He writes,

I bet that by the end of the calendar year, the number of deaths that can clearly be attributed to the disease will be greater than 100,000.

Note that he hopes he loses his bet, as do we all.

Think of 100,000 as 10 million cases times a 1 percent death rate.

Why might we get more than 10 million cases? First, it is possible that the number of cases that have not been officially detected is 100x the number of official cases. Because some infected people do not have symptoms, some who have symptoms are not going to get tested, and some who want to be tested have been, until recently, turned away.

Even if the true number of cases in the U.S. is only 10,000 today, if that were to double ten times we would be at 10 million. If the doubling time were a week, it would take only ten weeks to be over 10 million. And as of now the doubling rate is faster than that in many European countries and in the U.S.

But given the sharp reduction in travel and large gatherings that has taken place, I expect that the doubling rate will slow down. Suppose that, after these changes have been in place for a few weeks, we find that it is taking a month or more to double the number of cases. That would make it less likely that we hit the 10 million total by the end of the year. (Although, again, it is hard to know where we are starting from.)

We might also find that we have a lower death rate. Compared with other countries, we have less smoking and more capacity in our health care system. And the steps that we take to protect at-risk populations from the virus may prove effective.

This might be a time to update the status of two hypothetical bets of mine. First, I hypothetically bet that no centrist candidate would arrive at the Democratic convention with more than 40 percent of the delegates. That now looks like a bad bet.

More recently, I hypothetically bet that the number of Covid-19 cases in the U.S. would be more than 12,000 by the end of this week. As of Tuesday evening, the total was over 6000, and it appeared to be doubling every two or three days. Unfortunately, it looks like I will turn out to be correct on that one.

A reader writes,

I’m seeing millions of people, primarily at the middle to lower end of the economic spectrum, who will be financially ruined by the response.

While remaining humane and just, is there a more cost effective approach to the problem, particularly since it seems concentrated in a rather narrow subset of the population (those with compromised immune systems and the 60+ cohort)? E.g. instead of isolating the entire population, why not just isolate those most at risk and compensate them accordingly? How do we weigh the ethical concerns of one group as against another? Why do such questions seem so out of bounds and antisocial?

1. I think that even the “low-risk” population, if they move about freely, are likely to overwhelm the health care system. I doubt that encouraging them to go about their business is the first-best strategy. But it might work out better than other approaches.

2. What we are doing now, which is lockdown-lite, is also not the first-best strategy. It may exacerbate economic pain while failing to do enough to stop the virus. It may be an instance of my two-weeks-behind hypothesis. Still, I think we ought to support the lockdown-lite approach–as you know, my wife and I adopted self-quarantining last Thursday. We ought to give it a chance.

3. I suspect that the first-best strategy is a total, nationwide lockdown for two weeks, enforced militarily. The intent would be to deprive the virus of hosts. Even then, in order to contain subsequent outbreaks, we would have to continue to encourage social distancing, require people to keep track of contacts, and do a lot of random testing of asymptomatic people.

Think of this as comparable to the Arab oil embargo. Probably the harder the adjustment we make sooner, the better it will be. The macroeconomic policies of that era made things worse, and I expect the same to happen today.

I cringe at all the talk of monetary and fiscal “stimulus.” What this means is that governments will use the crisis to enlarge their share of the economy, which will hurt the adjustment process, not help it. It will also “solve” the problem of debt collapse by piling on more debt.

Robin Hanson wrote,

it isn’t crazy to consider cutting pandemic deaths via more infection inequality, including via deliberate exposure.

Pointer from Bryan Caplan.

Consider the following strategy:

1. Separate the population into low-risk and high-risk groups, based on their conditional probability of death if they get the virus. For example, young people with healthy immune systems vs. older people and/or those with compromised immune systems. Separate them not only conceptually, but physically–don’t let anyone from one group get near someone from the other group.

2. Then, allow the low-risk group to become infected, while keeping them away from the high-risk group.

3. Once the low-risk group have recovered, let the two groups mix.

Two reasons to hesitate about doing this. One is that it is not certain that people who have had the virus are immune. There are anecdotes about people re-acquiring the disease. Perhaps there are multiple strains, rather than “the” virus.

A second reason to hesitate is the high rate of death among health care providers, many of whom are young with healthy immune systems. This suggests that there are some other factors that affect risk, and you want to know more about those other factors before you try this approach.

My own “out of the box” suggestion is a program to test a random sample of people who are asymptomatic. That would give us a better idea of the dynamics of virus spreading.

I believe that the best macroeconomic response to the virus crisis would be what I call forbearance. Bank regulators would tell banks that they will be allowed to fall below minimum capital requirements. They will be allowed to write down the value of loans without having to raise capital as a result. They will be encouraged to in turn offer forbearance to borrowers, provided that there is a reasonable prospect that borrowers will be able to get repayments back on track once the crisis has passed.

Under this policy, it will be up to banks to decide which borrowers are in short-term difficulty and which borrowers are never going to recover. If I were at a bank, I would bet on airlines coming back. I would not bet on cruise ships coming back.

You can think of forbearance as a selective soft bailout. When it comes to bailing out industries, you can think of a type I and type II error. Type I error is where you let a business collapse when it could survive with some help to tide it over. A type II error is where you save a business that is really not viable.

Ordinarily, you just let the market operate, and accept the errors that it makes. But the virus crisis threatens to become a financial crisis, and in a financial crisis there will be a lot of Type I errors. These in turn will cause economic activity to fall. But if you provide indiscriminate bailouts, you will make too many Type II errors.

If you provide funds to a troubled firm, then you may commit a Type II error without realizing it. If you only provide forbearance, then you discover your Type II error when even after the crisis passes the firm cannot get back on track. So that limits the duration of the error that you make.

If you just use generic macroeconomic instruments, such as fiscal and monetary stimulus, you end up with a lot of both types of errors. That is how I judge the response to the crisis of 2008. On top of that, there was all sorts of economically useless graft, such as the “green energy” programs included in the fiscal stimulus.

I am skeptical that either quantitative easing or the stimulus actually helped. That is because I think that the “aggregate demand” paradigm is flawed. Economic activity declined because particular patterns of specialization and trade were disrupted. This will also be the case with the virus crisis. More government spending or more expansion of the Fed’s balance sheet will just socialize more of the economy. That will be of little benefit in the short run, and it will cause harm in the long run.

My working assumption continues to be that the elites are two weeks behind in dealing with this crisis. That is, what President Trump did yesterday was probably what he should have done two weeks ago. What I would like to see the top leadership do is ask the Centers for Disease Control to come up with a plan for what to do if three weeks from now the number of cases continues to double every few days with no sign of stopping. Take that plan and execute it now.

My working assumption is that American business and political elites are two weeks behind in their attempts to address the virus crisis. The steps they are taking now were necessary two weeks ago. And the steps that are needed now will not be taken for another two weeks.

So you can look at the news about events being canceled, telework being encouraged, and so on, and say that this is all for the good. But it would have been better to have taken these steps before, say, the Biogen conference.

So ask yourself, what are the steps that we will wish we had taken two weeks from now? Perhaps more self-quarantining by people who do not think they have been exposed.