Category: Law

Limiting liability for a resumption of business activity

I have a short Mercatus policy brief on that topic, co-authored with Trace Mitchell.  Excerpt:

Risk from reopening cannot fall to zero, but investments in safety by employers can bring real gains in many cases. Ideally, a plan should both minimize risk and encourage employers’ safety investments. In essence, policymakers should (1) limit liability in the short term to cases of recklessness, (2) use direct regulation to prohibit some obviously risky options, and (3) create and fund a COVID-19 compensation program while capping liability for covered entities.

To understand how this combination of options might work in practice, consider the simple example of the restaurant. Many states are allowing partial reopenings of restaurants, albeit with social distancing, which might comprise outdoor seating, limited seating within the restaurant, or both. Yet some practices that would be very dangerous in the current situation, such as open buffets, have been made illegal per se. This arrangement takes some of the highest-risk problems off the table, and for the better. It is also appropriate for regulation to mandate soap-and-water washing facilities for workers in all restaurants, to provide another example of a sensible regulation.

It is still necessary, however, for these businesses to have stronger liability protection, so that restaurants may proceed with greater certainty, and also solvency. While the number of future COVID-19 transmissions in restaurants is unlikely to be zero, restaurants can only do so much to limit risk, vulnerable individuals still can opt to stay away and indeed are likely to do so, and tracing particular cases to particular restaurants is very difficult. For all of those reasons, we do not expect the traditional liability system to perform well in the case of restaurants, and we wish to limit its applicability, while of course keeping other safeguards in place. In essence, our proposal takes that commonsense approach to restaurants and applies it to the economy more broadly.

I would stress that nursing homes require a fully separate treatment.  Here is a related Marc Thiessen piece.  Here is Ross Marchand on state-level experimentation with liability.

Should South Africa lock down?

The lockdown will lead to 29 times more lives lost than the harm it seeks to prevent from Covid-19 in SA, according to a conservative estimate contained in a new model developed by local actuaries.

The model, which will be made public today for debate, was developed by a consortium calling itself Panda (Pandemic ~ Data Analysis), which includes four actuaries, an economist and a doctor, while the work was checked by lawyers and mathematicians. The process was led by two fellows at the Actuarial Society of SA, Peter Castleden and Nick Hudson.

They have sent a letter, explaining its model, to President Cyril Ramaphosa. In the letter, headed “Lockdown is a humanitarian disaster to dwarf Covid-19”, they call for an end to the lockdown, a focus on isolating the elderly and allowing children to go back to school, while ensuring the economy restarts so that lives can be saved.

The paper also is at the link, and it is perhaps more of a rough and ready calculation than a formal model per se.  Nonetheless South Africa has a relatively young population and the core points are well taken:

In SA, they estimate that 5.4 years of life have been lost per Covid-19 death. They then multiply this by the range of deaths which they predict – 20,000 – as well as the actuarial society’s prediction of 88,000 fatalities. They factor in that the lockdown will have reduced some deaths, but not all. In the end, their model translated into a minimum of 26,800 “years of lives lost” due to Covid-19, and a maximum of 473,500 years. (This, critically, shouldn’t be confused with the actual number of fatalities expected from Covid-19.)

The actuaries then used the figures predicted by the National Treasury to model the impact on poverty. On Friday, the Treasury estimated that between 3-million and 7-million jobs will be lost due to the measures taken to combat the virus. The actuaries then work out that, conservatively, 10% of South Africans will become poorer, and as a result, will lose a few months of their lives.

It is a good question how many of the models used for the West have taken into account the “demonstration effect,” namely that poorer (and much younger) countries will be tempted to follow the same policies.  I’ve yet to see a good discussion of this.

Did non-pharmaceutical interventions actually help against the Spanish flu?

From three economics Ph.D students at Harvard, namely Andrew Lilley, Matthew Lilley, and Gianluca Rinaldi:

Using data from 43 US cities, Correia, Luck, and Verner (2020) find that the 1918 Flu pandemic had strong negative effects on economic growth, but that Non Pharmaceutical Interventions (NPIs) mitigated these adverse economic effects. Their starting point is a striking positive correlation between 1914-1919 economic growth and the extent of NPIs adopted at the city level. We collect additional data which shows that those results are driven by population growth between 1910 to 1917, before the pandemic. We also extend their difference in differences analysis to earlier periods, and find that once we account for pre-existing differential trends, the estimated effect of NPIs on economic growth are a noisy zero; we can neither rule out substantial positive nor negative effects of NPIs on employment growth.

I am very willing to publish a response from the original authors on this one.

A multi-risk SIR model with optimally targeted lockdown

Or you could say “all-star economists write Covid-19 paper.”  Daron Acemoglu, Victor Chernozhukov, Iván Werning, and Michael D. Whinston have a new NBER working paper.  Here is part of the abstract:

For baseline parameter values for the COVID-19 pandemic applied to the US, we find that optimal policies differentially
targeting risk/age groups significantly outperform optimal uniform policies and most of the gains can be realized by having stricter lockdown policies on the oldest group. For example, for the same economic cost (24.3% decline in GDP), optimal semi–targeted or fully-targeted policies reduce mortality from 1.83% to 0.71% (thus, saving 2.7 million lives) relative to optimal uniform policies. Intuitively, a strict and long lockdown for the most vulnerable group both reduces infections and enables less strict lockdowns for the lower-risk groups.

Note the paper is much broader-ranging than that, though I won’t cover all of its points.  Note this sentence:

Such network versions of the SIR model may behave very differently from a basic homogeneous-agent version of the framework.

And:

…we find that semi-targeted policies that simply apply a strict lockdown on the oldest group can achieve the majority of the gains from fully-targeted policies.

Here is a related Twitter thread.  I also take the authors’ model to imply that isolating infected individuals will yield high social returns, though that is presented in a more oblique manner.

Again, I would say we are finally making progress.  One question I have is whether the age-specific lockdown in fact collapses into some other policy, once you remove paternalism as an underlying assumption.  The paper focuses on deaths and gdp, not welfare per se.  But what if older people wish to go gallivanting out and about?  Most of the lockdown in this paper is for reasons of “protective custody,” and not because the older people are super-spreaders.  Must we lock them up (down?), so that we do not feel too bad about our own private consumption and its second-order consequences?  What if they ask to be released, in full knowledge of the relevant risks?

In the Race for a Coronavirus Vaccine, We Must Go Big

Today in the New York Times I have an op-ed with Susan Athey, Michael Kremer and Christopher Snyder. We argue for a big program to invest in vaccine capacity before any vaccine is tested and approved. We agree with Bill Gates that we want the vaccine factories to be warmed up by the time a vaccine is approved. We can’t leave it all to Gates, however. The US economy is hemorrhaging $150-$350 billion a month so the benefits of a vaccine to society are huge and we should go big.

Today, the U.S. government could go big and create a Covid-19 vaccine A.M.C., guaranteeing to spend about $70 billion on new vaccines — enough to make direct investments to support capacity installation or to repurpose capacity and to pay, say, $100 per person for the first 300 million people vaccinated.

An investment of that size can anticipate and overcome several challenges typical of vaccine development. If we want to achieve a 90 percent probability of success, we must take into account historical rates of success from publicly available data; doing that suggests that we need to actively pursue not two or three vaccine candidates, but 15 to 20.

…Usually, to avoid the risk of investing in capacity that eventually proves worthless, firms invest in large-scale capacity only after the vaccine has proved effective. But in the middle of a pandemic, there are huge social and economic advantages to having vaccines ready to use as soon as they have been approved. If we leave it entirely to the market, we will get too little vaccine too late.

An advance market commitment for Covid-19 should combine “push” and “pull” incentives. The “pull” incentive is the commitment to buy 300 million courses of vaccine at a per-person price of $100, for vaccines produced within a specified time frame. If multiple vaccines are developed, the A.M.C. fund will have authority to choose products to purchase based on efficacy, the availability of sufficient vaccine for timely vaccination or suitability for different population groups. So firms compete to serve the first 300 million people with the most attractive vaccines, and the “pull” component provides strong incentives for both speed and quality.

The “push” incentive guarantees firms partial reimbursement for production capacity built or repurposed at risk and partial reimbursement as they achieve milestones. The partial reimbursement ensures that manufacturers have “skin in the game,” while inducing them to build large-scale capacity before approval is certain.

More than usual, read the whole thing and please do help to circulate the ideas by posting and tweeting.

The op-ed draws on the work of a large team of economists and statisticians who have been working days and nights for weeks. You can find out more at AcceleratingHT where we will soon be posting additional analysis and tools.

It’s a great privilege for me to be working with this group. One day I will write the story but for now let me just say that I have never seen such a brilliant and dedicated group come together to apply their skills to a problem of such importance and urgency.

Why aren’t there more Covid-19 deaths in U.S. prisons?

There are about 2.3 million prisoners in the United States, and so far the number of reported Covid-19 deaths is 251, or higher by the time you are reading this.  If you know of a better data source, please let me know.

For purposes of contrast, Rhode Island has about a million people and currently 266 deaths (and rising).  Connecticut has 2,339 Covid-19 deaths, and a population of about 3.5 million, or in other words almost ten times the deaths as the prisons without having even twice the population.  In other words, at least nominally the prison system seems to be doing better against Covid-19 than either The Nutmeg State or The Ocean State.

And I read this kind of line quite frequently:

Ohio officials found that more than 80% of those inmates had the virus with the vast majority showing no symptoms.

Yet asymptomatic cases in non-prison samples are often in the 40-50% range, not higher.  Furthermore, the Bureau of Prisons just tested 2000 prisoners (how random a sample?…but don’t forget the false negatives!) and 70% tested positive.  Again, the death rate does not seem to be through the ceiling.

How can this heterogeneity be?  I see a few options:

1. Actual Covid-19 deaths in prisons are much higher than reported.  This is quite possible, though I don’t see the media coverage that might go along with this.  At the very least, prisons might have longer death reporting and classification lags than does Connecticut.

2. Prison deaths are about to explode, due to exponential growth in the number of cases and their progression through time.  Again, this is quite possible, but you know what?  I thought of writing this post a few weeks ago and then figured I would be refuted by an explosion of the death total over the next few weeks.  So far it hasn’t happened.  It may yet.

3. Prisoners are younger.  Here is data on inmate ages, they are not that much younger than the general U.S. population.  But they are somewhat younger, and surely this is one factor.

4. Prisoners smoke a lot, and nicotine actually may have protective properties against Covid-19.  And is obesity low in prison?  I do not know.  Still, I don’t think of prisoners as a group in perfect physical health.

5. Prisoners are…um…locked up.  The superspreaders just aren’t that super, there are not many new entrants to the prison population, few tourists from Italy, and so on.  Not only do they live in cells, but the prison system as a whole is like thousands of scattered islands.

I see 1-5 all as possible significant options, with #4 as the weakest candidate.  What else might be playing a role here?

When will discrimination against superspreaders arrive?

Garett Jones emails me:

How soon until superspreader discrimination studies becomes an academic field? Is it already, on a Straussian level?

Will employment discrimination law react quickly or slowly?

IIRC after 9/11 it took about a year for the left to start bringing up serious concerns about detainee treatment.

Perhaps social media and the naturally greater sympathy people may have toward probabilistic superspreaders will encourage a faster response to the injustice of treating people differently on the basis of personal E(R0 | Covid +).

This will shape the medium-term spread of Covid if it hasn’t already.

How tourism will change

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

Some of the safer locales may decide to open up, perhaps with visitor quotas. Many tourists will rush there, either occasioning a counterreaction — that is, reducing the destination’s appeal — or filling the quota very rapidly. Then everyone will resume their search for the next open spot, whether it’s Nova Scotia or Iceland. Tourists will compete for status by asking, “Did you get in before the door shut?”

Some countries might allow visitors to only their more distant (and less desirable?) locales, enforcing movements with electronic monitoring. Central Australia, anyone? I’ve always wanted to see the northwest coast of New Zealand’s South Island.

Some of the world’s poorer countries might pursue a “herd immunity” strategy, not intentionally, but because their public health institutions are too weak to mount an effective response to Covid-19. A year and a half from now, some of those countries likely will be open to tourism. They won’t be able to prove they are safe, but they might be fine nonetheless. They will attract the kind of risk-seeking tourist who, pre-Covid 19, might have gone to Mali or the more exotic parts of India.

And:

laces reachable by direct flights will be increasingly attractive. A smaller aviation sector will make connecting flights more logistically difficult, and passengers will appreciate the certainty that comes from knowing they are approved to enter the country of their final destination and don’t have to worry about transfers, delays or cancellations. That will favor London, Paris, Toronto, Rome and other well-connected cities with lots to see and do. More people will want to visit a single locale and not worry about catching the train to the next city. Or they might prefer a driving tour. How about flying to Paris and then a car trip to the famous cathedrals and towns of Normandy?

Maybe. But I might start by giving Parkersburg, West Virginia, a try.

My Conversation with Glen Weyl

I found it interesting throughout, the first half was on Covid-19 testing, and the second half on everything else.  Here is the audio and transcript.  Here is the summary:

Tyler invited Glen to discuss the plan, including how it’d overcome obstacles to scaling up testing and tracing, what other countries got right and wrong in their responses, the unusual reason why he’s bothered by price gouging on PPE supplies, where his plan differs with Paul Romer’s, and more. They also discuss academia’s responsibility to inform public discourse, how he’d apply his ideas on mechanism design to reform tenure and admissions, his unique intellectual journey from socialism to libertarianism and beyond, the common element that attracts him to both the movie Memento and Don McLean’s “American Pie,” what talent he looks for in young economists, the struggle to straddle the divide between academia and politics, the benefits and drawbacks of rollerblading to class, and more.

Here is one excerpt:

And:

And:

For me the most instructive part was this:

COWEN: What do you view yourself as rebelling against? At the foundational level.

But you will have to read or listen to hear Glen’s very good answer.

Definitely recommended.

The lockdown culture that is Singapore

S’porean man charged in court for leaving home 30 minutes before quarantine ended to get breakfast

And:

According to CNA, Tay is accused of leaving his home in Choa Chu Kang between 11:30am and 12pm, half an hour before his quarantine ended.

He thus breached his quarantine order by leaving his home to go to his neighbourhood shopping mall for breakfast without getting the permission of the Director of Medical Services, said the MOH release.

And:

The day prior, Thursday, Apr. 23, 34-year-old Alan Tham was sentenced to six weeks’ imprisonment for breaching his Stay-Home Notice (SHN) to eat bak kut teh.

To be clear, I am fine with Singapore doing this, but it hard to imagine the United States enforcing quarantine with the same vigor.  And on the other side, I might risk prison for laksa, but for bak kut teh?

For the pointer I thank Tuvshinzaya.  and Jeet Heer asks:

I have to confess I’m becoming more pessimistic since I don’t see much signs that most countries outside Asia & the Pacific are developing the testing-tracing-isolation capabilities needed. Am I wrong about this?

Model this, coronavirus stupidity edition

A [NY] state guideline says nursing homes cannot refuse to take patients from hospitals solely because they have the coronavirus.

Here is the NYT article, with much more detail.  Here is a previous MR post Claims About Nursing Homes.  Via Megan McArdle.

And from a formal study:

Twenty-three days after the first positive test result in a resident at this skilled nursing facility, 57 of 89 residents (64%) tested positive for SARS-CoV-2.

The Decline of the Innovation State is Killing Us

The latest relief bill contains another $320 billion in small business relief and $25 billion for testing. Finally, we get some serious money to actually fight the virus. But as Paul Romer pointed out on twitter, this is less than half of what we spend on soft drinks!!! (Spending on soft drinks is about $65 billion annually). Soda is nice but it is not going to save lives and restart the economy. Despite monumental efforts by BARDA and CEPI we are also not investing enough in capacity for vaccine production so that if and when when a vaccine is available we can roll it out quickly to everyone (an issue I am working on).

The failure to spend on actually fighting the virus with science is mind boggling. It’s a stunning example of our inability to build. By the way, note that this failure has nothing to do with Ezra Klein’s explanation of our failure to build, the filibuster. Are we more politically divided about PCR tests than we are about unemployment insurance? I don’t think so yet we spend on the latter but not the former. The rot is deeper. A failure of imagination and boldness which is an embarrassment to the country that put a man on the moon.

In Launching the Innovation Renaissance I said the US was a welfare/warfare state and no longer an innovation state. The share of R&D in the Federal Budget, for example, has diminished from about 12% at its height in the NASA years to an all time low of about 3% in recent years. We are great at spending on welfare and warfare but all that spending has crowded out spending on innovation and now that is killing us.

Social distancing should never be too restrictive

That is the topic of a new paper by Farboodi, Jarosch, and Shimer, published version in here.  They favor ” Immediate social distancing that ends only slowly but is not overly restrictive.”  Furthermore, they test the model against data from Safegraph and also from Sweden and find that their recommendations do not depend very much on parameter values.

Here is an excerpt from the paper:

…social distancing is never too restrictive. At any point in time, the effective reproduction number for a disease is the expected number of people that an infected person infects. In contrast to the basic reproduction number, it accounts for the current level of social activity and the fraction of people who are susceptible. Importantly, optimal policy keeps the effective reproduction number above the fraction of people who are susceptible,although for a long time only mildly so. That is, social activity is such that, if almost everyone were susceptible to the disease, the disease would grow over time. That means that optimal social activity lets infections grow until the susceptible population is sufficiently small that the number of infected people starts to shrink. As the stock of infected individuals falls,the optimal ratio of the effective reproduction number to the fraction of susceptible people grows until it eventually converges to the basic reproduction number.

To understand why social distancing is never too restrictive, first observe that social activity optimally returns to its pre-pandemic level in the long run, even if a cure is never found. To understand why, suppose to the contrary that social distancing is permanently imposed, suppressing social activity below the first-best (disease-free world) level. That means that a small increase in social activity has a first-order impact on welfare. Of course, there is a cost to increasing social activity: it will lead to an increase in infections. However,since the number of infected people must converge to zero in the long run, by waiting long enough to increase social activity, the number of additional infections can be made arbitrarily small while the benefit from a marginal increase in social activity remains positive.

Recommended, one recurring theme is that people distance a lot of their own accord.  That means voluntary self-policing brings many of the benefits of a lockdown.  Another lesson is that we should be liberalizing at the margin.

If I have a worry, however, it has to do with the Lucas critique.  People make take preliminary warnings very seriously, when they see those warnings are part of a path toward greater strictness.  When the same verbal or written message is part of a path toward greater liberalization however…perhaps the momentum and perceived end point really matters?

For the pointer I thank John Alcorn.

The essential Ben Thompson on isolation and quarantine

…while I have written about Taiwan’s use of cellphone-enforced quarantines for recent travelers and close contacts of those infected, I should also note that every single positive infection — symptomatic or not — is isolated away from their home and family. That is also the case in South Korea, and while it was the case for Singaporean citizens, it was not the case for migrant workers, which is a major reason why the virus has exploded in recent weeks.

Here’s the thing, though: isolating people is hard. It would be very controversial. It would require overbearing police powers that people in the West are intrinsically allergic to. Politicians that instituted such a policy would be very unpopular. It is so much easier to let tech companies build a potential magic bullet, and then demand they let government use it; most people wouldn’t know or wouldn’t care, which appears to matter more than whether or not the approach would actually work (or, to put it another way, it appears that the French government sees privacy as a club with which to beat tech companies, not a non-negotiable principle their citizens demand).

So that is why I have changed my mind: Western governments are not willing to take actions that we know work because it would be unpopular and controversial (indeed, the fact that central quarantine is so clearly a violation of liberties is arguably a benefit, because there is no way people would tolerate it once the crisis is over). And, on the flipside, that makes digital surveillance too dangerous to build. Politicians would rather leverage tech companies to violate liberty on the sly, and tech companies, once they have the capability, are all too willing to offload the responsibility of using it wisely to whatever government entity is willing to give them cover. There just isn’t much evidence that either side is willing to make hard choices.

That is from Ben’s Stratechery email newsletter, gated but you can pay to get it.  There is currently the risk that “test and trace” becomes for the Left what “chloroquine” has been for Trump and parts of the political right — namely a way to make otherwise unpalatable plans sound as if they have hope for more than “develop herd immunity and bankrupt the economy in the process.”

To be clear, I fully favor “test and trace,” and I’ve worked hard to help fund some of it.  That said, I wonder if we will anytime soon reach the point where it is a game changer.  So when people argue we should not reopen the economy until “test and trace” is in place, I increasingly see that as a kind of emotive declaration that others do not care enough about human lives (possibly true!), rather than an actual piece of advice.