From the comments, a bailout through credit card receivables?

Accepting the overall premise of Tyler’s Bloomberg column, shouldn’t the government encourage citizens to run up large credit card balances, most of which will become receivables of the major banks, and perhaps even encourage Amazon, Walmart, et. al. to sell goods on their own credit as well like in the old days of dry-goods stores? Then to the extent a massive government bailout is needed, the government can just deal directly with the relatively few Big Businesses that carry those receivables, e.g. by assuming the receivables or subsidizing them.

That is from Nadav.

Wednesday assorted links

Bullshit Patents

I wrote last year:

Despite never having built a working product, Theranos accumulated hundreds of patents. These patents are now the only thing of value left but the patents aren’t valuable because of breakthrough science, the patents are valuable because they can be used to force people who do breakthrough science to cough up part of their return.

Now, just as I predicted, some of these bullshit patents are being used to prevent a company that is working on Covid-19 tests. The logic is evil but impeccable. Sue a firm when time is of the essence. Moreover, you won’t be surprised that just about everyone involved is scraped from the bottom of the barrel. Theranos sold the patents which were bought by a patent troll owned by Softbank, the firm bankrolling the notorious WeWork disaster, and the law firm involved, Irell & Manella, once took a monkey for a client (literally, although PETA paid) in an infamously stupid copyright infringement dispute.

Mike Masnick who broke the story names the guilty and writes:

Honestly, I’m used to all sorts of awfulness, but this one piles awfulness upon awfulness, and takes it to a level of pure evil….I wonder how they sleep at night.

….I understand the need for zealous representation of a client in court, but this seems even more despicable than your every day patent trolling, and people should associate these lawyers names with the truly despicable behavior on display here. Similarly, it should be a reminder of why its a good thing that the Supreme Court decided a decade and a half ago that injunctions are often inappropriate in patent cases.

I do hope a sensible judge punishes this abuse.

Hat tip; Michael Pettengill.

“Herd immunity,” time consistency, and the epidemic yoyo

Saloni has long and detailed arguments against herd immunity.  Here is Caplan on Hanson.  Here is Kling on Hanson.  Here is the Taleb critique.  Here is the underlying Imperial College paper everyone is talking about.  The bottom line is that “locking everyone up to bend the hospital admissions curve” might have to last for at least a year to really choke off the coronavirus.

I’m not going to recap this complex debate, which most of you already have some inkling of.  Instead, I’d like to stress the issue of time consistency, noting that I’ll consider some extreme versions of policies to make exposition easier, even though no one advocates exactly those extreme versions.

Let’s say we expose lots of people to the virus rather quickly, to build up herd immunity.  Furthermore, we would let commerce and gdp continue to thrive.

Even if that were the very best policy on utilitarian grounds, it might not be time consistent.  Once the hospitals start looking like Lombardy, we don’t say “tough tiddlywinks, hail Jeremy Bentham!”  Instead we crumble like the complacent softies you always knew we were.  We institute quarantines and social distancing and shutdowns and end up with the worst of both worlds.

Alternatively, let’s say we start off being really strict with shutdowns, quarantines, and social distancing.  Super-strict, everything closed.  For how long can we tolerate the bankruptcies, the unemployment, and the cabin fever?  At what point do the small businesspeople, one way or another, violate the orders and resume some form of commercial activity?  What about “mitigation fatigue“?

Again, I fear we might switch course and, again, end up with the worst of both worlds.  We would take a big hit to gdp but not really stop the spread of the virus.

I also can imagine that we keep switching back and forth.  The epidemic yoyo.  Because in fact we find none of the scenarios tolerable.  Because they are not.

David Brooks postulates another possible form of time inconsistency:

What happens when there are a lot of people who’ve had the disease and become temporarily immune. They start socializing. Social distancing for the rest become harder if not impossible.


I greatly fear the epidemic yoyo.  And figuring out how to deal with it may be at least as important as calculating the numerical returns from various consistent policies.

I thank an anonymized correspondent for the term “epidemic yoyo.”

The *Love Letter* has a P.S.

As people start reacting to Covid-19, they are looking mostly to the larger businesses for assistance. Costco and Walmart are packed. Amazon and UPS are delivering our packages. For entertainment at home, Americans are relying on Netflix and the cable companies. For information on Covid-19, Twitter is a very useful stop. As hospitals become overcrowded, CVS and Rite Aid may become important as local health centers and sources of community information.

It turns out that the larger, more profitable businesses are the ones that have the talent, the command of public attention and the financial resources to adjust to these changing conditions.

Big business also has been ahead of the curve when it comes to prediction and adjustment. The NBA postponed its season before most politicians, including the president, realized the gravity of the situation.

Only a month ago, there were headlines mocking Silicon Valley for being overly concerned with Covid-19 and for avoiding handshakes. The tech community had a high degree of advance awareness of Covid-19 problems, and it was ready with telework and other adjustments when the time came. The tech world’s penchant for carrying what seemed to be absurdly large surpluses of cash — last year Apple had over $100 billion in cash reserves — now also seems prescient. Apple’s stores are currently closed in most parts of the world.

And this:

Larger businesses are also easier to assist if necessary. Whatever you think of the forthcoming bailout of the major U.S. airlines, logistically it will not be very difficult to pull off, since the targets are large and obvious and relatively easy to monitor. Banks are willing to lend to them, because they know the government does not contemplate a world without major airlines.

It is much more difficult to bail out the millions of small and medium-sized enterprises around the world that will demand assistance. How do you find and track them? How can you tell which have no chance of bouncing back? Government bureaucracies cannot easily deal with those problems, and in turn private banks do not perceive governments to be making credible commitments to these small businesses. By contrast, there are numerous precedents for governmental aid or loans to airlines or other major businesses.

That is all from my latest Bloomberg column, much more at the link.  One problem Italy has, of course, is a fairly high reliance on small business.

Bill Dupor of the St. Louis Fed on fiscal remedies

The entire piece is interesting, here are two highlights:

Subsidize COBRA Continuation Coverage Employer -provided health insurance is commonplacein the United States. Laid off (or furloughed) workers, even if they receive higher UI replacement rates, would (or at least could) lose their health insurance. The federal government already has the COBRA program to allow for continuation of coverage for workers losing their jobs. This program, however, requires worker-paid premiums. These premiums increase the relative cost of engaging in nonmarket activities. To reduce that cost, the federal government might temporarily cover 70 percent of the COBRA premiums for the unemployed or furloughed. Calculating an appropriate size of such a program, even in a rough sense, is difficult at this stage. For a baseline, suppose the allocation were $25 billion, which was the value of a similar program implemented under the 2009 Recovery Act.

And here is another way to get cash into people’s hands quickly:

Penalty-Free Withdrawals from Individual Retirement Accounts

Many Americans hold tax-deferred individual retirement accounts. Individuals can withdraw funds on retirement (and a few other special situations) or any time they wish if they pay a 10 percent penalty. This 10 percent penalty is in addition to the taxes that are due on the withdrawal. In the event of a severe viral outbreak, the federal government could temporarily remove this 10 percent penalty up to a certain dollar amount and for a preset length of time. Since the initial contribution to the retirement fund was tax deferred, taxes would need to be paid on the withdrawal even if the additional penalty was waived.


Convalescent Blood Therapy

A simple and medically feasible strategy is available now for treating COVID-19 patients, transfuse blood plasma from recovered patients. The idea is that the antibodies from the recovered patients will help the infected patients. The idea is an old one and has been used before with some success. Here is Robert Kruse from Johns Hopkins (who also makes other suggestions):

A simple but potentially very effective tool that can be used in infectious outbreaks is to use the serum of patients who have recovered from the virus to treat patients who contract the virus in the future. Patients with resolved viral infection will develop a polyclonal antibody immune response to different viral antigens of 2019-nCoV. Some of these polyclonal anti-bodies will likely neutralize the virus and prevent new rounds of infection, and the patients with resolved infection should produce 2019-nCoV antibodies in high titer.Patients with resolved cases of 2019-nCoV can simply donate plasma, and then this plasma can be transfused into infected patients. Given that plasma donation is well established, and the transfusion of plasma is also routine medical care, this proposal does not need any new science or medical approvals in order to be put into place. Indeed, the same rationale was used in the treatment of several Ebola patients with convalescent serum during the outbreak in 2014–2015, including two American healthcare workers who became infected.

As the outbreak continues, more patients who survived infection will become available to serve as donors to make antisera for 2019-nCoV, and a sizeable stock of antisera could be developed to serve as a treatment for the sickest patients.

Kruse worries that the exponential growth of the pandemic will be too fast but I think he makes a mistake. The number of recovered patients will far exceed the number of hospitalized patients so the supply of plasma will rise more quickly than the demand.

Convalescent blood therapy was used to treat people during the 1918 flu pandemic and appeared to be useful (see here for references to papers from that time.) A recent meta-analysis of patients treated with blood therapy during the 1918 flu found good results (noting, of course, that data from a hundred years ago wasn’t ideal) :

Patients with Spanish influenza pneumonia who received influenza-convalescent human blood products may have experienced a clinically important reduction in the risk for death. Convalescent human H5N1 plasma could be an effective, timely, and widely available treatment that should be studied in clinical trials.

Blood therapy has also been used periodically since that time to treat Ebola patients, MERS patients, Junin patients and others but under non-ideal conditions where lots of things were being tried at the same time and controls were not ideal. Results have been mostly positive or non-negative, e.g. this study on 84 Ebola patients found few benefits but also small costs. Blood therapy has also been used for animals.

To implement we need a database of recovered patients. The recovered patients then needed to be tested to find those with the most antibodies. It is probably best to use recovered patients from the same location to maximize overlap although the Chinese brought plasma from China to Italy. Most of the dangers from blood transfusion such as passing on another disease are well understood and should be manageable with testing and knowledge of donors. In rare cases such as Dengue it can bad to stimulate the immune system (see discussion here).

Plasma therapy is not difficult and there are firms with expertise in the field including Takeda and Regenernon the latter of whom developed a blood based treatment for Ebola. Thus, CBP seems worthy of consideration.

Hat tip: Monique van Hoek.

The best economic plan against the coronavirus

I have produced a 7 pp. document, mostly micro- rather than macroeconomics, leaving the pure health and health care issues aside, you will find it here (link is now corrected).  Intended for policymakers.  Here is the opening bit:

“We need a series of policies to achieve some rather complex ends, and in conjunction. Other than the obvious goals (“minimize human suffering”), these ends are:

  1. Scale down economic activity in a rapid way to keep people at home, but without devastating the physical, cultural, or organizational capital that will be needed to restore growth and normality.

  2. Boost the confidence of markets — both retail and financial markets — by showing progress in limiting the spread of the disease. (But note that merely slowing the spread of the disease may not help the economy, as uncertainty would linger for longer periods of time.)

  3. Keep business in a position to rebound.

  4. Create incentives for production to bounce back once that is appropriate.

You will notice a tension between #1 and #2-4, which is what makes this policy issue so difficult. The ideal policy mix should both lower and raise output, and at just the right speed. No one ever taught us how to do that.

Furthermore, policymakers need to figure out which sectors a) we wish to keep up and running (food, health care), b) which sectors we want to contract rapidly but bounce back rapidly as well (education), and c) which sectors we do not want to protect at all and would be willing to see perish (e.g., cruise ships, note that most operate under foreign flags and employ mainly non-Americans). 

Those classes of sector may require very different economic policies, most of all we should not waste aid on the latter class of sectors. Be nervous of general proposals for “the economy.”

Again, here is the link, please do leave your suggestions in the comments section of this blog post.  I thank Patrick Collison for some writing and editing assistance with this document, though of course he is not liable for its final contents or conclusions.

Mercatus call for short papers

Today, the Mercatus Center put out a call for policy briefs related to the COVID-19 pandemic. We hope to gather short, actionable analyses for decision makers in the public, civil society, and private sectors regarding both immediate response (what’s working or could be done immediately), as well as in the medium term (what do we need to be thinking about now so that we’re prepared in six to twelve months).

More information can be found here.

Papers will be published quickly (within 24 hours in most cases), and authors will receive a $1,000 honorarium.

The list of possible topics is advisory and by no means comprehensive; our goal is to assemble the smartest actionable analyses as quickly as possible.

Hedgehogs in particular: what do you know here that the foxes should hear?

Note that research need not directly relate to public policy, but also how the business sector and civil society can and should respond.

Tuesday assorted links

It matters that more older people are working now

Working women – For the first time, there are now more women aged 60-64 in work than not, analysis of data from the Office for National Statistics shows. The shift has been triggered by changes to the state pension age, the data reveals, with the number of older women in the workforce increasing by 51% since the reforms were introduced in 2010. The number of working men aged between 60 and 64 increased by 13% over the same period. Experts described the shift as “seismic” and said it would have profound implications for women now and in later life.

That is from the Guardian about the UK, via Stephen Gibbons.

Monday assorted links