Category: Law

Fallacies about constraints

I am reading many people claim something like “production and distribution of the vaccine is the constraint, not FDA approval.”

There are multiple mistakes in such a view, and here I wish to focus on the logic of constraints rather than debate the FDA issue.

First, there are vaccines available right now, and it helps some people (and their contacts) to have those distributed sooner rather than later.

Second, easing the FDA constraint encourages the suppliers and distributors to hurry to a greater degree.  Just imagine if the FDA were to take a few months longer to approve.  The more general point is that citing “x is right now the main constraint right now” does not mean “the elasticity of x is zero.”

“Sure” wrote in the comments:

On the economics side, I am not convinced that production has ramped up as full and as fast as possible. After all there is some risk premium for expanding plants, running constant shifts, etc. and the danger of delayed approval, particularly if you are in some (mostly negligible) way to the other vaccines may not warrant the investment.

After all, approvals appear to move stocks. Do we really think the market is that dumb? If approval has an impact on market value, why exactly would it not also have an impact on the cost of borrowing, expanding, etc.? Surely somebody believes that approval will result in something different will happen than was happening the day before.

Third, “FDA vaccine approval” is a complementary good for the final vaccine service, strongly complementary in fact.  If the other complementary infrastructure goods have price/quality combinations that are “too disadvantageous,” the theory of the second best implies that approval processes should be speedier and more lax than you otherwise might have thought.  This is just the converse of the classic result that multiple medieval princes imposing multiple tolls on a river create negative externalities for both river users and each other.  Lower those tolls wherever you can.

Fourth, let’s say there were three constraints, each absolutely binding at the current margin.  Speeding FDA approval, taken alone, would have absolutely no effect.  We then ought to be obsessed with identifying and remedying the other two constraints (along with approval)!

But we are not.  Instead we keep on citing those (supposed) constraints in defeatist fashion.  This absence of obsession with easing constraints is in fact one of the biggest reasons for thinking we can do better.  We need to throw more money and talent at these problems, and we are not working hard enough on how to do that.  We are just citing the constraints back and forth to each other and pleading helplessness.

As a final note, I recall that my recently deceased colleague Walter E. Williams was especially good on these issues.  I recall him once saying he wanted to hire a helicopter to drop a cow into the campus central quad, just to show people that supply has positive elasticity.  “I’m going to call them up and say “Williams wants a cow!””

Moo.

How many lives will be saved if the FDA had moved faster?

Many people are asking me this question.  I don’t mean to relitigate the question of whether the FDA should be moving faster, rather consider this an exercise in how to think about the trade-offs.  I thus am going to hold the safety and quality of the vaccine constant.

To proceed, consider the distinction between processes defined by economic time and processes defined by calendar time.  In Virginia it may snow in February but not in October, and that is defined by calendar time, not caused by local gdp.  But for many inventory processes, they do not restock until the shelf is emptied by buying customers, and that is economic time.  They don’t check to see if it is June or July.

Let us say that only economic time matters, though I will drop that assumption shortly.

Now, given how late we are in “the season,” it is easier to think about pushing the approval date back rather than moving it forward.  Let’s say that the FDA postponed the December 10 meeting to January 10.  Some number of people would die of Covid during that month — the current clip being around 2600 a day but changing — and then around Jan.10 some kind of vaccine-related health and economic recovery would move into fuller gear.

If only economic time matters, it seems the Dec.10 recovery and the Jan.10 recovery run about the same.  The net difference between the two scenarios is the lives lost in the meantime, to oversimplify say 2000 x 30 days, or 60,000 lives plus accompanying lost jobs and gdp.

I do not think that losing those lives would somehow speed the later, Jan.10-starting recovery process, and it may in some ways render it more fractious.

On top of that, the postponed recovery period likely will imply some kind of grinding uncertainty in the meantime, and possibly intertemporal substitution from some agents (like me!) who are waiting for the change to come before going to the barber. The true net costs are thus higher than what I listed two paragraphs above.

Now, how might the introduction of calendar time alter those estimates?

First, the production of complementary goods for vaccines (say freezers, but the point is more general) may be on a clock of its own, more or less on automatic pilot and requiring time.  When approval comes later, more of those complementary goods are in place, and thus the later recovery is a more powerful one.  That factor tends to lower the cost of delaying approval.

(Of course to the extent those same complementary inputs depend upon economic time, that is reason not to delay approval!  The sooner you approve, the sooner they will get working on getting those freezers in place, which of course boosts recovery power.  Supply is elastic with respect to approval, as suggested for instance by stock market reactions to approval decisions.)

Second, the seasonal effects will differ.  Ideally you want the spread of vaccines to be covering some of the more infectious and thus more difficult winter months.  February is worse than March, and so on.  Given the current clock, this is a big reason to be hurrying.

You might think of other ways calendar time could matter.  You also might think of various non-linear effects and interactions, though I am not sure whether they would make delay more or less costly.

Overall it seems to me that the costs of approval delay are likely very high.  They are not obviously overturned or minimized by citing the relevance of complementary inputs.  The import of complementary inputs might be more ruled by “economic time,” or the seasonal effects may be a stronger quantitative magnitude, again favoring faster speed of approval.

I do understand this is far from a final analysis, rather it is a starting point for conceptualizing the problem.

Don’t Delay a Vaccine to Allay Fear

I am getting very angry at people like Anthony Fauci who say that FDA delay is necessary or useful to alleviate vaccine hesitancy.

Fauci told Fox News that the FDA “really scrutinises the data very carefully to guarantee to the American public that this is a safe and efficacious vaccine. I think if we did any less, we would add to the already existing hesitancy on the part of many people because … they’re concerned that we went too quickly.”

The WSJ says much the same thing just with a slightly different flavor:

…this regulatory rigmarole is essentially a placebo to reassure the public it will be safe to get inoculated.

The ‘we must delay to allay’ argument is deadly and wrong.

First, we should not let public policy be guided by the most risk averse, fearful, and scientifically illiterate among us. Letting the fearful lead is a recipe for stagnation, mediocrity, and eventual collapse.

Second, there is no guarantee that the risk averse, fearful and scientifically illiterate will be convinced by extra FDA investigation and there is plenty of evidence that they won’t be. Dozens of well-done studies have found no link between vaccines and autism. The scientific evidence that vaccines don’t cause autism is very strong. Yet many people don’t care. Moreover, I bet there is a significant overlap between those who think or fear that vaccines cause autism and those who fear a COVID vaccine. Will a few weeks of extra FDA investigation win these people over? No. More science won’t end science denialism.

Third, rather than alleviating fear, FDA delay may increase fear. People may reason, if the FDA is taking this long to review the evidence when thousands of people are dying every day it must be a hard decision. Delay also makes the vaccine less useful and less obviously useful. Thus, if vaccines come too late people will say that we were reaching herd immunity anyway and that vaccines are useless.

Thus, when thinking about how much investigation the FDA should do before approving a vaccine, allaying fear shouldn’t on the benefit side of the ledger. Greater investigation does have other benefits but I think that the costs of delay exceed the benefits at this time.

The FDA is very unlikely to find reasons not to approve a vaccine later in December. But if that is the case, they should approve now. Note that in August, before the efficacy results were in, I ran the numbers and I said that the case for early vaccination wasn’t strong for most people. Now that we have the efficacy results and months of safety data and a higher death rate, I think quick approval is obviously justified.

How badly has the FDA been lagging?

As a Johns Hopkins scientist who has conducted more than 100 clinical studies and reviewed thousands more from the scientific community at large, I can assure you that the agency’s review can be done within 24 to 48 hours without cutting any corners. They just need to work harder.

Contrary to popular belief, the FDA process is not hands-on—it does not interview vaccine trial patients or look under a microscope at the immune cells. It’s doing a statistical analysis and looking at data. For the vaccine trial, the data set is small and straightforward. If my research team, normally tasked with analyzing data on millions of patients, was asked to review the smaller Pfizer vaccine study of 43,000 patients, it would take about one hour.

The FDA also reviews manufacturing data from Pfizer on how they made the drug. But not only can that data be reviewed in a few hours, it should have been done months ago when it was available. While the FDA was waiting for Pfizer’s long-term vaccine results to come in, the agency should have anticipated this step and done it early.

The final step of the FDA review is to look at the outcomes of the study volunteers, including rates and severity of infection and side effects in the vaccine and placebo groups. Again, there is no plausible reason why this basic analysis cannot be done in 24 hours. The FDA and external scientists have a simple task: confirm or reject  the review already conducted by the trial’s independent data safety monitoring board before FDA submission.

That is from Marty Makary, who also details an ongoing history of FDA delays during the pandemic, starting with the very first Covid testing attempts from the University of Washington, which the FDA tried to nix, but continuing throughout.  And:

FDA insiders say the agency and its approximately 17,000 employees were dark for the four-day Thanksgiving holiday, including those working on the vaccine approval.

For those of us who lived through the 2008 financial crisis (agencies other than the Fed were not on the ball in response), or who have studied (and indeed practiced) the economics of bureaucracy for forty years, or who know the extensive literature on how the FDA operates, will not be surprised by a lack of urgency.  Or from the NYT:

Dr. Fauci said the politicization of the pandemic in his own country had led regulators to move a little more cautiously than the British, to avoid losing public support.

Sorry people, but I read that as “for political reasons we did not go more quickly.”

Here from Statnews journalists Matthew Herper and Nicholas Florko defend the FDA, going into considerable detail, do read it.  Here is one excerpt, in direct contradiction to some of the above:

The agency’s staff “were eating turkey sandwiches on Thanksgiving while reviewing documents,” Peter Marks, who heads the FDA center conducting the vaccine reviews, said on a Thursday webcast run by the Journal of the American Medical Association.

Additionally, members of an FDA advisory committee that will convene Thursday to review the data and issue its recommendations, have expressed no desire to meet sooner. STAT spoke to four members of the panel and all said the agency should not try to move any faster.

My view is this: if your agency is saying “usually we move five to ten times more slowly,” it is highly unlikely their current procedures are optimized for speed.  It is fast organizations that are good at moving fast, right Usain Bolt?

We’re now at the point where Covid-19 is the single leading cause of death in this nation.

My excellent Conversation with Zach Carter

Zach is author of the recent book The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes, which has been on many year-end “best of” lists.  Here is the audio, transcript, and video.  Here is part of the CWT summary:

Zach joined Tyler to discuss what Keynes got right — and wrong — about the Treaty of Versailles, how working in the India Office influenced his economic thinking, the seemingly strange paradox of his “liberal imperialism,” the elusive central message of The General Theory, the true extent of Keynes’ interest in eugenics, why he had a conservative streak, why Zach loves Samuel Delaney’s novel Nova, whether Bretton Woods was doomed to fail, the Enlightenment intuitions behind early defenses of the gold standard, what’s changed since Zach became a father, his next project, and more.

Here is one excerpt:

COWEN: [Keynes is] sympathetic to his own ideas and wants to promote them. But to me, there’s a discord. Milton Friedman spends, what, 45 minutes talking to Pinochet, has a very long record of insisting economic and political freedom come together — maybe even too simplistically — writes against the system of apartheid in South Africa and Rhodesia, calls for free markets there. And people give Friedman hell over that.

Keynes writes the preface for the Nazis and favors eugenics his whole life, and that’s hardly ever mentioned.

CARTER: I don’t know that the way that Keynes talks about eugenics is as salient as you suggest. The best article that I came across on Keynes and eugenics is by this guy — I think David Singerman. It’s in the Journal of British Studies. It’s a pretty in-depth look at the way Keynes came to eugenics and what he did and did not support. It’s very clear that Keynes didn’t support eugenics in the way that Americans sterilizing poor Black workers in the South were interested in eugenics.

Keynes was broadly interested in it from the perspective of birth control. This is a time when eugenics and genetics are not as clearly defined as they are today, so he’s thinking about heritability of eye colors — how he gets involved in this stuff. He never really supports anything other than birth control.

When he actually has power as a policymaker, he just doesn’t do any of this stuff. He is working on the Beveridge plan. He is working on financial stuff that is much more egalitarian than what we think of him when we think about eugenics.

COWEN: But he is chair of the British Eugenics Society for eight years late in his career.

CARTER: He doesn’t do much there. There are big debates that are happening within that society, and he’s mostly sitting them out. Singerman goes into this in much more detail. It’s been a while since I read the article, but Singerman seems to think that this is a useful way of understanding Keynes’s worldview, but not that Keynes is some guy who’s going around wanting to sterilize people and do the things that we think of with the eugenics movement in the United States.

COWEN: I don’t think he wants to sterilize people, but he has those essays on population, which are not put into the collected works. They’re not mentioned by Roy Harrod. He is greatly worried that the people from some countries — I think including India — will outbreed the people from Britain, and this will wreak havoc on prices and wages, and it’s a big crisis. He even says, “We need to worry not only about the quantity of people, but the quality of people in the world.”

A very good episode, definitely recommended.  And here is Zach on Twitter.

Voting Rights, Deindustrialization, and Republican Ascendancy in the South

Here is a new paper from Gavin Wright:

The Voting Rights Act of 1965 revolutionized politics in the American South. These changes also had economic consequences, generating gains for white as well as Black southerners. Contrary to the widespread belief that the region turned Republican in direct response to the Civil Rights Revolution, expanded voting rights led to twenty-five years of competitive two-party politics, featuring strong biracial coalitions in the Democratic Party. These coalitions remained competitive in most states until the Republican Revolution of the 1990s. This abrupt rightward shift had many causes, but critical for southern voters were the trade liberalization measures of 1994, specifically NAFTA and the phase-out of the Multi-Fiber Arrangement which had protected the textiles and apparel industries for decades. The consequences of Republican state regimes have been severe, including intensified racial polarization, loss of support for public schools and higher education, and harsh policies toward low-income populations.

The last sentence strikes me as misleading and inappropriate (in multiple ways), but still the research is of very real interest. Via the excellent Kevin Lewis.

Misaligned incentives for incarceration in the United States

The incarceration rate has increased substantially in the United States between the 1980s and the 2000s. In this paper, I explore an institutional explanation for this growth: the fact that costs of incarceration are not fully internalized. Typically, prison is paid for at the state level, but county employees (such as judges, prosecutors or probation officers) determine time spent in custody. I exploit a natural experiment that shifted the cost burden of juvenile incarceration from state to counties, keeping overall costs and responsibilities unchanged. This resulted in a stark drop in incarceration, and no increase in arrests, suggesting an over-use of prison when costs are not internalized. The large magnitude of the change suggests that misaligned incentives in criminal justice may be a significant contributor to the current levels of incarceration in the United States.

That is from the opening of a new JPubEc piece by Aurélie Ouss, via the excellent Samir Varma.

SCOTUS, houses of worship, and the pandemic

The Supreme Court has sided with religious institutions (NYT) against some of the pandemic restrictions of state and local governments:

The opinion said the state had treated secular businesses more favorably than houses of worship.

“The list of ‘essential’ businesses includes things such as acupuncture facilities, camp grounds, garages, as well as many whose services are not limited to those that can be regarded as essential, such as all plants manufacturing chemicals and microelectronics and all transportation facilities,” the opinion said.

Here is also WaPo coverage.  And:

“We may not shelter in place when the Constitution is under attack,” Justice Gorsuch wrote. “Things never go well when we do.”

While I am not myself religious, I regard religious services as essential parts of our society and also in the longer run for our economy (birth rates, if nothing else).  More generally, I am struck by how many intelligent people no longer seem to attach much weight to religious liberty, by no means starting with the various anti-Church moves during the Obama administration, but certainly emphasized there.  (Even centrist Democrats are often clueless about the traumatic effects here, one of the biggest gaps in their understanding of American politics.)  So I am happy to see push back in the opposite direction, siding with the rights of religious institutions.  On top of all other considerations, those institutions are also (usually) bastions of non-Woke sentiments, which makes protecting them all the more important.

You will note that the decision does not strike down all restrictions on church services, but rather rejects a particular set of restrictions, leaving many broader issues open (to varying degrees for the different justices, if I understand correctly).

You might think “this decision is killing people,” but I wonder if that is true on net.  If you do believe various pandemic restrictions are the way forward at this point (only modestly in my view), you will want to restrict more than just churches.  If religious people see that the rights of churches will be protected to some reasonable degree, they might be more willing to support other restrictions.  So even if you are very pro-restriction, I hardly view this decision as an obvious consequentialist disaster.  We are not banning Thanksgiving travel either, right?

And if we do not turn government and also federal funds and tax exemptions into a battering ram against religious autonomy, we will reap a lot of other practical, life and death benefits from that decision over time, including a healthier American discourse.

That all said, if I were running a church likely I would cancel all in-person services beyond very limited numbers.

Addendum: If in 2016 you vowed to “respect Trump voters,” supporting this decision would be one good place to start.  It might do a good deal to limit polarization and improve the other decisions we make.

This was a thing, yes it was, that was then, this is now

Initially founded in 1962, the Anti-Digit Dialing League quickly became the premiere sensible dialing association organization in the United States of America. Nearly 60 years later, the problems this country’s phone network faces are direr than ever. While we continue to espouse the use of 2L+5N dialing over all-number calling whenever possible, our primary aim today is to publicly oppose the proliferation of 10-digit dialing, which is fast becoming a public nuisance and dialing nightmare for ordinary people everywhere in this country.

Circa 1962-64 (those were the days), here is the web site.  Web site?  Wait, it still is a thing!:

Although 771 is scheduled to be overlaid on D.C.’s 202 area code in 2021, forcing residents of our nation’s capitol to dial 10 digits forevermore, the A.D.D.L. objected to the use of an overlay as a matter of principle. According to NANPA, splits are unlawful when the majority of the area code is in the same rate center (as is D.C.) (see pg. 12 of Sept. 1 Community Hearing Transcript). That doesn’t mean overlays are inevitable in other areas, though. Overlays continue to remain a public nuisance, and although splits have not been commonplace since 2006, we will continue to urge the use of splits over overlays whenever possible, because splits better serve the public interest, a finding which is well supported by empirical data.

Don’t let them tell you money illusion is not a problem.  Via Anecdotal.

Rapid Antigen Tests in Europe

Image‘If rapid antigen tests are so good how come other countries aren’t using them’? is a question I get asked a lot. In fact, India authorized these tests months ago. Slovakia tested most of their population using antigen tests. Germany is using them to protect nursing home residents. Lufthansa is trialing rapid antigen tests on special flights. Rapid antigen tests are now beginning to be available more widely in Europe. Here from a twitter thread is a picture of what they look like, it’s just a paper strip inside. You swab your nose (no need for deep cleaning), swirl the swab in a tube with some liquid and then squeeze a few drops of the liquid onto the end of the tester. Results in 15 minutes. They cost about $8 a test.

Why are these tests important? The CDC now says that asymptomatic or pre-symptomatic people account for a majority of infections. Do you get it? How many people without symptoms will get a COVID PCR test, which can be time consuming and expensive? (And how many PCR tests can we run in a timely fashion if people without symptoms get many more tests?) Not that many. But many people without symptoms would get a $8 or less, at-home, 15 minute test. And if some of those people discover that they are infectious and self-isolate for a few days we can drive infection rates down.

We should have had an Operation Warp Speed for tests. We still need funding for a mass rollout and, of course, the FDA needs to approve these tests! (Here is Michael Mina in Time fulminating at the FDA holdup.)

By the way, more than 2800 Americans have died of COVID since Pfizer requested an Emergency Use Authorization for their vaccine. The FDA meets Dec. 10.

Addendum: Here’s me explaining why Frequent, Fast, and Cheap is Better than Sensitive and the difference between infected and infectious.

The Chilean pension system is in crisis

Chile’s celebrated $200bn private pensions system has served as a model for dozens of emerging markets since it was introduced in the 1980s. Now, it faces an existential crisis as public support for the model fades and populist politicians allow savers to withdraw funds during the coronavirus crisis.

The lower house of congress voted to allow Chileans to withdraw another 10 per cent of their pension funds last week, following a similar measure in July that saw withdrawals of some $17bn.

Congress could yet approve a third withdrawal next year, putting at risk a pool of savings that has driven the growth of Chile’s capital markets and jeopardising future returns.

That is from Benedict Mander and Michael Stott at the FT.  Of course you can say “Ah, they shouldn’t do that!”  And they should not.  Still, at the end of the day if you leave surpluses sitting around to be grabbed or handed out, don’t be surprised if they are grabbed or handed out.  Arguably the famed Chilean scheme has been shown to be time-inconsistent.  It was, however, nice while it lasted.

More immigrant founders and co-founders, in this case Moderna

Noubar Afeyan, co-founder and chairman of Moderna, is a two-time immigrant. He was born to Armenian parents in Lebanon and immigrated with his family in his early teens to Canada. After attending college, Afeyan came to the United States and earned a Ph.D. in biochemical engineering at the Massachusetts Institute of Technology (MIT). He started his first company at age 24 and ran it for 10 years, during which time he founded or co-founded five additional companies.

…Moderna’s CEO is Stéphane Bancel, who immigrated to America from France. He earned a master of engineering degree from École Centrale Paris (ECP), and came to the United States as an international student, receiving a master of science in chemical engineering from the University of Minnesota and an M.B.A. from Harvard Business School.

Here is the story, there will be more like it…