*Islam, Authoritarianism, and Underdevelopment*

That is a recent book by Ahmet T. Kuru, published in August.  All books should have a (non-Amazon) abstract, and here it is for this book:

Why do Muslim-majority countries exhibit high levels of authoritarianism and low levels of socioeconomic development in comparison to world averages? Ahmet T. Kuru criticizes explanations which point to Islam as the cause of this disparity, because Muslims were philosophically and socioeconomically more developed than Western Europeans between the ninth and twelfth centuries. Nor was Western colonialism the cause: Muslims had already suffered political and socioeconomic problems when colonization began. Kuru argues that Muslims had influential thinkers and merchants in their early history, when religious orthodoxy and military rule were prevalent in Europe. However, in the eleventh century, an alliance between orthodox Islamic scholars (the ulema) and military states began to emerge. This alliance gradually hindered intellectual and economic creativity by marginalizing intellectual and bourgeois classes in the Muslim world. This important study links its historical explanation to contemporary politics by showing that, to this day, the ulema–state alliance still prevents creativity and competition in Muslim countries.

I don’t really have my own view on these issues, and due to various duties and also the slowness of my on-line reading, I have read only a segment of this book.  I can report it is clearly written, to the point, and well argued, and I am happy to recommend it to anyone interested in these issues.

I think I will use MR today to catch up on some “book news,” after that back again to coronavirus for a while.

Crisis Innovation

That is the title of a new working paper by Tania Babina, Asaf Bernstein, and Filippo Mezzanotti, here is the abstract:

The effect of financial crises on innovative activity is an unsettled and important question for economic growth, but one difficult to answer with modern data. Using a differences-in-differences design surrounding the Great Depression, we are able to obtain plausible variation in local shocks to innovative ecosystems and examine the long-run impact of their inventions. We document a sudden and persistent decline in patenting by the largest organizational form of innovation at this time—independent inventors. Parallel trends prior to the shock, evidence of a drop within every major technology class, and consistent results using distress driven by commodity shocks all suggest a causal effect of local distress. Despite this negative effect, our evidence shows that innovation during crises can be more resilient than it may appear at a first glance. First, the average quality of surviving patents rises so much that there is no observable change in the aggregate future citations of these patents, in spite of the decline in the quantity of patents. Second, the shock is in part absorbed through a reallocation of inventors into established firms, which overall were less affected by the shock. Over the long run, firms in more affected areas compensate for the decline in entrepreneurial innovation and produce patents with greater impact. Third, the results reveal no significant brain drain of inventors from the affected areas. Overall, our findings suggest that financial crises are both destructive and creative forces for innovation, and we provide the first systematic evidence of the role that distress from the Great Depression played in the long-run innovative activity and the organization of innovation in the U.S. economy.

Further data coming your way…

Peter Navarro and the epistemic problem

A top White House adviser starkly warned Trump administration officials in late January that the coronavirus crisis could cost the United States trillions of dollars and put millions of Americans at risk of illness or death.

The warning, written in a memo by Peter Navarro, President Trump’s trade adviser, is the highest-level alert known to have circulated inside the West Wing as the administration was taking its first substantive steps to confront a crisis that had already consumed China’s leaders and would go on to upend life in Europe and the United States.

Here is the full story (NYT), and of course he wasn’t heeded.  I have disagreed with Navarro on most major issues, most of all on trade and quite possibly he is overpromoting chloroquine.  Still, I think we should reconsider in light of this new information.  I have not changed my mind on the previous issues, but should we not now all admit Navarro is, in expected value terms, one of the best advisors in recent memory in any administration?

How does isolation change status-seeking?

That is the topic of my new Bloomberg column, excerpt:

The plunge in status-seeking behavior is yet another way in which the lockdown is a remarkable and scary social experiment. One possible consequence is that many people won’t work as much, simply because no one is watching very closely and it is harder to get that pat on the shoulder or kind word for extra effort.

Worse yet, for many people social approbation compensates for economic hardships, and that salve is now considerably weaker. Time was, even if you were unemployed, you could still walk down the street and command attention for that one stylish item in your wardrobe, or your cool haircut, or your witty repartee. Now there’s no one on the street to impress.

Americans are learning just how much we rely on our looks, our charisma and our eloquence for our social affect. As Sonia Gupta asked on Twitter: “Extremely attractive people, I have a genuine question for you, no snark: What’s it like to not be getting the regular daily social attention you might be accustomed to, now that you have to stay inside and isolate from others?”

…To some extent this status erosion is liberating. It may cause a lot of people to reexamine perennial questions about “what really matters.” There are other positive effects: fewer peer-related reasons to go out and spend money, for instance (do you really need that new jacket, or to try all the hot new restaurants?). That will help make tighter budgets or even unemployment more bearable. Some socially anxious people may even feel they are better off.

Yet overall this is a dangerous state of affairs.

There is much more at the link.

Monday assorted links

1. 2007 Thomas A. Garett piece on the economics of the 1918 flu pandemic.  What else has been written on the macro side?

2. The economic impact of the 1918 flu on Brazil.

3. John Gray being John Gray (but “Second Life”??).

4. Economists studying the coronavirus (NYT).  and 2009 Becker-Posner short essay on the economics of pandemics.

5. Why Veneto did better than Lombardy (FT, less hospitalization is one reason).

6. Covid requests for everything: “Kaddish will be said by a group of people who currently have a mild case of Coronavirus and are together at the Prima Palace Hotel in Jerusalem (they are the only people who are legally able to Daven with a Minyan right now.”

7. Scott Adams, Covid-19 forecaster.

8. How Chinese apps handled Covid-19, excellent post.

9. The Covid culture that is middle-aged Pink Floyd fans from New Jersey.  You know you want to read this one.

10. MIT economics paper on ventilator rationing schemes, offers concrete proposals, not just BS.

11. “It’s not clear to me whether the divergent dynamics of epidemics will outweigh the homeostatic effect of human behavior.

12. Covid-19 has disrupted the progressives’ “organizing juggernaut.”

13. A South Korean exam with social distancing.

14. New NBER paper on Covid-19 and stock returns, and another.  And the curve is already flattening in NYC.

15. Japan finally declares state of emergency.  By the way, the mounds of evidence (testing data, not all public) are piling up against the “so many of us already have been exposed” theories.

16. Henry reviews the new William Gibson book.

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.

Our regulatory state is failing us, installment #1437

The Trump administration has stumbled in its initial push to implement the $2 trillion coronavirus aid package, with confusion and fear mounting among small businesses, workers and the newly unemployed since the bill was signed into law late last month.

Small-business owners have reported delays in getting approved for loans without which they will close their doors, while others say they have been denied altogether by their lenders and do not understand why. The law’s provision to boost unemployment benefits has become tangled in dated and overwhelmed state bureaucracies, as an unprecedented avalanche of jobless Americans seeks aid.

Officials at the Internal Revenue Service have warned that $1,200 relief checks may not reach many Americans until August or September if they haven’t already given their direct-deposit information to the government. Taxpayers in need of answers from the IRS amid a rapidly changing job market are encountering dysfunctional government websites and unresponsive call centers that have become understaffed as federal workers stay home.

Here is the full piece by Jeff Stein.  And here is me in WaPo:

Cowen said it’s inexplicable why the federal government, given all the warnings and evidence from China of a spreading pandemic, did not move more rapidly.

“You know, Trump was terrible, but you can’t just pin it on him. It’s far more systemic than that. The NBA [which suspended its season on March 11] really gets so much credit. I would put the NBA in charge of fighting climate change at this point.”

The piece there is by Dan Balz.

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.

Pickles are underrated

You are going to be running to the refrigerator for snacks anyway, so why not make the most of it?  Pickles are cool, fresh, delicious, and just the right size for snacking.  At the same time, they are not too delicious, and they are pretty good for you, more so than say chips or candy.  They store well too.  I have been ordering from Number One Sons (kimchee too, and they deliver in my area), while one very smart reader (Alex R.) recommends Oregon Brineworks, especially the spicy ones.

Soon I’ll be turning to books and movies for your lockdown.

Sunday assorted links

1. “As of Wednesday, women and men in Panama are under different quarantine schedules.

2. Banerjee and Duflo give their take.

3. On the decline of “Bridge Over Troubled Water.”  (I myself prefer “Cloudy,” among many other S&G songs.)

4. Does financial stress spur entrepreneurship?

5. “We find that firms that had more connections on the eve of the 1929 financial market crash have higher 10-year survival rates during the Great Depression. Consistent with a financing channel, we find that the results are particularly strong for small firms, private firms, cash-poor firms, and firms located in counties with high bank suspension rates during the crisis. Moreover, connections to cash-rich firms are stronger predictors of survival, overall and among financially constrained firms.”  Link here.

6. Is classical music becoming culturally more central under the lockdown?

7. 1957 flu memories, that was then this is now.

8. Roger Congleton model of the pandemic, the link downloads it rather than opening it up.

9. Maybe shaky as evidence, but this paper argues that thinking about coronavirus makes people more right-wing.

10. New site/model on estimating the number of infections.

11. How to do express loans for small businesses.

12. The impact on Native Americans.

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.

Stopping time plus hazard pay?

You’ve previously publicized the clever solution to the Corona-crisis of “stopping time.”  As others have pointed out, a drawback is that we can’t stop time for everyone.  In particular, we need essential services to continue.

Separately, there is a significant case for hazard pay.  In principle we could let the market sort this out.  But in practice, we don’t want to spend the next month getting to the equilibrium with health care workers.

The current round of government interventions entail mounting distortions.

So perhaps a more efficient solution to all of this would be:
–stop time, but
–government sends everyone checks that can be used for food and gas and directly pays for essential services (public safety, medical, utilities)

The net effect is hazard pay for essential workers—they continue to draw income, but their rent/mortgage/loan/utility obligations are frozen just like everyone else’s.

As a ballpark cost: if 25% of the economy is essential, this is about $400B/month.

Expensive, but much cheaper than alternatives.

That is from an email from Philip Bond, University of Washington.

The Strategy: Suppress then Test, Trace, Isolate

From internet comments I’ve seen some confusion on the suppress then “test, trace, isolate” strategy. The “flattening the curve” metaphor suggested that lockdown was all about spreading infections over time to keep the medical system operational. But more importantly, the purpose of lockdown is to reduce the infection rate, R, below 1. A virus needs hosts. Take away the hosts and it fades away. We can take away hosts by making people immune, either with a vaccine or through surviving exposure. We can also take away hosts by hiding–that’s what lockdown is for. If enough people hide, then the virus burns out and fades away.

Of course, hiding leaves us vulnerable to multiple rounds of infection. That’s where the second part of the strategy, test, trace and isolate comes into play. When the infection is running wild, as it is now, we don’t have enough tests to keep up with the virus. But after suppression we can put test, trace and isolate into effect very quickly as outbreaks flare up but before the virus runs out of control again. Increasing our test capacity dramatically makes this strategy even more viable. Thus, as V.V. Chari and Christopher Phelan write in a good op-ed:

…A wise use of the breathing room provided by mass quarantines would be to put in place the infrastructure to allow us to mimic the policies of countries such as South Korea, Taiwan, Singapore and Hong Kong. These countries have thus far controlled the pandemic at much lower economic cost…[using] aggressive but targeted quarantine policies. They quarantine people displaying symptoms, aggressively trace the people they have contacted, test their contacts, and then quarantine those who have the virus (and sometimes those who have just had contact with those who test positive), regardless of whether they are symptomatic or not.

It is a test, trace and isolate policy. These countries have not generally engaged in mass quarantines or shut down factories, shopping malls or restaurants.

After suppression, we can combine “test, trace and isolate” with mask wearing and other safety protocols and move towards reopening the economy.

Nils Karlson on the Swedish strategy (from an email forwarded to me)

Dear [redacted],

The strategy chosen by Sweden is of course discussed, but I would still say that there is a broad consensus across the political spectrum viewing the strategy, at least so far, as being wise.

I think this can be explained by at least the following five factors:

1. The high horizontal trust and the high vertical trust in Swedish society. In Swedish culture we usually trust that our peers will behave a responsible way and respect the integrity of others. Moreover, we usually trust our authorities, not only politicians but also the public administration. As a consequence “recommendations” for how to behave in regards to Covid-19 has so far been enough.

2. The long tradition of administrative independence. Since the 17th century we have an administrative system where the central governmental agencies such as the National Health Agency is independent. It is a quiet unique system of division of power, where the implementation of laws and regulations is entrusted to the bureaucracies rather than the politicians. As a result the experts rather the politicians have the say, make recommendations and the like, even in a situation like this. And their recommendation has been to not close down the whole society, but to avoid social contacts and to totally refrain from interact with people older than 70 years.

3. An attempt to reach group or mass immunity. As I interpret these experts the attempt is to reach group or mass immunity, 60 – 70 percent, of the population without reaching the limits of intensive care and by protecting the elderly. Also the ambition is to have the staff at hospitals on the job. Hence, child care and schools for children up to high school s still open as usual, shops, restaurants are still open, even if I many of them have very few customers.

4. As strong belief across the political parties to keep the economy going. There is wide consensus in Sweden about the value of work and to have jobs available, and in particular to keep the important export sector intact. I think especially the experience of the deep crisis we had in the early 1990s is important here. But perhaps also that the current prime minister has a back ground as the chairman of the metal workers union.

5. A long tradition of peace. A last factor I believe is that Sweden has stayed out of wars for over 200 years, Hence, we really do not think that disaster can happen to us. This in contrast to for example Denmark, Norway and Finland, who in fact have chosen very different strategies.

More generally, here is Dan Klein on Sweden.  Rolander and Daly (Bloomberg) wonder if Sweden will reverse its experiment.