Category: Law

Covid-19 liability reform for the eventual reopening

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

If an infected but asymptomatic worker shows up at work and sickens coworkers, for example, should the employer be liable? The answer is far from obvious. Liability exists not to shift unmanageable risk, but rather to induce management to take possible and prudent measures of precaution.

Another problem with liability law in this context is that the potential damages are high relative to the capitalization of most businesses. Covid-19 cases often pop up in chains; there have been many cases from a single conference, or in a single church choir, or on a single cruise ship. If a business or school is host to such a chain, it could be wiped out financially by lawsuits. In these cases the liability penalties do not have their intended deterrent effect because the money to lose simply isn’t there…

Another problem with liability in this setting has to do with jury expertise. Are random members of the public really the best people to determine acceptable levels of Covid-19 risk and appropriate employer precautions? Juries are better suited for more conventional applications of liability law, such as when the handyman fixing your roof falls off your rickety ladder. Given the unprecedented nature of the current situation, many Covid-19 risk questions require experts.

Finally, there is the issue of testing. Businesses could be of immeasurable help by testing their employees for Covid-19, as additional testing can help limit the spread of the virus (if only by indicating which workers should stay home or get treatment). Yet the available tests are highly imperfect, especially with false negatives. If businesses are liable for incorrect test results, and their possible practical implications, then business will likely not perform any tests at all, to the detriment of virtually everybody.

I recommend modest liability for some sectors, and zero liability, bundled with a New Zealand-like accident compensation system, for other sectors.  And of course some very dangerous sectors should not be allowed to reopen at all, though I am more sympathetic to regional experimentation than are some people on Twitter.

Immigration will be largely shut down for some time to come

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

Whether or not that reaction is rational, it is easy to imagine the public being fearful about the potential of immigration to contribute to a pandemic resurgence. It does seem that regions able to restrict in-migration relatively easily — such as New Zealand, Iceland and Hawaii — have had less severe Covid-19 problems. New York City, which takes in people from around the world, has had America’s most severe outbreak. And the recent appearance of a second wave of Covid-19 in Singapore has been connected to ongoing migration there.

I have never thought the federal government would build Trump’s wall on the U.S.-Mexico border. But now I wonder whether it may well happen — perhaps in electronic form.

And:

In addition to these effects, many migrants currently living in the U.S. might go back home. Say you are from southern India and live in Atlanta, and typically your parents or grandparents come to visit once a year. That is now much harder for them to do, and will be for the foreseeable future. India also might make it more difficult for Indian-Americans to return to visit their relatives, perhaps demanding an immunity certificate for entry. Many of these current migrants will end up returning home to live in their native countries.

But not all immigration will vanish:

n spite of all those possible restrictions, the pandemic itself may offer new reasons to embrace some forms of migration, if only to help Western economies continue to function. Many jobs are now more dangerous than before, because they involve face-to-face contact and time spent in enclosed spaces. Such professions as nursing and dental assistants, for example, already attracted many immigrants even before Covid-19. Working on farms may yet become more perilous if the virus strikes farm worker communities. New migrants from poorer countries will be willing to take on these risks — for extra income of course — but most U.S. citizens won’t go near them.

The reality may be an uptick in some forms of migration, mostly for relatively hazardous jobs.

In any case, the immigration debate two or three years from now will seem virtually unrecognizable, compared to what we had been expecting.

Swedish expert against lockdowns

Here is Johan Giesecke, Swedish epidemiologist, interviewed by Freddie Sayers for a little over half an hour, one of the most interesting set pieces I have heard this year.  “I’m going to tell you what I really think.  I don’t usually do that.”  He also gives his account of what Sweden did right and wrong, and he argues that more Swedes than Norwegians have died because a) Sweden has much larger nursing homes, and b) Swedish immigrants.  How he puts matters is of great interest as well.

It is a good exercise to figure out exactly where and why his claims might be wrong.  For a start, I don’t think his extreme claims about fatality and infection rates can be true, even if you agree with much of what he says.

Via Adam.

And from the excellent Samir Varma here is a new Bloomberg article about the Swedes claiming success.

Pollution is an Attack on Human Capital

Here’s the latest video from MRU where I cover some interesting papers on the effect of pollution on health, cognition and productivity. The video is pre-Covid but one could also note that pollution makes Covid more dangerous. For principles of economics classes the video is a good introduction to externalities and also to causal inference, most notably the difference in difference method.

Might I also remind any instructor that Modern Principles of Economics has more high-quality resources to teach online than any other textbook.

When Will The Riots Begin?

I was surprised when Trump won. The economy was doing well, Trump had charisma but was erratic and made what seemed like many missteps (like disparaging people in the military) that it didn’t seem plausible he could win. Yet, he plowed through the Republican primaries and gathered such a large and powerful base of support that people like Ted Cruz and Lindsey Graham, who have good reasons to hate his guts, even they kowtowed. I don’t want to revisit the debates about why Trump won but one of the reasons was that his base felt disrespected by coastal and media elites–their religion, their guns, their political incorrectness, their patriotism, their education, their jobs–all disrespected.

And now maybe it is happening again. From the point of view of the non-elites, the elites with their models and data and projections have shut the economy down. The news is full of pleas for New York, which always seemed like a suspicious den of urban iniquity, but their hometown is doing fine. The church is closed, the bar is closed, the local plant is closed. Money is tight. Meanwhile the elites are laughing about binging Tiger King on Netflix. It doesn’t feel right. I can understand that or feel that I must try to understand that.

Here’s a picture from a protest in Ohio. It wasn’t a large protest, about 100 people, but they look pretty angry. They want to reopen the economy.

Photo: Joshua Bickel.

Columbus Dispatch: Kevin Farmer of Cincinnati climbed to the top of the Statehouse steps with his bullhorn to lead the protesters in a series of chants.

“Some say that we’re actually causing havoc or putting lives in danger right now — but actually they’re putting my livelihood in danger and others because we’re laid off during this pandemic,” Farmer said to the crowd.

Farmer told The Dispatch that he has been laid off from his job at Cincinnati Metropolitan Housing, and said his employer will contact him when it is OK to return to work.

Farmer said he hoped DeWine would see the dissent caused by the demonstration, and allow Ohioans to get back to their jobs.

“Don’t Mike DeWine supposed to be a Republican (sic)? Don’t he believe in less government? Small government?” Farmer said.

“He has an obligated right to get us back to work, because if not, what do you think Americans are gonna go through?”

Farmer also led the demonstrators in a series of “When I say tyrant, you say Mike DeWine” chants, among others.

Another demonstrator, John Jenkins of Pleasantville, was bearing an upside down American flag, traditionally a distress signal.

“Ohio is currently under distress,” Jenkins said. “The United States is generally under distress.”

…Joe Marshall, who did not identify where he was from, said he was representing Anonymous Columbus Ohio.

Marshall said he chose to demonstrate against DeWine because he believes DeWine and Acton are being led astray by the World Health Organization, which he said is corrupt and peddling false information to local governments.

“Their numbers here are what these clowns are going by,” Marshall said. “Even if they are right, they don’t justify” enforcing a stay-at-home order.

“These are common sense things,” Marshall said. “The problem is, Mr. DeWine doesn’t want to do common sense things, he wants to listen to Amy [Ohio Health Director Dr. Amy Acton, AT], and Amy gets her orders from the World Health Organization.”

Another protestor from a follow-up:

 Columbus Dispatch: “We have children to feed, businesses to run, employees to pay, and Ohio must end this shutdown now. Those with high-risk categories and compromised immune systems can shelter safely at home while the rest of us can exercise our constitutional liberties to work and take care of our businesses and children.

“Patriots who love and respect our liberties and the Constitution are sick and tired of the fear-mongering while the governor and (state Health Director) Dr. (Amy) Acton continue to hide the numbers from the public.”

As Tyler put it yesterday, “America is a democracy, and the median voter will not die of coronavirus.” Solve for the equilibrium.

Addendum: In an excellent historical piece, Jesse Walker at Reason notes that cholera riots were common in Europe in the 19th century. Respect also played a role:

The more high-handed the ruling classes were, the more likely they were to be targeted by rumors and revolt. The riots persisted longest, Cohn writes, “where elites continued to belittle the supposed ‘superstitions’ of villagers, minorities, and the poor, violated their burial customs and religious beliefs, and imposed stringent anti-cholera regulations even after most of them had been proven to be ineffectual. Moreover, ruling elites in these places addressed popular resistance with military force and brutal repression.

One reason why food intended for restaurants is not reallocated to supermarkets

Nutrition labeling also frequently doesn’t comply with Agriculture Department and Food and Drug Administration guidelines for consumer sales, said Geoff Freeman, president and CEO of the Consumer Brands Association, a trade organization for the consumer packaged goods industry. A company that sold hamburger buns to major fast food outlets could try to pivot to retail, but that entails changing packaging on the fly, a relaxation of labeling requirements and new distribution contracts.

Here is a longer story, about how supermarkets are changing, by Laura Reiley, interesting throughout.  I’ll say it again: America’s regulatory state is failing us.

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.