Category Archives: PSST and Macro

Against vaccine passports

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Mask mandates make more sense to me than vaccine passports.

I would make the case for a mask mandate in a pandemic with no vaccine available. Suppose you and I enter the same store. As I understand it, my mask offers little protection to me. But your mask offers significant protection to me.

With a vaccine, the relative values are reversed. If you and I visit the same store, my vaccination shot gives me lots of protection, while your vaccination shot is much less meaningful to me.

In terms of immediate contact with other people, there is a public-goods argument for a mask mandate in a pandemic without a vaccine. But in terms of immediate contact with other people, vaccines are much more of a private good.

The public-goods argument for vaccines has to do with “crushing the virus” in general, not with making individuals safer to be around. You can argue that if not everyone is vaccinated, the virus will have more hosts and more opportunities to mutate.

I am willing to buy this public-goods argument for giving people an incentive to get vaccinated. But the penalty for not getting a vaccine should not be house arrest. Metaphorically, I would say we should give people a “vaccine discount” at the movies rather than banning unvaccinated people from going to the movies altogether.

Maybe the subsidy for getting a vaccine should be quite high. Maybe the “no-vaccine” tax should be quite high. But depriving someone of their freedom of movement because they refuse to get a COVID vaccine is wrong. I strongly oppose vaccine passports.

The case for stimulating demand and restricting supply

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J. W. Mason writes,

The fact that people like Lawrence Summers have been ignored in favor of progressives like Heather Boushey and Jared Bernstein, and deficit hawks like the Committee for a Responsible Federal Budget have been left screeching irrelevantly from the sidelines, isn’t just gratifying as spectacle. It suggests a big move in the center of gravity of economic policy debates.

It really does seem that on the big macroeconomic questions, our side is winning.

Pointer from Tyler Cowen. He lists a number of propositions, which tend to favor macroeconomic policies that stimulate demand and restrict supply.

For example although he argues (correctly) that there is no bright line between being unemployed and being out of the labor force, he claims that

Work incentives don’t matter.

Suppose you have very high marginal tax rates on work. The “new” theory is that with enough aggregate demand, everyone will work, anyway. As Mason puts it,

Weak demand is an ongoing problem, not just a short-term one. The most serious criticism of the ARPA is, I think, that so many of its provisions are set to phase out at specific dates when they could be permanent (the child tax credit) or linked to economic conditions (the unemployment insurance provisions). This suggests an implicit view that the problems of weak demand and income insecurity are specific to the coronavirus, rather than acute forms of a chronic condition.

I think that if you subsidize demand and restrict supply, then the whole economy will look like education, health care, and real estate, where prices go up and resources are wasted.

John Cochrane has a more detailed critique of this “new” economic theory. One way in which it differs from the conventional wisdom of the 1960s: back then, economists were confident that if inflation broke out, the government could direct businesses to slow the rate at which they increased wages and prices. That theory has not made a comeback, at least so far.

COVID models still don’t work

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David Wallace-Wells writes,

Looking back, you could find a few lonely voices suggesting winter would be calmer than autumn. But the CDC aggregates and showcases 26 pedigreed models predicting the near-term course of the disease. On January 18, only two of the 26 showed the dramatic case decline the country experienced by February 1 as being within what’s called the 95 percent confidence interval. In other words, 24 of the 26 models said what ended up happening over just the next two weeks was, more or less, statistically impossible. The other two gave it, at best, a sliver of a chance.

Pointer from Tyler Cowen.

The article correctly points out that the only clear differences in outcomes are between Asia and the West. I still wonder whether the two faced the same virus.

Virus update

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1. In a podcast with Russ Roberts, John Cochrane says,

We can talk about medicines and vaccines–those maybe could go wrong–but a test cannot hurt you unless you take this extraordinarily paternalistic view that you might do something bad with the information that you get with the test, which is in fact the kind of view that they take.

He is questioning the way that the FDA is conservative about approving tests.

To this day, I cannot understand the failure to do regular random-sample testing. I really want to send our public health officials walking across a live minefield wearing blindfolds, so that they can get a sense of how they are providing us with information that would be helpful.

2. A well-known COVID tracker is shutting down. They say that the CDC is now a better data source. The 7-day moving average daily death rate is the number I watch. I really would like to see it take another dive like it did the week after Valentine’s Day.

3. Israeli health officials are effusively praising the vaccine. But the overall numbers for cases and deaths in Israel are not plunging. Maybe in another couple of weeks?

Herd immunity by April?

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Marty Makary writes,

Testing has been capturing only from 10% to 25% of infections, depending on when during the pandemic someone got the virus. Applying a time-weighted case capture average of 1 in 6.5 to the cumulative 28 million confirmed cases would mean about 55% of Americans have natural immunity.

Unfortunately, he does not spell out his calculations enough for me to check. But it is likely that he is badly mistaken. Yes, back in March and April, we were not doing very many tests, and a large share of infections went undetected. I doubt that this has been true in recent weeks. I bet that the number of undetected cases in the last two months is less than double the total number of detected cases over that period. If so, then his claim that we will have herd immunity by April is probably unsound.

Number One Pick, who I think is a more credible observer, wrote,

Prediction: 75% chance that there will be a new wave peaking in March or April, with a peak at least half again as high as the preceding trough.
[EDIT: some people link new studies saying the B117 strain is less virulent than previously believed, and the US has been getting much better at vaccination since I checked, probably my prediction above is too high and we should worry less about this]

So it is hard to say what his current prediction is. I am guessing that he would put a low probability on herd immunity by April.

UPDATE: The 7-day average death rate has really plummeted over the past week. So maybe I should be more optimistic.

Cowen, Schumpeter, and employment fluctuations

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Tyler Cowen writes,

I take a finance perspective on the output gap. If you are at what others call “full employment,” you can indeed do better, or at least try to do better. Start 300 companies that aim to be the next Stripe, Facebook, SpaceX — whatever. In the short run, you will create jobs, people at jobs will work harder, and so on. Employment, output, and also tax revenue will rise. You can pat yourself on the back and say you were not at full employment.

The thing is, you have accepted a higher level of risk. Many of those companies are likely to fail. And since they were started by humans consuming a broadly common set of cultural and media inputs, those risks will to some extent be correlated as well. Of course it might pay off big time as well.

Schumpeter’s phrase “creative destruction” makes it sound as though those processes are synchronous. A new business is created and destroys an old one.

But the creation cycle and the destruction cycle are out of phase. A new business created today will not destroy an old business for several years. And an old business dying today will release resources that may not be redeployed in new businesses for several years.

We can be in a phase in which new businesses are being created, old businesses are hanging around, and lots of resources are being used Think of the Internet boom of the late 1990s. And Tyler is right that there was a lot of risk-taking going on at that time. Or we can be in a phase, like 2008-2014, where old businesses have died but not enough new businesses are being created. And there was plenty of risk aversion, some of it dictated by financial regulators.

Virus update

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1. Ynetnews said,

Researchers at Tel Aviv’s Ichilov Hospital on Thursday announced it has seen positive results in preliminary trials for a cure for COVID-19.

Meanwhile, Joseph A. Ladapo wrote,

while scientists argue that widespread vaccination will prevent variants from taking hold, lessons from the past year should make it abundantly clear that our ability to stop the spread of variants is extraordinarily limited.

So there is still a low-probability scenario in which We will quietly give up on a vaccine. But keep in mind that neither the Ynetnews piece nor Lapado’s op-ed should be treated as reliable.

2. I am pretty close to declaring Mr. Biden a failure as a virus-war President. To succeed, he needs to fight the bureaucracy much harder.

–declare the vaccine distribution system a failure, and put a military person in charge.

–take the vaccine approval process out of the hands of the FDA. In addition to FDA input, get input from a scientific advisory panel, consisting of folks like Michael Kremer, Scott Alexander, Bret Weinstein, and Balaji Srinivasan.

–create a treatment-protocol study group to evaluate current knowledge, disseminate best practices on an ongoing basis, and see that trials are conducted as rapidly and reliably as possible.

3. Our county’s vaccine appointment systems are ridiculous. Pointer from Tyler Cowen. But my wife got her first shot Friday, and I got mine Monday.

–Even though some occupations under age 65 are eligible, I don’t see how anyone with a job could possibly get an appointment. Trying to navigate/game the appointment systems is a full-time job, involving checking multiple web sites, learning what time is best to check a particular web site, hitting the “refresh” on your computer continually, and so on.
–Because it takes so much social capital to work the system (local list-servs are buzzing with tips on how to get an appointment), I was not surprised when a white person told me of getting an appointment at a grocery store in a mostly-black neighborhood and finding that all the other people with appointments were white. So on top of everything else, it exemplifies systemic racism.
–If a private firm operated like this, no one would put up with it.

4. You can’t die now–it’s the Super Bowl! Total COVID deaths for February 7-8 were under 3000, the lowest two-day total this year. Doctors do have a lot of discretion to keep someone alive for a day or two longer if that is more convenient for the family. I’m expecting a bounceback today.

V-Day?

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Today we have had our appointments for the first dose. But because the vaccine location is in a different county from where we live, that county decided to cancel us.

Actually, it sounds like we would have had a DMV-like experience. I’m not feeling sad.

Note that the average daily death rate in the U.S. is about 5 times it was this summer. If the vaccine is 90 percent effective, that means that my risk after vaccination is 1/10 of what it was without vaccination. Combining the two, that means that after the second dose and the vaccine has taken hold, I will have half the risk that I had this summer. That does not make me excited about getting out and circulating, even with the vaccine.

I will feel better if after a couple of months there are signs that the vaccine is reducing the incidence of the virus in the whole population. In a sense, getting the vaccine early is like getting onto a tour bus early. The bus isn’t going anywhere until more people are on board.

By the way, I think that Alex Tabarrok’s idea of giving first doses to more people and second doses to fewer people is unlikely to work in a free society. From society’s perspective, it may work more quickly to eradicate the virus. But from an individual perspective, I would rather wait to get two doses than get one dose and have to live with uncertainty about what happens next.

Speaking of the virus, the asymptomatic spreader fight never ends. Daniel P. Oran and Eric J. Topol write,

Today, the best evidence suggests that about half of Covid-19 cases are caused by infected people who do not have symptoms when they pass on the virus. These symptom-free spreaders are roughly divided between those who later develop symptoms, known as pre-symptomatic individuals, and those who never develop symptoms.

On the politics of the virus, Christopher J. Snowdon writes,

I suppose my position is boringly centrist. If you want a more invigorating take, you might be drawn to the Zero COVID strategy supported by “Independent” SAGE or the plan laid out in the the Great Barrington Declaration to shield the vulnerable and achieve herd immunity the old-fashioned way. Both of these options carry significant downsides and have now been made redundant by the vaccines, but whilst these ideas might have been flawed or unrealistic, they were not crazy. The former had worked in New Zealand and the latter had been the preferred policy of the chief medical officer until the hasty U-turn of March 2020. These were ideas that reasonable people could debate without being considered cranks.

But now, in the final months of this nightmare, the conversation among many of the noisiest lockdown sceptics has become decidedly cranky.

He speaks as a libertarian, policing his own side. Policing your own side is very honorable, in my view. It is the best way to fight polarization.

But libertarians can be more correct than others give them credit for. See Jacob Grier, who points out the many way government failures in the pandemic. Pointer from Tyler Cowen.

This reminds me that my main problem with “state-capacity libertarianism” is that the phrase itself assumes away, or at least downplays, the main reason I have for leaning libertarian. That is, there are structural reasons for state performance to be worse than you would expect and for market performance to be better than most people would expect.

Economic impacts of the virus

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Jose Maria Barrero, Nicholas Bloom, Steven J. Davis, and Brent H. Meyer write,

as of December 2020, firm-level forecasts of sales revenue growth over the next year imply a continuation of recent changes, not a reversal. Firms hit most negatively during the pandemic expect (on average) to continue shrinking in 2021, and firms hit positively expect to continue growing. Third, our survey data say that COVID-19 shifted relative employment growth trends in favor of industries with a high capacity of employees to work from home, as measured by Dingel and Neiman (2020), and against industries with a low capacity.

They emphasize the reallocation effects of the virus. Of course, in the PSST framework, every macroeconomic event is a reallocation shock.

The vaccine, the market, and government

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John Cochrane writes,

In a free market, vaccines would be sold to the highest bidder. The government could buy too, but you wouldn’t be forbidden from buying them yourself, and companies and schools would not be forbidden from buying them for their employees. Businesses would likely pay top dollar to vaccinate crucial employees who are off the job due to the pandemic. And only businesses know just which employees are crucial to the economy, and which can wait.

Government rationing gives power to public officials. It does not necessarily lead to superior moral outcomes. So far, the main accomplishment has been to slow the rollout.