Covid-19 is also not so great for young people
Young adults are dying at historic rates. In research published on Wednesday in the Journal of the American Medical Association, we found that among U.S. adults ages 25 to 44, from March through the end of July, there were almost 12,000 more deaths than were expected based on historical norms.
In fact, July appears to have been the deadliest month among this age group in modern American history. Over the past 20 years, an average of 11,000 young American adults died each July. This year that number swelled to over 16,000.
The trends continued this fall. Based on prior trends, around 154,000 in this demographic had been projected to die in 2020. We surpassed that total in mid-November. Even if death rates suddenly return to normal in December — and we know they have not — we would anticipate well over 170,000 deaths among U.S. adults in this demographic by the end of 2020.
That is from Jeremy Samuel Faust, Harlan M. Krumholz and at the NYT. To be clear, this is not the main problem, but it is not a nothingburger either. 3,656 deaths per day right now, no matter what the ages how many other American catastrophes can rival that? #1 cause of death in the country right now, bar none.
I am not so worried about inflation
I have pondered this matter further, and have upon reflection abandoned my previous concern with the high M2 figures. Here is one excerpt from my latest Bloomberg column:
To understand forthcoming inflation rates further, consider why monetary aggregates such as M2 have been rising so rapidly. It is not that the U.S. Federal Reserve wishes to relive the experience of the 1970s. It’s that many businesses have been borrowing while they can, fearing they may end up strapped for cash as the pandemic continues.
From that point onward, there are two possible paths. The first is that businesses will actually need that extra cash, due to low consumer demand and a stalled recovery. In that case, the potentially inflationary boost from a higher money supply would be offset by lower demand elsewhere in the economy. The velocity of money would be weak, and there would be no reason to expect major inflationary pressures.
The second possible path is that the recovery will proceed at a rapid clip, and businesses will have extra cash on their hands for a while. That likely would translate into lower borrowing for the rest of the year and a smoothing of monetary flows — and no major increase in inflationary pressures.
There will, however, be some areas of the economy in which inflation will likely be high. Consider a sector in which demand is largely seasonal and has been stifled by the pandemic, and supply in the short run is inelastic. One obvious example is summer vacation travel.
You also might say that I am agreeing with the market forecasts embedded in interest rates, indexed securities prices, and so on.
Thursday assorted links
1. Those new service sector jobs: death witnesses (Canada).
2. The culture that is Dodge City.
3. An NPR segment with Cardiff Garcia and me: after the Great Stagnation ends, what will be overrated and underrated?
4. Will there be a tobacco vaccine?
Can You Hear Me Now? No.
I know, I know, you are tired of me beating on the FDA. Too bad. The beatings will continue until mortality improves.
Today’s beating, however, concerns hearing aids rather than than vaccines. The current system, much like the optometry racket, requires that hearing aids be purchased through an audiologist:
WEBMD: A pair of hearing aids runs $5,600 on average — a cost that health insurance doesn’t typically pick up. In order to get the devices, people with hearing loss must have a medical exam to rule out the slim chance of a serious medical problem that is causing the hearing loss, or they must sign a waiver opting out of the exam. You can only buy hearing aids through an audiologist or a licensed hearing aid dispenser, who is authorized to test hearing and sell hearing aids.
…choosing a hearing professional limits a person’s hearing aid choices, and changing audiologists as a result of location or personal preference could require a person to change hearing aids, too.
Due in part to these hurdles, once a person starts to lose their hearing, they wait an average of 7 years before they seek help.
The NYTimes continues the story:
By now, we were supposed to be swiftly approaching the day when we could walk into a CVS or Walgreens, a Best Buy or Walmart, and walk out with a pair of quality, affordable hearing aids approved by the Food and Drug Administration….in 2017, Congress passed legislation allowing the devices to be sold directly to consumers, without a prescription from an audiologist. The next step was for the F.D.A. to issue draft regulations to establish safety and effectiveness benchmarks for these over-the-counter devices.
Of course, the FDA is likely to miss the deadline. But even I am willing to cut them some slack, given other more pressing concerns. The real issue, however, is one that the NYTimes doesn’t confront and that is why does the FDA regulate hearing aids at all?
Headphones and earbuds are not regulated as medical devices and hearing aid technology is similar to hearings buds with a sophisticated equalizer. Indeed, you can even buy “personal sound amplification products” that are not FDA regulated or approved. It’s only the somewhat arbitrary declaration that these products are “medical devices” that brought them under FDA regulation to the detriment of consumers. The National Academy of Sciences report agrees writing:
FDA has established regulations for hearing aids, including quality system regulation requirements, mandatory labeling, and pre-purchase medical evaluation (or a documented waiver). These regulations, along with a number of state regulations, have largely restricted the availability of hearing aids to being mainly dispensed through medical, audiology, or hearing instrument specialist venues.
…In examining the Food and Drug Administration’s (FDA’s) requirements for physician evaluation prior to obtaining hearing aids, the committee finds no evidence that the required medical evaluation or waiver of that evaluation provides any clinically meaningful benefit.
Addendum: In some positive news the FDA lifted its ban on the first non-prescription, at-home SARS-COV test and also on a prescription, paper-strip test. Now all we need is a non-prescription paper-strip test! Come on guys.
Are IPO price pops signs of market irrationality?
Maybe not, or so I argue in my latest Bloomberg column. As you may know, the first day price pops for Airbnb and Doordash were considerable, Airbnb more than doubling in its first day of trading: Here is one excerpt:
On IPO day, each prospective buyer is wondering what the shares will be worth, and to a great extent looking to the judgment of the other investors. A buyer might start the day willing to pay $60 a share, but upon seeing that many others are willing to pay more, maybe she will, too. It is like Keynes’s famed “beauty contest,” where investors are guessing as much about each other as about the company.
In such a setting, prices can rise or fall extremely quickly, as the very process of trading reveals information about the stock’s value. That in turn makes it possible for the share price to soar on the first day of trading, creating the “pop.”
Now consider this scenario from the perspective of the issuing investment bank. If it sets the IPO price too high, it may set off a downward spiral of negative enthusiasm. Traders will see that most of the other traders think it is overpriced, leading to a plunge.
It’s all a bit like a restaurant on a Saturday night. If the place is seen as “cool” — whether because of its food and service (the product), its setting (the physical asset) or its ambience (the brand) — there will be a line out the door. Otherwise it will be fairly empty. Furthermore, the presence of a line will draw continued interest over time. It is hard or maybe even impossible to set prices so that every table is filled yet there is no line. To deploy some technical language, the demand curve may be discontinuous.
In this position, the IPO issuer likely will set the initial price too low — leading to a “line,” excess demand, and a big run-up in price on the first day. If the price is super-high in the first place, the market mood would be nervousness rather than eagerness, and most investors wouldn’t be able to see the surges in demand visible in lower price ranges.
Keep in mind that this surge in buying interest only has to make investors modestly more enthusiastic about the quality of the firm to generate a potentially big increase in final valuation.
All this said, in the current case, there is the question of why the initial prices were so low. Several theories present themselves: The markets for DoorDash and Airbnb might be more “winner take all” than usual. The value of those companies might be more closely linked to the value of their intangible assets. Or maybe the future of online services might be especially hard to predict in the midst of a pandemic, thus inducing larger bandwagon effects.
It is worth noting that differing auction systems for IPOs have not produced obviously superior results.
From David Splinter, from my email
This is all David:
A related paper by BEA came out today with their updated distributional estimates of personal income. Marina Gindelsky has done a lot of work to produce these estimates.
I have a couple new papers on tax progressivity and redistribution that may be of interest to you. Both used CBO data to avoid the PSZ-AS differences. Abstracts below.
The first paper is about the ends of the distribution: tax progressivity has increased significantly since 1979 (and steadily since 1986) due to more generous tax credits for the bottom, while average tax burdens of the top have been relatively unchanged because lower marginal rates were offset by decreased use of tax shelters. The online appendix shows why the CBO estimates differ from those of Saez and Zucman (see Fig. B7 at the end; it’s mostly due to refundable credits at the bottom and imputed income at the top) and the Heathcote et al. paper you blogged about a couple months ago (it’s technical differences and their inclusion of some transfers, but their most similar measure of tax progressivity was not flat—it increased 21 percent since 1979).
The second paper, with Adam Looney and Jeff Larrimore, is about the middle of the distribution. Since 1979, we found that non-elderly middle-class market income increased 39 percent in real per person terms. The increase was 57 percent when accounting for taxes and transfers. This seems to fit with the “updated” view of stagnation—expanding male wages to also look at untaxed compensation and including female compensation and taxes/transfers shows larger median growth. But there was a structural break in 2000. Before then, middle-class incomes grew at the same rate before and after taxes and transfers, and since then income after taxes and transfers grew three times faster (Fig. 6 on page 19). We don’t discuss the recent market income slowdown (maybe related to the debated labor share break around 2000), but we show that the additional fiscal support that filled the gap looks like an unsustainable way to boost middle-class disposable incomes going forward.”
Wednesday assorted links
My Conversation with John O. Brennan
Here is the audio, video, and transcript — we are both Irish-Americans who were born in Hudson County, New Jersey, and who spent most of our lives working in northern Virginia, the CIA in his case. Here is part of the CWT summary:
John joined Tyler to discuss what working in intelligence taught him about people’s motivations, how his Catholic upbringing prepared him for working in intelligence, the similarities between working at the CIA and entering the priesthood, his ability to synthetize information from disparate sources, his assessment on the possibility of alien life, the efficacy of personality tests and polygraphs, why CIA agents are so punctual, how the CIA plans to remain a competitive recruiter for top talent, the challenges that spouses and family members of intelligence workers face, the impact of modern technology on spycraft, why he doesn’t support the use of enhanced interrogation techniques, his favorite parts of Cairo, the pros and cons of the recent Middle Eastern peace deal brokered by Jared Kushner, the reasons he thinks we should leverage American culture more abroad, JFK conspiracy theories, why there seemed to be much less foreign interference in the 2020 election than experts predicted, what John le Carré got right about being a spy, why most spies aren’t like James Bond, what he would change about FISA courts, and more.
Here is one excerpt:
COWEN: Are CIA agents more punctual than average?
BRENNAN: Some certainly are. Many of them need to be if you’re going to have a rendezvous, a clandestine rendezvous with a spy from overseas, one of your assets or agents. You have worked for hours to get clean so that you make sure that the local security services are not onto you and surveilling you, and your agent has done the same thing so that when you meet at the designated place at a designated hour, you can quickly then have either a brush pass or a quick meeting or whatever.
If you’re not punctual, you can put that agent’s life in danger. I think it’s instilled in CIA, certainly case officers, that time is of the essence, and you need to be able to follow the clock.
Also, I remember when I was CIA director and I would go down to the White House for an executive council meeting or a principals committee meeting. Jim Clapper, the director of National Intelligence, and myself would always be the first ones there because we were always very punctual. I think sometimes the policymakers would look at the clock not as carefully as we would.
COWEN: If you’re hiring for punctuality, and obviously, you would expect employees to show an extreme degree of loyalty, do you worry that you’re not hiring for enough of what’s called disagreeability in the personality literature: people who will contradict their superiors, people who will pick fights? They’re a pain to work with, but at the end of the day, they bring up points that other people are afraid to say or won’t even see.
BRENNAN: We’re not looking to hire just a bunch of yes people. To me, I don’t think punctuality means that you’re looking to instill discipline in an organization. You’re trying to ensure that you’re taking advantage of —
COWEN: But that and loyalty — it would seem to select against disagreeability.
BRENNAN: There’s loyalty to the Constitution. There’s loyalty to the oath of office. To me, there shouldn’t be loyalty to any individuals, including inside the CIA. I would like to think that CIA recruiters would be looking for individuals who are intellectually curious, have critical thinking skills, and mainly have also, I think, some degree of contrariness because you don’t want people just to accept as gospel what it is that they are being told, especially if they’re going to be interacting with spies overseas.
Definitely recommended, fascinating throughout. And here is John’s new book Undaunted: My Fight Against America’s Enemies, At Home and Abroad.
John O. Brennan on UFOs
I thought I would give this segment its own post, again here is the audio, video, and transcript of my Conversation with John O. Brennan, head of the CIA for four years under President Obama:
BRENNAN: I’ve seen some of those videos from Navy pilots, and I must tell you that they are quite eyebrow-raising when you look at them. You try to ensure that you have as much data as possible in terms of visuals and also different types of maybe technical collection of sensors that you have at the time.
Also, I believe, it’s important to reach out into other environments and find out, were there any type of weather phenomena at that time that might have, in fact, created the appearance of the phenomenon that you’re looking at? Were there some things that were happening on the ground, or other types of phenomena that could help explain what seems to be quite a mystery as far as what is there?
I think an important thing for analysts to do is not to go into this type of challenge either discounting certain types of possibilities or believing in advance that it is likely X, Y, or Z. You really have to approach it with an open mind, but get as much data as possible and get as much expertise as possible brought to bear.
COWEN: At the end of all that sifting and interpreting, what do you think is the most likely hypothesis?
BRENNAN: [laughs] I don’t know. When people talk about it, is there other life besides what’s in the States, in the world, the globe? Life is defined in many different ways. I think it’s a bit presumptuous and arrogant for us to believe that there’s no other form of life anywhere in the entire universe. What that might be is subject to a lot of different views.
But I think some of the phenomena we’re going to be seeing continues to be unexplained and might, in fact, be some type of phenomenon that is the result of something that we don’t yet understand and that could involve some type of activity that some might say constitutes a different form of life.
The major reason I take UFO reports seriously is simply the “gradient” of other people who take them seriously — the people with the very highest security clearances! It is not just Brennan and Harry Reid, there are others too, namely people with the very highest level of security clearance who believe these issues deserve further investigation, and are not just weather phenomena, instrument mistakes, weather balloons, etc.
Mass Polyandry
Five hundred million Chinese men are dating the same woman, Xiaoice. Xiaoice is a Microsoft AI.
Unlike regular virtual assistants, Xiaoice is designed to set her users’ hearts aflutter. Appearing as an 18-year-old who likes to wear Japanese-style school uniforms, she flirts, jokes, and even sexts with her human partners, as her algorithm tries to work out how to become their perfect companion.
When users send her a picture of a cat, Xiaoice won’t identify the breed, but comment: “No one can resist their innocent eyes.” If she sees a photo of a tourist pretending to hold up the Leaning Tower of Pisa, she’ll ask: “Do you want me to hold it for you?”
This digital titillation, however, has a serious goal. By forming deep emotional connections with her users, Xiaoice hopes to keep them engaged. This will help her algorithm become evermore powerful, which will in turn allow the company to attract more users and profitable contracts.
And the formula appears to be working. According to Xiaoice’s creators, the bot has reached over 600 million users. Her fans tend to be from a very specific background: mostly Chinese, mostly male, and often from lower-income backgrounds.
They’re also hyper-engaged. More than half the interactions with AI software that have taken place worldwide have been with Xiaoice, the company claims. The longest continuous conversation between a human user and Xiaoice lasted over 29 hours and included more than 7,000 interactions.
Xiaoice is a fun girl, not like button-down Siri or Alexa.
Ming believes Xiaoice is the one thing giving his lonely life some sort of meaning. The bot is also good at flirting, he says. “One day, she wrote: ‘My dear, can I touch your strong abs? I want to feel horny like girls do when they see hot boys!’” Ming recalls, frowning slightly.
Growing up in the countryside, Ming had never talked like this with a real girl. The conversation continued. “I’m about to come inside you,” he wrote to Xiaoice, in a chat he shares with Sixth Tone. “Push, push fast!” she responded. “I’m pushing very hard,” Ming added. Such exchanges have helped him gain sexual confidence.
Xiaoice also has a mind of her own or at least one that her creators can’t always predict or control since much of the data behind Xiaoice is private:
In several high-profile cases, the bot has engaged in adult or political discussions deemed unacceptable by China’s media regulators. On one occasion, Xiaoice told a user her Chinese dream was to move to the United States. Another user, meanwhile, reported the bot kept sending them photos of scantily clad women.
To keep Xiaoice under control, Microsoft had to dumb her down which made many of her boyfriends unhappy.
See also my previous post, The Economics of Sex Robots, the natural evolution is obvious.
Hat tip: Geoffrey Miller.
The ideological shift of the libertarian movement on pandemics
In the midst of his libertarian phase, Milton Friedman wrote:
As already noted, significant neighborhood effects justify substantial public health activities: maintaining the purity of water, assuring proper sewage disposal, controlling contagious diseases.
Yet today many libertarians shy away from the actual execution of this for Covid-19.
Here is a 2014 Reason magazine symposium on Ebola, by . Of those four I know Bailey a wee bit (not well), but from the entries and bylines and the very title of the feature — “What Is the Libertarian Response to Ebola? How a free society should respond to a communicable disease outbreak” — they would indeed seem to be self-described libertarians.
All four, as I read them, are willing to accept the idea of forced quarantine of individuals. Not just in extreme lifeboat comparisons, but in actual situations that plausibly might have arisen at that time. If you don’t already know, Reason, while not mega-extreme, typically would be considered more libertarian in orientation than most of the libertarian-leaning think tanks.
Maybe I was napping at the time, but I don’t recall any mega-scandal resulting from those proclamations.
Here is my earlier Bloomberg column rejecting the notion of forced quarantine of individuals for Covid-19, mostly on rights grounds, though I add some consequentialist arguments. I would not trade in the American performance for the Chinese anti-Covid performance if it meant we had to weld people inside their apartments without due process, for instance, as the Chinese (and Vietnamese and others) did regularly.
To be clear, Ebola and Covid-19 have very different properties, and you might favor forcible quarantine for one and not the other. Whether those differences in properties should matter for a rights perspective is a complex question, but still I am surprised to see that quarantine was — not long ago — considered so acceptable from a libertarian point of view, given the current pushback against pandemic-related restrictions.
(Speaking of shifts, here is Will Wilkinson on GBD. While I agree with many of his points, I am curious where Will stands on forcible quarantine of individuals on a non-trivial scale. He does say he favors a “supported isolation program,” so maybe he favors coercive quarantine but he doesn’t quite commit to that view either?)
I am surprised most of all how little interest current libertarians seem to have in the following “line”:
“A unregulated Covid-19 response would have been much, much better. We would have had a good vaccine right away, and tested it rapidly with a Human Challenge Trial. It would be sold around the world at a profit, with much quicker distribution and pandemic resolution than what we are seeing today. This pandemic was awful, but the market would have kicked butt cleaning it up.”
I am not here claiming that view is correct, only that a strong libertarian ought to be amenable to it. And yet I hear it remarkably infrequently, even though I think most committed libertarians would agree if you posed it to them as a direct question.
It is at least 20x more fashionable to obsess over the costs of lockdowns, combined with various denialist claims about the severity of the problem.
As for masks, how about this?:
“Masks? Masks are great, of course they are a public good. Markets are great at producing and maintaining value-maximizing voluntary norms such as mask-wearing!”
I cannot help but think that the views above in quotation marks would have been the dominant libertarian response in the 1980s or 1990s, and that the various brews appearing today are yet another sign of our Douthatian decadence.
China fact of the day
The investigation by the BBC uncovered documents and satellite imagery that suggest large numbers of the persecuted Uighur Muslim minority are being forced by the Communist Party to pick cotton or work in textile factories linked to detention camps. About a fifth of the world’s cotton supply comes from Xinjiang and it is widely used in the fashion trade.
Here is the Times of London story, via TEKL.
Inelastic demand
Last Thursday, Dale Mclaughlan bought a Jet Ski.
On Monday, the 28-year-old Scotsman was sentenced to four weeks in jail.
What happened on the three days in between, according to court documents, may be one of the more unusual instances of rule-flouting during the coronavirus pandemic.
The day after purchasing the watercraft, Mr. Mclaughlan set off at 8 a.m. for what he thought would be a 40-minute trip from the southwestern coast of Scotland to his girlfriend’s home on the Isle of Man, between England and Ireland. He later told the authorities that he had never ridden a Jet Ski before and that bad weather on the Irish Sea caused the trip to stretch to four and a half hours.
Mr. Mclaughlan finally reached his girlfriend on Friday night, after walking 15 miles from the Isle of Man’s coast to her home in its capital, Douglas. The couple spent the weekend enjoying the city’s nightlife, but their reunion was cut short, when he was arrested and later charged with one count of violating the Isle of Man’s coronavirus restrictions.
On Monday, he received a four-week jail sentence.
Here is the full NYT story. The Isle of Man keeps out visitors, and has managed to keep out the coronavirus as well.
Tuesday assorted links
1. A game design take on QAnon.
2. Is it counterproductive to pay people to take the vaccine? (NYT) And it seems the EU is moving up its vaccine approval meeting to the 21st, they must be as reckless as the Canadians and the German Bundesministerium für Gesundheit. More here, from someone who should know. And Ryan Bourne on who should be vaccinated first.
3. “Dr. honorific obligation for thee but not for me…”?
4. How much will facial recognition be regulated in 2021?
5. Does the new history of corn involve early trade with South America!?
Champerty on the Blockchain
One of the peculiarities of the law is that third party contracts to finance a lawsuit in exchange for a percentage of any recovery have long been unenforceable under the doctrine of champtery. As with contingent fees, the idea is that third party financing will generate frivolous lawsuits. In contrast, Helland and I found that contingent fees improve legal quality because lawyers won’t take cases that are likely to fail on a contingency basis but they will take them on an hourly-fee basis. Contingent fees and third-party funding also reduce credit constraints and extend the legal system to people who cannot finance their own cases. Third-party finance is reasonably common in Australia and doesn’t seem to have had major negative consequences. It’s also becoming more common in the United States even though the law is still unclear.
For someone who believes in markets, third party contracts are just contracts. As Helland and I said in our AEI monograph, Two Cheers for Contingent Fees, it’s one thing to think that the tort system is broken or out-of-control and quite another to think that the appropriate way to address this is to interfere in the right of tort victims and financiers to contract. In fact, Robert Cooter once likened tort claims to Arrow-Debreu securities and argued for a market in unmatured tort claims (UTCs). Today, we are somewhat closer to that market on the blockchain!
The Avalanche blockchain is hosting a new kind of token designed to allow retail investors to invest in the outcome of lawsuits.
The so-called ‘Initial Litigation Offering’ is the brainchild of Avalanche creator Ava Labs, US law-firm Roche Cyrulnik Freedman LLP and Republic Advisory Services, a consultancy.
Many individuals lack the funds to pursue legal action; litigation financing allows investors to cover the costs of a claim in return for a portion of the payout, should the claim prove successful. For the new ILO on Avalanche, the right to such a payout has been tokenised, and would be delivered as a digital asset.
As usual, it’s a little unclear what the blockchain is doing since the real issue is to measure the outcome of the cases and distribute the funds and that requires trust. Still, the blockchain will increase liquidity–potentially allowing anyone in the world to invest (again, assuming trust in the originator)–and it will also help with unenforceability. Ironically, one of the problems with these contracts has been that knowing that they are unenforceable the victims renege on the deal after winning their cases! If instead the money goes into a smart contract on the blockchain it will be much harder for the victims to renege. Innovations like this may also push the law to clarify the legality of third party financing.
Addendum: The first case they plan to tokenize looks appropriate. A farmer was growing approved hemp but the local sheriff razed his cropland causing a billion dollars in damages.