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Bryan Caplan on the cost of Covid

Here is Bryan’s post, here is one bit:

Taking quality of life into account, how many life-years has the reaction to COVID destroyed?…

Upshot: The total cost of all COVID prevention has very likely exceeded the total benefit of all COVID prevention.

I don’t agree with Bryan’s numbers, but the more important point is one of logic.  The higher the costs of reaction to Covid, the stronger the case for subsidizing vaccines, therapeutics, and other corrective measures.  Would you accept this Bryan?  You have numerous posts about risk overreaction, but not one (if I recall correctly) calling for such subsidies.  Furthermore we just did some of those subsidies, through Operation Warp Speed, and they worked and they will fix the relevant incentives and lead to a resumption of normal life.  So the “subsidies will prove counterproductive” argument doesn’t seem strong here.  The subsidies are the (much) quicker path back to what you desire.

A second question is whether moral suasion — “don’t overreact to Covid!” — is likely to prove effective.  As I’ve already linked to, risk explains mobility reductions far more than do lockdown policies.  Or consider Sweden, which had a relatively non-panicky Covid messaging, no matter what you think of their substantive policies.  Sweden didn’t do any better on the gdp front, and the country had pretty typical adverse mobility reactions.  (NB: These are the data that you don’t see the “overreaction” critics engage with — at all.  And there is more where this came from.)

How about Brazil? While they did some local lockdowns, they have a denialist president, a weak overall response, and a population used to a high degree of risk.  The country still saw a gdp plunge and lots of collateral damage.  You might ponder this graph, causality is tricky and the “at what margin” question is trickier yet, but it certainly does not support what Bryan is claiming about the relevant trade-offs.

I keep on hearing this point again and again, about overreaction.  What kinds of reaction are you expecting or viewing as feasible and attainable?  If overreacting is indeed a public bad, why think you can talk people down out of it?  How much do you think you can talk them out of it?  What if someone suggested that we try to talk people out of their irrational voting patterns, as analyzed by Bryan’s The Myth of the Rational Voter?  How sanguine would he be about that enterprise?  I believe he instead stressed changes in relative prices.

And this is the huge flaw behind so much of the discourse about the “costs of lockdowns” — they can cite the stupidity of closing the parks in March, yes, but they don’t and indeed can’t tell you how most of those costs were to be avoided, given how the public reacts to risk.

If we instead look to the relevant changes in relative prices, that means subsidies for vaccines and tests, most of all through advance market commitments, but not only.  And a full-scale commitment to implementing testing and masks and therapeutics.

The more you push home points about overreaction, the more you ought to favor these subsidies.  Libertarians out there, do you?  This chicken has come home to roost, so please fess up and give the right answer here.  Do you favor these subsidies, not just murmured into your closet at night but in plain black and white for the world to read?  Moral suasion against risk overreaction is a red herring, fine enough for cutting back on one part of the problem by maybe a few percentage points, but serving mainly to distract from the very real economic questions at hand and the need to admit that one’s libertarian ideology doesn’t fit around this problem as nicely as one might wish.

Friday assorted links

1. Home field advantage has gone away in the NFL.  And thread on reading fast.

2. Atlantic profile of Peter Turchin.

3. “No son of mine will marry a consequentialist!”  A lesson in human pettiness.

4. Ticketmaster exploring verifying fans’ vaccine status before issuing concert passes.  And the Golden State Warriors will try to reopen at 50% capacity plus tests for everyone.  And people taking the placebo will get the Pfizer vaccine (but when?).

5. Hall and Kudlyak on the inexorable recovery of employment.

6. “Settlers and Norms,” job market paper by Joanne Haddad.

Sweden Covid-19 update

Do not judge Sweden until the autumn. That was the message from its state epidemiologist Anders Tegnell in May and through the summer as he argued that Sweden’s initial high death toll from Covid-19 would be followed in the second wave by “a high level of immunity and the number of cases will probably be quite low”.

Now the autumn is here, and hospitalisations from Covid-19 are currently rising faster in Sweden than in any other country in Europe, while in Stockholm — the centre for both the first and second waves in the country — one in every five tests is positive, suggesting the virus is even more widespread than official figures suggest.

Even Sweden’s public health agency admits its earlier prediction that the country’s Nordic neighbours such as Finland and Norway would suffer more in the autumn appears wrong. Sweden is currently faring worse than Denmark, Finland and Norway on cases, hospitalisations and deaths relative to the size of their population.

…The number of patients hospitalised with Covid-19 is doubling in Sweden every eight days currently, the fastest rate for any European country for which data is available. Its cases per capita have sextupled in the past month to more than 300 new daily infections per million people, close to the UK and way ahead of its Nordic neighbours.

Here is more from Richard Milne at the FT.  To be clear, it seems that many of the Swedish deaths are due to a “dry tinder” effect, so in relative terms they are not doing as much worse than you might think. Other parts of Europe may well catch up to them, at least on a “tinder-adjusted” basis.  But if you are just asking which predictions of which model are being vindicated here, it is that the herd immunity obtained through a partial neutralization of super-spreaders is temporary rather than permanent.

Source here. And Swedish deaths seem to be 40% of the U.S. equivalent.

To be clear, I did not predict this (or its opposite), but rather for many months I have been saying we need more data from Sweden to draw a conclusion.  Now we have more data.

Where We Stand

There is good news and there is bad news.

Let’s start with the good news.The early results from the Pfizer vaccine are very good, 90% efficacy. That will probably fall a bit but it’s very good news not just for the Pfizer vaccine but for most of the vaccines in the pipeline which target the spike protein.

The Pfizer vaccine does require very cold storage which means it won’t work for large parts of the world. A distribution plan is in place for most of the United States and Pfizer already has 50 million doses, which can cover ~25 million people, in storage.

Many thousands of people are dying every week so Pfizer should apply for and the FDA should issue a EUA without further delay.

One issue is, given limited supply, how to distribute the vaccine. I have suggested we randomize distribution across hospitals, police and fire stations, and nursing homes (see also my piece in Bloomberg with Scott Kominers, The Case for a COVID Vaccine Lottery.) A vaccine lottery is fair, it will make distribution easier by limiting the number of vaccination locations and it will in essence create a very large clinical trial. With millions of participants we will be better able to make fine distinctions between the vaccine’s safety and efficacy in different populations and the results will come in quickly. Thus, if we randomize and collect data, limited capacity has a silver lining.

Second issue. Manufacturing capacity. Pfizer will have enough capacity to produce 1.3 billion doses in 2021 which sounds like a lot but it’s a two dose vaccine and there will be losses in distribution so maybe 500 million people vaccinated. We need to vaccinate billions.

The cost to the world economy of COVID is in the trillions so we want to vaccine a lot faster. Faster than private markets are willing to go. There are other vaccines in the pipeline but we still need to ramp up capacity. Increasing capacity is something that Michael Kremer, Susan Athey, myself and others at Accelerating Health Technologies have been working on since the beginning of the crisis. It’s not too late to do more.

Third issue is testing. Trump got it into his head that more tests means more cases when in fact a lot more tests means fewer cases. There is a Laffer curve for testing. Our failure to get ahead of the virus with tests has meant hundreds of thousands of excess deaths. We are still failing this test. Winter is coming. Infections and deaths are both rising.

Biden won’t be president until late January but there are things he can do now. In particular, Congress already allocated $25 billion to testing in April—that was far too little. We spent trillions on relief and comparatively little fighting the virus. But here is the real shocker, most of the $25 billion allocated in April hasn’t been spent. Let me say that again, most of the money allocated for testing in April has not been spent. Biden can signal today that that money and more will be spent. He can also signal, as in fact he has, that he wants rapid antigen tests approved.

Rapid antigen tests are cheap, paper strip tests that can check for infectiousness and are ideal to getting things like the schools running again.

Even if we start vaccinating this year, we won’t vaccinate a majority of the US population until well into 2021. That’s true but what’s underappreciated is that testing, masks, social distancing and vaccines are complementary. The more people are vaccinated, for example, the greater our testing capacity rises relative to the population at risk.

The pandemic is getting worse not better but we did flatten the curve, albeit imperfectly, and now if we can summon the will, we have the tools including rapid antigen tests, vaccines and monoclonal antibodies to really crush the virus.

Are body cameras effective for constraining police after all?

Controversial police use of force incidents have spurred protests across the nation and calls for reform. Body-worn cameras (BWCs) have received extensive attention as a potential key solution. I conduct the first nationwide study of the effects of BWCs in more than 1,000 agencies. I identify the causal effects by using idiosyncratic variation in adoption timing attributable to administrative hurdles and the lengthy process to the eventual adoption at different agencies. This empirical strategy addresses limitations of previous studies that evaluated BWCs within a single agency; in a single-agency setting, the control group officers are also indirectly affected by BWCs because they interact with the treatment group officers (spillover), and agencies that give researchers access may fundamentally differ from other agencies (site-selection bias). Overcoming these limitations, my multi-agency study finds that BWCs have led to a substantial drop in the use of force, both among whites and minorities. Nationwide, they reduce police-involved homicides by 43%. Surprisingly, I do not find evidence that BWCs are associated with de-policing. Examining social media usage data from Twitter as well as data on the Black Lives Matter (BLM) movement, I find that after BWC adoption, public opinion toward the police improves. These findings imply that BWCs can be an important tool for improving police accountability without sacrificing policing capabilities.

That is from a new paper by Taeho Kim, on the job market from the University of Chicago, a Steve Levitt student.  The piece has a revise and resubmit from ReStat.

Rising Ethnic Diversity in the United States Accompanies Shifts Toward an Individualistic Culture

This is consistent with some claims by Bryan Caplan, and perhaps contra what used to be called the new Democratic demographic strategy:

We investigate the relationship between ethnic diversity and the rise of individualism in the United States during the 20th and 21st centuries. Tests of the historical rates of ethnic diversity alongside individualistic relational structures (e.g., adults living alone, single-/multi-child families) from the years 1950 to 2018 reveal that societal and regional rates of ethnic diversity accompanied individualistic relational structures. These effects hold above and beyond time-series trends in each variable. Further evidence from experimental studies (N = 707) suggests that the presence of, and contact with, ethnically diverse others contributes to greater individualistic values (e.g., the importance of uniqueness and personal achievement). Converging evidence across societal-, regional-, and individual-level analyses suggests a systematic link between ethnic diversity and individualism. We discuss the implications of these findings for sociocultural livelihood in light of the rising rates of ethnic diversity across the globe.

That is from a new paper by Alex C. Huynh and Igor Grossman.  Via the excellent Kevin Lewis.

When will vaccine tourism come?

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

It is now possible to have a decent sense of which nation is winning the vaccine race, and it is not the U.S. A Chinese vaccine is being distributed now, and so far it seems to be safe and modestly effective. The data are not sufficiently clear that you ought to get one now, but it is easy to imagine that in another month or two the Chinese vaccine will be a plausible option.

And no, you probably won’t have to go to China for the jab. The Chinese vaccines are being distributed on a global basis, and are already in extensive tests in the United Arab Emirates. The timing is uncertain, but with delays on the U.S. side it is entirely possible that come January you will be able to get a “good enough” vaccine in Dubai but not in Dallas.

So would you get on that plane?

And:

You might think there will be complicated allocation rules limiting your ability, as a foreigner, to have access to these vaccines. That is likely true, but there is also going to be slippage. Say you are a front-line nurse overseas, and you already had Covid back in March. The private clinic you work for will be able to order a vaccine on your behalf, but then turn around and sell it to a visiting foreigner for, say, $20,000.

There is much more at the link.

The Nobel Prize: Milgrom and Wilson

The 2020 Nobel Prize in Economics goes to Paul Milgrom and Robert Wilson for auction theory and the improvement of auction designs. The Nobel Committee has a popular introduction and good scientific overview of auction theory. Billions of dollars of spectrum and other natural resources have been allocated using auctions designed by Milgrom and Wilson and their co-authors.

The money won’t mean much to these winners, who have made plenty of money advising firms about how to bid in the auctions that they designed. Milgrom’s firm Auctionomics advertises its service and Milgrom notes:

Milgrom has advised bidders in radio spectrum auctions, power auctions, and bankruptcy auctions. One advisee, Comcast and its consortium, SpectrumCo, followed the advice of a Milgrom’s team in FCC Auction 66 to achieve the most exceptional performance in US spectrum auction history. SpectrumCo saved nearly $1.2 billion on its spectrum license purchases compared to the prices paid by other large bidders – such as T-Mobile and Verizon – for comparable spectrum acquired at the same time in the same auction. SpectrumCo’s tactics included a $750 million jump bid – the largest in the history of US spectrum auctions and a move that prompted the FCC to change the auction rules.

You can figure that Milgrom got a percentage of those savings! Milgrom also advised Yahoo and Google, among other tech firms, on their advertising auctions.

My post Mechanism Design for Grandma written for the Hurwicz, Maskin and Myerson Nobel, has some background on auctions.

Auction theory and auction practice arose together–this is not a case of theory being rediscovered decades later by practitioners but of the demands by practitioners leading to new theory and new theory leading to new institutions. The Nobel committee notes:

In the early 1990s, an explosion of the demand for mobile communication made the U.S. federal government decide to use an auction for allocating radio-spectrum licenses among telecommunication firms. Previously, the U.S. Federal Communications Commission (FCC) had only been allowed to rely either on administrative procedures—commonly referred to as “beauty contests”—or on lotteries. These methods had notably failed in a number of complex settings, at the expense of both taxpayers and end-users…The obvious alternative is to adopt an auction to as-sign licenses. In fact, as early as in the 1950s, the 1991 Laureate Ronald H. Coase argued that the basic principle should be to allocate objects, such as broadcasting licenses, to the firms who will make the most efficient use of them, and the best way to identify these firms is to assign the objects through a competitive price mechanism (Coase, 1959).

…Following the FCC policy shift, multi-object auctions turned from an esoteric topic at the fringe of microeconomic theory to a hot research topic almost overnight.

…For the 1994 FCC auction, the final version of the newly designed auction was the Simultaneous Multiple Round Auction (SMRA)…[which] raised some $20 billion for the U.S. federal government, twice the forecasted amount. This outcome attracted considerable media attention and led other governments to set up their own auctions. The U.K. 3G spectrum auction that concluded in 2000 raised about $34 billion for the British government (Binmore and Klemperer, 2002). The SMRA auction format became the dominant design for spectrum sales worldwide, and versions of it have been used in Canada, Finland, Germany, India, Norway, Poland, Spain, Sweden, theU.K., and the U.S. These auctions have generated hundreds of billions of dollars for governments worldwide.

Perhaps the most impressive culmination of this work was the 2017 incentive auctions which “simultaneously” bought licenses from over-the air broadcast television stations and resold them to modern cellular phone bidders while respecting constraints so that over-the-air frequencies could be repackaged in ways such that they would not interfere with one another. The auction bought licenses for $10 billion, sold them for $20 billion, generating $10 billion in profit and generating an even larger increase in consumer surplus.

The first is a reverse auction that determines a price at which the remaining over-the-air broadcasters voluntarily relinquish their existing spectrum-usage rights. The second is a forward auction of the freed-up spectrum. In 2017, the reverse auction removed 14 channels from broadcast use, at a cost of $10.1 billion. The forward auction sold 70 MHz of wireless internet licenses for $19.8 billion, and created 14 MHz of surplus spectrum. The two stages of the incentive auction thus generated just below $10 billion to U.S. taxpayers, freed up considerable spectrum for future use, and presumably raised the expected surpluses of sellers as well as buyers.

These auctions also brought home that economics is now tied to computer science. The complexity of the allocation process was so high that new algorithms had to be devised. In particular, repackaging of the frequencies involved solving hundreds of thousands of graph-coloring problems, an NP-hard problem. Computer scientist Kevin Leyton-Brown was brought in to design and optimize the necessary algorithms. At the same time, Milgrom and Segal had to prove that their auction could be characterized in such a way that it could be solved in reasonable time by known algorithms.

Computer scientist Tim Roughgarden has an excellent video lecture on how implementing the incentive auction required a combination of cutting-edge economics and computer science. More generally, mechanism design in the real world, including auction design, Uber’s supply and demand mechanism, blockchains like bitcoin and many other examples, requires both economists and computer scientists to devise institutions and algorithms that incentivize socially beneficial behavior and that can also be solved in real time for real populations.

See Tyler’s post on Milgrom and on Tyler’s post on Wilson for much more, going well beyond their contributions to auction theory.

Friday assorted links

1. Were the experts too slow to embrace travel restrictions? (NYT)  And the Covid culture that is German (short video).

2. Does personality drive moral judgement?: Polite deontologists and curious consequentialists.

3. My rewrite of this thread: doctors hate highly beneficial but somewhat inaccurate testing methods that lower their status and good feelings about themselves.

4. Further results on “dry tinder” in the Nordics: “My results show that a large share of the excess mortality in Sweden in April 2020 may be partially explained by a vulnerable, elderly population due to very mild flu seasons in 18/19 and 19/20 as well as very few deaths during the 2019 summer compared to earlier years and compared to other Nordic countries.”

5. John Cochrane on political diversity in the AEA.

6. NASA tests new $23M titanium space toilet.

7. Do we find herd immunity in the NYC data?

Wednesday assorted links

1. Russian billionaire wants to buy cancelled Confederate statues.

2. “Nursing homes have new COVID-19 tests that are fast and cheap. So why won’t N.J. allow them to be used?

3. Where are the missing right-wing firms?  And Arnold.

4. The vaccine protocols.

5. The world forager elite.

6. An evidence-based return to work plan.

7. The nasal spray, which will be entering clinical trials.

8. On the Abraham Accords.

Unintended Consequences of Criminalizing Sex Work

We examine the impact of criminalizing sex work, exploiting an event in which local officials unexpectedly criminalized sex work in one district in East Java, Indonesia, but not in neighboring districts. We collect data from female sex workers and their clients before and after the change. We find that criminalization increases sexually transmitted infections among female sex workers by 58 percent, measured by biological tests. This is driven by decreased condom access and use. We also find evidence that criminalization decreases earnings among women who left sex work due to criminalization, and decreases their ability to meet their children’s school expenses while increasing the likelihood that children begin working to supplement household income. While criminalization has the potential to improve population STI outcomes if the market shrinks permanently, we show that five years post-criminalization the market has rebounded and the probability of STI transmission within the general population is likely to have increased.

That is from a new NBER working paper by Lisa Cameron, Jennifer Seager, and Manisha Shah.

America, meet India

Tata group has received approval from the Drug Controller General of India (DCGI) for the commercial launch of the country’s first CRISPR (Clustered Regularly Interspaced Short Palindromic Repeats) coronavirus test ‘Feluda’, the Council of Scientific and Industrial Research (CSIR) said on Saturday. This test uses an indigenously developed, cutting-edge CRISPR technology for detection of the genomic sequence of SARS-CoV-2 virus, CSIR said in a statement.

The Tata CRISPR test achieves accuracy levels of traditional RT-PCR tests with quicker turnaround time, less expensive equipment and better ease of use.

Here is the full story, via Alex HR.