I “zoom bombed” a high school class that is using Modern Principles of Economics. I thought that it would be useful to relate some virus economics to some regular economics. Here’s what I said:
Why has the response to coronavirus been so poor? Exponential growth, rare events, and the necessity of using theory instead of experience.
Coronavirus infections, when unchecked, double approximately every three days. If we start out with 1000 infections that means in 10 doublings, just 30 days, there will be one million infections (1,2,4,8,16,32,64,256,512,1024). If you act early and stop just one doubling, you prevent 500,000 people from being infected. Speed is of the essence. But you need to act when the problem appears small. You need to use theory rather than observation which isn’t natural or easy.
People get good at something when they have repeated attempts and rapid feedback. People can get pretty good at putting a basketball through a hoop. But for other decisions we only get one shot. One reason South Korea, Hong Kong and Taiwan have been much better at handling coronavirus is that within recent memory they had the SARS and H1N1 flu pandemics to build experience. The US and Europe were less hit by these earlier pandemics and responded less well. We don’t get many attempts to respond to once-in-a-lifetime events.
Even as coronavirus swept through China and Italy, many people dismissed the threat by thinking that we were somehow different. We weren’t. Even within the United States some people think that New York is different. It’s not. Most people learn, if they learn at all, from their own experiences, not from the experiences of others–even others like them. Learning from your own mistakes and experiences is a good skill. Many people make the same mistakes over and over again. But learning from other people’s mistakes or experiences is a great skill of immense power. It’s rare. Cultivate it.
Now let’s apply these issues to another one close to your life. Savings and retirement. Savings also follow an exponential process, albeit one neither as rapid nor as certain as those involving viruses. The same principles apply, however. But in this case instead of wanting to avoid the gains at the end you want to start saving early in order to capture the big gains in your 50s and 60s as you approach retirement. You don’t get many attempts at retirement so you need to use theory rather than experience. And because you don’t get many attempts you need to learn from other people, including other people’s mistakes, to guide your savings decisions today.
The students asked good questions and we also talked about aggregate demand and supply and how to think about the economic crisis.
Hat tip: Joel Cohen and Dr. Brian Dille.
P.S. I didn’t actually zoom bomb the class. I was invited but it was a surprise to the students.
Emergent Ventures, a project of the Mercatus Center at George Mason University, is leading a new “Fast Grants” program to support research to fight Covid-19. Here is the bottom line:
Science funding mechanisms are too slow in normal times and may be much too slow during the COVID-19 pandemic. Fast Grants are an effort to correct this.
If you are a scientist at an academic institution currently working on a COVID-19 related project and in need of funding, we invite you to apply for a Fast Grant. Fast grants are $10k to $500k and decisions are made in under 48 hours. If we approve the grant, you’ll receive payment as quickly as your university can receive it.
More than $10 million in support is available in total, and that is in addition to earlier funds raised to support prizes. The application site has further detail and explains the process and motivation.
I very much wish to thank John Collison, Patrick Collison, Paul Graham, Reid Hoffman, Fiona McKean and Tobias Lütke, Yuri and Julia Milner, and Chris and Crystal Sacca for their generous support of this initiative, and I am honored to be a part of it.
Meanwhile, elsewhere in the world (FT):
The president of the European Research Council — the EU’s top scientist — has resigned after failing to persuade Brussels to set up a large-scale scientific programme to fight Covid-19.
During World War II, the NDRC accomplished a lot of research very quickly. In his memoir, Vannevar Bush recounts: “Within a week NDRC could review the project. The next day the director could authorize, the business office could send out a letter of intent, and the actual work could start.” Fast Grants are an effort to unlock progress at a cadence similar to that which served us well then.
We are not able at this time to process small donations for this project, but if If you are an interested donor please reach out to [email protected].
One of the best books on the history of American higher education, author Miguel Urquiola of Columbia argues for the importance of market competition in the rise and dominance of the American system. Strongly argued and full of good evidence and stories, here is one excerpt I found of interest:
That Columbia would be among the first successful American research universities would have surprised many observers around 1850, as the school had seen real oscillations in its fortunes. For the first decades after its creation in 1754, Columbia was a wealthy but small school. In 1774 it had the highest collegiate endowment, but only 36 students, while Harvard and Yale had four or five times as many…in 1797 the college had eight faculty members, during most of the 1800s it had four. In 1809, an inquiry warned that Columbia College “was fast becoming, if it has not become already, a mere Grammar School”; between 1800 and 1850, even as New York City grew, the school’s enrollment stagnated, and even in 1850 the average entering age was 15.
Among wealthy countries, the United States is unusual in letting its university sector operate as a free market. Self-rule, free entry, and free scope are much less prevalent in Europe.
Recommended, you can pre-order here.
Eibhlin Lim, Penang and University of Chicago.
“I interview founders from different industries and around the globe and share their origin stories to inspire the next generation of founders to reach for their own dreams. I previously shared these stories in Phoenix Newsletters, an online newsletter that organically grew to serve more than 7000 high school and university student subscribers primarily from Malaysia. In July 2018, I decided to self-publish and distribute a book, ‘The Phoenix Perspective’, which contains some of the most loved stories from Phoenix Newsletters, after learning that some of our biggest fans did not have constant access to the Internet and went through great lengths to read the stories. With the help of founders and organizations, I managed to bring this book to these youths and also 1000+ other youths from 20+ countries around the globe. I hope to be able to continue interviewing founders and share their origin stories, on a new website, to reach even more future founders from around the world.”
Carole Treston/Association of Nurses in AIDS Care
To jump-start a Covid-19 program to produce cheap informational videos and distribute them to their nurse network for better information and greater safety, including for patients.
“Right now, the main sources of data for Coronavirus are CSV files and websites which make the data fairly inaccessible to work with for developers. By giving easy access to this data more products can be built and more information can be shared. The API I built is an easily accessible, single source of Coronavirus data to enable developers to build new products based on COVID19 data. These products could be mobile applications, web applications and graphed data…The API exposes this data in JSON which is the easiest data format to work with for web and mobile developers. This in turn allows for quick integration in to any products. The API is also completely free to users.”
17 year old from Ontario, wishes to work in San Francisco, he does computational biology with possible application to Covid-19 as well, Twitter here. His Project De Novo uses molecular machine learning methods for novel small molecule discovery, and the grant will be used to scale up the cloud computing infrastructure and purchase chemical modelling software.
To build an on-line university to bring learning programs to the entire world, including to businesses but by no means only. His background is in philosophy and German thought, and now he is seeking to change the world.
There is also another winner, but the nature of that person’s job means that reporting must be postponed.
Here are previous Emergent Ventures winners, here is an early post on the philosophy of Emergent Ventures. You will note that the Covid-19-related work here is simply winning regular EV grants, these are not the prizes I outlined a short while ago. I expect more prize winners to be announced fairly soon.
Put aside the people with small (and not so small) children at home, and observe whether the pandemic has boosted or destroyed their productivity. That is one measure for how they handle stress, and whether you might wish to trust them with a start-up or some other major project requiring quick adaptation and performance under duress. It may or may not be a measure for their ordinary performance on the job.
Consider the now-cancelled Candidates’ chess tournament in Russia. Ding Liren was one of the two clear favorites (with Caruana), and he lost three games in the first half of the tournament. That is evidence he does not play well under an extreme degree of stress. Yet he still is rated #3 in the world, from a career playing under conditions of “not a pandemic level of stress but still world-class levels of competitive stress.”
Grischuk had been saying the tournament should be called off, even in midstream. Probably he was right, but if play had continued would you have predicted him to come in first? Caruana, the American, was worried he may not be able to get home after the tournament. His play was OK but subpar, at least for a world-ranked number two. The non-favored but sturdy Nepomniachtchi was up three games, before unwisely playing a Winawer defense with the black pieces, but still he was the clear leader. How should we now revise our opinions of him?
A friend of mine writes to me:
I have submitted 4 papers in 2 weeks. Two R and Rs [revise and resubmits] done and sent back and two new papers sent out. Very close on 2 more. Then I guess I’ll start freaking out or something. Working is keeping me less stressed and more sane. You can really see the divide on Twitter between people getting shit done and people spending all their time hyperventilating.
David Brooks (NYT) considers how you have been living your life.
The psychometric stress test is being run, including on our institutions, regions, and nations. We’ll see how it goes.
Alan Krueger died a year ago this week. I think of him often, and would like to mark the anniversary of his death by sharing a story of my time with Alan. Alan and I had a lot in common. First, we were both born in the third quarter; that is, we’re QOB3s. In fact, Alan was only one day older than me. We used to joke that this explains his relative success: it’s an age effect!
There is much more at the link, moving throughout. And here is the Joshua Angrist introduction to econometrics course on Marginal Revolution University.
In our textbook, Modern Principles of Economics, Tyler and I explain the benefits of free trade and show why some common arguments against free trade are mistaken. Our goal, however, is to teach students how to think like economists and so we also explain the costs of free trade. In particular, we indicate the strongest arguments against free trade and explore when those arguments best apply. Here’s one of the better arguments against free trade, straight from the book:
If a good is vital for national security but domestic producers have higher costs than foreign producers, it can make sense for the government to tax imports or subsidize the production of the domestic industry. It may make sense, for example, to support a domestic vaccine industry. In 1918, more than a quarter of the U.S. population got sick with the flu and more than 500,000 died, sometimes within hours of being infected. The young were especially hard-hit and, as a result, life expectancy in the United States dropped by 10 years. No place in the world was safe, as between 2.5% and 5% of the entire world population died from the flu between 1918 and 1920. Producing flu vaccine requires an elaborate process in which robots inject hundreds of millions of eggs with flu viruses. In an ordinary year, there are few problems with buying vaccine produced in another country, but if something like the 1918 flu swept the world again, it would be wise to have significant vaccine production capacity in the United States.
If I may be permitted to advertise a bit (more). In Modern Principles, we explain the concept of externalities using flu shots. In macroeconomics, we deal with both real shocks and demand shocks and we list pandemics as one example of a real shock. We also explain how shocks are amplified and can create dis-coordination. These relevant, real world examples in Modern Principles are not an accident. There are different styles of textbooks. Some are written in a vanilla style so they don’t need to be updated or revised very often. In contrast, we wanted Modern Principles to have modern examples and to be relevant to the times. Sometimes, however, we’d like it to be a little less relevant.
And, despite not knowing what threat the SETREP-ID would be enacted for, the group had pre-emptive ethical clearance to immediately gather samples from patients – something which would take weeks or months in other countries.
It is believed that this has saved thousands of lives, here is the full story, via Rohan Claffy.
We recorded this two days ago on the spur of the moment, the discussion is still current, here is the transcript and audio, here is the CWT summary:
Tyler and Russ Roberts joined forces for a special livestreamed conversation on COVID-19, including how both are adjusting to social isolation, private versus public responses to the pandemic, the challenge of reforming scrambled organization capital, the implications for Trump’s reelection, appropriate fiscal and monetary responses, bailouts, innovation prizes, and more.
Russ is more optimistic than I am, here is one excerpt on the economic side:
COWEN: Well, two to four weeks [of shutdown], those are easy cases. If you think of many service sectors as having to shut down say until August, which is quite a possible scenario in some cases even later. That to me is greatly concerning and it may vary across sectors. So if you think about the NBA, whenever the NBA is ready to play games again, I mean the players will show up the next day and there’ll be ready, right? That will come back very quickly. But if you think of small businesses, say restaurants, the big chains aside, they’re typically thinly capitalized.
Let’s say a significant portion of those are gone forever. And then when things are somewhat normal again, how does the economy re-scramble and re-constitute the organizational capital that was in those ongoing enterprises? That to me is a hugely difficult problem and whatever you think the government should or should not do, just spending a lot on fiscal stimulus will not ease that problem. That’s the actual destruction going on is the relationships, the organizational capital, the intangibles that will decay. Not over two weeks, probably not over four weeks but over four or five months or longer. Then I think that’s a matter really of great concern…
But even in China where the number of new cases is really in most parts of the country, genuinely very low, they are not returning with live sporting events. Keep in mind we will have a pool of never infected people, which will be fairly large in absolute numbers and what risks we will be willing to take. Insurance companies would allow, our liability system and corporate lawyers would be willing to allow. When you think through all of that stickiness, I think we’re really not so close to resuming many of these shutdown activities.
There is much more at the link, we start off on the personal side and then move into the larger issues.
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.
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.
Many universities are moving rapidly to teach online. Tyler and I and the entire team at MRU want to do everything we can to help make the process as successful as possible not just to improve education but to help to reduce the threat from COVID-19.
First, we have created a Resources Page on Teaching Online at that page you can also find a Facebook Community Page where educators are providing lots of tips and resources not just on videos but on how to use Zoom and other tools. Here, for example, is an excellent twitter thread on teaching online from Luke Stein that covers hardware, software, and techniques.
Second, If you are using Modern Principles, our textbook, and want to move online, Macmillan will do that for you for free, very rapidly, and including online tests, homework etc. If you want to move online from a different book, send Tyler or myself an email and we can discuss the best ways to do that.
Third, MRU has hundreds of videos which are free for anyone to use. Most notably our courses on Principles of Microeconomics and Principles of Macroeconomics but a lot more as well. You can search for MRU videos here. Here is a “greatest hits” list.
MRU is, of course, not the only source of excellent teaching material. Here are some others:
- Mary McGlasson has a micro playlist (54 videos) and macro playlist (38 videos). These are great and can be used in both university/high school.
- The St. Louis Fed provides a variety of great resources, including 14 videos on popular micro and macro topics.
- If you’re looking for pop culture references to embed into an econ class, check out https://econ.video/, http://www.bazinganomics.com/ (Big Bang Theory clips), https://breakingbadecon.com/.
- Jacob Clifford is a popular option among AP Econ teachers. He has micro playlists (93 videos) and macro playlists (85 videos).
- Planet Money Shorts also has good material.
One place to begin might be to explain to your students the mathematics of why universities and schools are closing despite relatively few deaths to date in the United States. As always, this 3Blue1Brown video is excellent.
Addendum: See also Tyler’s important announcement on EV Prizes.
This one was done with an associated public event, ah the good ol’ days! Here is the audio and transcript, here is the summary:
Who can you ask about the Great American Songbook, the finer Jell-O flavors, and peculiar languages like Saramaccan all while expecting the same kind of fast, thoughtful, and energetic response? Listeners of Lexicon Valley might hazard a guess: John McWhorter. A prominent academic linguist, he’s also highly regarded for his podcast and popular writings across countless books and articles where often displays a deep knowledge in topics beyond his academic training.
John joined Tyler to discuss why he thinks that colloquial Indonesian should be the world’s universal language, the barbaric circumstances that gave rise to Creole languages, the reason Mandarin won’t overtake English as the lingua franca, how the Vikings shaped modern English, the racial politics of Gershwin’s Porgy and Bess, the decline of American regional accents, why Shakespeare needs an English translation, Harold Arlen vs. Andrew Lloyd Webber, whether reparations for African-Americans is a good idea, how living in Jackson Heights shapes his worldview, what he learned from his mother and father, why good linguistics students enjoy both Russian and Chinese, and more.
COWEN: Let’s say I interview a job candidate using Skype or Zoom rather than face-to-face, how is that different linguistically? How should I adjust? What should I expect that’s different?
MCWHORTER: You mean if they’re not actually there in the room?
COWEN: Right, but I see them on the screen.
MCWHORTER: I think that’s fine.
COWEN: You think it’s just as good?
MCWHORTER: It helps bring the world together. Do I need to be in the room with the person, watching what they do with their legs, getting a vague sense of whatever their redolence happens to be?
COWEN: All of these people have showed up, right?
MCWHORTER: Yeah. To tell you the truth, all of that to me is a distraction. I would rather just hear their voice. Frankly, I despise Skype. You’re sitting there, you look bad, and it always cuts out. Yet your whole life these days is about “You wanna Skype?” And I’m thinking, “Yeah, it’s going to cut out, and we’re both going to look bad.”
But I would rather just hear the person. Maybe that’s because I’m kind of linguist-centric.
COWEN: Here’s a very basic question. Let’s say immersion is not possible. How should an adult study a foreign language?
MCWHORTER: It’s hard. Sleep with somebody, frankly.
How have your reading tastes changed over time?
I was a book-a-day child, a pretentious teenager. I read hugely in my 20s and 30s — all the good stuff, nothing very odd or esoteric. As I started getting published, I read my contemporaries in a way that was not entirely pure. Then, after I had children, I stopped. It is possible more books were written than read by me, in the years when they were small. I don’t think I am a recreational reader. I am always looking for something and I am not sure what it is. These days, I am increasingly restless. I throw books aside. I blame the internet. I blame the chair. I yearn for books not published yesterday or next week. I stick to nonfiction. And then suddenly, I can’t leave a book out of my hand. This happened most recently with “Where Reasons End,” by Yiyun Li.
Here is the full interview (NYT).
That is the new forthcoming book by Jay Belsky, Avshalom Caspi, Terrie E. Moffitt, and Richie Poulton, which will prove one of the best and most important works of the last few years. Imagine following one thousand or so Dunedin New Zealanders for decades of their lives, up through age 38, and recording extensive data, and then doing the same for one thousand or so British twins through age 20, and 1500 American children, in fifteen different locales, up through age 15. Just imagine what you would learn!
You merely have to buy this book. In the meantime, let me give you just a few of the results.
The traits of being “undercontrolled” or “inhibited,” as a toddler are the traits most likely to persist up through age eighteen. The undercontrolled tend to end up as danger-seeking or impulsive. Those same individuals were most likely to have gambling disorders at age 32. Girls with an undercontrolled temperament, however, ran into much less later danger than did the boys, including for gambling.
“Social and economic wealth accumulated by the fourth decade of life also proved to be related to childhood self-control.” And yes that is with controls, including for childhood social class.
Being formally diagnosed with ADHD in childhood was statistically unrelated to being so diagnosed later in adult life. It did, however, predict elevated levels of “hyperactivity, inattentiveness, and impulsivity” later in adulthoood. I suspect that all reflects more poorly on the diagnoses than on the concept. By the way, decades later three-quarters of parents did not even remember their children receiving ADHD diagnoses, or exhibiting symptoms of ADHD (!).
Parenting styles are intergenerationally transmitted for mothers but not for fathers.
For one case the authors were able to measure for DNA and still they found that parenting styles affected the development of the children (p.104).
As for the effects of day care, it seems what matters for the mother-child relationship is the quantity of time spent by the mother taking care of the child, not the quality (p.166). For the intellectual development of the child, however, quality time matters not the quantity. By age four and a half, however, the children who spent more time in day care were more disobedient and aggressive. At least on average, those problems persist through the teen years. The good news is that quality of family environment growing up still matters more than day care.
But yet there is so much more! I have only scratched the surface of this fascinating book. I will not here betray the results on the effects of neighborhoods on children, for instance, among numerous other topics and questions. Or how about bullying? Early and persistent marijuana use? (Uh-oh) And what do we know about polygenic scores and career success? What can we learn about epigenetics by considering differential victimization of twins? What in youth predicts later telomere erosion?
I would describe the writing style as “clear and factual, but not entertaining.”
You can pre-order it here, one of the books of the year and maybe more, recommended of course.
Here’s a great new video on Janet Yellen from our team at MRU. In addition to Yellen, the video features Ben Bernanke and Christina Romer, who is tremendous. Other videos in the series are on Anna Schwartz and Elinor Ostrom with more on the way. The video is excellent but my favorite MRU video with Yellen has her in superhero mode.
Instructors, feel free to use these videos in any of your classes. Of course, you can also find these videos integrated with our textbook.