Category: Law

There’s No Such Things as a Free L̶u̶n̶c̶h Test

In a short-sighted blunder, India’s Supreme Court has ruled that private labs cannot charge for coronavirus tests:

NDTV: “The private hospitals including laboratories have an important role to play in containing the scale of pandemic by extending philanthropic services in the hour of national crisis…We thus are satisfied that the petitioner has made out a case…to issue necessary direction to accredited private labs to conduct free of cost COVID-19 test,” the court said.

Whether the private labs should be reimbursed by the government, will be decided later, Justices Ashok Bhushan and S Ravindra Bhat said in a hearing conducted via video conferencing.

The Supreme Court’s ruling will reduce the number of tests and dissuade firms from rushing to develop and field new drugs and devices to fight the coronavirus. A price is a signal wrapped up in an incentive. Instead of incentivizing investment, this order incentives firms to invest resources elsewhere.

Nor do private labs have a special obligation that mandates their conscription–an obligation to fund testing for all, falls on all.

The ruling is especially unfortunate because as Rajagopalan and Choutagunta document, India’s health care sector is predominantly private:

…India must rely primarily on the private sector and civil society to lead the response to COVID-19,…the role of the government should be financing and subsidizing testing and treatment for those who cannot afford to pay. India’s private healthcare system is better funded and better staffed than the government healthcare system, and it serves more people. It is estimated to be four times bigger in overall healthcare capacity, and it has 55 percent of the total hospital bed capacity, 90 percent of the doctors, and 80 percent of the ventilators.

The temptation to requisition private resources for state use in an emergency is ever present—but Indian policymakers must resist that temptation because it will compromise instead of increase capacity.

Benevolence is laudatory but even in a pandemic we should not rely on the benevolence of the butcher, brewer or baker for our dinner nor on the lab for our coronavirus tests. If we want results, never talk to suppliers of our own necessities, but only of their advantages.

The Economic Consequences of the Virus?

The inhabitant of New York could order by computer, sipping his morning coffee in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep; he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages; or he could decide to couple the security of his fortunes with the good faith of the townspeople of any substantial municipality in any continent that fancy or information might recommend. He could secure forthwith, if he wished it, cheap and comfortable means of transit to any country or climate with passport or other formality and could then proceed abroad to foreign quarters, without knowledge of their religion, language, or customs, bearing just a credit card upon his person, and would consider himself greatly aggrieved by the TSA but otherwise much surprised at the least interference. But, most important of all, he regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement, and any deviation from it as aberrant, scandalous, and avoidable. The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, exclusion and of pandemics which were to play the serpent to this paradise, were little more than the amusements of his daily twitter feed, and appeared to exercise almost no influence at all on the ordinary course of social and economic life, the internationalization of which was nearly complete in practice.

Only slightly modified.

Why I do not favor variolation for Covid-19

Robin Hanson makes the strongest case for variolation, here is one excerpt:

So the scenario is this: Hero Hotels welcome sufficiently young and healthy volunteers. Friends and family can enter together, and remain together. A cohort enters together, and is briefly isolated individually for as long as it takes to verify that they’ve been infected with a very small dose of the virus. They can then interact freely with each other, those those that show symptoms are isolated more. They can’t leave until tests show they have recovered.

In a Hero Hotel, volunteers have a room, food, internet connection, and full medical care. Depending on available funding from government or philanthropic sources, volunteers might either pay to enter, get everything for free, or be paid a bonus to enter. Health plans of volunteers may even contribute to the expense.

Do read the whole thing.  By the way, here is “Hotel Corona” in Tel Aviv.  Alex, by the way, seems to endorse Robin’s view.  Here are my worries:

1. Qualified medical personnel are remarkably scarce right now.  I do not see how it is possible to oversee the variolation of more than a small number of individuals.  Furthermore, it is possible that many medical personnel would refuse to oversee the practice.  The net result would be only a small impact on herd immunity.  If you doubt this, just consider how bad a job we Americans have done scaling up testing and making masks.

The real question right now is what can you do that is scalable?  This isn’t it.

I recall Robin writing on Twitter that variolation would economize on the number of medical personnel.  I think it would take many months for that effect to kick in, or possibly many years.

2. Where will we put all of the Covid-positive, contagious individuals we create?  What network will we use to monitor their behavior?  We have nothing close to the test and trace systems of Singapore and South Korea.

In essence, we would have to send them home to infect their families (the Lombardy solution) or lock them up in provisional camps.  Who feeds and takes care of them in those camps, and what prevents those individuals from becoming infected?  What is the penalty for trying to leave such a camp?  Is our current penal system, or for that matter our current military — both longstanding institutions with plenty of experienced personnel — doing an even OK job of overseeing Covid-positive individuals in their midst?  I think not.

Under the coercive approach, what is the exact legal basis for this detention?  That a 19-year-old signed a detention contract?  Is that supposed to be binding on the will in the Rousseauian sense?  Where are the governmental structures to oversee and coordinate all of this?  Should we be trusting the CDC to do it?  Will any private institutions do it without complete governmental cover?  I don’t think so.

If all this is all voluntary, the version that Robin himself seems to favor, what percentage of individuals will simply leave in the middle of their treatment?  Robin talks of “Hero Hotels,” but which actual hotels will accept the implied liability?  There is no magic valve out there to relieve the pressure on actual health care systems.  Note that the purely voluntary version of Robin’s plan can be done right now, but does it seem so popular?  Is anyone demanding it, any company wishing it could do it for its workforce?

3. The NBA has an amazing amount of money, on-staff doctors, the ability to afford tests, and so on.  And with hundreds of millions or billions of dollars at stake they still won’t restart a crowdless, TV-only season.  They could indeed run a “Heroes Hotel” for players who got infected from training and play, and yet they won’t.  “Stadium and locker room as Heroes Hotel” is failing the market test.  Similarly, colleges and universities have a lot at stake, but they are not rushing to volunteer their dorms for this purpose, even if it might boost their tuition revenue if it went as planned (which is not my prediction, to be clear).

The proposal requires institutions to implement it, yet it doesn’t seem suited for any actual institution we have today.

4. Does small/marginal amounts of variolation do much good compared to simply a weaker lockdown enforcement for activities that involve the young disproportionately?  Just tell the local police not to crack down on those soccer games out in the park (NB: I am not recommending this, rather it is the more practical version of what Robin is recommending; both in my view are bad ideas.)  Robin’s idea has the “Heroes Hotel” attached, but that is a deus ex machina that simply assumes a “free space” (both a literal free space and a legally free space) is available for experimentation, which it is not.

5. Society can only absorb a small number of very blunt messages from its leaders.  You can’t have the President saying “this is terrible and you all must hide” and “we’re going to expose our young” and expect any kind of coherent response.  People are already confused enough from mixed messages from leaders such as presidents and governors.

6. There is still a chance that Covid-19 causes or induces permanent damage, perhaps to the heart and perhaps in the young as well.  That does not militate in favor of increasing the number of exposures now, especially since partial protective measures (e.g., antivirals, antibodies) might arise before a vaccine does.  This residual risk, even if fairly small, also makes the liability issues harder to solve.

7. The actual future of the idea is that as lockdown drags on, many individuals deliberately will become less careful, hoping to get their infections over with.  A few may even infect themselves on purpose, one hopes with a proper understanding of dosage.  One can expect this practice will be more popular with the (non-obese) young.  The question is then how to take care of those people and how to treat them.  That debate will devolve rather rapidly into current discussions of testing, test and trace, self-isolation, antivirals, triage, and so on.  And then it will be seen that variolation is not so much of a distinct alternative as right now it seems to be.

8. The main benefit of variolation proposals is to raise issues about the rates at which people get infected, and the sequencing of who is and indeed should be more likely to get infected first.  Those questions deserve much more consideration than they are receiving, and in that sense I am very happy to see variolation being brought (not much risk of it happening as an explicit proposal).  That said, I don’t think Heroes Hotel, and accelerating the rate of deliberate, publicly-intended infection, is the way to a better solution.

Soon I’ll write more on what I think we should be doing, but I would not put explicit variolation above the path of the status quo.

Immunity Passes Must Be Combined With Variolation

I wrote earlier that “recovered individuals have a kind of superpower and would be highly desirable workers.” Antibody tests will soon be able to identify these workers and that will help to reopen the economy because not only can these workers go back to work relatively safely they can also work relatively safely with those who are not immune, thus a kind of multiplier-effect for the workplace. Hence, Italy and the UK are talking about “Immunity Passes” that would allow (we hope) immune workers to go back to work.

One factor, however, which hasn’t been taken into account is that the demand to go back to work may be so strong that some people will want to become deliberately infected. If not done carefully, however, these people will be a threat to others, especially in their asymptomatic phase. Thus, if we use Immunity Passes they will need to be combined with variolation, infecting people with small doses of the virus to create immunity under controlled conditions, as suggested by Robin Hanson.

Hat tip for discussion: Rafael Yglesias.

That was then, this is now — Pushkin under lockdown

In autumn 1830, Pushkin was confined by a cholera outbreak to the village of Boldino, his father’s remote country estate in southeastern Russia. Desperate to return to Moscow to marry, he wrote to his fiancée: “There are five quarantine zones between here and Moscow, and I would have to spend fourteen days in each. Do the maths and imagine what a foul mood I am in.”

Pushkin went on complaining bitterly but, with nothing else to do, he produced an astonishing number of masterpieces — short stories, short plays, lyric and narrative poems, and the last two chapters of his verse novel Eugene Onegin — in a mere three months.

Here is the full FT piece by Robert Chandler.

Measuring the Cost of Regulation: A Text-Based Approach

We derive a measure of firm-level regulatory costs from the text of corporate earnings calls. We then use this measure to study the effect of regulation on companies’ operating fundamentals and cost of capital. We find that higher regulatory cost results in slower sales growth, an effect which is mitigated for large firms. Furthermore, we find a one-standard deviation increase in our preferred measure of regulatory cost is associated with an increase in firms’ cost of capital of close to 3% per year. These findings suggest that regulatory risk is a major cost to firms, but the largest firms are able to manage that risk better.

That is the abstract of a new NBER paper by Charles W. Calomiris, Harry Mamaysky, Ruoke Yang, a piece written in pre-Covid-19 times.  It has never been more relevant, except that the estimates for regulatory costs turn out to be far too low (no criticism of the authors is intended here).  To repeat my earlier point, America’s regulatory state is failing us.

That was then, this is now: Palantir privacy edition

Data-analytics company Palantir Technologies Inc. is in talks to provide software to governments across Europe to battle the spread of Covid-19 and make strained health-care systems more efficient, a person familiar with the matter said.

The software company is in discussions with authorities in France, Germany, Austria and Switzerland, the person said, asking not to be identified because the negotiations are private…

European Union Commissioner Thierry Breton said Monday that the bloc is collecting mobile-phone data to help predict epidemic peaks in various member states and help allocate resources.

Palantir has signed a deal with a regional government in Germany, where it already has a 14 million euro ($15 million) contract with law enforcement in North Rhine-Westphalia, the person said. Palantir is also seeking a contract at a national level, the person said, but talks have stalled, the person added.

When a nation or company buys access to Palantir, it can use the data analytics software to pull far-flung digital information into a single repository and mine it for patterns.

Here is the full story.  From a distance it is difficult to evaluate these deals, but I will stick with my general claim that the anti-tech intellectuals have become irrelevant, and for the most part they know it.

America’s regulatory state is failing — we can’t even give money away

Top U.S. banks have threatened to give the federal government’s small-business rescue program a miss on concerns about taking on too much financial and legal risk, five people with direct knowledge of industry discussions told Reuters…

Their main concern is that the Treasury Department has said it expects lenders to verify borrower eligibility, and take steps to prevent fraud, money laundering and protect customer information under the Bank Secrecy Act, sources said. Banks are worried they could face regulatory penalties or legal costs down the line if things go awry in the haste to get money out the door, or get blamed for not moving funds fast enough if they perform due diligence the way they would in ordinary times, the sources said.

Here is the full story.

Barriers to masks

I’ve been working with a generous donor to get a million PPEs (masks) to the myriad healthcare workers in NYC who constantly tell us they’re facing shortages. Yet, hurdle after hurdle of dysfunction is severely inhibiting us from getting donated masks to those in need.

Here’s a catalog of all the ways various forces conspire against this effort at EVERY level: – Employers threaten to fire doctors & nurses if they speak frankly about shortages so it’s hard to determine the most at-need hospitals & if everyone in the chain is doing their job

– CDC and WHO messaging about “no need for masks” provide cover for hospitals, limiting reputational damage and protects them from class-action lawsuits for not providing adequate PPE to their staff (which should be their job)

– US PPE compliance is messy and confusing (different agencies setting different rules) which limits supply  – All 50 states, Federal agencies, hospitals, NGOs, and businesses bid against each other, pushing prices up

– US authorities punishes anyone for “price gouging” so importers and suppliers are reluctant to order PPEs from vendors for fear of being penalized  – As a result, US importers and suppliers of N95 masks get outbid by foreign competitors so the US loses out

– Because there are no export controls, local supplies of N95 masks get purchased by foreign buyers and are exported – FDA fails to authorize KN95 masks thus choking off total mask supply as KN95s are cheaper & available in larger quantities than N95s (they have similar specs)

– As a result, US Importers are hesitant to order KN95s (mostly produced overseas) because they’re worried they’ll get held up at customs or that hospitals would refuse to accept them even as free donations as they fear legal liability if healthcare worker gets ill using them

– Healthcare workers don’t get the protection they need but they can’t complain to the press – Rinse, wash, repeat – (Chinese state propaganda uses this as proof that the US is just as bad as the CCP for silencing whistleblowers)

That is a tweet storm by Melissa Chen.

Running ahead of Pandemics: Achieving In-Advance Antiviral Drugs

From Jaspreet Pannu (an EV winner, by the way, Jassi Pannu), here is a new, short Mercatus policy brief.  Excerpt:

I propose adopting innovation prizes with awards large enough to justify investments in broad-spectrum antiviral drugs developed up to phase III clinical trials in the FDA drug approval process. I also emphasize the importance of starting this effort with pathogen families of known pandemic potential, such as respiratory viruses.

…the medical community needs—and currently lacks—a class of drugs designed for emerging viruses of pandemic potential. These broad-spectrum drugs that target entire viral families can be developed as individual drugs or platform technologies.

Just before the outbreak of COVID-19, researchers at the Johns Hopkins Center for Health Security stated that “broad-spectrum [antiviral] therapeutics should be pursued given their potential value.”

There is much more at the link.

Small business aid through Fintech?

Consumers open up Facebook, Instagram, Snap, and WhatsApp dozens of times a day. Businesses, on the other hand, are checking Square, Stripe, QuickBooks, Netsuite, Brex, FreshBooks, Xero, Gusto, DoorDash, Mindbody, Toast and other tools that show them sales, orders, customers, and expenses. Almost every one of these platforms has been granted permission to access—read and write—bank accounts, and helps run the business.

The stimulus bill is going to direct funds through the Small Business Administration, but the SBA doesn’t really make loans. It simply guarantees loans made by banks. For many banks, the way you apply for an SBA 7a loan is to prepare tons of documents, go to your local branch, and then wait as long as 90 days. Wells Fargo has a fancy website, but for SBA loans it directs you to your local branch for a process that takes dozens of hours of form collections and physical signatures followed by months of waiting. Many private lenders approve loans in hours, so the SBA process has historically been an adverse selection lending trap.

It’s March of 2020, the world is under quarantine, all financial data exists in digital form, and billions of people use the internet—we can and should do better. Here’s how this can work, and Silicon Valley is standing by to build this, open source it, and get it out in days so that these small businesses can weather this storm.

Each and every financial services company can place a button on their website or in their app that sucks in relevant data from each business—much of it unforgeable, like credit card receipts as validated by the credit card processor—and spits out an instant machine readable package for aid. If Federal assistance needs to go through an SBA-approved bank (an odd construct, since most of these loans are meant to be forgiven) then this machine readable package can go out to whatever bank out of the 3000+ active SBA lenders can authorize it the quickest. To prevent fraud, that bank can be granted permission to the same set of financials—without loan officers, in person visits, scans and faxes. And if it comes back clean, route the money to the financial service that has already performed the Know Your Customer check on that merchant. A very complex problem is reduced to several hundred lines of code, aided by tools that nearly every small merchant in the United States uses.

That is by Alex Rampell, there is more at the link.  More generally, we need to be honest with ourselves about who is capable of generating rapid response and who is not.  Here is a Reason piece on the successes of the tech community.

Why is Physician Pay Being Cut In a Crisis?

One of the craziest unforeseen consequences of the crisis is that many people are delaying medical care but in places without a lot of coronavirus cases that’s creating a big hit on revenues.

ProPublica: Most ER providers in the U.S. work for staffing companies that have contracts with hospitals. Those staffing companies are losing revenue as hospitals postpone elective procedures and non-coronavirus patients avoid emergency rooms. Health insurers are processing claims more slowly as they adapt to a remote workforce.

“Despite the risks our providers are facing, and the great work being done by our teams, the economic challenges brought forth by COVID-19 have not spared our industry,” Steve Holtzclaw, the CEO of Alteon Health, one of the largest staffing companies, wrote in a memo to employees on Monday.

The memo announced that the company would be reducing hours for clinicians, cutting pay for administrative employees by 20%, and suspending 401(k) matches, bonuses and paid time off. Holtzclaw indicated that the measures were temporary but didn’t know how long they would last.

…Tenet Healthcare, a Dallas-based publicly traded company that runs 65 hospitals, said it would postpone 401(k) matches and tighten spending on contractors and vendors. Emergency room doctors at Boston’s Beth Israel Deaconess Medical Center have been told some of their accrued pay is being held back, according to The Boston Globe. More than 1,100 staffers at Atrius Health in Massachusetts are facing reduced paychecks or unpaid furloughs, and raises for medical staff at South Shore Health, another health system in Massachusetts, are being delayed. Several other hospitals have also announced furloughs.

The CARES bill has billions for hospitals but there seems to be a gap between funding sources that hasn’t been bridged. It’s peculiar that ER physicians often don’t work for the hospitals where they work.

Special hat tip: the excellent Kevin Lewis.

The optimal duration of lockdown

Here is a new AEI paper by Anna Scherbina.  I have not read it and am not endorsing (or criticizing) its conclusions, here goes:

We investigate the optimal duration of the COVID-19 suppression policy. We find that absent extensive suppression measures, the economic cost of the virus will total over $9 trillion, which represents 43% of annual GDP. The optimal duration of the suppression policy crucially depends on the policy’s effectiveness in reducing the rate of the virus transmission. We use three different assumptions for the suppression policy effectiveness, measured by the R0 that it can achieve (R0 indicates the number of people an infected person infects on average at the start of the outbreak). Using the assumption that the suppression policy can achieve R0 = 1, we assess that it should be kept in place between 30 and 34 weeks. If suppression can achieve a lower R0 = 0.7, the policy should be in place between 11 and 12 weeks. Finally, for the most optimistic assumption that the suppression policy can achieve an even lower R0 of 0.5, we estimate that it should last between seven and eight weeks. We further show that stopping the suppression policy before six weeks does not produce any meaningful improvements in the pandemic outcome.

I hope there is a variable in the analysis for “risk of extreme societal pressures,” though I am not sure if those are higher for extreme lockdown scenarios or for extreme “let it rip” scenarios.  In any case, such risks are a significant factor in how I view these questions.

And now I must teach! (on-line, of course).  But I wanted to get this up for your attention before the evening closes.

The biggest supply chain risk right now?

Trump administration officials are asking India to lift restrictions to give the U.S. access to pharmaceutical ingredients needed to produce a range of drugs, amid fears of a potential U.S. drug supply shortage prompted by the coronavirus outbreak, three sources familiar with the matter told NBC News.

The two governments are holding discussions aimed at easing newly imposed restrictions on pharmaceutical exports from India, which Delhi introduced to ensure the country would have medicine needed to handle the pandemic inside of its borders, the sources said.

With coronavirus potentially disrupting the global supply chain for medicine, India earlier this month restricted the export of 26 pharmaceutical ingredients and the medicines made from them, including acetaminophen — a common pain reliever. India is the world’s leading supplier of generic drugs and is a key source for active pharmaceutical ingredients, or APIs, used to produce a range of medicines.

We need to get on this one right away, I have heard similar worries from very reliable sources.  Here is one article.

A new NBER paper on the Wuhan lockdown

We quantify the causal impact of human mobility restrictions, particularly the lockdown of the city of Wuhan on January 23, 2020, on the containment and delay of the spread of the Novel Coronavirus (2019-nCoV). We employ a set of difference-in-differences (DID) estimations to disentangle the lockdown effect on human mobility reductions from other confounding effects including panic effect, virus effect, and the Spring Festival effect. We find that the lockdown of Wuhan reduced inflow into Wuhan by 76.64%, outflows from Wuhan by 56.35%, and within-Wuhan movements by 54.15%. We also estimate the dynamic effects of up to 22 lagged population inflows from Wuhan and other Hubei cities, the epicenter of the 2019-nCoV outbreak, on the destination cities’ new infection cases. We find, using simulations with these estimates, that the lockdown of the city of Wuhan on January 23, 2020 contributed significantly to reducing the total infection cases outside of Wuhan, even with the social distancing measures later imposed by other cities. We find that the COVID-19 cases would be 64.81% higher in the 347 Chinese cities outside Hubei province, and 52.64% higher in the 16 non-Wuhan cities inside Hubei, in the counterfactual world in which the city of Wuhan were not locked down from January 23, 2020. We also find that there were substantial undocumented infection cases in the early days of the 2019-nCoV outbreak in Wuhan and other cities of Hubei province, but over time, the gap between the officially reported cases and our estimated “actual” cases narrows significantly. We also find evidence that enhanced social distancing policies in the 63 Chinese cities outside Hubei province are effective in reducing the impact of population inflows from the epicenter cities in Hubei province on the spread of 2019-nCoV virus in the destination cities elsewhere.

That is by Hanming Fang, Long Wang, and Yang Yang, of course do beware data quality issues.