Category: Political Science
A Pandemic Trust Fund
The Coronavirus Pandemic may be the most warned about event in human history. Surprisingly, we even did something about it. President George W. Bush started a pandemic preparation plan and so did Governor Arnold Schwarzenegger in CA but in both cases when a pandemic didn’t happen in the next several years those plans withered away. We ignored the important in favor of the urgent.
It is evident that the US government finds it difficult to invest in long-term projects, perhaps especially in preparing for small probability events with very large costs. Pandemic preparation is exactly one such project. How can we improve the chances that we are better prepared next time?
In a short paper for the Center for Growth and Opportunity I offer a different funding mechanism to address the problem:
…we would like organizations tasked with protecting the public from low-probability, high-cost events to be funded on a permanent basis that is not subject to budgetary discretion or degradation. Instead of yearly appropriations, it’s preferable to have a one-time appropriation to finance a stream of investments. The financial means of doing this is to buy a bond with an earmarked revenue stream. That is, instead of selling bonds the government buys long-term safe bonds which pay out dividends that are earmarked to a program, in this case to pandemic preparation.
There is a well-known example of such a financing scheme, the social security trust fund. The social security trust fund was established in 1937. It buys long-term safe bonds that pay dividends that are used to finance social security payments. Unlike the pandemic trust fund I propose, the Social Security Trust Fund buys bonds on an ongoing basis but that is a relatively unimportant difference.
The Social Security Trust Fund buys the safest form of government bonds, which has given rise to a long-standing controversy over whether the trust fund is a “fiction.”10Of course, the trust fund is a kind of fiction but so are federalism, checks and balances, and the Constitution. Fictions can be powerful because they create shared understandings that govern behavior and determine equilibrium action. The trust fund does what it says—it increases trust by indicating that Social Security payments are higher in creditor priority than other spending. Just as Section 507 of the Bankruptcy Code increases trust by indicating that secured bondholders get paid before unsecured creditors such as a company’s suppliers. Since 1937, the Social Security Trust Fund has always held net assets, and when it briefly ran deficits in the 1970s and early 1980s, the Greenspan commission was established to shore up the system.11 That is, the simple existence of the Trust Fund as an accounting entity created an awareness, which made it easier to act to maintain the Fund.
A Pandemic Trust Fund would begin with a $250 billion investment in bonds earmarked to pandemic preparations. At current effective rates of interest of about 3%, this is enough to support spending of $7.5 billion annually.12 Note that $7.5 billion is nowhere near enough to address the current pandemic, but that is because we did not invest enough in pandemic preparation. Had we invested $7.5 billion in pandemic preparation every year for the last two decades, for example, we would be in much better shape today. The $7.5 billion is for annual ongoing preparation.
…A Pandemic Trust Fund invested in $250 billion of government bonds is an accounting fiction that may be readily agreed upon today at the height of the crisis because it has few current costs. Yet, as we have discussed, accounting fictions can have real power in changing the future allocation of resources.
Read the whole thing, it is also includes some interesting info on clever DOD contracts that have advanced pandemic preparations.
Big G
Yes, that is the title of a new paper and it is excellent indeed. Lydia Cox et.al bring you a fresh and original look at some properties of government spending:
“Big G” typically refers to aggregate government spending on a homogeneous good. In this paper, we open up this construct by analyzing the entire universe of procurement contracts of the US government and establish five facts. First, government spending is granular, that is, it is concentrated in relatively few firms and sectors. Second, relative to private expenditures its composition is biased. Third, procurement contracts are short-lived. Fourth, idiosyncratic variation dominates the fluctuation of spending. Last, government spending is concentrated in sectors with relatively sticky prices. Accounting for these facts within a stylized New Keynesian model offers new insights into the fiscal transmission mechanism: fiscal shocks hardly impact inflation, little crowding out of private expenditure exists, and the multiplier tends to be larger compared to a one-sector benchmark aligning the model with the empirical evidence.
Via the still excellent Kevin Lewis.
Why the low status of opposition to child abuse?
Michael Kaan emails me:
Hi Tyler, I’m a healthcare professional in Canada and a long-time reader of your blog. For the past couple of years, observing the culture wars and various elections, I’ve noticed that child abuse is an extremely rare topic among the cultural left: the highly visible progressive segment that drives wokeness, is culturally powerful, etc. You know what their dominant concerns are. (On the right it’s basically non-existent.)
While there’s nothing obviously wrong with their attention to sexual and racial discrimination, the energy put into it is disproportionate to the massive social cost of child abuse. Rates vary around the world, but in general it looks like about 30% of all children globally suffer some sort of serious maltreatment each year, often many times a year, repeated over multiple years.So one can easily estimate that billions of people have experienced this. In other words, more people have been abused as children than have experienced war, famine, or epidemics.
The impact and costs of this have been measured (low academic achievement, health problems, low earnings, drug and alcohol use, etc.), and child abuse is sometimes lethal. What puzzles me is why it has no legs politically. Among the woke crowd, if child abuse is mentioned it’s usually in terms of discrimination against girls or sexual minorities. But there are really no prominent voices actively campaigning to mitigate child abuse generally.Why is this? Is it overly complex? Is the phenomenon too widely dispersed demographically, so that an evil agent group isn’t easily identified? Does its persistence foreground chronic failures of the welfare state (if that’s the case)? Is it boring?
For a start, I would note that virtually everyone is again child abuse, so opposing it doesn’t make anyone significant look worse. But I am sure there is much more to it than that.
My Conversation with Philip Tetlock
Here is the audio and transcript, here is part of the summary:
He joined Tyler to discuss whether the world as a whole is becoming harder to predict, whether Goldman Sachs traders can beat forecasters, what inferences we can draw from analyzing the speech of politicians, the importance of interdisciplinary teams, the qualities he looks for in leaders, the reasons he’s skeptical machine learning will outcompete his research team, the year he thinks the ascent of the West became inevitable, how research on counterfactuals can be applied to modern debates, why people with second cultures tend to make better forecasters, how to become more fox-like, and more.
Here is one excerpt:
COWEN: If you could take just a bit of time away from your research and play in your own tournaments, are you as good as your own best superforecasters?
TETLOCK: I don’t think so. I don’t think I have the patience or the temperament for doing it. I did give it a try in the second year of the first set of forecasting tournaments back in 2012, and I monitored the aggregates. We had an aggregation algorithm that was performing very well at the time, and it was outperforming 99.8 percent of the forecasters from whom the composite was derived.
If I simply had predicted what the composite said at each point in time in that tournament, I would have been a super superforecaster. I would have been better than 99.8 percent of the superforecasters. So, even though I knew that it was unlikely that I could outperform the composite, I did research some questions where I thought the composite was excessively aggressive, and I tried to second guess it.
The net result of my efforts — instead of finishing in the top 0.02 percent or whatever, I think I finished in the middle of the superforecaster pack. That doesn’t mean I’m a superforecaster. It just means that when I tried to make a forecast better than the composite, I degraded the accuracy significantly.
COWEN: But what do you think is the kind of patience you’re lacking? Because if I look at your career, you’ve been working on these databases on this topic for what? Over 30 years. That’s incredible patience, right? More patience than most of your superforecasters have shown. Is there some dis-aggregated notion of patience where they have it and you don’t?
TETLOCK: [laughs] Yeah, they have a skill set. In the most recent tournaments, we’ve been working on with them, this becomes even more evident — their willingness to delve into the details of really pretty obscure problems for very minimal compensation is quite extraordinary. They are intrinsically cognitively motivated in a way that is quite remarkable. How am I different from that?
I guess I have a little bit of attention deficit disorder, and my attention tends to roam. I’ve not just worked on forecasting tournaments. I’ve been fairly persistent in pursuing this topic since the mid 1980s. Even before Gorbachev became general party secretary, I was doing a little bit of this. But I’ve been doing a lot of other things as well on the side. My attention tends to roam. I’m interested in taboo tradeoffs. I’m interested in accountability. There’re various things I’ve studied that don’t quite fall in this rubric.
COWEN: Doesn’t that make you more of a fox though? You know something about many different areas. I could ask you about antebellum American discourse before the Civil War, and you would know who had the smart arguments and who didn’t. Right?
And another:
TETLOCK:
…I had a very interesting correspondence with William Safire in the 1980s about forecasting tournaments. We could talk a little about it later. The upshot of this is that young people who are upwardly mobile see forecasting tournaments as an opportunity to rise. Old people like me and aging baby-boomer types who occupy relatively high status inside organizations see forecasting tournaments as a way to lose.
If I’m a senior analyst inside an intelligence agency, and say I’m on the National Intelligence Council, and I’m an expert on China and the go-to guy for the president on China, and some upstart R&D operation called IARPA says, “Hey, we’re going to run these forecasting tournaments in which we assess how well the analytic community can put probabilities on what Xi Jinping is going to do next.”
And I’ll be on a level playing field, competing against 25-year-olds, and I’m a 65-year-old, how am I likely to react to this proposal, to this new method of doing business? It doesn’t take a lot of empathy or bureaucratic imagination to suppose I’m going to try to nix this thing.
COWEN: Which nation’s government in the world do you think listens to you the most? You may not know, right?
Definitely recommended.
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.
The new (old) federalism under coronavirus
That is the topic of my Bloomberg column, here is one bit:
As May begins, it seems highly likely that the states will be reopening at their own paces and with their own sets of accompanying restrictions, with some places not reopening at all. There is likely to be further divergence at the city and county level, with say New York City having very different policies and practices than Utica or Rochester upstate.
Such divergence in state policy is hardly new. But until now states have typically had many policies in common, on such broad issues as education and law enforcement and on narrower ones such as support for Medicaid. Now and suddenly, on the No. 1 issue by far, the states will radically diverge.
Hence the idea that America is inching closer to what it was under the Articles of Confederation, which governed the U.S. from 1781 to 1789. The U.S. constitutional order has not changed in any explicit manner, but the issues on which the states are allowed to diverge have gone from being modest and relatively inconsequential to significant and meaningful if not dominant.
And:
This divergence may create further pressures on federalism. In Rhode Island, for example, state police have sought to stop cars with New York state license plates at the border, hindering or delaying their entrance. Whether such activities are constitutional, most governors do have broad authority to invoke far-reaching emergency powers.
As some states maintain strict lockdowns while others reopen and allow Covid-19 to spread, such border-crossing restrictions could become more common — and more important. Maryland has been stricter with pandemic control than has Virginia, so perhaps Maryland will deny or discourage entry from Virginia — in metropolitan Washington, there are only a few bridges crossing the river that divides the two states. Or maybe Delaware won’t be so keen to take in so many visitors from New Jersey, while Texas will want to discourage or block migration from Louisiana.
To be clear, I think this unusual situation will recede once Covid-19 is no longer such a serious risk.
Policy for Covid-19, from Policy.NZ
Chris McIntyre from Wellington emails me:
“Pleased to share that COVID-19 Policy Watch is now live at www.covid19policywatch.org [links fixed]. We currently cover federal policies for 12 countries, including the US, UK, and China, with 15 more underway. We expect to expand our network of publishing partners from three, to five over the coming days. All feedback is most welcome.
A blurb for MR readers to edit as you see fit:
We aim for COVID-19 Policy Watch to be the most accessible source for governments’ policy responses to COVID-19 so that researchers, policymakers, journalists, and the general public can quickly learn about and compare governments’ responses. If you think this is important, we’d love your help: we’re seeking publishing partners (news media, universities, research groups) to keep country policies up to date, and experienced front- and back-end Drupal devs to help build new features. Interested parties should email covid19@policy.nz.
TC again: I am pleased to announce that Policy.NZ is a new Emergent Ventures winner (not Fast Grants with its biomedical orientation, rather “classic” Emergent Ventures).
What does this economist think of epidemiologists?
I have had fringe contact with more epidemiology than usual as of late, for obvious reasons, and I do understand this is only one corner of the discipline. I don’t mean this as a complaint dump, because most of economics suffers from similar problems, but here are a few limitations I see in the mainline epidemiological models put before us:
1. They do not sufficiently grasp that long-run elasticities of adjustment are more powerful than short-run elasticites. In the short run you socially distance, but in the long run you learn which methods of social distance protect you the most. Or you move from doing “half home delivery of food” to “full home delivery of food” once you get that extra credit card or learn the best sites. In this regard the epidemiological models end up being too pessimistic, and it seems that “the natural disaster economist complaints about the epidemiologists” (yes there is such a thing) are largely correct on this count. On this question economic models really do better, though not the models of everybody.
2. They do not sufficiently incorporate public choice considerations. An epidemic path, for instance, may be politically infeasible, which leads to adjustments along the way, and very often those adjustments are stupid policy moves from impatient politicians. This is not built into the models I am seeing, nor are such factors built into most economic macro models, even though there is a large independent branch of public choice research. It is hard to integrate. Still, it means that epidemiological models will be too optimistic, rather than too pessimistic as in #1. Epidemiologists might protest that it is not the purpose of their science or models to incorporate politics, but these factors are relevant for prediction, and if you try to wash your hands of them (no pun intended) you will be wrong a lot.
3. The Lucas critique, namely that agents within a model, knowing the model, will change how the model itself operates. Epidemiologists seem super-aware of this, much more than Keynesian macroeconomists are these days, though it seems to be more of a “I told you that you should listen to us” embodiment than trying to find an actual closed-loop solution for the model as a whole. That is really hard, either in macroeconomics or epidemiology. Still, on the predictive front without a good instantiation of the Lucas critique again a lot will go askew, as indeed it does in economics.
The epidemiological models also do not seem to incorporate Sam Peltzman-like risk offset effects. If you tell everyone to wear a mask, great! But people will feel safer as a result, and end up going out more. Some of the initial safety gains are given back through the subsequent behavioral adjustment. Epidemiologists might claim these factors already are incorporated in the variables they are measuring, but they are not constant across all possible methods of safety improvement. Ideally you may wish to make people safer in a not entirely transparent manner, so that they do not respond with greater recklessness. I have not yet seen a Straussian dimension in the models, though you might argue many epidemiologists are “naive Straussian” in their public rhetoric, saying what is good for us rather than telling the whole truth. The Straussian economists are slightly subtler.
4. Selection bias from the failures coming first. The early models were calibrated from Wuhan data, because what else could they do? Then came northern Italy, which was also a mess. It is the messes which are visible first, at least on average. So some of the models may have been too pessimistic at first. These days we have Germany, Australia, and a bunch of southern states that haven’t quite “blown up” as quickly as they should have. If the early models had access to all of that data, presumably they would be more predictive of the entire situation today. But it is no accident that the failures will be more visible early on.
And note that right now some of the very worst countries (Mexico, Brazil, possibly India?) are not far enough along on the data side to yield useful inputs into the models. So currently those models might be picking up too many semi-positive data points and not enough from the “train wrecks,” and thus they are too optimistic.
On this list, I think my #1 comes closest to being an actual criticism, the other points are more like observations about doing science in a messy, imperfect world. In any case, when epidemiological models are brandished, keep these limitations in mind. But the more important point may be for when critics of epidemiological models raise the limitations of those models. Very often the cited criticisms are chosen selectively, to support some particular agenda, when in fact the biases in the epidemiological models could run in either an optimistic or pessimistic direction.
Which is how it should be.
Now, to close, I have a few rude questions that nobody else seems willing to ask, and I genuinely do not know the answers to these:
a. As a class of scientists, how much are epidemiologists paid? Is good or bad news better for their salaries?
b. How smart are they? What are their average GRE scores?
c. Are they hired into thick, liquid academic and institutional markets? And how meritocratic are those markets?
d. What is their overall track record on predictions, whether before or during this crisis?
e. On average, what is the political orientation of epidemiologists? And compared to other academics? Which social welfare function do they use when they make non-trivial recommendations?
f. We know, from economics, that if you are a French economist, being a Frenchman predicts your political views better than does being an economist (there is an old MR post on this somewhere). Is there a comparable phenomenon in epidemiology?
g. How well do they understand how to model uncertainty of forecasts, relative to say what a top econometrician would know?
h. Are there “zombie epidemiologists” in the manner that Paul Krugman charges there are “zombie economists”? If so, what do you have to do to earn that designation? And are the zombies sometimes right, or right on some issues? How meta-rational are those who allege zombie-ism?
i. How many of them have studied Philip Tetlock’s work on forecasting?
Just to be clear, as MR readers will know, I have not been criticizing the mainstream epidemiological recommendations of lockdowns. But still those seem to be questions worth asking.
What should I ask Adam Tooze?
I will be doing a Conversation with him, no associated public event. He has been tweeting about the risks of a financial crisis during Covid-19, but more generally he is one of the most influential historians, currently being a Professor at Columbia University. His previous books cover German economic history, German statistical history, the financial crisis of 2008, and most generally early to mid-20th century European history. Here is his home page, here is his bio, here is his Wikipedia page.
So what should I ask him?
Happiness and the quality of government
From John F. Helliwell, Haifang Huang, and Shun Wang:
This chapter uses happiness data to assess the quality of government. Our happiness data are drawn from the Gallup World Poll, starting in 2005 and extending to 2017 or 2018. In our analysis of the panel of more than 150 countries and generally over 1,500 national-level observations, we show that government delivery quality is significantly correlated with national happiness, but democratic quality is not. We also analyze other quality of government indicators. Confidence in government is correlated with happiness, however forms of democracy and government spending seem not. We further discuss three channels (including peace and conflict, trust, and inequality) whereby quality of government and happiness are linked. We finally summarize what has been learned about how government policies could be formed to improve citizens’ happiness.
Having read through the paper, I thought the main interesting result was that quality of service provision (effectiveness, rule of law, regulatory quality, and absence of corruption) is correlated with happiness whereas kind of democracy is not, with the latter democracy variable being an index related to voice, accountability, stability, and freedom from violence.
Of course it would be very interesting to rerun such a test during pandemic times.
My Conversation with Ross Douthat
We do another CWT, here is the audio and transcript (link corrected), a very good installment in the series. Here is part of the summary:
Ross joined Tyler to discuss why he sees Kanye as a force for anti-decadence, the innovative antiquarianism of the late Sir Roger Scruton, the mediocrity of modern architecture, why it’s no coincidence that Michel Houellebecq comes from France, his predictions for the future trajectory of American decadence — and what could throw us off of it, the question of men’s role in modernity, why he feels Christianity must embrace a kind of futurist optimism, what he sees as the influence of the “Thielian ethos” on conservatism, the plausibility of ghosts and alien UFOs, and more.
A welcome relief from Covid-19 talk, though we did cover Lyme disease. Here is one excerpt:
COWEN: Does the Vatican have too few employees? There’s a Slate article — it claimed in 2012, the Roman Curia has fewer than 3,000 employees. Walmart headquarters at the time had 12,000. If the Church is a quite significant global operation, can it be argued, in fact, that it’s not bureaucratic enough? They don’t actually have state capacity in the sense that state capacity libertarianism might approve of.
DOUTHAT: Right. State capacity libertarianism would disapprove of the Vatican model. And it reflects the reality that media coverage of the Catholic Church doesn’t always reflect, which is that in Catholic ecclesiology and the theory of the institution, bishops are really supposed to be pretty autonomous in governance. And the purpose of Rome is the promotion of missionary work and the protection of doctrine, and it’s not supposed to be micromanaging the governance of the world Church.
Now, I think what we’ve seen over the last 30 years — and it’s been thrown into sharp relief by the sex abuse crisis — is that the modern world may not allow that model to exist; that if you have this global institution that has a celebrity figure at the center of it, who is the focus of endless media attention, you can’t, in effect, get away with saying, “Well, the pope is the pope, but sex abuse is an American problem.”
And to that extent, there is a case that the Church needs more employees and a more efficient and centralized bureaucracy. But then that also coexists with the problem that the model of Catholicism is still a model that was modern in the 16th century. It’s still much more of a court model than a bureaucratic model, and pope after pope has theoretically tried to change this and has not succeeded.
Part of the reality is, as you well know, as a world traveler, the Italians are very good at running courts that exclude outsiders and prevent them from changing the way things are done. Time and again, some Anglo-Saxon or German blunderer gets put in charge of some Vatican dicastery and discovers that, in fact, the reforms he intends are just not quite possible. And you know, in certain ways, that’s a side of decadence that you can bemoan, but in certain ways, you have to respect, too.
Definitely recommended, a very fun CWT with lots of content. And again, here is Ross’s (recommended) book The Decadent Society: How We Became a Victim of Our Own Success.
European fatality rates and lawfulness
Correlation ain’t causation, but nonetheless it is worth looking at correlation:
Via Daniel Wilson. And here is a story about defiant Iranians.
The Coronavirus Killed the Progressive Left
That is the topic of my latest Bloomberg column. Yes trolling, but trolling with the truth. Here are scattered excerpts:
— The egalitarianism of the progressive left also will seem like a faint memory. Elites are most likely to support wealth redistribution when they feel comfortable themselves, and indeed well-off coastal elites in California and the Northeast are a backbone of the progressive movement. But when these people feel threatened in their lives or occupations, or when the futures of their children suddenly seem less secure, redistribution will not be such a compelling ideal…
— The case for mass transit also will seem weaker, because subways and buses will be associated with the fear of Covid-19 transmission. In a similar fashion, the forces of NIMBY will become stronger, relative to those of YIMBY, because people secure in their isolated suburban homes will feel less stressed than those in densely packed urban apartment buildings.
— There is likely to be much more government intervention in some parts of the health-care sector, but it will focus on scarce hospital beds and ventilators, and enforce nasty triage, rather than being a benevolent move toward universal coverage. If anything, it will drive home the message that supply constraints are binding and America can’t have everything — hardly the traditional progressive message.
— — The climate change movement is likely to be another victim. How much have you heard about Greta Thunberg lately? Concern over the climate will seem like another luxury from safer and more normal times. In addition, the course of anti-Covid-19 efforts may not prove propitious for the climate change movement. If the fight against Covid-19 suddenly improves (perhaps a vaccine working very quickly?), Americans may come to expect the same in the fight against climate change.
There is much more at the link, of course some of you will hate it. And of course Sanders and Warren did not exactly dominate voter sentiment, and that was largely pre-Covid.
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.
“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.”