor chips and to put more chip factories in the U.S. That switch has come after years of disappointing results from Intel. Can it set things straight? Right now there is a chip shortage in automobile manufacturing, and given the potential fragility of Taiwanese chip supply, U.S. national security hangs in the balance…

Supply-side economics got a bad name because it was associated with too many economists who insisted that tax cuts would be self-financing, or who insisted on tax cuts above all other possible supply-side improvements. Yet all economists ought to proudly announce that they are supply-side economists, first and foremost. That is pretty far from the world we live in, especially as social media have made U.S. monetary and fiscal policies a touchstone for the entire world to debate, often in highly emotional terms.

Here is the rest of my Bloomberg column.

Housing and the Game of Reverse Musical Chairs

The Mayor of Charlottesville recently tweeted.

Please explain how building more market rate housing will free up the housing market for low-income citizens. Which low-income citizens will be able to afford to buy or rent a home that’s going to sell to $450,000? New construction will not lower the selling price of older homes….

musical chairsFortunately, Bryan Caplan has an excellent explanation, the game of reverse musical chairs.

New housing is usually nice housing, because over time technology improves and capital depreciates.  Since richer people are more willing to pay the upcharge for nicer housing, the future residents of new construction are usually well-to-do.

So what do casual observers miss?  They miss the big picture: People who move into new construction are moving away from older construction.  When they move, those older units become available for others.  While those others probably won’t be drastically poorer than those they replace, they tend to be slightly poorer.  Think: “one rung down.”  When these slightly poorer people move, their prior dwellings will tend to be taken over by those who are a further rung down.  And so on, in a great chain reaction.  Allowing new construction really does help the whole income distribution.

Since this is hard to visualize, picture a game of musical chairs.  With one key difference.  A normal game of musical chairs starts out with one chair per person, then subtracts a chair every turn.  The result: Faster, aggressive kids push out everyone else, until the fastest, most aggressive kid wins.  In my variant game, we start out with fewer chairs than people, then add a chair every turn.  The result: Slower and more pacific kids start getting places to sit, until there are enough chairs for everyone.

Both games feature a competitive scramble.  In conventional musical chairs, however, the competition gets more and more cutthroat and in the end almost everyone loses.  In my reverse musical chairs, in contrast, competition gets milder and milder and in the end everyone wins.

Trypanophobia or How to Alleviate Vaccine Hesitancy

A significant share of vaccine hesitancy is driven by fear of needles, trypanophobia. Adults don’t like to admit a fear of needles and less so that they would avoid a vaccine for fear of a needle. But trypanophobia is common and does reduce flu immunizations:

Avoidance of influenza vaccination because of needle fear occurred in 16% of adult patients, 27% of hospital employees, 18% of workers at long‐term care facilities, and 8% of healthcare workers at hospitals. Needle fear was common when undergoing venipuncture, blood donation, and in those with chronic conditions requiring injection.

Aside from fear of the needle, I think there is also a perception that needles are “serious medicine” and thus anything that comes in needle form must be serious or dangerous. In fact, vaccines are safer than many commonly used drugs that are taken orally.

Needle hesitancy is bad for the hesitant who don’t get protection from COVID and bad for everyone else who are further subject to transmission from unvaccinated carriers.

The best way to alleviate needle hesitancy is to get rid of the needle. Operation Warp Speed made smart investments in a fairly widely range of vaccines (we advised going wider) including a pill vaccine from VaxArt. The VaxArt vaccine has completed a Phase I trial with modest results and is moving into Phase II. Nasal vaccines are in development. The RadVac open science vaccine, for example, is a nasal vaccine available to anyone with a scientific bent willing to give an unapproved vaccine a try. CodaGenix has a nasal vaccine in Phase I trials as does Altimmune.

Aside from ease of delivery, a COVID nasal or oral vaccine may also be better than intramuscular injection because it stimulates the immune system at the first point of viral attack, the mucosal tissues in the nose, mouth, lungs and digestive tract. In addition, the mucosal immune system has some unique elements so you get a potentially stronger immune response more capable of neutralizing the virus quickly.

Operation Warp Speed investments generated trillions in value for billions in cost, a few additional smart investments in accelerating nasal and oral vaccines could pay off highly in mopping up vaccine hesitancy and moving us more quickly to herd immunity. We could even do a human challenge trial with nasal vaccine v. intramusucalar injection. Oral and nasal vaccines will also be great for kids and for booster shots.

Even at this late stage we are spending trillions on stimulus/relief and not enough on investment, especially on highly successful investment in vaccines.

Addendum: I know it probably won’t help but fyi, it’s a painless shot. Nothing to fear! Get a superpower and a donut afterwards. It will be memorable.

Noah Smith on the new macro wars

The most interesting thing about the new Macro Wars is that academic research is almost a total non-factor. In 2011 we were arguing about the Zero Lower Bound, DSGE models versus reduced-form models, etc. Now, though academics are involved in the debates, you rarely see an actual paper invoked. And when it is, it’s nearly always an empirical paper rather than a theory paper.

Why? If academics themselves weren’t involved in the debates, you could say that OK, maybe these people are just ignorant of the literature. But academics are involved, and they do know the literature; they’re just not invoking it much. Also, it’s not that Twitter econ debates are lightweight or short on references — the minimum wage debate, for example, cites papers constantly.

You can come up with various hypotheses for this, but it seems fairly clear to me that the reason is that everyone quietly stopped believing in the usefulness of academic macro theory. Macro profs are still out there doing their jobs, writing theory papers, and getting paid handsomely for it — in fact, I’d argue that with folks like Emi Nakamura, Jon Steinsson, Yuriy Gorodnichenko, and Ivan Werning on the job, the field of macro theory is chock full of top talent. And those are good people who take their jobs seriously and aren’t out to push political narratives.

But the problem is that macro theory is just really, really hard.

His whole Substack post is very good, though I give the entire matter a different interpretation.  I do not view contemporary macroeconomics as wonderfully predictive, but it does put constraints on what you can advocate or for that matter on what you can predict.  I saw the Republicans go down this path some time ago, and now the Democrats are following them — it ain’t pretty.  I think what we are seeing now is that (some, not all) Democratic economists want Democrats to be popular, and to win, and so they will rearrange macroeconomic thinking accordingly.  David Henderson, in a recent post, put the point well:

Notice what even Krugman admits. First, that the aid to state and local governments is too much, even by his standards. Second, the checks to people who hadn’t suffered much, which are a huge part of the package, are the “least-justifiable piece in terms of standard economics.” And what’s Krugman’s justification for those payments? That they are “by far the most popular” and, for that reason, we can’t “entirely disregard that.”

On the actual analytics of this debate, Summers has been a clear winner, and that simply hasn’t mattered much at all.  See also this excellent comment by Karl Smith:

Bidenism is hitting at exactly the right time politically. It’s not pushing the American people but meeting them where they are. It is quite frankly the coherent manifestation of MAGAism in the same way that Reaganism was a coherent manifestation of Carter-era deregulation

Ongoing…