Category: Medicine

Mass Testing to Fix the Labor Market

What is the scenario for going back to work? Testing and tracing. In fact, two types of tests. First, the test for COVID-19 which says if an individual is infected. After deadly delays caused by the FDA and CDC we unleashed the private labs and the states and are now ramping up the number of tests. As of today, we have run about 80 thousand but we need many more and with every positive test we need to isolate and contact trace. Test, isolate, and trace. Health care workers need daily testing. We don’t need to test everyone but we do need to test enough to get the number of new cases down to a level that people feel comfortable returning to work, to shop, to eat. In China yesterday there were no new local infections. We can get there.

The second test is for COVID-19 antibodies which indicate that the person was infected and recovered and may thus have some immunity. An antibody test was just announced. The test looks only at one antibody and this doesn’t guarantee immunity. Nevertheless, people who have been infected and recovered are valuable. The blood of recovered individuals may be useful as a treatment. (N.B. The NIH Vaccine Research Center is looking for otherwise healthy recovered COVID-19 patients who are willing to donate their blood for study. Please contact.) In addition, recovered individuals have a kind of superpower and would be highly desirable workers. Recovered individuals are better able to help the sick at lower risk, for example (David Balan made this point in an unpublished piece). Moreover, a non-infected person would be very willing to work with a recovered person so the effect on labor supply is amplified.

As with the financial crisis, there are some bad risks out there but no one knows where and so every borrower/worker is suspect and no one is lending/working. With more information we can separate out the bad risks and get the majority of people working again.

To be clear, things are going to get worse but there is a reasonable scenario for recovery. Social distancing, including all the shutdowns, will start to show an effect in a week or two. With luck and effort we may stop SFO, Seattle and NYC from going critical and we can then start to bend the curve nationally. If we greatly expand testing, it’s possible that we can get people back to work in one or two months. That will not end the crisis–a fall rebound is possible and we can expect outbreaks. But if we test quickly and widely at the first sign of an outbreak, outbreaks can be contained. A vaccine is also possible and perhaps faster than most people think. Treatments will also improve. Testing and tracing buys us time.

We can get the economy back on track. Testing, isolating and tracing will do it much faster and cheaper than dealing with a prolonged recession.

My Coronavirus Conversation with Russ Roberts

We recorded this two days ago on the spur of the moment, the discussion is still current, here is the transcript and audio, here is the CWT summary:

Tyler and Russ Roberts joined forces for a special livestreamed conversation on COVID-19, including how both are adjusting to social isolation, private versus public responses to the pandemic, the challenge of reforming scrambled organization capital, the implications for Trump’s reelection, appropriate fiscal and monetary responses, bailouts, innovation prizes, and more.

Russ is more optimistic than I am, here is one excerpt on the economic side:

COWEN: Well, two to four weeks [of shutdown], those are easy cases. If you think of many service sectors as having to shut down say until August, which is quite a possible scenario in some cases even later. That to me is greatly concerning and it may vary across sectors. So if you think about the NBA, whenever the NBA is ready to play games again, I mean the players will show up the next day and there’ll be ready, right? That will come back very quickly. But if you think of small businesses, say restaurants, the big chains aside, they’re typically thinly capitalized.

Let’s say a significant portion of those are gone forever. And then when things are somewhat normal again, how does the economy re-scramble and re-constitute the organizational capital that was in those ongoing enterprises? That to me is a hugely difficult problem and whatever you think the government should or should not do, just spending a lot on fiscal stimulus will not ease that problem. That’s the actual destruction going on is the relationships, the organizational capital, the intangibles that will decay. Not over two weeks, probably not over four weeks but over four or five months or longer. Then I think that’s a matter really of great concern…

But even in China where the number of new cases is really in most parts of the country, genuinely very low, they are not returning with live sporting events. Keep in mind we will have a pool of never infected people, which will be fairly large in absolute numbers and what risks we will be willing to take. Insurance companies would allow, our liability system and corporate lawyers would be willing to allow. When you think through all of that stickiness, I think we’re really not so close to resuming many of these shutdown activities.

There is much more at the link, we start off on the personal side and then move into the larger issues.

Most Grand Princess passengers not tested

They solved for the equilibrium:

Despite assurances from Vice President Mike Pence that all Grand Princess cruise ship passengers quarantined at Travis Air Force Base would be tested for COVID-19, The Chronicle has learned that two-thirds of them have declined, often at the encouragement of federal health officials.

As of Wednesday, 568 of the 858 passengers screened while confined turned down the test, a federal official familiar with the Travis quarantine and testing told The Chronicle. The low testing numbers align with what passengers were told by officials during a Tuesday afternoon teleconference, citing a 30% acceptance rate for the novel coronavirus test, several passengers told The Chronicle.

“These folks know they are in a 14-day quarantine, if they test positive they are further delayed until they test negative,” said the official, who The Chronicle agreed not to name because they were not authorized to speak to the media, in accordance with the paper’s ethics policy. “They don’t want to stay. They want to be released.”

Interpret the resulting data accordingly, of course.  Here is the full story, via Anecdotal.

Should Amazon and eBay allow price gouging?

This one has been a big story (NYT):

Matt Colvin stayed home near Chattanooga, preparing for pallets of even more wipes and sanitizer he had ordered, and starting to list them on Amazon. Mr. Colvin said he had posted 300 bottles of hand sanitizer and immediately sold them all for between $8 and $70 each, multiples higher than what he had bought them for. To him, “it was crazy money.” To many others, it was profiteering from a pandemic.

The next day, Amazon pulled his items and thousands of other listings for sanitizer, wipes and face masks.

Colvin ended up giving them away to charity (NYT).  More analytically, here are three factors that matter when we consider whether a market-clearing price is better:

1. The traditional maximization of consumer + producer surplus that results from market-clearing prices.

2. People getting pissed off when they see the inequities and supposed inequities of price gouging.  That is a real economic loss too, though you have to wonder how much they actually would pay to make the gouging go away (and they might consider such a payment a “price gouge” too!).

3. There are significant social externalities to consumption during a pandemic.  So do the market-clearing prices or the rationing algorithms do a better job getting the relevant protective commodities to the most likely super-spreaders?  You might think poorer individuals are the most likely super-spreaders, but low prices and queue don’t seem to place the scarce commodities in their hands anyway.  Marginal allocation will be by privilege (e.g., do you have friends in China who can send you masks? etc.) if not by income.  So I do not see that this factor is going to favor rationing algorithms.

On net, the market-clearing prices are likely to be the better solutions.  I also am reluctant to eschew better solutions simply because some people do not like them from a distance, consider Sen on Paretian liberalism.

One interesting feature of this problem is that it points to a potential disadvantage from conglomerates such as Amazon.  Masks for instance are a tiny part of Amazon’s revenue.  Yet price-gouging on masks can hurt Amazon’s public image a lot.  So a fearful Amazon is unlikely to allow the welfare-improving price gouging to continue.  The company is too much an agent and too easy a target on social media.  That keeps them away from welfare-maximizing, politically incorrect decisions.

Alternatively, imagine you bought masks at a shop that sold nothing else — The Mask Store.  Perhaps their reputation rests on having masks always available, but in any case they are not afraid that bad PR will destroy their profits in other lines of business, as there are no other lines of business.  So The Mask Shop is more likely to allow prices to reach their market-clearing level.

Stopping Time: An Approach to Pandemics?

From Scott Ellison:

Sometimes, the best solutions to big problems are very simple. Regarding the current outbreak of COVID-19, I propose a solution that—on the surface—might seem preposterous, but if one manages to stay with it and really think through the potential benefits, then it emerges as a much more credible course of action.

I propose temporarily stopping time. This means that today’s date, Tuesday, March 17th, 2020, will remain the current date until further notice. This also means that everything that happens in time (e.g. mortgage due dates, payrolls, travel bookings, stock market trading, contractor gigs, concerts, sporting events) will be paused. It also means that all of these events remain on the books, and will continue as planned once time is resumed.

Before reacting to this crazy idea, let’s start with a very simple example of how manipulating time is already both commonplace and effective. I’m talking about daylight savings time, a practice that everyone in the US is already accustomed to where we set our clocks forward one hour every Spring. This simple, small action instantly changes the behavior of all 330 million US citizens. Suddenly, every single one of us shows up to work a little earlier than we did the week before, and this massive collective action occurs seamlessly and with only minor need for rectifications (e.g. some over night shift workers must be compensated differently for that paycheck).

It’s the impressive unity of action that is significant about this idea of manipulating time, and this feature is key in responding to a global pandemic. Right now, we’re dealing with all the fallout from this outbreak piecemeal, which isn’t sustainable nor very effective—both from the standpoint of stopping the spread of the outbreak and from the standpoint of preserving our society and economy. We’re spending trillions of dollars to keep time going (e.g. sending every American $1,000 so they can pay their rent, sending airlines $50 billion so they can pay their jet notes, providing billions to banks to cover distressed assets), but none of this really relieves the need to keep going out and working and thus further spreading the virus. What’s worse is that, in spending all this money to keep time going, there’s no guarantee that the economy will be there to take back up the baton once government payments stop. How many travel plans, conferences, sports leagues, and other plans have already been cancelled along the way?

We should be targeting this massive government money for mission-critical items like expanding hospital capacity, ensuring the food supply, and maintaining distribution networks. These are the mission critical activities that must continue even if the date is frozen. It will be readily apparent which of these activities is mission critical, and the trillions of dollars flowing from the government can be directed toward footing these bills.

In my opinion, the most important feature of this solution is that it can be easily implemented again in the future. Right now, we’re using all of our energy to keep time going. Imagine a scenario in which—a few months after this current outbreak subsides—this virus mutates and strikes again. After all the work (and money) we’ve already put into keeping things on track, I sincerely doubt we will be ready to meet any follow up challenge.

FDA senior scientists

“The White House considered issuing an executive order greatly expanding the use of investigational drugs against the new coronavirus, but met with objections from Food and Drug Administration scientists who warned it could pose unneeded risks to patients, according to a senior government official.

The idea to expand testing of drugs and other medical therapies was strongly opposed by the FDA’s senior scientists this week, the official said, and represented the most notable conflict between the FDA and the White House in recent memory.”

Ahem.  Here is the full WSJ piece.

Bullshit Patents

I wrote last year:

Despite never having built a working product, Theranos accumulated hundreds of patents. These patents are now the only thing of value left but the patents aren’t valuable because of breakthrough science, the patents are valuable because they can be used to force people who do breakthrough science to cough up part of their return.

Now, just as I predicted, some of these bullshit patents are being used to prevent a company that is working on Covid-19 tests. The logic is evil but impeccable. Sue a firm when time is of the essence. Moreover, you won’t be surprised that just about everyone involved is scraped from the bottom of the barrel. Theranos sold the patents which were bought by a patent troll owned by Softbank, the firm bankrolling the notorious WeWork disaster, and the law firm involved, Irell & Manella, once took a monkey for a client (literally, although PETA paid) in an infamously stupid copyright infringement dispute.

Mike Masnick who broke the story names the guilty and writes:

Honestly, I’m used to all sorts of awfulness, but this one piles awfulness upon awfulness, and takes it to a level of pure evil….I wonder how they sleep at night.

….I understand the need for zealous representation of a client in court, but this seems even more despicable than your every day patent trolling, and people should associate these lawyers names with the truly despicable behavior on display here. Similarly, it should be a reminder of why its a good thing that the Supreme Court decided a decade and a half ago that injunctions are often inappropriate in patent cases.

I do hope a sensible judge punishes this abuse.

Hat tip; Michael Pettengill.

“Herd immunity,” time consistency, and the epidemic yoyo

Saloni has long and detailed arguments against herd immunity.  Here is Caplan on Hanson.  Here is Kling on Hanson.  Here is the Taleb critique.  Here is the underlying Imperial College paper everyone is talking about.  The bottom line is that “locking everyone up to bend the hospital admissions curve” might have to last for at least a year to really choke off the coronavirus.

I’m not going to recap this complex debate, which most of you already have some inkling of.  Instead, I’d like to stress the issue of time consistency, noting that I’ll consider some extreme versions of policies to make exposition easier, even though no one advocates exactly those extreme versions.

Let’s say we expose lots of people to the virus rather quickly, to build up herd immunity.  Furthermore, we would let commerce and gdp continue to thrive.

Even if that were the very best policy on utilitarian grounds, it might not be time consistent.  Once the hospitals start looking like Lombardy, we don’t say “tough tiddlywinks, hail Jeremy Bentham!”  Instead we crumble like the complacent softies you always knew we were.  We institute quarantines and social distancing and shutdowns and end up with the worst of both worlds.

Alternatively, let’s say we start off being really strict with shutdowns, quarantines, and social distancing.  Super-strict, everything closed.  For how long can we tolerate the bankruptcies, the unemployment, and the cabin fever?  At what point do the small businesspeople, one way or another, violate the orders and resume some form of commercial activity?  What about “mitigation fatigue“?

Again, I fear we might switch course and, again, end up with the worst of both worlds.  We would take a big hit to gdp but not really stop the spread of the virus.

I also can imagine that we keep switching back and forth.  The epidemic yoyo.  Because in fact we find none of the scenarios tolerable.  Because they are not.

David Brooks postulates another possible form of time inconsistency:

What happens when there are a lot of people who’ve had the disease and become temporarily immune. They start socializing. Social distancing for the rest become harder if not impossible.

Plausible?

I greatly fear the epidemic yoyo.  And figuring out how to deal with it may be at least as important as calculating the numerical returns from various consistent policies.

I thank an anonymized correspondent for the term “epidemic yoyo.”

The *Love Letter* has a P.S.

As people start reacting to Covid-19, they are looking mostly to the larger businesses for assistance. Costco and Walmart are packed. Amazon and UPS are delivering our packages. For entertainment at home, Americans are relying on Netflix and the cable companies. For information on Covid-19, Twitter is a very useful stop. As hospitals become overcrowded, CVS and Rite Aid may become important as local health centers and sources of community information.

It turns out that the larger, more profitable businesses are the ones that have the talent, the command of public attention and the financial resources to adjust to these changing conditions.

Big business also has been ahead of the curve when it comes to prediction and adjustment. The NBA postponed its season before most politicians, including the president, realized the gravity of the situation.

Only a month ago, there were headlines mocking Silicon Valley for being overly concerned with Covid-19 and for avoiding handshakes. The tech community had a high degree of advance awareness of Covid-19 problems, and it was ready with telework and other adjustments when the time came. The tech world’s penchant for carrying what seemed to be absurdly large surpluses of cash — last year Apple had over $100 billion in cash reserves — now also seems prescient. Apple’s stores are currently closed in most parts of the world.

And this:

Larger businesses are also easier to assist if necessary. Whatever you think of the forthcoming bailout of the major U.S. airlines, logistically it will not be very difficult to pull off, since the targets are large and obvious and relatively easy to monitor. Banks are willing to lend to them, because they know the government does not contemplate a world without major airlines.

It is much more difficult to bail out the millions of small and medium-sized enterprises around the world that will demand assistance. How do you find and track them? How can you tell which have no chance of bouncing back? Government bureaucracies cannot easily deal with those problems, and in turn private banks do not perceive governments to be making credible commitments to these small businesses. By contrast, there are numerous precedents for governmental aid or loans to airlines or other major businesses.

That is all from my latest Bloomberg column, much more at the link.  One problem Italy has, of course, is a fairly high reliance on small business.

Bill Dupor of the St. Louis Fed on fiscal remedies

The entire piece is interesting, here are two highlights:

Subsidize COBRA Continuation Coverage Employer -provided health insurance is commonplacein the United States. Laid off (or furloughed) workers, even if they receive higher UI replacement rates, would (or at least could) lose their health insurance. The federal government already has the COBRA program to allow for continuation of coverage for workers losing their jobs. This program, however, requires worker-paid premiums. These premiums increase the relative cost of engaging in nonmarket activities. To reduce that cost, the federal government might temporarily cover 70 percent of the COBRA premiums for the unemployed or furloughed. Calculating an appropriate size of such a program, even in a rough sense, is difficult at this stage. For a baseline, suppose the allocation were $25 billion, which was the value of a similar program implemented under the 2009 Recovery Act.

And here is another way to get cash into people’s hands quickly:

Penalty-Free Withdrawals from Individual Retirement Accounts

Many Americans hold tax-deferred individual retirement accounts. Individuals can withdraw funds on retirement (and a few other special situations) or any time they wish if they pay a 10 percent penalty. This 10 percent penalty is in addition to the taxes that are due on the withdrawal. In the event of a severe viral outbreak, the federal government could temporarily remove this 10 percent penalty up to a certain dollar amount and for a preset length of time. Since the initial contribution to the retirement fund was tax deferred, taxes would need to be paid on the withdrawal even if the additional penalty was waived.

Recommended.

The best economic plan against the coronavirus

I have produced a 7 pp. document, mostly micro- rather than macroeconomics, leaving the pure health and health care issues aside, you will find it here (link is now corrected).  Intended for policymakers.  Here is the opening bit:

“We need a series of policies to achieve some rather complex ends, and in conjunction. Other than the obvious goals (“minimize human suffering”), these ends are:

  1. Scale down economic activity in a rapid way to keep people at home, but without devastating the physical, cultural, or organizational capital that will be needed to restore growth and normality.

  2. Boost the confidence of markets — both retail and financial markets — by showing progress in limiting the spread of the disease. (But note that merely slowing the spread of the disease may not help the economy, as uncertainty would linger for longer periods of time.)

  3. Keep business in a position to rebound.

  4. Create incentives for production to bounce back once that is appropriate.

You will notice a tension between #1 and #2-4, which is what makes this policy issue so difficult. The ideal policy mix should both lower and raise output, and at just the right speed. No one ever taught us how to do that.

Furthermore, policymakers need to figure out which sectors a) we wish to keep up and running (food, health care), b) which sectors we want to contract rapidly but bounce back rapidly as well (education), and c) which sectors we do not want to protect at all and would be willing to see perish (e.g., cruise ships, note that most operate under foreign flags and employ mainly non-Americans). 

Those classes of sector may require very different economic policies, most of all we should not waste aid on the latter class of sectors. Be nervous of general proposals for “the economy.”

Again, here is the link, please do leave your suggestions in the comments section of this blog post.  I thank Patrick Collison for some writing and editing assistance with this document, though of course he is not liable for its final contents or conclusions.

Mercatus call for short papers

Today, the Mercatus Center put out a call for policy briefs related to the COVID-19 pandemic. We hope to gather short, actionable analyses for decision makers in the public, civil society, and private sectors regarding both immediate response (what’s working or could be done immediately), as well as in the medium term (what do we need to be thinking about now so that we’re prepared in six to twelve months).

More information can be found here.

Papers will be published quickly (within 24 hours in most cases), and authors will receive a $1,000 honorarium.

The list of possible topics is advisory and by no means comprehensive; our goal is to assemble the smartest actionable analyses as quickly as possible.

Hedgehogs in particular: what do you know here that the foxes should hear?

Note that research need not directly relate to public policy, but also how the business sector and civil society can and should respond.