Before I get to that, Matt Ridley writes,
There are already several different strains of the virus, one of which, the L strain, looks to be more lethal than others.
What? Whoa!! Somebody needs to shout this from the rooftops. It suggests that there is no such thing as the death rate, even controlling for other factors. To me, it may suggests that we should be testing for this specific “L strain.”
Also, if there is more than one strain, does immunity to one strain not necessarily confer immunity to another? So you could get “it’ (i.e., one of them) again?
Now on to some other economists, who mostly make sense.
If most Americans who wanted a test could get one, and if people who tested positive stayed home and sought medical attention, fear of going out wouldn’t disappear, but it would dissipate. Think of it as a super-effective form of fiscal stimulus. Test kits are ridiculously cheap compared with the GDP and job losses they might forestall.
Do you want to give people cash if they will just go out and spend it on entertainment or in large, crowded stores? Is that what you are hoping they will do? To what extent do we want the “transmitting sectors” to be contracting right now? Does it do much good to send consumers money they will spend on Amazon or pizza deliveries, two sectors that may do fine or even prosper during the tough times?
I do not think we should bail out shale oil producers or cruise lines. Presumably we wish to support businesses with an income gap for coronavirus reasons, but what exactly should we do? I am puzzled by the degree of certainty people seem to exhibit about this issue.
3. Timothy Taylor tells us about a quickly-published booklet edited by Richard Baldwin and Beatrice Weder di Mauro. Taylor quotes Baldwin and Eiichi Tomiura writing
the supply-chain disruptions that are likely to be caused by COVID-19 could lead to a push to repatriate supply chains. Since they [sic] supply chains were internationalised to improve productivity, their undoing would do the opposite.
I intend to download the booklet and read it. Meanwhile, I recommend Taylor’s entire post.
The booklet evidently includes some quantitative estimates of the GDP cost of the virus crisis. I am quite sure that the models used to produce those estimates are worthless. There is no way for them to estimate the cost of shifting to less-efficient supply chains. More important, nobody has a model of how leveraged financial institutions interact with the economy. Consider a cruise line that owes debt service payments on its ships or an airline that owes debt service payments on its planes. If they cannot service their debts and they have to declare bankruptcy, it is hard to calculate the effect of that on GDP. It is even harder to calculate the effect hits when the banks with the outstanding loans have to deal with the effect on their balance sheets.
The best article I could find on the L vs S strains is Scientists identify 2 strains of COVID-19; mutated strain more aggressive than the one it evolved from.
I think the Matt Ridley article is excellent and makes the following point which is exposes a key false assumption we have about infectious diseases:
This is NOT the “frightening combination of traits” that most people feared. We are always fighting the last war and this war is different because this virus appears so common and benign; it’s not so bad for 99% of us. It is only in aggregate that 1% makes COVID-19 so deadly.
The Introduction chapter of the booklet in point 3 above is excellent. It references the SIR (Susceptible, Infected, and Recovered) Model. The Wikipedia section in the link has a useful graph depicting the Susceptible population and Recovered population as S Curves (Logistic Curves) linked by a Bell Curve (Gaussian Curve) representing the Infected population. This is another example of the S Curve and Bell Curve models I think we should all have in our heads; it is the ultimate Fermi Model for making quick and dirty estimates.
The Bell Curve represented the Infect population is the “flatten the curve” model that has become a popular meme in response to COVID-19. Matt Ridley’s emphasis on the 99% Mildly Sick vs the 1% Death Rate is useful within this framework. One can imagine a very fast 3-week Tough Love strategy, similar to what mother’s due when they intentionally expose their children to chickenpox/measles, that moves the population from 100% Susceptible to 99% Recovered while carefully controlling access to the most vulnerable 1% (elderly, sick, smokers?) that are unlikely to survive a serious respiratory infection. I’m not promoting the 3-week Tough Love strategy as anything but a useful mental model.
Self-Isolation is an incredibly useful technique. Something as simple as a home Pulse Oximeter (over the finger electronic gadget that measures blood oxygen saturation which is over 95% in healthy people) should give peace of mind for parents with children and a useful tool for identifying those in need of enhanced medical attention.
When thinking about supply chains, one can imagine a population of certified Recovered workers. Wuhan province is probably a close example. The worst case scenario economically is a long lasting limbo where the population infection rate hovers around the Health System Capacity to detect/treat/certify-recovery-of COVID-19.
Here is a link to the study
Keep in mind that viruses produce so many copies so quickly that though there is a lot of negative selection pressure, there is still lots of opportunity for viable mutations to occur with reasonably similar rates of spread (otherwise one would quickly dominate), and there is always going to be a small amount of genetic diversity in the viral population as a result. There often is no good, objective line where one can point to the number of mutations that constitute different “strains”
What actually happens is that we eventually test for all “strains”. The way the testing is done is via very, very specific genetic testing and PCR amplification of small amounts of genetic material, and matching with primers. But the development of the tests and primers doesn’t stop, and keeps getting refined and reiterated by analyzing new samples, so that the prevailing tests quickly adjust as necessary to pick up all the important variants of a current infectious agent, but without producing a lot of false positives.
There seems to be a trade-off between the level of care and time needed to minimize Type I and Type II errors, and the needs to do a lot of tests quickly. There is some concern that the countries that were able to deploy lots of tests in short time accepted a higher error rate, and so the numbers we have are sketchy and not easy to compare.
Handle’s link includes a session token so it fails. I think the web page with the abstract and pdf link is On the origin and continuing evolution of SARS-CoV-2 by Xiaolu Tang et al.
My quick interpretation is that the L-Strain is representative of COVID-19 and that the milder S-Strain would have been lumped into the general category of Influenza-like illness (ILI).
Since they [sic] supply chains were internationalised to improve productivity, their undoing would do the opposite.—
Well….sometimes (usually?) supply chains internationalize to seek lower-cost labor which might actually be less productive, or to seek state subsidized but less productive supply chains (China).
US workers are usually ranked among the world’s most productive. Resourcing back home would result in the use of very productive labor. If new factories are built I would imagine they be even more productive. Who knows? Resourcing home lead to an industrial and technological renaissance in the US.
Regarding debt service: I wonder if you couldn’t mitigate some of the worst effects of defaults with some kind of mass forbearance policy. After all, if Southwest no longer has the cash flow to cover the financing costs of it’s fleet, what are its creditors going to do in the middle of a public health crisis? Come and repo the jets? In order to do what with them?
As far as repatriating supply chains, businesses need to think about risk management in addition to productivity. Perhaps a more diversified supply chain is warranted, at least for certain products? I’m prepared to let market participants sort that out on their own, though, at least for the moment. But in general, if China is going to be subject to periodic outbreaks of this disease that cripple its economy for unpredictable lengths of time, going forward, then obviously, that negatively impacts the productivity gains from a China-centric supply chain.
“Supply chains were internationalized to improve productivity”
If you want to say “internationalized” means moved completely to one country, China. And of course it had nothing at all to do with escaping:
– punitive corporate tax rates;
– random and arbitrary product liability suits;
– having major capital investments held hostage by labor unions;
– politicized enforcement of regulations;
– a welter of local, state, and federal regulatory authorities;
– a deferred tax burden in the form of national debt;
– a hostile cultural environment for manufacturing which is scorned as low skill work; and
– an educational system that graduates workers who are markedly inferior in reading and math skills than those of many other countries,
for starters, yeah then sure, it’s all about productivity.
Exactly. “Free” markets are often blamed for the consequences of government intervention. Business make rational decisions based on the incentives and disincentive created by the “rules of the game,” which Washington can change at will.
Trump says:
If you want to get money into the hands of people quickly & efficiently, let them have the full money that they earned, APPROVE A PAYROLL TAX CUT until the end of the year, December 31. Then you are doing something that is really meaningful. Only that will make a big difference!
I support this 100% (or maybe a bit less, it’s not the Only thing that would make a big difference). This is big help to all the workers, rather than owners of capital, or gov’t dependents.
I would think that looking at what happened after Legionnaires Disease might providee some useful insights.