Sunday assorted links

In developing countries the coronavirus deaths are younger

In Brazil, 15 percent of deaths have been people under 50 — a rate more than 10 times greater than in Italy or Spain. In Mexico, the trend is even more stark: Nearly one-fourth of the dead have been between 25 and 49. In India, officials reported this month that nearly half of the dead were younger than 60. In Rio de Janeiro state, more than two-thirds of hospitalizations are for people younger than 49.

And here are the speculations:

Because population density is so much higher in much of the developing world — and because so many people must keep working to survive — a far greater share of the population ends up being exposed to the virus.

The virus then spreads through a population that’s less resilient. People in the developing world grapple not only with the diseases that have long been associated with it — malaria, dengue, tuberculosis, HIV/AIDS — but increasingly with those more closely associated with wealthier countries. Rates of diabetes, obesity and hypertension are surging. But treatment for many such illnesses is lacking.

Here is more from Terrence McCoy and Heloisa Traiano.

Fairfax County fact of the day

Fairfax County Health Department responded to my request for nursing home/longterm care facility deaths from COVID-19. As of May 22, there have been 249 coronavirus deaths in these facilities. That’s ***75 percent*** of all Fairfax County deaths from coronavirus as of today (330)

Here is the link, via Alex T.  For epidemiology, shouldn’t those numbers be in a separate model altogether?

Also, it would be very interesting to test the performance of the private sector vs. public sector institutions here.

Saturday assorted links

1. “Of all the Sonoma County youth under 18 who have tested positive for coronavirus, a staggering 95% are Latino, a statistic that is again raising concerns over how the virus is disproportionately impacting local Latinos.

2. How is cocaine trafficking doing?

3. Edenville dam failure caught on video.

4. Ten arguments against immunity passports.  I mean…those are the arguments you should make.  But there is no conception that you have to “solve for the equilibrium” if there are no formal immunity passports, and compare the two situations in terms of cost, unfairness, and the like.  In that sense the authors cannot conceive that there needs to be a comparison at all.

5. The New Modality (a forthcoming publication) seeks articles on these topics and particular kinds of writers.

6. Do proponents of moral outrage wish to “sneak up on women”?  That would explain a lot.

7. The import of super-spreaders in Israel.

8. American Interest interview with Larry Summers.  “LHS: There’s a lot of empirical evidence since Keynes wrote, and for every non-employed middle-aged man who’s learning to play the harp or to appreciate the Impressionists, there are a hundred who are drinking beer, playing video games, and watching 10 hours of TV a day.”  It’s a good thing that has nothing to do with subsequent delayed re-employment (also known as “unemployment”), isn’t it?

*The Price of Peace*

The author is Zachary D. Carter, and the subtitle is Money, Democracy, and the Life of John Maynard Keynes.  Maybe you’ve read plenty about Keynes, but still this book is good enough to qualify (without reservation) for the year’s “best of non-fiction” list published every December.

One surprise is that the author seems to “get” the Bloomsbury Circle, Woolf, and the like, even though he is not an old, crusty British pain in the ass.

A second surprise is that much of the biography goes well past the life of Keynes, though with no diminution of quality.  I very much enjoyed for instance the discussion of Samuelson vs. Galbraith, the career of Milton Friedman, the role of the Volker Foundation, and so on.

Very readable, substantive, and the main topic never ceases to be interesting.  I am not sure if there is anything truly new in here, but it is nonetheless a very good book to read about Keynes and his later influences on economic thought.

Oliver Williamson, RIP

Oliver Williamson won the Nobel in 2009 with Elinor Ostrom. My post on that event is reprinted below (no indent). See also Tyler here.

——————

In Adam Smith there is the pin factory and the market and from that beginning we trace the long literature in economics focused on the twin questions, What price to set?  How much to produce?  Following Coase, Williamson asks different questions, Why a pin factory?  Why are the 18 steps to make a pin performed by a single firm rather than two or more?  Why are there many firms instead of one large firm?  Why does the pin factory not vertically integrate upwards to buy the steel factory and downwards to buy the retail hardware shop?

Williamson’s answers rest on the notions of bounded rationality, contract incompleteness, asset specificity and opportunism. Start at the end, asset specificity and opportunism.  When a deal has been sealed the parties typically move from having many potential partners to being locked in.  That’s bad because it raises the possibility of opportunism–one party can exploit the other.  But it’s also good because when the lock-in is credible each party may be more willing to invest in assets which are extra-productive but specific to the relationship.

Marriage, for example, takes away some possibilities but it adds others.  With marriage, for example, comes a greater willingness to invest in children (n.b. asset specificity, the child is of extra value but only to the specific parties involved in the marriage) but that very benefit also means that one of the parties has the leverage to be opportunistic.  Knowing all of this when they enter the contract the parties bargain ex-ante, they exchange promises and make investments (the ring), they establish rules for ex-post bargaining or decide on the background rules to apply in that eventually (pre-nup, no fault divorce, covenant marriage).  The rules are never perfect and the contacts are always incomplete.

Transaction cost economics is all about applying these ideas in different settings to figure out the best governance structures (marriage, vertical integration etc.) in different circumstances. How does one deal with expensive investments (such as highly individual dies or plant construction) that are specific to a given
trade and put the investor at risk yet which increase productivity? Williamson analyzes how firms come to rely on long term contracts or vertical integration or other seemingly non-competitive solutions to enhance market productivity. Early generations of antitrust enforcers often saw these as monopolistic dealings, but scholars such as Williamson helped us understand how these are essential to the workings of the invisible hand.

Williamson’s paper, The Economics of Governance is an excellent recent summary of his views in the area.

Williamson’s work is notable for inspiring a large body of empirical and theoretical work in modern industrial organization and having influence in law, political science, and management. His work has been widely cited, and by some counts he was the most widely cited economist in the world.

I especially thank John Nye who contributed to this post.

Which NBA teams will gain in relative prospects from the shutdown?

The Los Angeles Lakers, far and away.

The most valuable stars, such as LBJ, have their own private gyms and work-out rooms, often in their homes.  They have stayed in the best shape, and of course LBJ has the discipline too.  Those star players also are the most used to unusual circumstances (All-star games, Olympics, etc.) and being accustomed to higher than average levels of pressure.  They rely less on crowd support than do the role players, noting it is the latter who benefit much more from home court advantage.  If the games are played in Las Vegas and Orlando, and without crowds, no one will have home court advantage (except the Orlando Magic, sort of).

So teams built around star veterans will have higher chances of doing better in the playoffs.

The interrupted and probably shortened season also will be easier on the older players, which again covers LeBron.  Anthony Davis is not so old but the Lakers would love to play him as many minutes as possible.

The teams with “many necessary complementary parts” will fare worst in relative terms.  With such a long break, surely at least 10-20% of those players have “gone off the reservation,” so to speak, and will not return to quality form for some time.  Those teams will not gel so easily and find their groove.

Who might that be?  I know the Clippers have two big stars, but they seem to rely a lot on the team as a whole.  Who else?  The Celtics maybe?  Indiana?

What are the implications of this analysis for management and business firms?  Will teams built around a superstar have an advantage there too?

Should you worry about the rate of price inflation being too high?

Of course you should worry, not withstanding all of the dogmatism on Twitter and the pre-Lucasian framing of various charts and graphs.

Here is a simple way to look at it.  Let’s say the Fed does the very best job possible with its monetary policy (and in my view the Fed has done a very good job so far).  That would mean in terms of the loss function a Fed error in one direction would mean a too low rate of price inflation, and a Fed error in the other direction would mean a too high rate of price inflation.

Now, supply conditions have never been so volatile in my lifetime, and perhaps never in American history.  We don’t know how the virus will spread, how reopenings will go, when a vaccine will arrive, how good the vaccine will be, how much a climate of fear will persist, and so on.  Demand conditions in turn depend on how these supply conditions will evolve.

The Fed thus could make an error on either side of its target, through no procedural fault of its own. As a result, as a simple matter of logic, the rate of price inflation could be too high, or it also could be too low.

if you think you know the direction of the error in advance, you aren’t paying enough attention to the underlying unpredictable uncertainties.

And if your response is to cite old open letters to the WSJ and the like, that is the same dogmatic error that the inflation hawks from the 1970s have been making.

There are other, more substantive arguments why the rate of price inflation might end up too high (the fiscal side really matters!), but that is the simplest one and you won’t see it on Twitter.  And it is fine to argue, by the way, as does Matt Yglesias, that you would rather see it too high than too low.

I was glad to see Martin Wolf tackle this whole question (FT) and not be too scared off by the yappers.

Friday assorted links

1. Paul Kedrosky assorted comments.

2. Thread on collider bias.

3. The Florida strategy.  Too early to say in my view, but still this piece is of interest.

4. “Magnus the platform” lets it rip.

5. America’s top spelling searches: in Virginia, they don’t know how to spell “Virginia.”  Recommended.

6. Volunteer history booming during the lockdown.

7. Mainstreaming Karl Marx.

8. Plexiglass vs. Plexiglas(TM).

9. The polity that is Dutch: grandmother ordered to delete Facebook photos.  At least they didn’t kill her.

10. A real smokescreen.  Really.

11. The new seroprevalence studies show relatively low rates of infection.

12. Fast Grants active at UC Berkeley.  Good coverage.

13. TreatEarly, a new biomedical initiative (possibly influenced by Fast Grants?), looks interesting note I have no direct knowledge of their work.

Alan Merten, RIP

Alan Merten, former President of GMU, has died after a battle with Parkinson’s disease. I got to know Alan just a little when we visited China together in 2008. Our visit was part of GMU’s 1+2+1 program in which students in China earned their degree by doing 1 year at a partner university in China, 2 years at GMU and then a final year in China. We were touring the partner universities to participate in their graduation ceremonies. It was a great trip. I visiting the Great Wall, stayed in a Hutong in Beijing, and visited Kunming in Yunan province.

I also found it exhausting as we traveled from graduation ceremony to graduation ceremony. One night at the beginning of another such ceremony I said to Alan “I guess your job is to go to a lot of these events” and he turned to me beaming and full of energy and said “Oh yes, I love seeing the students so happy and their parents so proud. It’s the best part of my job.” And he meant every word. I’ve never forgotten that. He was a good university president.

Income Share Agreements Looking Up

The Federal Reserve Bank of Richmond has a good piece reviewing income share agreements, aka income-contingent loans, including a timely example:

ISAs provide students with funding to cover their education expenses in exchange for a portion of their income once they start working. Under a typical contract, recipients pledge to pay a fixed percentage of their incomes for a set period of time up to an agreed cap. For example, a student who has $10,000 of his or her tuition covered through an ISA might agree to repay 5 percent of his or her monthly income for the next 120 months (10 years), up to a maximum of $20,000. ISAs typically also have a minimum income threshold before payments kick in; if the recipient earns less than the minimum, he or she pays nothing. This means that ISAs offer students more downside protection than a traditional loan.

This downside protection is what attracted Andrew Hoyler to Purdue’s “Back a Boiler” ISA program, which launched in the fall of 2016. Hoyler, who graduated from Purdue’s professional flight program in 2017, signed up for Back a Boiler in his senior year. He received $21,263 in reduced tuition and flight fees in exchange for agreeing to repay 7.83 percent of his monthly income for 104 months, or until he had paid back 2.5 times the amount he originally received. Now a pilot for PSA Airlines, a subsidiary of American Airlines, he has been making payments on his ISA for about 30 months.

…Hoyler is particularly grateful to have that safety net now, as the airline industry is being rocked by the COVID-19 outbreak. “The ISA is giving me a sense of relief. If I find myself furloughed, my payments stop with zero interest,” he says.

Interview with Josh Angrist

From the Richmond Fed Bulletin:

EF: You’ve looked at the question of how much peers matter. Many parents obviously seek schools where they believe their children will have higher-quality peers, whatever they may mean by that term. You and your co-authors have looked at Boston and New York City selective public schools, and you concluded that peer effects don’t seem to matter much. Why is that?

Angrist: I’m always beating that drum. I think people are easily fooled by peer effects. Parag, Atila Abdulkadiroglu, and I call it “the elite illusion.” We made that the title of a paper. I think it’s a pervasive phenomenon. You look at the Boston Latin School, or if you live in Northern Virginia, there’s Thomas Jefferson High School for Science and Technology. And in New York, you have Brooklyn Tech and Bronx Science and Stuyvesant.

And so people say, “Look at those awesome children, look how well they did.” Well, they wouldn’t get into the selective school if they weren’t awesome, but that’s distinct from the question of whether there’s a causal effect. When you actually drill down and do a credible comparison of students who are just above and just below the cutoff, you find out that elite performance is indeed illusory, an artifact of selection. The kids who go to those schools do well because they were already doing well when they got in, but there’s no peer effect from being exposed to higher-achieving peers.

We also have papers where we show that the elite illusion is not just a phenomenon relevant for marginal kids. This is in response to an objection that goes, “If you’re the last kid admitted to Stuyvesant, it’s not good for you because you’re not strong enough.” We can refute that with some of our research designs.

There are good stories and analyses throughout.

The Japan model

So what is the Japan model? First, it is a cluster-based approach, derived from a hypothesis obtained from an epidemiological study based on Chinese data and conducted on the Diamond Princess cruise ship that entered the port of Yokohama on February 3, 2020. This hypothesis accounts for the many passengers who were not infected with the coronavirus despite having had close contact with infected persons. It posits that the explosive increase in infected persons is a result of the high transmissibility of certain infected individuals, which forms a cluster. Infected individuals with even higher transmissibility appear from these clusters to form more clusters and infect many others. Based on this hypothesis, under the cluster-based approach, each cluster is tracked to the original infection source and persons with high transmissibility are isolated to prevent the spread of infection. For this reason, pinpoint testing is carried out and broad testing of the population is not required, in contrast to the approaches taken in other counties.

This cluster-based approach is conditioned on an environment in which there are only a few infected persons and clusters are detectable at an early stage. In February 2020, when the spread of infection was observed in Hokkaido, a cluster-based approach was adopted. As a result, Hokkaido was successfully able to contain its outbreak.

For the cluster-based approach to be effective, protective measures at airports and ports are important. Hokkaido has the advantage of being an island, making it comparatively easy to control the inflow of infected people. Behavioral changes are also required. On February 28, 2020, acting without legal basis, Hokkaido Governor Naomichi Suzuki declared a state of emergency and called on residents to refrain from going outside. Residents took the call seriously, and are responsible for the success of the cluster-based approach. Following its success in Hokkaido, the cluster-based approach was adopted nationally. On February 25, 2020, a Cluster Response Team was established in the Ministry of Health, Labour and Welfare.

Here is more from Kazuto Suzuki, with other points of note.