Category Archives: PSST and Macro

A simple solution for the virus?

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UPI reports,

A commercially available nasal antiseptic solution “inactivates” COVID-19 just 15 seconds after the coronavirus is exposed to it, effectively preventing the infection from developing, according to a study published Thursday by JAMA Otolaryngology-Head & Neck Surgery.

It works in test tubes, but needs to be proven to work on humans. In theory, it could make my outlandish prediction that we will give up on a vaccine come true. But have we already invested too much financial, political, and cultural capital into “wait for a vaccine” to adopt an alternative?

Naive realism and the pandemic

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Ross Douthat writes,

it probably makes more sense to compare the U.S. death toll to similarly positioned and sized countries — meaning the biggest countries in Western Europe and our major neighbors in the Americas — than to compare us to a global average. And when you compare deaths as a share of population within that group of peer countries, the U.S. starts to look more mediocre and less uniquely catastrophic.

He is responding to the views of his newspaper’s writers and readers that the United States suffered many more COVID deaths because Donald Trump was President. I think that this view is very widespread and very wrong.

A lot of research suggests that non-pharmaceutical interventions made little or no difference in cross-regional and cross-country comparisons. Statistical comparisons aside, tell me what policies the President could have put in place that would have made a large difference. Show your work, keeping in mind how many deaths seemed to stem from New York subways and nursing homes.

Jeffrey Friedman introduced me to the term naive realism, which is an important concept with a misleading name. I would explain naive realism as follows.

A first-order naive realist believes that he knows enough to solve a problem if he were in charge.
A second-order naive realist admits that he does not know the solution, but he is sure that someone could solve the problem if that person were put in charge.

It seems to me that there are a lot of naive realists about the pandemic. To them, I would say the following:

1. Even now, there are huge gaps in our knowledge. It is not clear that after more than 6 months we know what the optimal policy should be or should have been.

2. Among experts, the most touted solution is massive testing along with “track and trace.” But in February or March, when this might have made a large difference, it was logistically and politically impossible. It was logistically impossible for many reasons, including the fact that the FDA was in the process of disapproving any test not issued by the CDC, and the CDC was in the process of issuing faulty tests. It was politically impossible because in early March, politicians on the left were positioning themselves against taking the virus seriously, arguing that to do so was anti-Asian and racist.

3. Health experts were against masks.

I am not saying that President Trump said the right things or gave good advice. But to me, the view that we would have had a different outcome under a different President seems difficult to support.

Macroeconomics I can approve

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Raj Chetty and others write,

we study the mechanisms through which COVID-19 affected the economy by analyzing heterogeneity in its impacts. We first show that high-income individuals reduced spending sharply in mid-March 2020, particularly in areas with high rates of COVID-19 infection and in sectors that require in-person interaction. This reduction in spending greatly reduced the revenues of businesses that cater to high-income households in person, notably small businesses in affluent ZIP codes. These businesses laid off many of their employees, leading to widespread job losses especially among low-wage workers in affluent areas. High-wage workers experienced a “V-shaped” recession that lasted a few weeks in terms of employment loss, whereas low-wage workers experienced much larger job losses that persisted for several months. Building on this diagnostic analysis, we use event study designs to estimate the causal effects of policies aimed at mitigating the adverse impacts of COVID-19. State-ordered reopenings of economies have small impacts on spending and employment. Stimulus payments to low-income households increased consumer spending sharply, but little of this increased spending flowed to businesses most affected by the COVID-19 shock, dampening its impacts on employment. Paycheck Protection Program loans increased employment at small businesses by only 2%, implying a cost of $300,000 per job saved. These results suggest that traditional macroeconomic tools – stimulating aggregate demand or providing liquidity to businesses – have diminished capacity to restore employment when consumer spending is constrained by health concerns

Pointer from Tyler Cowen.

The natural slowdown in virus spread

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Andrew Atkeson, Karen Kopecky, and Tao Zha write,

Relatively slow growth or even shrinkage of daily deaths from the disease was observed in every location that we study 20-30 days after that location first experienced 25 cumulative deaths, and the dispersion in growth rates of daily deaths across locations fell even more rapidly

They argue that the uniformity of this pattern across different locations implies that differences in lockdown policies are not important. This could be because the private responses to the pandemic are more uniform, or the network structure of social interaction leads to a rapid spread followed by a slower spared, or there is some biological factor at work. On the latter point, they cite another paper which reports that

of eight major influenza pandemics that have occurred since the early 1700’s (including the Spanish Flu of 1918-19), seven had an early peak that disappeared over the course of a few months without significant human intervention. Unfortunately, each of those seven had a second substantial peak approximately six months after the first.

I recommend the whole paper.

Meanwhile, Greg Ip writes,

Five months later, the evidence suggests lockdowns were an overly blunt and economically costly tool. They are politically difficult to keep in place for long enough to stamp out the virus. The evidence also points to alternative strategies that could slow the spread of the epidemic at much less cost. As cases flare up throughout the U.S., some experts are urging policy makers to pursue these more targeted restrictions and interventions rather than another crippling round of lockdowns.

My sense is that the best science says that we don’t know what works. Lockdowns are certainly the most theatrical policy, though. They allow politicians to show that they care. They are the equivalent of Hansonian medicine.

Note how well what I thought were outlandish predictions three months ago are holding up.

Misperceptions of virus risk

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Sonal Desai writes,

The discrepancy with the actual mortality data is staggering: for people aged 18–24, the share of those worried about serious health consequences is 400 times higher than the share of total COVID deaths; for those age 25–34 it is 90 times higher.

I am not so happy with the metric here.

Let A = someone is worried about health consequences of the virus.

Let B = someone dies of the virus

Let C = someone is 18-24.

The claim that young people have a distorted view of their risk would be that p(A/C) is way too high relative to P(B/C). But the data that they are presenting seems to me to compare P(A/C) relative to P(B and C)

But let us stipulate that in fact young people now tend to greatly over-estimate the risk. Why would this be?

1. Tyler Cowen predicted this with one of his very first posts on the virus–that we would under-estimate the risk early and then over-estimate the risk. More recently, he speaks of phantom risk, or the “stigma” of cases.

2. Desai cites partisanship and media hype. I agree that this is a hypothesis, and perhaps when President Biden takes office the mainstream media will decide that it’s time to say that it’s safe for people to go back to work and school. But I think that the virus fears are too deep in our collective psyche for the media to undo them.

3. Respect for authority is still a thing, and the authorities are saying that schools cannot open, etc. So people infer that the risk must be pretty great.

4. I don’t think we can say that fear of the virus is completely irrational. As of a week ago, the average daily death figures continued to hover at around 1000, and if you extrapolate that to an annual rate of 365,000 it is frighteningly high. And young people know that even if they do not suffer adverse consequences, they may come into contact with friends or relatives who are older and more vulnerable.

Virus update

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Jeff Harris, who did some research claiming that the NY subway system affected the outbreak there, is still ringing that bell.

That leaves us with the public transportation system, particularly New York City’s public subway system. We continue to stress the word system, because we should think of the subways not as a loose aggregate of individual stations docked in individual neighborhoods, but as a whole, as a mechanism for efficiently pooling millions of individuals into one large mixing basin.

New York City’s unique subway system had the capability in late February and early March to rapidly disperse SARS-CoV-2 throughout the city’s boroughs

Elsewhere, Harris notes that the falling ratio of deaths to reported cases suggests that treatment is getting better. That goes along with my prediction that treatment is more likely than a vaccine to be the solution.

Tyler Cowen notes that testing with rapid results could change the game, also, and he put some grant money where his mouth is. Read the whole post.

Suppose that with current best treatment practices (aided by rapid-results testing?), out of 10,000 otherwise healthy people who get the virus, fewer than 5 suffer adverse long-term consequences. Are we still supposed to structure our lives around fear of the virus?

Of course, health experts cannot or will not give us an estimate of how many out of 10,000 otherwise health people will suffer adverse long-term consequences if they get the virus. Because we are in the dark, every outbreak of cases becomes a justification for allowing our lives to be directed by health experts.

I note that this paper looks at India’s performance with respect to the virus by comparing age-specific case fatality rates across countries. The U.S. is not one of the comparison countries. Probably because we do not have the data broken down that way?

The new class war and the virus

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Michael Lind writes,

The present system serves the credentialed elite in the large private, public, and nonprofit bureaucracies of the managerial elite quite well. In contrast, the members of the professional bourgeoisie and the small business bourgeoisie live in terror of proletarianization. Many professionals fear they will not be able to secure high-status jobs with their educational credentials, and the small proprietors fear they will lose their businesses and be compelled to work for others.

Lind sees a class war between the credentialed professionals and small business owners, with the managerial elite positioned more securely. Now, let us think about the virus situation. Many (but not all) of the credentialed professionals are able to telework. Note that many small businesses are vulnerable. Note that the managerial elite are almost all able to telework.

The managerial elite, who were already ahead, are winning during the virus crisis. You can see that in the fortunes of the S&P 4. The small business owners are losing heavily. The credentialed professionals fall somewhere in the middle. But you can see who has an interest in maximizing fears of the virus and who has an interest in minimizing those fears.

Turning to the George Floyd protests, Lind writes,

I am not the first to observe that what were initially legitimate protests against the use of excess force and racism by particular police departments have turned into a campaign for greater funding for social-services jobs and diversity officer jobs for members of the professional bourgeoisie

Lind’s point is that, not so coincidentally, economic interest tends to align with political tribalism on these issues.

The virus as a social change agent

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Balaji S. Srinivasan writes,

Every sector that had previously been resistant to the internet (healthcare, education, law, finance, government itself) has now flipped to remote-first.

This is a response to Einat Wilf, who writes,

Many of us have been forced to homeschool our children. In doing so, some of us have been realizing a parenting fantasy or living a parenting nightmare, or both. Either way, we’ve become aware of the many ways in which teaching and learning can take place at home. Even many adults have had time to pursue the wealth of excellent learning materials available for free or limited cost—including classes and lectures from the world’s best universities.

I think that the future in many of these areas will be a blend of approaches from the pre-virus era and the virus era.

And if the government schools should self-destruct in the process, so be it.

When to re-open schools? How about never?

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A commenter asked for my views on re-opening schools this fall.

If “re-open schools” means trying to go back to schooling as it existed before the virus with various rules added in an effort to reduce contagion, then I don’t think you can count me in the re-open camp.

With or without a virus, I want schooling to be reinvented. If it were up to me, I would try to use the virus crisis as an opportunity to be more aggressively experimental. Many of these experiments would enable education to take place with less risk of contagion, but that would not be the main purpose of the experiments.

I want children to learn to read. If the child is already a good reader, or if the parents are likely to teach the child to read, then school may be optional for a child aged 5 to 8. But otherwise, I think that failing to provide the child with school could be tragic.

For the child aged 5 to 8 whose parents are not as capable of teaching reading as the school, I want to see about 2-3 hours a day of school, focused on reading and arithmetic. The school could provide additional hours of day care, mostly in the form of music, art, and outdoor recess, to enable parents to work. Note Bryan Caplan’s rant about the day care issue.

If schools won’t provide daycare, why on Earth should taxpayers continue to pay over $10,000 per year per child? Every taxpayer in Fairfax County now has an ironclad reason to say, “I want my money back.”

The older the child, the less I want to see traditional schooling and the more I want to see a blend of online learning, project-based learning, computer gaming, and some ordinary classroom learning. I want to see much more physical exercise and much less sitting. The online learning would come from specialized companies, not from regular teachers.

Assuming that these ideas work for children near the center of the emotional and cognitive bell curve, you still have children who are far from that center. Those children will require programs suited to their particular traits.

Back to the present. Is it not odd that, because of the way they have lined up on Trump and the virus, that the Right is now pro-school and the Left is now anti-school? I find this amusing.

Also, my guess is that the surge in home schooling is particularly pronounced among progressive parents. I see interesting potential there.

The virus as a PSST shock

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David Autor and Elisabeth Reynolds write,

The COVID crisis appears poised to reshape labor markets along at least four axes: telepresence, urban de-densification, employment concentration in large firms, and general automation forcing. Although these changes will have long-run efficiency benefits, they will exacerbate economic pain in the short and medium terms for the least economically secure workers in our economy, particularly those in the rapidly growing but never-highly-paid personal services sector.

Pointer from Tyler Cowen. Also discussed by Timothy Taylor.

I keep emphasizing that a recovery in terms of employment will require a massive amount of entrepreneurial experimentation. I think that deregulation and cutting payroll taxes are the best hope there. If instead you get a lot government debt/money being issued with an inflexible economy, the only result will be bidding up prices for the offerings of the surviving businesses.

On the payroll tax cut, I believe that President Trump is correct. I wrote,

government ought to be encouraging the transition to new activities that are profitable in a virus-conscious economy. One way to do so would be to pay businesses a wage subsidy to hire workers. Another method would be to cut the payroll tax. An economy-wide incentive to add workers would have more bang for the buck than a costly effort to keep uneconomical businesses afloat.

It is sad that even some Republican Senators prefer Keynesian remedies. Shows you how little influence I have.