Category Archives: virus crisis

Thoughts on heterogeneity

Posted on by

Tyler Cowen asks why numbers imply spread rates and death rates that are so difficult to reconcile across regions and countries.

People are feeding their elegant dashboards, nifty charts, and fancy computer models with worthless numbers. Nobody seems to want to listen to me on that. But it would not surprise me to find that all of the heterogeneity that cannot be explained by demographics and differences in treatment quality is simply an artifact of the way that numbers are collected.

Only fools claim to know precisely the true spread rates or the true death rates. We don’t even have decent ballpark estimates.

If we were to obtain data that were good enough to infer true spread rates and death rates, and these rates turn out to differ greatly across regions, then I would speculate on a combination of two factors. First, different variants of the virus, which spread and kill at different rates. Second, a highly skewed spreading phenomenon. That is, instead of every infected person proceeding to infect exactly 2.2 other people, you have a few infected persons infecting dozens of others, and most infected people infecting no one else. Put those two factors together, and you will get heterogeneity. But I emphasize that this is purely speculative. Don’t take this idea and run with it. Stop guessing. Get some facts first.

I wish someone at the CDC would take and run with the idea of obtaining scientific data, rather than guessing using the numbers that are being collected. In a scientific study, the investigator chooses who gets tested for the virus, and when the tests are conducted. The study uses the same type of test kit on every subject, preferably a test kit with a low rate of false positives and false negatives. Tests are conducted by carefully trained workers who follow very standard procedures. Before we test a large sample of people, we administer two tests to 100 people and count the number of times that we get different results on the two tests. If it is large, then we need to figure out how many tests we need to do on one person to get a reliable result.

Of the many problems with numbers as collected and reported, consider the issue of time lag. Suppose that two regions each test 1000 infected people on day 1. Region A reads and records the results a few hours later. Region B reads and records the results a week later. Suppose that the one-week spread rate is 100 percent per week, and each region then tests 1000 new infected people. Suppose that the death rate is 1 percent, and death occurs near the end of the week.

After day 8, each region has 2000 cases and 10 deaths. But region A, which reads the results quickly, will report that cases are doubling weekly and the death rate is 10/2000, or 0.5 percent. Region B, which reads the results slowly, will still report 1,000 cases, with a death rate of 1.0 percent.

Another problem is that there is very large variation in the ratio of tests to infected people, not only across regions but over time within a region. As you ramp up testing, you increase the reported spread rate and lower the reported death rate.

Almost all health agencies have chosen not to monitor this crisis scientifically. I wish I could change that.

A sense of relief

Posted on by

We have been living through tense times. But the legislation that President Trump signed on Friday should make us feel better.

Economists overwhelmingly agree that we needed this dose of fiscal medicine, and probably more, to treat individuals and businesses that are suffering and to minimize the potential for their troubles to spread. Rising to the occasion, Congress put aside its polarized politics and passed the bill. The press, which has been harshly critical of the Administration for its tardy and often ineffectual actions in dealing with the virus, is much more on board with these economic measures. We are seeing America come together to take constructive measures in a crisis.

If you are like most people, the passage of this legislation eased some of your anxiety. Government is doing something, and it’s going to help. You are experiencing a sense of relief.

And you should not read the rest of this post. Continue reading →

The inflation virus

Posted on by

Michael Mandel writes,

In the short run, the sheer disruption of the sudden lockdown advocated by the health experts is going to send both demand and prices plunging. . .

But then, like a tsunami wave, trillions of dollars of Federal Reserve funding and Treasury payments to individuals and businesses will finally come roaring onto shore. Demand should soar for all sorts of goods and services that the global economy is too disrupted to provide in quantity. The most likely outcome: A new era of rising prices like we have not seen since the 1970s.

My thoughts:

1. Right now, we are laughing at the people hoarding toilet paper. But wait a few years. When toilet paper is $50 a roll, we’ll see who’s laughing.

2. The “stimulus” is injecting new money and money-substitutes (I’ll just say “money” from now on) in the economy amounting to 20% of GDP. Since GDP isn’t going up, that is 20 percent more money chasing the same amount of goods. So prices ought to rise by 20 percent at some point.

3, But it doesn’t stop there. Inflation is a social and psychological phenomenon. At some point, people lose the belief that money and government securities are a store of value, because their value is eroding quickly. When that psychology kicks in, what do you do? You try to get rid of financial assets as fast as you can and buy toilet paper. By which I mean all kinds of stuff.

4. When everybody tries to trade financial assets for stuff, what happens? The price of stuff goes up. In other words, the fear of inflation becomes self-fulfilling, causing more inflation. In monetary jargon, the velocity of money goes up.

5. Supposedly the Fed will know how to stop the inflation virus before it causes much damage. But viruses seem to have a way of eluding the government agencies that are supposed to stop them.

Have a nice day.

My idea in the Wall Street Journal

Posted on by

Far and away the best policy solution I’ve seen to the economic hardships created by our response to the Covid-19 pandemic is a proposal by economist Arnold Kling.

That is Tom Giovanetti, of the Institute for Policy Innovation. He continues with an excellent write-up of the credit-line proposal and its rationale.

UPDATE: Following a trail from Tyler Cowen, I got to this post by Miles Kimball.

Instead of mailing $1000 check to each person as is being discussed, mail each adult a government credit card with a $5000 line of credit. Mail similar government credit cards with lines of credit that are a certain percentage of previous revenue to small businesses that would be most strongly affected by the coronavirus.

He wrote that on March 19. So I think he had the idea before I did.

What I won’t forgive

Posted on by

1. Flying blind. I have been complaining about two major unknowns.

(a) We don’t know the true prevalence of the virus. Random-sample testing could have addressed this.

(b) We don’t know the spread mechanisms. For example, we know that the virus can remain on a doorknob for a long time. But we don’t know how likely it is that one will become infected via a doorknob. We need the experiment.

I blame the CDC for continuing to fly blind.

2. Absence of masks. As Americans, we look at masks from a “what will it do for me?” perspective. Maybe if I wear a mask and I’mm around infected people who don’t wear masks, I won’t improve my chances much. But Asians look at it from more of a social perspective. If I wear a mask an I am unknowingly infected, it seems likely that I greatly reduce my chance of infecting other people. So if everybody wears a mask, my thinking is that we can mingle in public and hold the spread rate down. Not to zero, but enough so that we don’t need to cripple the economy with lockdowns.

When I see countries that are a lot closer to China with lower case loads and deaths, and I see lots of masks in use, that makes me think that masks might be sufficient. At least in some parts of the country.

Where is the CDC on this? On the one hand, they tell us that masks won’t work. On the other hand, they tell us that masks are precious and they must be reserved for front-line health care providers.

We should have had a gigantic strategic mask reserve before this crisis started. No, I never thought of that before. But it should have occurred to the CDC. As the saying goes, You Had One Job.

3. On macroeconomic policy, using the same measures that were used in the 2008 financial crisis. This ignores (a) the fact that those tools did not work very well then and (b) this is a different crisis. In particular, this is mostly a liquidity crisis in the nonfinancial sector. We could do without fiscal “stimulus.” We could do without the Fed expanding its balance sheet. We could help people get by with short-term loans. These would enable individuals and small businesses pay rent, utilities, and meet other financial obligations. And perhaps we could let people get back to work if we used the scarves and masks strategy.

I blame economists for falling back on the 2008 playbook.

Who is getting the “stimulus”?

Posted on by

Do your think that your $1000 check is a big deal? Consider this:

Assuming that there are 130 million households, and each household gets $1000, that would amount to $130 billion. Yet the “stimulus” is $2 trillion, so that leaves a lot unaccounted for. Let’s assume that the bill contains $.02 trillion in funds for medical supplies along with $0.13 trillion in checks for households. That leaves $1.85 trillion for special interests.

I know that it’s too late to do anything about it. I should just shut up and move on. But I’m in a bitter mood today. Sorry.

UPDATE. It looks closer to $3000 per household. In that case, call it $0.4 trillion for households and $1.58 trillion for special interests.

Thinking fast and slow

Posted on by

Tyler Cowen writes,

What many people do not realize is that “the speed premium” is vastly higher when a deadly virus is doubling in reach every five to seven days.

We needed a billion masks weeks ago.

But thinking is slow. Eons ago, on March 13, I wrote,

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.

Here are some predictions going forward:

1. The FDA and CDC were slow and often counterproductive in this crisis. But going forward, praise will be heaped on these experts.

2. If and when public health experts finally adopt something like the masks and scarves strategy, they will fill the journals will research papers showing that lockdowns were the key to beating this crisis.

3. No matter how special-interest-fueled, unhelpful, or even counterproductive the $2 trillion “stimulus” turns out to be, economists will fill the journals with research papers showing how it saved the economy.

My point is that it does not pay to be right about the crisis. That is playing Game 1. What pays is to be on the side of the powerful elites. That is playing Game 2. And nothing makes me feel more bitter and betrayed than seeing all the Game 2ers out there, patting each other on the back and gaining in status.

Whose status should be going up? Probably Razib Khan, who on Twitter now styles himself “Self-quarantine if you Khan.”

On March 18, Razib Khan wrote,

To be frank, most of the skeptics of the impact of coronavirus are not very smart.

How about me? On March 12, I wrote,

Even though we have no symptoms and no reason to believe we have been infected, my wife and I are going to try to do everything reasonable to reduce outside contact for a while. Call it “social distancing” or self-quarantining.

How about the former Mencius Moldbug?

On February 1–February first!–Curtis Yarvin wrote,

there is no good reason for anyone to be flying across the Pacific. The same may soon be true of the Atlantic. And certainly, no one should be flying in or out of mainland China—except via a quarantine facility. . . And Western public health authorities, though their epidemiology remains first-rate, cannot say this, or even think it, because of their internationalist intellectual doctrine, just one aspect of the great American progressive tradition of government.

If I can guarantee one thing, it is that his status will not go up. I am not saying we should drop all our existing beliefs and adopt his, but we ought to take into consideration that his view of the world made him quicker to spot the threat.

Compare side by side

Posted on by

Two approaches to dealing with the combined public health crisis and economic crisis.

(1) Have people privately reduce mingling with one another PLUS have government order people to take steps to reduce mingling. Then try to deal with the economic consequences by increasing government spending by $2 trillion or more, with a share of that to be financed by money creation assuming the government is not going to be able to borrow that much on such short notice.

(2) Instruct people on how to tie a scarf over the nose and mouth.* Meanwhile, ramp up mask production, so that as soon as possible masks are widely available. Point out to everyone that wearing something over their nose and mouth is a public duty. It’s not (just) protecting yourself from infection, it protects other people from being infected unknowingly by you. If necessary, legislate fines and enforce them when people go out in public without wearing something over nose and mouth.

With either (1) or (2), you still need to isolate people who are coughing and who are known to have the virus. With either (1) or (2), you need to be supportive of health care workers, search for cures, search for a vaccine, and so on.

With either (1) or (2), there is an imposition on liberty. With (1), you tell people where they are allowed to go and tell businesses they have to shut down. With (2), you tell people that they can’t leave their noses and mouths naked.

With either (1) or (2), there will continue to be new cases of the virus. The goal is to reduce the spread of the virus down to a level that will keep hospital emergency rooms from getting overwhelmed. Both (1) and (2) leave gaps. For example, under (1) there will be some mingling, either by people breaking the rules or people who are exceptions to the rules. But even though there are gaps, it seems plausible that either approach could greatly reduce the spread rate.

With (1), a lot of economic activity is curtailed. With (2), some people will still be leery of getting onto planes or going on cruises. Eating in restaurants will be awkward, and many people will put off doing so. But more businesses will feel ok about opening their offices. And more individuals will feel ok about getting haircuts, shopping in stores, and going to sporting events–provided that they see everyone around them wearing masks (which should turn out to be the case, if social pressure and law enforcement are effective).

With (1), government finance will be shaky. I don’t know why more people aren’t worried about this. If there is no down side to increasing spending by 10 percent of GDP, why doesn’t the government do so all the time? I think that the answer is that eventually you turn into Zimbabwe, with hyperinflation. Hyperinflation is like a virus, in that by the time you can see it, it’s too late to stop it. Hyperinflation destroys the social fabric. It’s something to fear.

Finally, I wonder how charitable I should be about the health advisers, economic pundits, and political leaders who are committed to (1). Those poobahs will be more important if we implement (1) instead of (2). I hope that is not what tips the decision.

Thanks to Russ Roberts for a helpful conversation.

UPDATE: *We would also need to instruct people on sanitary use of a scarf. Best not to reverse it, not to touch it while wearing it, and also to wash it or heat treat it frequently. I would like to thank Dallas Weaver for pointing this out. He has some advice on the use of masks. In an email, he writes “I assume you have noticed that all the countries that are under control use masks.”