Is Cowen Right about the Great Barrington Declaration? Part 2

 

Yesterday, I reviewed the first half of Tyler Cowen’s critique of the Great Barrington Declaration. This is the last half. As before, quotes from him are highlighted and my responses are not.

Here are the key words of the Great Barrington Declaration on herd immunity:

The most compassionate approach that balances the risks and benefits of reaching herd immunity, is to allow those who are at minimal risk of death to live their lives normally to build up immunity to the virus through natural infection, while better protecting those who are at highest risk. We call this Focused Protection.

And then:

What exactly does the word “allow” mean in this context? Again the passivity is evident, as if humans should just line up in the proper order of virus exposure and submit to nature’s will. How about instead we channel our inner Ayn Rand and stress the role of human agency? Something like: “Herd immunity will come from a combination of exposure to the virus through natural infection and the widespread use of vaccines. Here are some ways to maximize the role of vaccines in that process.”

It means, as the document says, “allow those who are at minimal risk of death to live their lives normally.” I’m not sure why Cowen has trouble understanding. Allowing people to live their lives has nothing to do with passivity. It certainly is consistent with the idea of human agency, even if you don’t go all Ayn Rand on it. When people are allowed to do something, that doesn’t mean they have to do it. There’s necessarily human agency.

He’s right about how herd immunity will come about. But then he says, “Here are some ways to maximize the role of vaccines in that process.” The problem here is, as former Obama economist Austan Goolsbee pointed out in a related context, that this is like the old economics joke where the punch line is “assume a can opener.” We don’t yet have a vaccine, so right now maximizing the role of vaccines gets you to a maximum of zero.

In practical terms, the most problematic paragraph in the declaration is this one:

Those who are not vulnerable should immediately be allowed to resume life as normal. Simple hygiene measures, such as hand washing and staying home when sick should be practiced by everyone to reduce the herd immunity threshold. Schools and universities should be open for in-person teaching. Extracurricular activities, such as sports, should be resumed. Young low-risk adults should work normally, rather than from home. Restaurants and other businesses should open. Arts, music, sport and other cultural activities should resume. People who are more at risk may participate if they wish, while society as a whole enjoys the protection conferred upon the vulnerable by those who have built up herd immunity.

In most parts of the Western world, normal openings for restaurants, sporting events and workplaces are likely to lead to spiraling caseloads and overloaded hospitals, as is already a risk in some of the harder-hit parts of Europe. Reopenings, to the extent they work, rely on a government that so scares people that attendance remains low even with reopening.

The middle paragraph is from the Great Barrington Declaration. The paragraphs that bookend it are from Cowen.

I’m not familiar with Europe but Georgia (in the United States) opened without overloaded hospitals. As for spiraling caseloads, that’s part of how you reach herd immunity. And if you follow his link to a Bloomberg article, you’ll see that it says not a word about overloaded hospitals.

Cowen is right that governments have reacted by scaring people. That’s one reason the Great Barrington Declaration is important. It seeks to tell people not to be so afraid unless they’re particularly vulnerable. Notice the statement in the Declaration that “Young low-risk adults should work normally, rather than from home.” The authors are not saying that they should be forced to; they’re saying they should. As I understand the Declaration, they’re trying to talk to young people as well as others and say, in effect, “Come in, the water’s fine.” Does Cowen object? If so, he doesn’t make clear and he doesn’t say why.

Don’t get me wrong: The Great Barrington strategy is a tempting one. Coming out of a libertarian think tank, it tries to procure maximum liberty for commerce and daily life. It is a seductive idea. Yet consistency of message is not an unalloyed good, even when the subject is liberty. And when there is a pandemic, one of the government’s most vital roles is to secure public goods, such as vaccines.

Notice how he jumps from the idea that the message is tempting and seductive (I agree) to government’s role in vaccines. Little problem: WE DON’T HAVE A VACCINE. The Great Barrington Declaration makes clear that it’s addressed to what to do while we’re waiting for a vaccine. Insert can opener joke.

The declaration is disappointing because it is looking for an easy way out — first by taking the best alternatives for fighting Covid off the table, then by pretending a normal state of affairs is also an optimum state of affairs.

Does he care to tell us what “the best alternatives for fighting Covid” are? It strikes me that he has two in mind: (1) vaccines, which haven’t yet been approved, in part thanks to the FDA, which Cowen has earlier said should not approve one from Russia, and (2) lockdowns, which Cowen says aren’t that important and, by the way, we should tighten them.

My worldview is both more hopeful and more tragic. There is no normal here, but we can do better — with vigorous actions to combat Covid-19, including government actions. The conception of human nature evident in the Great Barrington Declaration is so passive, it raises the question of whether it even qualifies as a defense of natural liberty.

I missed the hopeful part. OK, so what are the vigorous actions that include government actions? Blank out, as the aforementioned Ayn Rand loved to say. And how does he know that the authors of the Great Barrington Declaration would not favor those actions? Cowen is fixated on the idea that three non-libertarians produced a libertarian statement. As I mentioned in Part 1, that sends him down a rabbit hole from which he doesn’t emerge.

 

 

 

 

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Three Economists Walk Into a Discussion, Part 2

Last week I posted Part 1 of my observations on the discussion between Kevin Hassett and Austan Goolsbee. This is Part 2.

I left with the issue of the federal deficit and debt.

35:30: Goolsbee doesn’t think we’ll be Greece. We have low income tax rates, no VAT, and better demographics.

He argues that tax rates on grandkids will need to he higher. He thinks we need immigration to offset the aging of the population.

DRH comment: I’m disappointed that neither Hassett nor Goolsbee discussed refinancing the debt to 10 to 30-year bonds, thus saving on a potential time bomb if interest rates rise by even 2 percentage points.

38:00: Goda says that the chance of kids today outearning their parents in the long run is less than for my generation outearning our parents.

39:00: Goda follows Goolsbee’s lead and turns to inequality.

39:45: Hassett talks about Trump’s opportunity zones and also notes Trump’s efforts on prison reform.

41:30: Hassett emphasizes that charter schools should not be curtailed.

42:00: Goda links the California fires and climate change. She doesn’t justify this.

42:30: Hassett emphasizes Trump’s “regulatory budget.” He also points out that Trump’s economists finally started including the deadweight loss from raising taxes to fund enforcement of regulation. (I think he confuses it by making a claim at first that even the cost of enforcing the regulations wasn’t included as a cost. That’s hard to believe.)

45:00: Goolsbee claims that Trump’s economists did cost/benefit analysis wrong. Hard to believe, but I don’t know.

47:30: Goda asks about trade.

48:00: Hassett points out that trade deals are thousands of lines and that he learned this from Goolsbee. Hassett says that trade deals were asymmetric in the past, with the U.S. conceding more than other countries. But this seems (to DRH) like a protectionist argument. “Conceding” to other countries presumably means dropping our tariffs and quota restrictions more than they drop theirs, so that our consumers gain more than their’s do.

50:30: Goolsbee says Trump’s approach is muscular declaration of trade wars with our allies: Canada, Mexico, Japan, Korea, Germany, the EU, and Australia. And with China.

52:25: Goolsbee surprises me by saying that the USMCA is better than NAFTA. For my view see “NAFTA 0.0,” Defining Ideas, December 20, 2019.

53:00: The U.S. is putting agriculture on the welfare payroll.

53:30: Hassett goes back to the asymmetry point.

54:40: Goda asks them to share their data, based on input from listeners.

55:10: Goda asks question from the audience about immigration. What’s the appropriate policy?

56:00: Hassett says that when he was in the White House, Jared Kushner and others put together a reform that would make U.S. immigration policy like Australia’s.

56:45: Goolsbee’s best moment. Without robust immigration, we’ll have problems with safety net (presumably Social Security and Medicare) due to baby boomers. Points out how actively hostile Trump is to legal immigration also.

58:40: “This is not the American way.” I could hug Goolsbee.

59:00: Goda asks about Biden’s tax policies.

To be continued in Part 3.

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Three Economists Walk Into a Discussion, Part 1

On September 15, the Stanford Institute for Economic Policy had a virtual discussion about both Covid-19 and the views of the two major presidential candidates. The moderator was Gopi Shah Goda of SIEPR and the two interviewees were Kevin Hassett, who had been chairman of the Council of Economic Advisers under President Trump and Austan Goolsbee, who had had the same job under President Obama.

I watched it live.

I’ll hit some highlights and make some comments. This is Part 1.

At 4;24, Goda asks: “What are the right economic policies to provide relief to those whose livelihoods have been adversely affected by the pandemic and stimulate the economy? How much spending should we do in the short run on Covid relief issues like extended and extra unemployment and stimulus payments?”

She started with Kevin, and I got my first big disappointment. Notice that she asked two questions. Kevin, though, answered only the second. He gave a big number for spending and didn’t mention any other means of relief: deregulating, letting people work in occupations without having to get a license, allowing restaurants to sell food, allowing restaurants to open, getting the FDA to allow people to use home tests for the coronavirus.

And his number for additional federal spending was big: $1.5 to 2.5 trillion.

Goolsbee’s answer was what I would have predicted: lots more federal spending and a big bailout of state and local government.

14:50: Kevin defines classical liberals like me out of the discussion with “I don’t think there’s anyone who thinks there shouldn’t be state and local aid.”

15:10: Austan gets it right: There are a great number of people who are opposing state and local aid.

17:10: Austan has a funny line that riffs on the old can opener joke: “This is not just ‘assume we have a can opener; let’s assume we have the greatest of all can openers.’” Then he says that you wouldn’t want to use the price system to allocate the vaccine.

23:43: Goda asks about the differences between the two candidates’ tax policies.

24:20: Austan says that Biden wants to raise taxes on high-income people and on corporations. What’s important, he says, is what the money is used for. If the added revenue were used to provide universal child care, that would be very pro-growth, says Austan.

But wait. This is not a discussion between politicians. This is a discussion between economists. What’s the market failure that would justify government provision of child care? Austan doesn’t  even mention one. If my wife and I, when we were younger, had wanted to hire child care so she could work, we would have compared her after-tax income to our net-of-child-care-tax-credit cost of hiring child care. I showed in a piece in the Journal of Policy Analysis and Management in the late 1980s that the structure of the tax credit at the time could be seen as a way of offsetting the distorting high marginal tax rate of the second earner, typically the women. But Austan isn’t making that argument; in fact, for high earners, he wants an even higher marginal tax rate. Moreover, various changes in the tax law have been the tax credit much less pro-growth.

At about the 25:00 point, they get into a real substantive discussion about what happened to real wages and real family incomes after the tax cut. They literally disagreed about what the numbers were. Austan said that the effects of the tax cut on real median family incomes were disappointing. Kevin said that in a debate with Austan in Philadelphia a few years earlier, he had predicted that real median family income would rise by $4,000 and that the data that just came in (which were pre-pandemic), the number was actually a $4,900 gain. Kevin also pointed out that over 6 million people had moved out of poverty, the biggest drop since the War on Poverty had begun under LBJ. Kevin also pointed out that he had predicted that income inequality would fall as a result of the 2017 tax cut and that it had fallen.

Aside for non-economists: Why would reductions in income tax rates on corporations and on high-income individuals even be expected, at a theoretical level, to increase real wages? By increasing the incentive to invest in capital. The greater the capital to labor ratio, the higher are real wages.

29:10: Kevin catches Austan’s characterization of the proposed Biden tax hike as an increase in taxes on billionaires. Kevin points out that it would apply to people making over $400K annually. He then expresses optimism that Biden will hold off on raising marginal tax rates, due to the state of the economy.

31:00: Here is where Austan gives numbers on increases in real median family income that differ dramatically from Kevin’s data.

Aside:  As a viewer, I was able to type a question on line and I did. We learned near the end from Goda that a number of viewers had asked a similar question and it was this: “You two are disagreeing on actual facts; show us your sources.” I asked Mark Duggan, the SIEPR director, for the source and he sent me the link to the Census data that Kevin had cited. Kevin turned out to be right about the large growth in median family income of families, including black and Hispanic families. I’m still scratching my head about what data Austan had in mind.

32:00: Kevin says that growth in median real family income in the first 3 years of Trump vastly exceeded any 3-year period under Obama.

32:10: Goda lays out the deficit issue nicely and asks about the two candidates’ plans.

In Part 2, I’ll cover the rest of the discussion.

 

 

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