Mask Mandate Costs

by  Tyler Cowen in

There is now an NBER working paper on this topic:

This paper presents the results from a hypothetical set of questions related to mask-wearing behavior and opinions that were asked of a nationally representative sample of over 4,000 participants in early 2022. Mask mandates were hotly debated in public discourse, and though much research exists on benefits of masks, there has been no research thus far on the distribution of perceived costs of compliance. As is common in economic research that aims to assess the value to society of non-market activities, we use survey valuation methods and ask how much participants would be willing to pay to be exempted from rules of mandatory community masking. The survey asks specifically about a 3 month exemption. We find that the majority of respondents (56%) are not willing to pay to be exempted from mandatory masking. However, the average person was willing to pay $525, and a small segment of the population (0.9%) stated they were willing to pay over $5,000 to be exempted from the mandate. Younger respondents stated higher willingness to pay to avoid the mandate than older respondents. Combining our results with standard measures of the value of a statistical life, we estimate that a 3 month masking order was perceived as cost effective through willingness-to-pay questions only if at least 13,333 lives were saved by the policy.

That is by Patrick Carlin, Shyam Raman, Kosali I. Simon, Ryan Sullivan, and Coady Wing.  A few comments:

1. Willingness to be paid magnitudes are often much higher than willingness to pay numbers.  Especially when issues of justice and desert are involved.  I know some people who might say: “I have a right to refuse a mask.  I’m not going to pay anything not to wear one, but you would have to pay me a million dollars to put it on.”  There are less extreme versions of this view, noting that even in quite normal laboratory circumstances WTBP can be 5x higher than WTP.

2. For many people the value of masking — either positively or negatively — depends on what others do.  Some might feel “I guess I can wear a mask, but if you make everyone do that, that is a gross Orwellian dystopia.”  Others, perhaps leaning more to the political left, might say: “I am willing to do my share, but of course I expect the same from everyone else.  Let us sing this collective song and with our masks dance to the heavens!”

3. Why not just look at what private sector establishments chose when the force of law was not present?  Don’t they have the best sense of how to internalize all the different factors behind what their customers want?  Of course the answer here will vary, depending on what stage of the pandemic we are in.

*Shock Value: Prices and Inflation in American Democracy*

by  Tyler Cowen in

That is the new and very useful book by Carola Binder, mostly a very good economic history.  Here is one excerpt:

The [Nixon price controls] were seen as necessary to support the third component of the Economic Stabilization Program, an expansionary fiscal package that included tax reductions to promote business recovery.  The Council of Economic Advisers wrote in its annual report that “action to make fiscal policy more expansive had been limited by the need to avoid intensifying any inflationary expectations and stepping-up the inflation. The establishment of the direct wage-price controls created room for some more expansive measures, because it provided a certain degree of protection against both the fact and the expectation of inflation.”

The ties of the dollar to gold had been cut recently as well, as Bretton Woods turned into floating exchange rates.  1970s macro was a strange thing!

The book is recommended, you can pre-order here, most of American monetary history is covered.

Will Sri Lanka have gdp-linked bonds?

by  Tyler Cowen in

Negotiations to finally bring an end to Sri Lanka’s long-running $13bn debt default could result in an innovative new type of bond that would link payouts to economic growth and governance reforms, a long-held aim of emerging market bond investors.

The bankrupt south Asian nation and its creditors have agreed in principle to replace the debt, which it stopped paying in 2022 following a currency crisis, with so-called macro-linked bonds that would track the country’s recovery.

The inclusion of GDP-tied payouts into bonds that could be included in major indices is a big step forwards in trying to develop debt structures that will lure international investors back to riskier emerging market nations desperately in need of financing, say analysts…

In return for taking a roughly one-third haircut on their original debt, creditors have proposed a new $9bn bond with payments adjusted higher or lower in 2028 depending on the average US dollar GDP that Sri Lanka achieves. The country has put forward other ways of setting GDP-linked payments and is also assessing a creditor proposal for a separate governance-linked bond. This would cut coupon payments if the country raises tax revenue collection as a share of GDP and passes anti-corruption reforms.

As they emerge from defaults, countries such as Ukraine and Uruguay have handed out equity-like warrants, which promise extra money based on factors like movements in the price of commodities that the country produces or GDP, as a way of getting creditors to swallow debt losses.

Here is the full FT story by Joseph Cotterill, here is an earlier Alex post on Bob Shiller and related ideas.

Addendum: Brad Setser comments critically.

Thwarted markets in everything, antiquities remain underpriced

by  Tyler Cowen in

An auction house has withdrawn 18 ancient Egyptian human skulls from sale after an MP said selling them would perpetuate the atrocities of colonialism.

Bell Ribeiro-Addy, the chair of the all-party parliamentary group on Afrikan reparations, believes the sale of human remains for any purposes should be outlawed, adding that the trade was “a gross violation of human dignity”.

The skulls of 10 men, five women, and three people of uncertain sex, were listed by Semley Auctioneers in Dorset, with a guide price of £200-300 for each lot.

They were originally collected by the Victorian British soldier and archaeologist Augustus Henry Lane Fox Pitt-Rivers, who founded the University of Oxford’s Pitt Rivers Museum in 1884.

Here is the full Guardian story, indirectly via Samir Varma.

Saturday assorted links

by  Tyler Cowen

1. Incels vs insings, “Half of Malmö Consists of Guys Who Dumped Me.”

2. Will agentic work flows lead to more and better training data?

3. Critique of feminism, not by BC.

4. The New Atlantis, call for submissions, on what we should be building.

5. Chilean births down 20% over the last year.

6. “I make over $2,500 a month from focus groups.”

7. The actor behind Jar Jar Binks (NYT).

Who was the wealthiest man in the world in the 1830s?

by  Tyler Cowen in

Wu Bingjian, better known in the west as ‘Houqua’, or sometimes ‘Howqua’, was the most successful Chinese merchant of his day.  As leader of the Cohong (gonghang), the guild of Chinese traders that had been authorized in the late 18th century by the Qing court to oversee trade with Western merchants at Canton (Guangzhou), he was at once the richest man in the world.  In 1834, Wu’s personal wealth was estimated at 26 million Mexican silver dollars (£6.24 million then, around (£680 million today).  To put this wealth in perspective, the contemporary European financier Nathan Rotschild held capital equivalent to US $5.3 million (around £1.06 million) in 1828.  Wu’s extraordinary ability to maintain a complex balance between his business interests, the Qing court and his Western partners, made him the most importnat player in Western countries’ trade with China for over half a century.

That is from the new and quite interesting Creators of Modern China: 100 Lives from Empire to Republic 1796-1912, edited by Jessican Harrison-Hall and Julia Lovell.

Economists’ predictions from 1980

by  Tyler Cowen in

That is the topic of my latest Bloomberg column, here is the intro:

Out of curiosity, I recently cracked open The American Economy in Transition, published in 1980, edited by Martin Feldstein and including contributions from… Nobel-winning economists [Samuelson, Friedman, Kuznets], successful business leaders and notable public servants. Though most of the essays get it wrong, I found the book oddly reassuring

The problems the book describes truly are of a different era. On one hand, I was comforted to learn that many of these fears turned out to be unfounded. On the other, I am concerned that many current economists are not worried about the correct things.

How did they do in their analyses?:

For instance, many authors in the book are focused on capital outflow as a potential problem for the US economy. Today, of course, the more common concern is a possible excess inflow of foreign capital, combined with a trade deficit in goods and services. Another concern cited in the book is European economies catching up to the US. Again, that did not happen: The US has opened up its economic lead. Energy is also a major concern in the book, not surprisingly, given the price shocks of the 1970s. No one anticipates that the US would end up the major energy exporter that it is today.

Then there is the rise of China as a major economic rival, which is not foreseen — in fact, China is not even in the book’s index. Nether climate change nor global warming are mentioned. Financial crises are also given short shrift, as the US had not had a major one since the Great Depression. In 1980 the US financial sector simply was not that large, and the general consensus was that income inequality was holding constant. Nor do the economics of pandemics receive any attention.

So you may see why the book stoked my fears that today’s economists and analysts do not have a good handle on America’s imminent problems.

As for opportunities, as opposed to risks: The book contains no speculation about the pending collapse of the Soviet Union. Nor are the internet, crypto or artificial intelligence topics of discussion.

The column is interesting throughout.  Milton Friedman for instance thought that the Fed would not find it politically profitable to fight inflation until inflation reached 25 percent.  The best essay in the book was by Samuelson, who noted that such predictions usually misfire.

Edge Esmerelda

by  Tyler Cowen in

From Devon Zuegel:

“Edge Esmeralda is a month-long “popup village” for people who believe the future can be better and are actively working to make it happen.

Over 1,000 people will join over the course of the month to create a healthy, productive environment to learn, collaborate, build, and experiment. Edge Esmeralda will be held in Healdsburg, CA June 2-30. 
Some of the tracks organized by attendees include:
  • Replacing Aging, by Laura Deming from The Longevity Fund
  • Hard Tech Weekend, by Eli Dourado from The Abundance Institute
  • LabWeek Field Building, by Juan Benet from Protocol Labs
  • Advance Market Commitments Unconference, by Nan Ransohoff who leads Stripe Climate
Edge Esmeralda is a collaboration between Edge City, which was the core team behind Zuzalu, and Devon Zuegel, who’s using this popup village as a prototype to build a permanent new town called Esmeralda.

Learn more & sign up at edgeesmeralda.com.”  And here is coverage from Sonoma Magazine.