Category: Uncategorized
Thursday assorted links
1. Tips for slowing livestock growth due to plant closures.
3. Florian Schneider has passed away.
4. Source code for the Imperial College model. And Sue Denim is very upset about the quality of that source code. Another reader with a strong technical background wrote me equally critical remarks. Are there further opinions on this?
5. Sujatha Gidla on her experience with Covid-19 (NYT), and here is my earlier CWT with her, one of my favorite episodes.
6. A new real-time journal COVID Economics.
7. Tankersley interviews Hassett and covers the brouhaha (NYT).
8. Effective Altruist forum ranks Fast Grants as one of their top two projects.
10. Jerry Seinfeld on success.
11. “A county in Washington State dealing with a coronavirus outbreak has identified a confounding new source of spread: “Covid-19 parties” organized so that people can deliberately mingle with an infected person in the hope of getting their own illness out of the way.” (NYT link) I wonder what they play for the music.
12. How are the social sciences evolving? Less rational choice, for one thing.
13. Why are meatpacking plants hit so hard? Holds true for numerous countries — is it the deliberate circulation of cool air?
14. Emily Oster and Galit Alter have a new Covid public health information site.
Save Grandma, Save the Economy
The meat supply is starting to fail. Meat processing factories seem especially susceptible to COVID-19 probably because of mist, chilled air circulation, the creation of aerosols and close worker contact. What other industries could be affected? What would happen if the energy, transportation, or pharmaceutical sector failed? We aren’t even sure which industries are critical. Who would have thought that nasal swabs would be a critical industry? In researching vaccine production I was stunned to learn that glass vials may be a bottleneck. Glass vials! How then do we best protect the workers in our critical industries? Should everyone else practice social distancing, closing of non-essential firms and work from home or should everyone else return to work as if everything were normal?
Social distancing, closing non-essential firms and working from home protect the vulnerable but these same practices protect workers in critical industries. Thus, the debate between protecting the vulnerable and protecting the economy is moot. “Lockdowns” protect vulnerable people and protect vulnerable industries. Save grandma, save the economy.
The point is simple but made formally in Social Distancing and Supply Disruptions in a Pandemic by Bodenstein, Corsetti and Guerrieri.
Abstract: Drastic public health measures such as social distancing or lockdowns can reduce the loss of human life by keeping the number of infected individuals from exceeding the capacity of the health care system but are often criticized because of the social and economic costs they entail. We question this view by combining an epidemiological model, calibrated to capture the spread of the COVID-19 virus, with a multisector model, designed to capture key characteristics of the U.S. Input Output Tables. Our two-sector model features a core sector that produces intermediate inputs not easily replaced by inputs from the other sector, subject to minimum-scale requirements. We show that, by affecting workers in this core sector, the high peak of an infection not mitigated by social distancing may cause very large upfront economic costs in terms of output, consumption and investment. Social distancing measures can reduce these costs, especially if skewed towards non-core industries and occupations with tasks that can be performed from home, helping to smooth the surge in infections among workers in the core sector.
Addendum: I wrote “lockdowns” because I am in favor of getting back to work with mass testing and safety protocols so I don’t think that a “lockdown” is necessarily the optimal policy. Indeed, I think we could get the meat processors back up and running with testing at the door and safety protocols. But we are not having a rational discussion about the tools and the investments that we need to reopen the economy. Instead, the people protesting to reopen the economy are also protesting against the use of a key tool to reopen the economy, masks! Welcome to crazy town.
What to Watch
My viewing habits are less hi-brow than Tyler’s, perhaps especially now when I am seeking escape and mind rest. Here’s a few things I have enjoyed and some that I have not.
DEVS on Hulu. If you know what the Everett interpretation is you will probably enjoy this science-fiction drama with big ideas on quantum computing and free will but also enough suspense, action and human relationships to drive the drama forward. From the director of Ex Machina. Sonoya Mizuno steals the show, super charismatic in an off beat way.
Westworld on HBO. A few interesting scenes but mostly disappointing.
Formula 1: Drive to Success on Netflix. I have no real interest in car racing but this documentary–each season is a season–is very well produced. Great shots from within the cars and each episode is tightly crafted, dare I say formulaic, so you want to watch the next. Popcorn but good popcorn. An extended version of Rush. I had no idea a team can cost $300-$500 million a year.
Bosch on Amazon. A police noir set in the real Los Angeles. Bosch is the Sisyphus of police detectives, driven to find justice for the victims but the victims never thank him, justice doesn’t bring them back and each day brings another. A study in character.
Extraction on Netflix. Awful. Brainless. If you want action, watch Fauda about a special Israeli Defense Unit. It’s well done and you will learn something even if what you will learn is how decent people turn into terrorists in an endless cycle of retribution and misery.
Impostors on Neflix: A light con-woman caper. Good for one season but harder to sustain once you’ve seen behind the curtain.
Beforeigners on HBO: My only share with Tyler. I look forward to a second season.
Top Chef on Amazon (I bought the new Season). Still my go to for competence-porn and don’t we all need some of that? Plus makes me look forward to restaurants.
Labor market restructuring and its possible permanence
We find 3 new hires for every 10 layoffs caused by the shock and estimate that 42 percent of recent layoffs will result in permanent job loss.
That is from a new paper by Jose Maria Barrero, Nick Bloom, and Steven J. Davis, top experts on this and related topics. As for policy:
Unemployment benefit levels that exceed worker earnings, policies that subsidize employee retention, occupational licensing restrictions, and regulatory barriers to business formation will impede reallocation responses to the COVID-19 shock.
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.
My Conversation with Adam Tooze
Tinges of Covid-19, doses on financial crises, but mostly about economic history. Here is the audio and transcript. Here is the summary:
Adam joined Tyler to discuss the historically unusual decision to have a high-cost lockdown during a pandemic, why he believes in a swoosh-shaped recovery, portents of financial crises in China and the West, which emerging economies are currently most at risk, what Keynes got wrong about the Treaty of Versailles, why the Weimar Republic failed, whether Hitler was a Keynesian, the political and economic prospects of various EU members, his trick to writing a lot, how Twitter encourages him to read more, what he taught executives at BP, his advice for visiting Germany, and more.
Here is one excerpt:
COWEN: Was Keynes right about the Treaty of Versailles? Was it as bad as Keynes said?
TOOZE: No. I’m a confirmed liberal Keynesian in my broad politics, and my understanding of politics and the way expertise ought to relate to it, and the operations of modern democracy. I think his political writings in Essays in Persuasion are brilliant. But I regard The Economic Consequences of the Peace as disastrous because, essentially, it enhanced and gave arguments to the German nationalists who —
COWEN: But that doesn’t mean Keynes was wrong, right? It may have had that effect, but he’s writing at a time where the wealth-to-income ratio is especially low, so a given measure of debt burden is much worse for an economy than what we might be used to.
TOOZE: Absolutely, but the evidence of the 1920s is that, with the right framework, the Weimar Republic was, in fact, perfectly capable of bearing a reasonable burden of reparations — 2 percent to 3 percent were doable. The fact of the matter is the German political class had no interest in accepting that responsibility and was quite determined to do a variety of different things to escape that burden.
And there is no doubt at all that the front-loading of the demands, which is very understandable from the point of view of the financial needs of the French in particular, caused a huge bottleneck, if you like, early on in the history of the Weimar Republic when it was most fragile. And that’s, as it were, the moment when I think the critique is most valid.
And that’s why, for me, really, the hidden agenda of the economic consequences of the peace is an appeal, to the Brits but above all to the Americans, for large-scale debt concessions, on which one could only agree with Keynes that this was, in fact, absolutely critical, that market economies have unspoken fundamental political preconditions, which, in the aftermath of the massive war, have been disrupted.
And:
COWEN: Speaking of Hitler, was Hitler, in fact, the Keynesian?
TOOZE: No. Hitler personally — absolutely not. Hitler’s personal monetary ideas are very, very conservative. He’s an anti-inflation hawk. He has to be persuaded to engage in large-scale monetary financing.
Somebody like Schacht is a contemporary of Keynes, and that’s Hitler central banker and an adventurous monetary thinker. He’d learned to think outside the monetary box, if you like, in the efforts to stabilize Weimar’s currency in 1923–24. And he’s certainly an expansionary. He’s not afraid of monetary finance and of using off-balance-sheet vehicles to provide liquidity and to provide credit for an underemployed economy.
And quite reasonably, no one’s worried about inflation in 1933 because Germany has massive unemployment. So, in that sense, they are adventurous, macroeconomic, monetary economists.
They’re not Keynesians for the simple reasons that Keynesianism, classically, of course, is a liberal economic politics. It believes in a multiplier, and the multiplier’s the be-all and end-all really of Keynesian economics because what it suggests is that small, intermittent, discretionary interventions by the state — relatively small — will generate outside reactions from the economy, which will enable the state to serve a very positive role in stabilizing the economy but doesn’t require the state to permanently intrude and take over the economy.
That’s a post-1945 kind of vision of a mixed economy. Keynes himself — that’s why he wants the multiplier to be three because if the multiplier is three, then $1 by government spending generates $3 of private economic activity.
You can think of government intervention as sporadic. It’s emergency medicine. It’s not chronic care. That, of course, is the antithesis of what the Nazis are doing because they are ramping up government spending, not across the board, but highly focused on rearmament because what they’re doing is not just creating jobs, though they do create jobs as a side effect. What they’re doing is restructuring the economy towards building the foundation for rearmament in a war economy.
What they’re actually trying to do is systematically repress the multiplier because they do not want people employed in armaments factories to go out and buy clothing and fancy food, which requires imports. They want the money to be circled straight back into the armaments effort. Saving various types of financial oppression is the order of the day. They’re macroeconomists, the Nazis. They’re adventurous macroeconomists. They’re doing massive intervention, but they’re not Keynesian.
Tooze’s discussion of his own career and interests, toward the end, is hard to excerpt but for me the highlight of the conversation. He also provided the best defense of Twitter I have heard.
Definitely recommended.
Wednesday assorted links
1. The problem with Covid-19 and immunity?
2. Podcast with Marc Lipsitch. And Unherd interview with a German virologist (have not heard yet).
3. Excellent FT piece on liability issues.
4. The multiple virus strains hypothesis reemerges, caveat lector, please don’t get too carried away with this one, but worth a ponder. And here is a WaPo piece on the surrounding debate.
5. When will cancelled sailings impact U.S. ports?
6. Henry Farrell on what the public wants.
7. Are the Swedes epidemiological nationalists? (Might others be too?) And I don’t understand this Peter Turchin post on Denmark vs. Sweden, but maybe you will?
8. How the debate about herd immunity should proceed.
9. Model this (Australian camel plunge, multi-camel plunge in fact).
10. How much contact is required for transmission?
11. How do the CRISPR tests for Covid-19 work? (pretty amazing stuff).
12. Are panviral defenses a real option? (NYT)
13. The Quebec plan for school reopening — feasible or not?
Movies to watch under lockdown
I/we have been watching the following:
The Wedding Plan, Israeli movie about a religious woman who precommits to her future wedding, yet without having a particular groom in mind. Full of subtlety, motivated by behavioral economics and game theory, poignant, recommended. Israeli cinema and TV remain an underexploited profit opportunity.
Teorema, directed by Pasolini, this one makes no sense but is utterly captivating. I say it is the devil rather than Christ, but you could argue it either way. Don’t expect any scene to cohere, but this one is from the golden age of cinema and it shows.
The Lady from Shanghai. Could this be my favorite Welles movie, as he had not yet started to take himself too seriously? It spans sailing life, New York, Acapulco and Mexico’s Pacific coast, noir, and San Francisco’s Chinatown. The look at 1947 SF is enough to scare some YIMBY into the most desperate protectionist. This was a rewatch for me, and it seemed even better the second time around.
Rhapsody in August, late Kurosawa from 1991. Not for neophytes but the frankest cinematic treatment of Nagasaki you are likely to find. The best 2/3 of this film are very moving and indeed unforgettable. It is sufficiently subtle that most of the reviews are suitably bad.
Beforeigners, a Norwegian television show with a unique twist on the usual immigration story. Due to a time warp, migrants from earlier periods of history, such as medieval times and also the Stone Age, climb into current-day Oslo. You are not allowed to call them “Vikings,” rather they are “people of Norse descent.” And they cannot assimilate to a very foreign culture, though at least one of them ends up working in the Oslo police department. Clever and original, I hope they make more than just the first six episodes.
Tuesday assorted links
2. Conor Sen catnip: “For example, people in New York travel 38% fewer total kilometers and visit 14% fewer block-sized areas than people in Atlanta.” The paper has further interesting results.
3. What is the chance you know someone with coronavirus?
4. Pareto: the virtual start-up assistant. A new product and company. The founder is EV winner Phoebe Yao.
5. Case numbers and deaths in prisons, relative to what the models predicted.
6. A simple John Cochrane model of Covid-19. And further commentary along similar lines. Both recommended. Again, we are actually getting somewhere with these.
7. Houllebecq on Covid-19. And “How Yukon’s ‘one caribou apart’ physical distancing campaign became a sensation.“
What is non-optimal about current sorting?
In club theory, clubs have congestion costs and charge fees, in part to reflect those costs. If there are enough clubs, or non-convexities are not too severe, the voluntary outcome is roughly optimal.
So why then are guidelines for social distancing needed? Why can’t we just let consumers decide to stay away from stores or other venues that might be too dangerous?
The problem with pandemics is that congestion costs are endogenous, and not fixed as in the simple club models. If you get infected, congestion costs rise, and entry fees rise, increasing both congestion and exclusion (shut stores as one symptom of exclusion), both reducing the welfare of others. Individuals do not take those costs into account when deciding their risk of exposure.
Seller Reputation and Price Gouging
That is a new paper by Luís Cabral and Lei Xu, here is the abstract:
We test the theory that seller reputation moderates the effect of demand shocks on a seller’s propensity to price gouge. From mid January to mid March 2020, 3M masks were priced 2.72 times higher than Amazon sold them in 2019. However, the difference (in price ratios) between a post-COVID-19entrant and an established seller is estimated to be about 1.6 at times of maximum scarcity, that is, post-COVID-19entrants price at approximately twice the level of established sellers. Similar results are obtained for Purell hand sanitizer. We also consider cumulative reviews as a measure of what a seller has to lose from damaging its reputation and, again, obtain similar results. Finally, we explore policy implications of our results.
In other words, Amazon is afraid to raise its prices, presumably for a mix of reputational and regulatory reasons.
Why isn’t Belarus being hit harder?
This is from my email, from Hayden Murray:
I’m an American, who lives in Belarus…[various disclaimers]
There’s no doubt that the government is underreporting Coronavirus deaths here, but also there’s no denying that there is very little problem. I don’t know anyone affected, (or even anyone that knows anyone,) yet I know many in California.
I think you were probably at least somewhat right with your idea that low consumption is already part of the culture. I think the difference in deaths is primarily due to better isolating the elderly, though. I’ve never seen an elderly person at a restaurant here, and I’ve been here for years. Compare this to California – and I mainly see older people (and often quite elderly) people at restaurants.
In addition, it seems that most elderly people in Belarus live in villages – which are often extremely isolated, even in normal times. Also, I have never heard of a nursing home here. I’ve seen many families taking care of extremely old family members, though. So, maybe this alone could explain some major differences. Couldn’t find hard stats on it though. But, putting all our most vulnerable into place, and then shuffling low-wage workers in and out constantly – seems like a recipe for disaster right now.
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?
Monday assorted links
1. Opioid deaths appear to be surging.
2. Varun’s predictions about the future.
3. U.S. prison CFR simulator (by Paul Novosad).
4. Isaac Chotiner interviews Paul Romer.
5. You Can Now Get a Face Mask With Your Favorite Disney, Marvel, and Star Wars Characters. And price gouging could fix our mask shortage.
6. The friend number paradox. And Hobbes and plague.
7. Brewing trouble in the mortgage market.
8. Matt Parlmer thread, recommended.
9. Report on Buffett and Munger.
10. Straussian Swedes?: “In my household my opinion counts for little, and she has continued to live her life pretty normally (her high-school classes went online, however).”
What I’ve been reading
1. Ethan Sherwood Strauss, The Victory Machine: The Making and Unmaking of the Warriors Dynasty. On top of everything else this is an excellent book on management, and the random events along the way to making a team (the Warriors once wanted to trade both Curry and Thompson for Chris Paul). Kevin Durant ends up as the fall guy, recommended to those who care.
2. Valerie Hansen, The Year 1000: When Explorers Connected the World — and Globalization Began. Worth reading, my favorite part was the discussion of how Cahokia in Mississippi was connected to the Mayans. And Chichen Itza is probably the world’s best preserved city from the year 1000.
3. Zena Hitz, Lost in Thought: The Hidden Pleasures of an Intellectual Life. “Drawing on inspiring examples, from Socrates and Augustine to Malcolm X and Elena Ferrante, and from films to Hitz’s own experiences as someone who walked away from elite university life in search of greater fulfillment, Lost in Thought is a passionate and timely reminder that a rich life is a life rich in thought.”
4. Alaine Polcz, One Woman in the War: Hungary 1944-1945. I am surprised this book is not better known. I found it deeper and more gripping than many of the more broadly recommended wartime memoirs, such as Viktor Frankl. And more honest about the toll of war on women.
5. Adam Thierer, Evasive Entrepreneurs and the Future of Governance: How Innovation Improves Economies and Governments. A very good libertarian, “permissionless innovation” look at tech.
I have browsed Judith Herrin’s Ravenna: Capital of Empire, Crucible of Europe, and it seems to be the definitive book on the early history of that city (one of my favorite one-day visits in the whole world).