Tuesday, March 24, 2020

Virus crisis tidbits -- get out of the way and demand shift

The first rule of medicine is "do no harm," and not a bad first rule for economic and public policy too. The second  rule of economic and public policy should be "get out of the way." With that thought in mind,

From Marginal Revolution, FDA Stops at-home tests. Imagine what they would think of the DIY ventilator

From change.org, Allow US entities to import and use non-FDA PPE, diagnostic tests and ventilators.
There is a massive inefficiency in the global supply chain which could supply us as currently the US only allows FDA certified PPE and diagnostic tests to be imported and used. .. One example with one supplier in China I found:
500k surgical masks
100k N95 masks
500k COVID-19 rapid test kits
These products are currently available today in inventory... but no one in the US can import them as they only have the EU certification (CE)!!
The University of Chicago Booth School of Business is running a survey to find more such regulations. Contribute!

Chris Edwards at Cato on a long list of how private companies are rushing to bring products to market. No we don't need the National Defense Act. Now how much more would they do if we paid them double? Oh and
Fun fact: facemasks are regulated by four separate federal bureaucracies: FDA, CDC, NIOSH, and OSHA
The central story of the virus crisis is that our public heath systems were and still are woefully unprepared with masks, gowns, test kits, ventilators, and procedures. (A nice sort summary.) You handle this sort of thing without shutting down the economy by intensive contact tracing, massive frequent testing (remember AIDS?), isolation, and tamping down hot spots. The fact that the US was and remains unprepared for this is now going to cost us trillions of dollars -- and much suffering, lost jobs, shuttered businesses and associated woe, in addition to lost lives. At least get out of the way.

Some of what we are seeing is a shift in demand, which offers many opportunities.

Hospitals are hiring (duh), and not just doctors.

Coronavirus Sparks Hiring Spree for Nearly 500,000 Jobs at Biggest Retailers

Walmart to Pay $550 Million in Staff Bonuses, Hire 150,000 Temporary Workers

There are jobs for janitors, cleaning crew, people to staff lines, and so on, Not great jobs, but it's something for totally unemployed lower income Americans. I don't think we're close to there yet, but it would not be ideal public policy for the government to make sure that nobody lost any jobs and just sat at home.

Some of this shift in demand may be permanent. I suspect we are exiting the age of worry about terrorism, and entering -- or reentering -- the age of worrying (justly) about pandemics. That ought not to mean waves of people dead as in centuries past, but a restructuring of our economic system to control public health, maybe in analogy with the late 19th century. Air travel may be down forever. RVs up.  Restaurants too may decline, and live music, or any other event that brings lots of people together breathing the same air. We may move to a life of quite permanent "social distancing."

We might even leave behind the economy based on close personal contacts in crowded hot spots like New York and San Francisco, to an economy based on much more virtual contact centered in small towns and suburbs. That has been long forecast. When millennials come to think of an apartment and a bar in San Francisco like a cruise ship, it may happen. It will be a second boom for tech, as online delivery of everything grows. We will not be an isolated society, but we may revert to the British Pub,  the private dinner, not the jam packed Manhattan bar, club, or other mass event.


  1. The United States has been spending trillions on defense to prepare for a war that might never come and effectively nothing preparing for a pandemic that was almost a statistical inevitability. Maybe going forward an amount equal to 5% or 10% of what goes to the military could go to medical preparedness (including a search for new antibiotics.)

  2. Also, if remote work becomes the new norm, it can perhaps help some of the housing issues you've mentioned previously as it relates to zoning laws. Caveat: need communication infrastructure to support high-speed Internet. Rural areas have been underserved for too long due to weak markets in these areas. We shall see what unfolds. Maybe Musk's satellite footprint up in space can eventually help deliver better internet to rural areas.


    1. My friend owns a small business. He has made it known, monitoring efficiency at work is hard enough. It becomes much harder once work goes remotely for large periods of time. He basically told me that he told most of his employees(except for the few essential one's) that they would be paid till the end of the month and then no more.

  3. Think of the billions spent on nuclear command and control infrastructure during the cold war, which totally failed on 9/11 -- Bush and team were forced to use cell phones to reach the VP in the situation room at a time when many though that the nation might be under attack. What does this say about the capability of governments effectively to plan and test for crises that are of extremely low probability, but potentially existential. Note also, this apparent failure is not limited to elected governments. Stalin was so shocked by the Nazi attack that he was reduced to a near-catatonic state for weeks; more recently, the Chinese government's initial response to to Covid-19 was hardly a model competence. Is this simply a failure of our species evolutionary defenses that makes it impossible for us to rationally deal with such risks? Or, are there ways that advanced forms of governance can overcome this, provided we have the will to do so? I hope, the latter...

  4. Please, not permanent social distancing. I was hoping it would end next week.

    The CDC reports a 0.1% death rate from Covid 19 in the 22--44 year old age group. I assume that does not include people never tested or who never went to a hospital. Like all those kids in Florida.

    If you are elderly with comorbidities, then Covid 19 can be a serious situation.

    I hope we get back to normal as soon as possible, and if anything I hope Americans are friendlier and in contact with each other more in future years.

    1. I think you are being rather optimistic. A death rate of .1% for the young with higher death rates for the over 60 crowd still translates into a millions of Americans dead.

      We are not yet at peak social distancing and not at the peak of deaths. Even if we manage to stop the exponential growth: some distancing, better hand washing discipline, no handshakes, much less international travel, many fewer high density events, widespread mask wearing, along with physical restructuring of retail outlets and structural changes to the economy are probably permanently with us. Relax prematurely and the virus will continue spreading exponentially.

  5. There was an article on npr titled "How To Avert Economic Catastrophe: Ideas From 5 Top Economists".

    I found it interesting that only one, Tyler Cowen, emphasized regulation and the choking of supply as a real issue to focus policy on. The rest emphatically were suggesting massive stimulus and transfers as the predominant policy solution.

    Not trying to debate the merits of their proposals, but I find it interesting that by default, economists emphatically support stimulus and transfers in all economic crises within advanced economies. It's become the de facto playbook. I'm not sure if this is because its been proven to work(Pretty sure that it hasn't), or because its a gut human compassion response, or just a lingering philosophy of the 1930s.

    1. Thomas Sowell in "A Conflict of Visions" (1988) and "Vision of the Anointed" (1995) pointed out the bias often found in Elite thinkers, how they - or someone - could "plan" better social arrangements because they are the top-20%: educated, elite, of course.
      But Sowell's analysis of the other 80% of society whose "constrained vision" accords better with F.A. Hayek's insights. Relevant knowledge is decentralized and spontaneous-order displays individual choice allocations (e.g. markets).

      So to call this "a lingering philosophy of the 1930s" is to miss an important point: it is pathological bias in smart, educated human minds.

    2. Joe, good stuff. It's more than a pathological bias. They are morally presumptuous. They genuinely believe they are less fallible than the rest of us and know what's best for society. Of course they will engineer society by confiscating private property, taxation, green initiatives, tariffs and corporate boards run by stakeholders.

    3. I'm not sure I agree. None of the recommendations were particularly over-engineered overly contrived plans of excessive grandeur. These were the same policy prescriptions I've seen repeated over and over and over again. the economy is demand constrained, the poor people will be out on the streets,w need to stabilize demand, confidence is low, so let's inject a bunch of money through federal government lending.

      Again maybe some of these arguments have merit ( for the first time in my life I might be in favor of some kind of stimulus program), but it's strange that this has become the de facto response from the profession for every crisis.

    4. James Carlyle, you are correct but today the government(s) are seemingly poorly coordinated nor are they "ready." So much for whatever "planning" might have contributed, disregarding hindsight but blaming them anyway for failing.

      The real Test of this question would be, What is to be expected if the whole Leadership Process was Exhortation, Warning, and Information? Nobody has shown me a case for coercion, police action, nor for most of those grandstanding plays by governors.


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