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Some people say the craziest things: 500K net job creation is to be expected in a recovery: http://econbrowser.com/archives/2012/05/more_on_governo The scientific method doesn’t involve predicting observed data: http://econbrowser.com/archives/2014/02/a-random-thought-on-the-scientific-method Fiscal multipliers are typically near zero: http://econbrowser.com/archives/2014/02/birthers-stimulus-deniers-and-economic-myths There is no big trend in global temperatures: http://econbrowser.com/archives/2015/01/hottest-on-record If a variable is I(0) by construction, then it’s best to treat […]
Economist James Pethokoukis at the American Enterprise Institute writes:
But it may not be enough to point out liberal democratic capitalism and creative destruction create a wealthier, healthier, and more interesting society. I mean, that should be enough. Maybe not, however. What about the “moral” case for capitalism and the economic growth it generates like no other system ever devised or imagined? Does capitalism make a better society in non-material aspects? Harvard University economist Benjamin Friedman made a powerful affirmative case that it did in his 2005 book, “The Moral Consequences of Economic Growth.”
So far so good. Then Pethokoukis quotes Benjamin Friedman:
The experience of many countries suggests that when a society experiences rising standards of living, broadly distributed across the population at large, it is also likely to make progress along a variety of dimensions that are the very essence of what a free, open, democratic society is all about: openness of opportunity for economic and social advancement; tolerance toward recognizably distinct racial, or religious, or ethnic groups within the society, including new immigrants if the country regularly receives in-migration; a sense of fairness in the provision made for those in the society who, whether on account of limited opportunities, or lesser human endowments, or even just poor luck in the labor market, fall too far below the prevailing public standard of material well-being; genuinely contested elections that determine who controls the levers of political power; and democratic political rights and civil liberties more generally. Conversely, experience also suggests that when a society is stagnating economically—worse yet, if it is suffering a pervasive decline in living standards—it is not only likely to make little if any progress in these social, political, and (in the eighteenth-century sense) moral dimensions; all too often, it will undergo a period of rigidification and retrenchment, sometimes with catastrophic consequences.
Most of these are good. But Friedman seems to be implying that rising standards of living lead to a bigger welfare state, and that that’s good. I’m not the only one who thinks Friedman is saying that. Pethokokuis thinks so too. Pethokokuis writes:
It’s an appealing intuition that Friedman supports through a political and economic analysis of US and Western European history. For example: The Great Society was passed in the Go-Go 1960s, while the economic volatility of the 1970s was followed by a decline in public support for welfare programs and immigration.
The Great Society was a substantial increase in the welfare state and, therefore, a substantial decline in economic freedom, which includes people’s freedom to choose how to allocate their resources.
So the moral case for capitalism, according to Friedman and Pethokokuis, is that it leads to greater wealth, which leads to bigger government and, in some areas, less freedom.
I don’t think that’s a good moral case for capitalism. It’s contradictory. More capitalism should mean less government control over resources, not more.
But is there a moral case for capitalism? Yes, there is. The moral case for capitalism is that it lets each person make his/her own choices about how to live: what work to engage in, what to spend money on, whom to associate with, how to arrange his/her private property, what substances to ingest in his/her body, and how to spend his/her leisure time, to name six.
HT2 Don Boudreaux.
If you were hoping to cure your cabin fever with a quick jaunt to San Francisco to eat a $200 dinner in a geodesic dome next to a homeless encampment, it looks like you’ve missed your chance. The San Francisco Chronicle reports that after a surprise inspection, the city’s health department has ordered Japanese fine dining […]
Figure 1: Nonfarm payroll employment in Wisconsin, June release (brown), July release (pink), Economic Outlook forecast of June (teal), author’s forecast based on national employment (brown box), in 000’s, s.a. Source: BLS, Wisconsin Economic Outlook (June 2020), and author’s calculations. Nonfarm payroll employment grew 30.5 thousand from a downwardly revised June level (1.1% growth, not […]
COVID-19 researchers and modelers have assumed that at least 60 percent of a population, perhaps 70 percent, would need to be infected with the new coronavirus or vaccinated against it before reaching herd immunity, the point at which the virus can no longer spread widely among a community. Some infectious disease experts are now examining the “hopeful possibility” that far fewer people have to get infected or immunized to achieve herd immunity, The New York Times reports, citing interviews with more than a dozen scientists.
If their new, complicated statistical models are correct, and communities can reach herd immunity with 50 percent or less of people gaining immunity to COVID-19, “it may be possible to turn back the coronavirus more quickly than once thought,” the Times reports. A clear minority of researchers predict as few as 10 or 20 percent of a population developing antibodies to the disease would be sufficient for herd immunity; Stockholm University mathematician Tom Britton calculated the threshold at 43 percent.
I continue to see these extremely misleading articles, which suggest that herd immunity is some sort of stable parameter than can be estimated by scientists. Actually, herd immunity is a function of behavior.
When Covid-19 first appeared it was highly infectious. That led to estimates of 60% or 70% for herd immunity. But unlike with the common cold, societies almost everywhere took precautions to reduce the spread of Covid-19. Even in Sweden there was a great deal of social distancing. Since April, social distancing in New York State has reduced the fatality rate from Covid-19 from almost 1000/day to near zero. And that’s with antibody levels far below 60% (probably closer to 20%)
But if New Yorkers were suddenly to go back to life as usual, Covid-19 cases would likely rise sharply, as New York’s current situation of near herd immunity is predicated on a high level of social distancing and mask wearing.
This does not mean the initial 60% to 70% estimates are correct, even for a population taking no precautions. Scientists now have a better understanding of issues such as natural immunity and heterogeneity in behavior (super-spreaders). So the initial estimates may be incorrect.
Here’s how I look at things. The US has a fatality rate of 533/million, rising fast. Sweden’s has leveled off at 584/million. But New Jersey’s at 1805/million deaths despite lots of social distancing. Indeed I know people in New Jersey who work at home and are extremely unlikely to contract Covid-19 unless they go back to business as usual. Thus even New Jersey is far from herd immunity with no precautions. Therefore it’s unlikely that herd immunity was a sensible solution for the US back in April. The entire US would have likely been hit even harder than New Jersey was hit. (And recall that even official death rates probably undercount the true death toll, at least according to “excess deaths” studies.)
On the other hand, the fatality rates I cite for New Jersey reflect the medical care back in April, when most of the deaths occurred. There is evidence that the death rate for Covid-19 (per actual case) has already fallen sharply in recent months. With improved treatments, it’s very possible that at some point herd immunity will become the optimal strategy. I’m agnostic on that question. But it’s important to think clearly about these issues, and a number of recent news articles have done a disservice to the public by oversimplifying the problem.
PS. People often focus too much on the public policy aspects of this issue. When I said, “Therefore it’s unlikely that herd immunity was a sensible solution for the US back in April” I was not referring to public policy. There’s no way the US government could have adopted herd immunity as a strategy, as the public would have done social distancing on their own, and indeed started doing so even before lockdown were in place.
It’s also worth noting that while Sweden’s economy did better than the Eurozone (so far); its recession was as bad as in Denmark and worse than in Finland. (Norway’s Q2 GDP data is not in yet.) Sweden shows that substantial social distancing was inevitable.