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A Half Dose of Moderna is More Effective Than a Full Dose of AstraZeneca

Today we are releasing a new paper on dose-stretching, co-authored by Witold Wiecek, Amrita Ahuja, Michael Kremer, Alexandre Simoes Gomes, Christopher M. Snyder, Brandon Joel Tan and myself.

The paper makes three big points. First, Khoury et al (2021) just published a paper in Nature which shows that “Neutralizing antibody levels are highly predictive of immune protection from symptomatic SARS-CoV-2 infection.” What that means is that there is a strong relationship between immunogenicity data that we can easily measure with a blood test and the efficacy rate that it takes hundreds of millions of dollars and many months of time to measure in a clinical trial. Thus, future vaccines may not have to go through lengthy clinical trials (which may even be made impossible as infections rates decline) but can instead rely on these correlates of immunity.

Here is where fractional dosing comes in. We supplement the key figure from Khoury et al.’s paper to show that fractional doses of the Moderna and Pfizer vaccines have neutralizing antibody levels (as measured in the early phase I and phase II trials) that look to be on par with those of many approved vaccines. Indeed, a one-half or one-quarter dose of the Moderna or Pfizer vaccine is predicted to be more effective than the standard dose of some of the other vaccines like the AstraZeneca, J&J or Sinopharm vaccines, assuming the same relationship as in Khoury et al. holds. The point is not that these other vaccines aren’t good–they are great! The point is that by using fractional dosing we could rapidly and safely expand the number of effective doses of the Moderna and Pfizer vaccines.

Second, we embed fractional doses and other policies such as first doses first in a SIER model and we show that even if efficacy rates for fractional doses are considerably lower, dose-stretching policies are still likely to reduce infections and deaths (assuming we can expand vaccinations fast enough to take advantage of the greater supply, which is well within the vaccination frontier). For example, a half-dose strategy reduces infections and deaths under a variety of different epidemic scenarios as long as the efficacy rate is 70% or greater.

Third, we show that under plausible scenarios it is better to start vaccination with a less efficacious vaccine than to wait for a more efficacious vaccine. Thus, Great Britain and Canada’s policies of starting First Doses first with the AstraZeneca vaccine and then moving to second doses, perhaps with the Moderna or Pfizer vaccines is a good strategy.

It is possible that new variants will reduce the efficacy rate of all vaccines indeed that is almost inevitable but that doesn’t mean that fractional dosing isn’t optimal nor that we shouldn’t adopt these policies now. What it means is that we should be testing and then adapting our strategy in light of new events like a battlefield commander. We might, for example, use fractional dosing in the young or for the second shot and reserve full doses for the elderly.

One more point worth mentioning. Dose stretching policies everywhere are especially beneficial for less-developed countries, many of which are at the back of the vaccine queue. If dose-stretching cuts the time to be vaccinated in half, for example, then that may mean cutting the time to be vaccinated from two months to one month in a developed country but cutting it from two years to one year in a country that is currently at the back of the queue.

Read the whole thing.

The Becker-Friedman center also has a video discussion featuring my co-authors, Nobel prize winner Michael Kremer and the very excellent Witold Wiecek.

How will crypto wealth transform philanthropy?

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

If the price of Bitcoin were to reach $200,000, Coinbase Chief Executive Officer Brian Armstrong observed recently, half of the world’s billionaires would be crypto billionaires. Even at the lesser valuations that currently prevail, this crypto wealth has vast potential to reshape philanthropy. Expect a relative decline in the influence of longstanding nonprofit institutions — and more weird, stand-alone projects.

Bitcoin itself is a weird, stand-alone project. The true identity of its inventor, Satoshi Nakamoto, is still unknown, and the broader Bitcoin ecosystem is not owned or controlled by any company or institution. It has been self-sustaining since the beginning, and so it should hardly come as a surprise that Bitcoin billionaires take Bitcoin itself as a model for future institutions, including in philanthropy.

As philanthropists, Bitcoin and other crypto billionaires will likely look to support ideas that can launch in a dramatic way and quickly acquire escape velocity. They are unlikely to fund the ongoing labor costs of established cultural institutions.

Bitcoin and many other cryptocurrencies seem designed to stand independent of any government or mainstream financial institution. That too suggests that the philanthropic emphasis of crypto wealth will be on non-establishment, non-governmental organizations.

And:

Venture capitalist Paul Graham has pointed out that wealth is earned much more quickly nowadays, and that is all the more true in crypto, which after all is only 12 years old. Unlike many of the wealthy people in law or investment banking, these are not people who had to spend their lives working their way up, finally achieving a top position in their 60s. They either are founders of rapidly growing and scaling companies, or they bought large sums of the right crypto assets early on, or both. Either way, their temperaments are geared to expect immediate action and rapid results.

Nonprofits will have to adjust accordingly, even though speed is not typically their comparative advantage. That in turn suggests that the organizational structures of many nonprofits will have to change fairly radically. Many of them were designed or have evolved to be good at continuity, like the Cleveland Symphony Orchestra, which after all is still playing Beethoven with violins and cellos.

There is much more at the link.

Why I am not entirely keen on the Great Barrington Declaration and AIER

More people are asking me about my attitudes toward Great Barrington and AIER, including David Henderson in this post (which also has a good transcript of my remarks to Russ Roberts).  Earlier I wrote a conceptual critique of the Great Barrington Declaration, but today I would like to make some more targeted remarks.  I didn’t do this when speaking to Russ because I feel they require direct quotation and documentation, which one cannot easily do in a podcast.  And in general I don’t like to write posts “attacking people” (way oversupplied on the internet), but in this case libertarian sympathies are so split that a kind of a wake-up call is needed.

Let me first say that if you are libertarian, and would like a libertarian response to the pandemic, and you find Alex and me not libertarian enough, read the Ryan Bourne book from the Cato Institute.  You may not agree with everything in there, but it has no “gross errors” and no “biomedical weirdness.”  And people, the Cato Institute really is libertarian.  They once hired David Henderson as chief economist.

As for the AIER, read this Jeremy Horpedahl thread and click through appropriately, here is the Sam Bowman-produced part of the thread.  Conspiracy theorist and shall we say “speculative thinker” Naomi Wolf is now a senior researcher at AIER, please do read her tweets.  5G conspiracy theories?  Vaccine nanoparticles that make you travel back in time?  “Not kidding” she wrote, and the general weirdness extends far beyond that, to some of her books as well.  Or try this “externality denialism” from just a few days ago: “Your vaccine status makes no difference to others.”  Her pinned tweet casts suspicion on Bill Gates, and refers to “global treason.”

I say it is a mistake to let such a group set the libertarian agenda or indeed any agenda, even if you favor very rapid reopenings and are very critical of lockdowns.  I implore you to think very seriously about what is going on here.

Going back to the GBD proper, which again is sponsored by AIER, here is co-author Sunetra Gupta:

“What we’ve seen is that in normal, healthy people, who are not elderly or frail or don’t have comorbidities, this virus is not something to worry about no more than how we worry about flu,”  professor Gupta told HT.

Nope, almost 600,000 U.S. deaths later.  Or how does this Gupta claim look?:

‘Why would you arrest transmission?’ she asks. ‘To wait for a vaccine? You cannot get rid of it.’

What would Benjamin Netanyahu say?  Or Gupta in May: “Covid-19 is on the way out.”

The best of them is probably Jay Bhattacharya, with whom I often agree, and who, as far as I can tell, has no track record of blatantly false predictions.  Yet even he cannot avoid a tinge of biomedical weirdness.

Why was Bhattacharya on the advisory board of the anti-vax group Panda?  I am reluctant to play the “guilt by association” game here, but I think there is a broader pattern of these writers simply being wrong about the science, and their associations reflecting that.

I agree with his WSJ critique (with Kulldorff) of vaccine passports.  Still, he comes up with some literally true but misleading sequences such as:

The idea that everybody needs to be vaccinated is as scientifically baseless as the idea that nobody does. Covid vaccines are essential for older, high-risk people and their caretakers and advisable for many others.

I wonder why cannot he bring himself to say that “the average social value of a 16-year-old getting vaccinated is strongly positive”?  (And we are running significant tests to lower the remaining uncertainty, and if it is merely adenovirus platforms you worry about well say that.)  Instead he has to walk around the issue and play down the value of near-universal Covid vaccination.  You might think that is all the fault of the editorial chopping board, but it seems to be a broader and more consistent pattern with this group.

Take Hulldorff’s now-famous tweetThose with prior natural infection do not need it [Covid vaccines]. Nor children.”  “Need?” — OK, I get it, demand curves slope down.  But again, his tweet is not nearly as good or as accurate a message as “the average social value of a 16-year-old getting vaccinated is strongly positive.”  There is good evidence that the vaccines provide better protection than does natural infection, especially against the Covid variants, and it is established that infected younger persons can carry Covid to the unvaccinated, of which there will always be quite a few, most of all globally.  Furthermore, non-vaccine methods of achieving herd immunity are looking worse, due to the spread of variants and areas such as Manaus, which seem to have high rates of reinfection.  And have I mentioned that hospitalization rates for the young are rising?  (We are not sure why.)

Is it so great that 38.9% of Marines are refusing to take the vaccine? (no).  Or have these writers looked into the huge success that is Gibraltar?

Why take this weird, hinky attitude toward the science for no good reason?  It’s as if — when it comes to vaccines — they deliberately talk in an Alice in Wonderland universe without self-awareness of that fact.

No matter what your associations may or may not be, getting people vaccinated with quality vaccines is the #1 issue right now and it is the path back to liberty most likely to succeed and prove sustainable.  If you are not really enthusiastic about that, I think, frankly, that you are out to lunch.

In praise of Alex Tabarrok

Here’s a question I’ve been mulling in recent months: Is Alex Tabarrok right? Are people dying because our coronavirus response is far too conservative?

I don’t mean conservative in the politicized, left-right sense. Tabarrok, an economist at George Mason University and a blogger at Marginal Revolution, is a libertarian, and I am very much not. But over the past year, he has emerged as a relentless critic of America’s coronavirus response, in ways that left me feeling like a Burkean in our conversations.

He called for vastly more spending to build vaccine manufacturing capacity, for giving half-doses of Moderna’s vaccine and delaying second doses of Pfizer’s, for using the Oxford-AstraZeneca vaccine, for the Food and Drug Administration to authorize rapid at-home tests, for accelerating research through human challenge trials. The through line of Tabarrok’s critique is that regulators and politicians have been too cautious, too reluctant to upend old institutions and protocols, so fearful of the consequences of change that they’ve permitted calamities through inaction.

Tabarrok hasn’t been alone. Combinations of these policies have been endorsed by epidemiologists, like Harvard’s Michael Mina and Brown’s Ashish Jha; by other economists, like Tabarrok’s colleague Tyler Cowen and the Nobel laureates Paul Romer and Michael Kremer; and by sociologists, like Zeynep Tufekci (who’s also a Times Opinion contributor). But Tabarrok is unusual in backing all of them, and doing so early and confrontationally. He’s become a thorn in the side of public health experts who defend the ways regulators are balancing risk. More than one groaned when I mentioned his name.

But as best as I can tell, Tabarrok has repeatedly been proved right, and ideas that sounded radical when he first argued for them command broader support now. What I’ve come to think of as the Tabarrok agenda has come closest to being adopted in Britain, which delayed second doses, approved the Oxford-AstraZeneca vaccine despite its data issues, is pushing at-home testing and permitted human challenge trials, in which volunteers are exposed to the coronavirus to speed the testing of treatments. And for now it’s working: Britain has vaccinated a larger percentage of its population than the rest of Europe and the United States have and is seeing lower daily case rates and deaths.

Here is more from Ezra Klein at the New York Times.

FDA Postpones Inspections Delaying New Drugs and Creating Shortages of Old Drugs

NYTimes: The Covid-19 pandemic has forced the Food and Drug Administration to postpone hundreds of drug company inspections, creating an enormous backlog that is delaying new drug approvals and leading the industry to warn of impending shortages of existing medicines.

…In an interview, F.D.A. officials said they sharply curtailed the inspections to protect their investigators, following guidelines from the Centers for Disease Control and Prevention, which discouraged federal employees from travel during the pandemic.

But some people in both industry and public health communities say that federal drug inspections are essential, and that the agency should bypass travel restrictions by taking precautions, including wearing proper personal protective equipment.

…In interviews, F.D.A. officials denied that the dramatic drop in inspections has slowed drug approvals. But a number of drug companies, including Spectrum Pharmaceuticals, Biocon Biologics and Bristol Myers Squibb, has issued statements noting deferred F.D.A. action because of the agency’s inability to conduct inspections.

  • In October, Spectrum announced that the F.D.A. had deferred action on its application for Rolontis, a treatment for cancer patients who have a very low number of certain white blood cells, because it could not inspect the manufacturing plant the company uses in South Korea.

  • In late December, Biocon Biologics notified shareholders that the F.D.A. deferred action on its joint application with Mylan for a proposed biosimilar to Avastin, a cancer drug.

  • Bristol Myers Squibb announced in November that the F.D.A. would miss its November deadline for taking action on a lymphoma treatment, lisocabtagene maraleucel because it could not inspect a third-party Texas manufacturing plant. The agency eventually did complete its inspection and approved the drug last month.

Grocery store workers are working, meat packers are working, hell bars and restaurants are open in many parts of the country but FDA inspectors aren’t inspecting. It boggles the mind.

Let’s review. The FDA prevented private firms from offering SARS-Cov2 tests in the crucial early weeks of the pandemic, delayed the approval of vaccines, took weeks to arrange meetings to approve vaccines even as thousands died daily, failed to approve the AstraZeneca vaccine, failed to quickly approve rapid antigen tests, and failed to perform inspections necessary to keep pharmaceutical supply lines open.

I am a long-time critic of the FDA and frankly I am stunned at the devastation.

Canada: An Official Strong Recommendation for First Doses First

Canada’s National Advisory Committee on Immunization (NACI), a scientific advisory group to the government, has made a forceful and dramatic statement strongly favoring First Doses First (delay the second dose.) This is a very big deal for the entire world. Basically NACI have endorsed everything that Tyler and I have said on First Doses First since my first post tentatively raised the issue on December 8. I am going to quote this statement extensively since it’s an excellent summary. No indentation.

—-NACI Statement—-

Based on emerging evidence of the protection provided by the first dose of a two dose series for COVID-19 vaccines currently authorized in Canada, NACI recommends that in the context of limited COVID-19 vaccine supply jurisdictions should maximize the number of individuals benefiting from the first dose of vaccine by extending the second dose of COVID-19 vaccine up to four months after the first. NACI will continue to monitor the evidence on effectiveness of an extended dose interval and will adjust recommendations as needed. (Strong NACI Recommendation)

    • In addition to emerging population-based data, this recommendation is based on expert opinion and the public health principles of equity, ethics, accessibility, feasibility, immunological vaccine principles, and the perspective that, within a global pandemic setting, reducing the risk of severe disease outcomes at the population-level will have the greatest impact. Current evidence suggests high vaccine effectiveness against symptomatic disease and hospitalization for several weeks after the first dose, including among older populations.

Protecting individuals

  • By implementing an extended four month interval strategy, Canada will be able to provide access to first doses of highly efficacious vaccines to more individuals earlier which is expected to increase health equity faster. Canada has secured enough vaccines to ensure that a second dose will be available to every adult.
  • As a general vaccination principle, interruption of a vaccine series resulting in an extended interval between doses does not require restarting the vaccine series. Principles of immunology, vaccine science, and historical examples demonstrate that delays between doses do not result in a reduction in final antibody concentrations nor a reduction in durability of memory response for most multi-dose products.
  • Assessment of available data on efficacy and effectiveness of a single dose of mRNA vaccine was a critical factor in assessing the impact of a delayed second dose at this time. The two available clinical trials for mRNA vaccines (Pfizer-BioNTech and Moderna) provide evidence that indicates that efficacy against symptomatic disease begins as early as 12 to 14 days after the first dose of the mRNA vaccine. Excluding the first 14 days before vaccines are expected to offer protection, both vaccines showed an efficacy of 92% up until the second dose (most second doses were administered at 19-42 days in the trials). Recently, real world vaccine effectiveness data presented to or reviewed by NACI assessing PCR-positive COVID-19 disease and/or infection from Quebec, British Columbia, Israel, the United Kingdom and the United States support good effectiveness (generally 70-80%, depending on the methodology used and outcomes assessed) from a single dose of mRNA vaccines (for up to two months in some studies). While studies have not yet collected four months of data on effectiveness of the first dose, the first two months of population-based effectiveness data are showing sustained and high levels of protection. These data include studies in health care workers, long term care residents, elderly populations and the general public. While this is somewhat lower than the efficacy demonstrated after one dose in clinical trials, it is important to note that vaccine effectiveness in a general population setting is typically lower than efficacy from the controlled setting of a clinical trial, and this is expected to be the case after series completion as well.
  • Published data from the AstraZeneca clinical trial indicated that delaying the second dose to ≥ 12 weeks resulted in a better efficacy against symptomatic disease compared to shorter intervals between doses.
  • The duration of protection from one or two doses of COVID-19 vaccines is currently unknown. Experience with other multi-dose vaccines after a single dose suggests persistent protection could last for six months or longer in adolescents and adults. Longer-term follow-up of clinical trial participants and those receiving vaccination in public programs will assist in determining the duration of protection following both one and two doses of vaccination. NACI will continue to monitor the evidence on effectiveness of an extended interval, which is currently being collected weekly in some Canadian jurisdictions, and will adjust recommendations as needed if concerns emerge about waning protection.

Protecting populations

  • Although effectiveness after two-doses will be somewhat higher than with one dose, many more people will benefit from immunization when extending the interval between doses in times of vaccine shortage; offering more individuals direct benefit and also the possibility of indirect benefit from increasing population immunity to COVID-19 disease. Everyone is expected to obtain the full benefit of two doses when the second dose is offered after 4 months.
  • Internal PHAC modelling reviewed by NACI based on Canadian supply projections suggested that accelerating vaccine coverage by extending dose intervals of mRNA vaccines could have short-term public health benefits in preventing symptomatic disease, hospitalizations, and deaths while vaccine supply is constrained. Even a theoretical scenario analysis in which intervals were extended up to six months and protection was lost at a rate of 4% per week after the first dose also showed that extending the mRNA vaccine dose intervals would still have public health benefits. External modelling results have also suggested that extending dose intervals can avert infections, hospitalizations and deaths.
  • The impact on variants of concern by extending the interval between doses is unknown, but there is currently no evidence that an extended interval between doses will either increase or decrease the emergence of variants of concern. COVID-19 mRNA vaccines and AstraZeneca vaccine have shown promising early results against variant B.1.1.7. As effectiveness of the first dose against other variants of concern is emerging, ongoing monitoring will be required.
  • Vaccine distribution will be optimized through this strategy, and current vaccine supply projections will work well with an extended dose strategy that aims to immunize as many Canadians as efficiently as possible. Extending the dose intervals for mRNA vaccines up to four months has the potential to result in rapid immunization and protection of a large proportion of the Canadian population….

First Doses First, Now! – New Information

A lot of new information has dropped recently about the efficacy of First Doses First.

First, as I mentioned yesterday, we now have epidemiologists and vaccine researchers saying that for people previously infected with COVID a second dose is not necessary and may be “overkill.” Given how many people have had COVID, this increases the net benefit to First Doses First for everyone significantly.

Second, an important new study verifies that for the AZ vaccine a longer delay for the second dose is better because it generates a more powerful immune response (picture from the FT). This is a common finding for vaccines. The authors write:

ChAdOx1 nCoV-19 vaccination programmes aimed at vaccinating a large proportion of the population with a single dose, with a second dose given after a 3 month period is an effective strategy for reducing disease, and may be the optimal for rollout of a pandemic vaccine when supplies are limited in the short term.

In addition “Analyses of PCR positive swabs in UK population suggests vaccine may have substantial effect on transmission of the virus with 67% reduction in positive swabs among those vaccinated.” In other words, the vaccine cuts transmission risk.

As I have said before “the US failure to authorize the AstraZeneca vaccine in the midst of a pandemic when thousands are dying daily and a factory in Baltimore is warmed up and ready to run is a tragedy and dereliction of duty of epic proportions.”

Third, the New and Emerging Respiratory Virus Threats Advisory Group (NERVTAG), a scientific advisory group to the British government, recently considered the risks of immune escape from the delayed second dose strategy and concluded that although the risk is real it is likely small, especially in comparison to other sources of immune escape such as therapeutics and natural infection. Moreover, the risk is outweighed by the measurable benefits of getting more does out quickly.

It is not currently possible to quantify the probability of emergence of vaccine resistance as a result of the delayed second dose, but it is likely to be small.The UK currently has more than 1,000 COVID-19 related deaths each day and has limited supplies of vaccine. In the current UK circumstances the unquantifiable but likely small probability of the delayed second dose generating a vaccine escape mutant must be weighed against the measurable benefits of doubling the speed with which the most vulnerable can be given vaccine-induced protection.

..a single dose of vaccine does not generate a new/novel risk. Given what we have observed recently with the variants B.1.1.7 and B1.351, it is a realistic possibility that over time immune escape variants will emerge, most likely driven by increasing population immunity following natural infection.

Fourth, the British health establishment has largely solidified around First Doses First. Consider this from the Four UK’s Chief Medical Officers.

The 4 UK Chief Medical Officers agree with the JCVI that at this stage of the pandemic prioritising the first doses of vaccine for as many people as possible on the priority list will protect the greatest number of at risk people overall in the shortest possible time and will have the greatest impact on reducing mortality, severe disease and hospitalisations and in protecting the NHS and equivalent health services.

Fifth, the US public health experts are beginning to come around to the economic point of view. Consider Experts tout delaying 2nd COVID vaccine dose as US deaths mount which notes:

“The maximum public health benefit would come from giving a single dose to as many people as possible, and following up with a second dose when supply improves,” said Neal Halsey, MD, of Johns Hopkins University, in an interview. Halsey and Stanley Plotkin, MD, co-authored a letter in Clinical Infectious Diseases last week explaining how delaying a second dose of vaccine would accelerate the US vaccine rollout.

Halsey said data from both companies show the first dose of the vaccine offers significant protection against COVID-19 in the short term, for at least 1 to 3 months after injection. He also said he and Plotkin believe this was the most beneficial public health strategy even before the arrival of new variants of the virus was discovered.

“There are a number of examples of changing [vaccination] course because ACIP takes into account public health impact,” Halsey said. “We asked the ACIP to review in depth this strategy to give one dose as rapidly as possible. Such a meeting should be scheduled as soon as possible.”

The University of Minnesota’s Michael Osterholm, PhD, MPH, said yesterday on “Meet the Press”  that he believes the United States has to change direction on vaccine strategy in light of the possibility of a surge of new infections coming from variant strains.

I believe that the US will go to First Doses First. The only question is will we go to First Doses First soon, when it can still help, or will we be forced to do it later in an act of desperation and agony.

My Conversation with Benjamin Friedman

Here is the audio, transcript, and visual. Here is part of the CWT summary:

Benjamin Friedman has been a leading macroeconomist since the 1970s, whose accomplishments include writing 150 papers, producing more than dozen books, and teaching Tyler Cowen graduate macroeconomics at Harvard in 1985. In his latest book, Religion and the Rise of CapitalismBen argues that contrary to the popular belief that Western economic ideas are a secular product of the Enlightenment, instead they are the result of hotly debated theological questions within the English-speaking Protestant world of thinkers like Adam Smith and David Hume.

Ben joined Tyler to discuss the connection between religious belief and support for markets, what drives varying cultural commitments to capitalism, why the rate of growth is key to sustaining liberal values, why Paul Volcker is underrated, how coming from Kentucky influences his thinking, why annuities don’t work better, America’s debt and fiscal sustainability, his critiques of nominal GDP targeting, why he wouldn’t change the governance of the Fed, how he maintains his motivation to keep learning, his next big project on artificial intelligence, and more.

Here is one excerpt about religion:

COWEN: If we think of the most influential advocates for capitalism in the mid–20th century, there’s Hayek, I would say Keynes at most phases of his career — maybe not all, Milton Friedman. They seem to be largely secular rather than religious. If we look at theologians — while there’s a great diversity of views, on average, they seem to be left-leaning. So why is it the religious thinkers lean towards socialism, and the economists are quite secular?

FRIEDMAN: I think there’s a part of the story that you’re missing, and that has to do with the coming together at mid–20th century in America, of religious conservatism and economic conservatism. I think the catalyst that brought them together was the existential fear of world communism. Here we are — call it 70 years later, and it’s difficult to put ourselves back in the shoes of Americans in the 1950s, but that was a real fear.

Communism, at least as advocated at that time, had a unique feature of being simultaneously the existential enemy of lots of things that we hold dear. It was the enemy of Western-style political democracy, but it was also the enemy of Western-style market capitalism, and importantly for purposes of this line of argument, it was the enemy of Western-style religion.

I think the religious conservatives and the economic conservatives realized that they had an enemy in common, and they took the threat seriously, and this led them to come together.

And about macro:

COWEN: Pandemic aside, if, on average, G is greater than R, can’t we just grow our way out of the debt? As you mentioned, now borrowing rates are negative in real terms, right? Economic growth, on average, is positive, so just keep on plowing straight ahead. Let the clock tick.

FRIEDMAN: There are two parts of the sustainability question, and you hit one of them correctly. If your economy is growing in real terms faster than the debt, then you can grow your way out of any debt. But there’s another side of it, and that’s how rapidly are you taking on new debt?

Let’s take your question seriously and say we’re going to put the pandemic aside. In the year before the pandemic — we’re talking about the government’s fiscal year 2019, so ended September 30, 2019 — none of us had talked about pandemics yet. In that year, the US government spent $4.5 trillion, and it only took in, in revenues, $3.5 trillion.

That $1 trillion deficit, even at a time of a fully employed economy and, of course, before the pandemic hit, that was nearly 5 percent of our national income — even though our economy was growing nicely, more rapidly than the rate of interest that the government was paying on the debt, we were on the other side of the equation, adding new debt so rapidly that the debt-to-income ratio was going up instead of down.

So simply pointing to the so-called R-minus-G factor, I think, is a very incomplete way to look at the question of sustainability.

Recommended, and here is Ben’s new and very interesting book Religion and the Rise of Capitalism.

Felix Camilo Ayala, RIP

He was an indigenous, Nahuatl-speaking Mexican painter in the “Naive” tradition, working on board, amate paper, and ceramics.  Some of you will know that I was his biographer, along with his two brothers Marcial Camilo and Juan Camilo, both painters as well.  I spent many hours interviewing Felix Camilo (and his friends and relatives) about the events of his life, so it is especially sad for me to see such a tragic final episode, namely death by Covid in his mid-sixties.  He simply was not able to breathe any more, and then he died.

Felix was less ambitious than his brothers, but he had a natural eye for a lovely scene.  Pretty much everyone in San Agustin Oapan, his home village, liked or loved him, and such general popularity there is rare.  He worked hard to avoid faction, to stay on good terms with all, and to raise his children after his wife passed away almost thirty years ago.

Here is an update on the coronavirus situation in Mexico:

Officials reported 1,219 deaths Saturday, which was a near-record for one day, and 463 deaths Sunday.

Mexico has now seen over 1.64 million total infections and registered over 140,000 deaths so far in the pandemic. With the country’s extremely low testing rate, official estimates suggest the real death toll is closer to 195,000.

Here is some basic background on Felix Camilo, his village, and my involvement with it.  These days, one of my friends in Oapan estimates that about two percent of the village has died from Covid, and about half of those are relatively young.  There are many comorbidities and no medical care to speak of.

Here are a few other Felix Camilo images.  He was never a famous painter, but he played a significant part in capturing and communicating a culture that is vanishing rapidly.

Elrond and the New Crypto Spaces

I’m an advisor to a number of firms, including several in the crypto space such as Elrond (eGLD coin). When I signed on as an advisor more than two years ago, Elrond was almost completely unknown, which wasn’t surprising as they were based in Romania. I thought the Romanian base was a positive, however, because it meant that Elrond could hire extremely well-educated computer scientists, mathematicians and software engineers at below Silicon Valley prices. Moreover, the blockchain world, true to its foundations, is decentralized. Like a modern day Erdos, Vitalik Buterin operates out of his suitcase. The Silicon Valley of the blockchain is the internet. Why the blockchain world has evolved differently than Silicon Valley is an interesting question (with implications for whether SV could loses its centrality) but because it is decentralized I thought location was less important than the quality of the team. And the team, led by hard-charging founder Beniamin Mincu, is excellent. In the last two years the Elrond team has built a completely modern blockchain from the ground up using secure proof of stake and sharding to achieve a potential throughput of upwards of 16 thousand transactions per second with 6s latency and $.001 transaction cost and a toolkit for developers. I was also impressed by the commitment Elrond had to security, including formal verification methods, and especially to making Elrond accessible to the masses. Today Elrond/eGLD is on a tear and by market cap it is one of the top 50 projects in the space with a strong upward trend.

Will Elrond take over the world? I hope so! But, of course, it is unclear. Aside from ranking Elrond versus other projects the space itself still doesn’t have a killer app for the masses. In 2017 near the peak of the market at that time, Vitalik Buterin tweeted:

So total cryptocoin market cap just hit $0.5T today. But have we *earned* it?

How many unbanked people have we banked?

How much censorship-resistant commerce for the common people have we enabled?

How much value is stored in smart contracts that actually do anything interesting?

The total market cap is now close to a trillion, about twice the level when Vitalik tweeted, and these are still good questions. Bitcoin has established itself as a new asset class that is rapidly supplanting gold as a store of value (gold is lame) but not as a payments platform. Ethereum, Elrond and competitors like Algorand were built for smart contracts, including things like stable coins which will be used for payments, but smart contracts are capable of doing much more. In theory, smart contracts let people cooperate in new ways, potentially unlocking trillions in value. But we aren’t there yet.

Decentralized finance or DeFi is one suggestive hint of where things are going. Already many billions of dollars are “lent” and “saved” using DeFi. The lending and saving, however, is almost entirely done in one cryptocurrency for another. In essence, the DeFi system is leveraging off of crypto speculation and trading.

Nevertheless, something interesting is happening in DeFi. The DeX’s or decentralized exchanges have shown that automated market makers can perform the services of market order books used by the traditional exchanges like the NYSE at lower cost while being easily accessible from anywhere in the world and operating 24/7/365. Thus, every exchange in the world is vulnerable to a DeX.

Also, although DeFi is a place where you can easily lose all your money to mistakes, scams, and bugs (not to mention changes in asset values), DeFi is rapidly developing state-of-the-art security. Only the paranoid survive on the blockchain which means that the systems that do survive are robust. Balaji Srinivasan recently tweeted that Bitcoin is the most powerful algorithm in the world and few algorithms have been as battle-tested as Bitcoin. In a similar way, DeFi will be secure or die and security in a blockchain world will be more secure than anywhere else.

Combining security with accessibility is what’s hard. It’s telling that Coinbase is one of the most successful firms in the crypto space despite performing services which are in some tension with the philosophical foundations of crypto. Satoshi Nakamoto would probably be a little disappointed to learn that people were depositing their Bitcoins in a bank! I can understand the impulse, however. It’s almost magical how you can move money on a blockchain without input or permission from any authority. But when you click the button and your money disappears it’s terrifying as you pray for the invisible hand of the miners to restore your money in another account. Elrond’s soon to be released Maiar app, a wallet that interacts with the Elrond blockchain using only a phone number, will be an interesting test of whether a blockchain platform can duplicate the ease of use of something like PayPal or Zelle.

The other interesting development in the space are zero knowledge proofs. Zero knowledge proofs let someone prove that they know a piece of information or the results of a computation without revealing the information. ZK proofs started in the academic literature but research in their uses and applications has exploded as computer scientists like Silvio Micali start blockchains and blockchains like ZCash hire computer scientists who advance the scientific literature (to give just one example). Truly anonymous digital cash is one application but more generally zero knowledge proofs let people buy and sell information in a way which has always been difficult and seemed impossible (how can you sell a piece of information without showing it to someone first but then having seen the information why would they buy it?).

Bottom line is that crypto is still waiting for the killer app which will make it 21st century infrastructure but there has been tremendous scientific progress in blockchains since the ur-date, 1/3/2009. Modern platforms like Elrond are faster, more robust, and more powerful than past platforms and the potential is there for transformative growth.

The politics of Covid just got even more hellish

That is the title of my latest Bloomberg column, here is one excerpt:

Preliminary data indicate that the new strain in the U.K. allows the virus to spread from one person to another more easily. The practical upshot is that even the strict lockdowns of early 2020, such as the one just ordered in the U.K. by Prime Minister Boris Johnson, may not be enough to reverse the spread of the virus.

It is far from obvious that politicians will be able to sell voters on strict lockdowns if they still allow the virus to spread. Furthermore, vaccine distribution has been sufficiently slow that a full lockdown would have to last for many months, and that probably isn’t feasible or desirable. Yet not having lockdowns would lead to a much more rapid spread of the virus, overloading hospitals and public health facilities.

And:

The biggest moral dilemmas might come in those countries that to date have been fairly successful at containing the spread of the virus. Apart from restrictions on foreign travel, life in Taiwan has been normal for some time now, and Covid-related casualties have been miniscule. Other successful examples of virus containment can be found throughout Asia and the Pacific.

But how will those countries deal with the new strain? It has already appeared in both Taiwan and China. So far it has not taken over, but the previous tactics of quarantine and tracing may no longer suffice, should the new strain become more active. It is already spreading in Denmark, which did a good job against Covid-19 early on.

Imagine being a leader of a country that has successfully contained Covid, and now realizing that a single mistake could undo almost a year of very hard work. You also know that, precisely because your country has been so effective at fighting the virus, it is not on the verge of vaccinating your entire population. What if you let a single returning citizen pass through customs taking one Covid test rather than three? What if you then cannot control the subsequent spread of the strain that person is carrying?

When was the last time that stakes for such apparently minor decisions were so high? How will leaders deal with the extreme moral anxiety that their decisions will likely induce?

It is like we are living in a horror movie, and just when we think it’s over, the monster comes back, stronger than ever.

Important throughout.

Why bitcoin will not take over the world

Yes it is here to stay, and it is not a bubble, but…here is one part of the argument:

If you hold or trade with a stablecoin, you incur several risks. First, the stablecoin peg to the dollar may someday be broken, an old problem with pegged exchange rates that Milton Friedman often warned about. Second, to the extent stablecoins and other crypto assets become a major part of the financial system, they will attract more regulatory interest. That in turn will limit many of their advantages over the traditional bank sector. The U.S. government does not want a financial system that evolves outside the purview of the Federal Reserve, FDIC and other regulatory institutions.

Third, the formal banking sector will improve, for instance by moving to more rapid clearing, or by introducing electronic reserve currencies. With the latter, you could transfer your electronically-based dollars within the accounting system of the central bank, and achieve a non-intermediated transfer without resorting to crypto. It is not obvious that crypto will be the market winner once more mainstream institutions learn some lessons from the success of crypto.

And in sum:

The more utopian scenarios for crypto, whether proponents realize it or not, rely on the notion that crypto remains simultaneously fringe and mainstream. That will be a hard trick to pull off.

Your rebuttals, and more, are considered at the link to my latest Bloomberg column.

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.

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.