Taming the Wave of Small and Medium Enterprise Insolvencies

by Federico J. Díez, Romain Duval, Chiara Maggi and Nicola Pierri The pandemic has hit small and medium enterprises particularly hard, partly because they are predominant in some contact-intensive sectors like hotels, restaurants, and entertainment. As a result, many advanced economies risk experiencing a wave of liquidations that could destroy millions of jobs, damage the […]

Read More

Giving Everyone a Fair Shot

By David Amaglobeli, Vitor Gaspar, and Paolo Mauro The COVID-19 pandemic is intensifying the vicious circle of inequality. To break this pattern and give everyone a fair shot at prosperity, governments need to improve access to basic public services—such as health care (including vaccination) and education—and strengthen redistributive policies. For most countries, this would require […]

Read More

Slow-Healing Scars: The Pandemic’s Legacy

By Sonali Das and Philippe Wingender Recessions wreak havoc and the damage is often long-lived. Businesses shut down, investment spending is cut, and people out of work can lose skills and motivation as the months stretch on. But the recession brought on by the COVID-19 pandemic is no ordinary recession. Compared to previous global crises, […]

Read More

Working Out the Differences: Labor Policies for a Fairer Recovery

By John Bluedorn The COVID-19 pandemic’s destruction of jobs was sure and swift. The lasting effects of the crisis on workers could be just as painful and unequal. Youth and lower-skilled workers took some of the hardest hits on average. Women, especially in emerging market and developing economies, also suffered. Many of these workers face […]

Read More

Covid Caution and Curry

On March 17, my favorite NBA player, Steph Curry shot a 3-pointer and then, as is his wont, backpedalled. The problem: he was backpedalling off the sideline instead of down the court and there was no barrier to stop him. In a normal game, there would have been some normal barrier to stop his going backward, whether the barrier be other chairs that players were sitting on or something else.

But because of Covid cautions, there are large spaces between chairs and so as Steph went backward, he didn’t stop until his tail bone came in hard contact with some metal stairs. Go to this link and page down to the 38-second video if you want to see what happened. But be prepared to watch something painful.

Why do I highlight this in an economics blog? Because it illustrates in microcosm the failure to make reasonable tradeoffs to deal with Covid-19. We know that Covid-19 is not particularly risky for young people and especially for young people without co-morbidities. NBA players are not a random sample; their physical fitness certainly puts them in the top 1 percent and maybe even in the top 0.1 percent of people their age, let alone of all ages. (And maybe in the top 0.01 percent.) The probability that Steph Curry would get badly sick from Covid, even if he didn’t get the shot, is really low. But the NBA did not make the tradeoffs the way I would have. I’m not challenging their right to do so: it’s their arena, pun not intended. I’m challenging the bad thinking behind their decision.

We often hear from the behavioral economists like Richard Thaler and  behavioral legal scholars like Cass Sunstein about “availability bias.” The idea is that people pay attention to what’s most prominent, not to what’s most likely. Where oh where are Thaler and Sunstein? Shouldn’t this be their moment to shine by pointing out how absurd some of these policies are?

 

(0 COMMENTS)

Read More

Privileges and Privacy for the Rulers

Recent journalistic investigations revealed that the family and friends of New York governor Andrew Cuomo benefited from nomenklatura privileges at the time when ordinary people had problems getting Covid-19 tests and timely results. These state-privileged people could be tested rapidly, often at home and many times if they wished. Their tests were often rushed to laboratories by state troopers and treated in priority. Liz Wolfe of Reason Magazine writes:

There was limited testing if you thought you’d been exposed, and long wait times if you did manage to nab one of those precious few tests.

But not if your last name starts with a C and ends with an uomo! …

The Albany Times Union reported last night that Democratic Gov. Andrew Cuomo directed the state’s top health officials to prioritize COVID testing for “the governor’s relatives as well as influential people with ties to the administration.”

This reminded me that, in late December, I reported on Cuomo’s intention to prosecute those who would give or sell Covid-19 vaccines to anybody outside the groups favored by the state and its priorities (“Free Enterprise: A Daring New Year Wish”). At that time, I asked the governor’s office, through its website, if he had himself received the vaccine. Two weeks later, having received no reply, I rapidly drafted a freedom-of-information request (called Freedom of Information Law or FOIL request in New York State) and emailed it to both the governor’s office and the New York State Department of Health.

The two replies landed in my virtual mailbox a few days apart in January. The letter from the Executive Chamber of the State of New York said:

This letter responds to your correspondence dated January 12, 2021, which pursuant to FOIL, requested:

“the dates Governor Cuomo, members of his family, and immediate staff have received vaccines against Covid-19; and indicate in which group of priority recipients (according to the State of New York’s policies) they fall.”

To the extent your request is reasonably described, these records are not maintained by the NYS Executive Chamber.

Please be advised that even assuming such records were maintained by the Executive Chamber, they would be exempt pursuant to Public Officers Law § 87(2)(b) because, if disclosed, would “constitute an unwarranted invasion of personal privacy.

Additionally, pursuant to Public Officers Law § 87(2)(a), an agency may deny access to records or portions thereof that are “specifically exempted from disclosure by state or federal statute.” Accordingly, to the extent records may exist said records are exempt from production pursuant to Health Insurance Portability and Accountability Act of 1996, Public. Law 104-191 and New York State Public Health Law §18.

The reply from the Department of Health was not very different:

This letter responds to your Freedom of Information Law (FOIL) request of January 12, 2021, in which you requested “the dates Governor Cuomo, members of his family, and immediate staff have received vaccines against Covid-19; and indicate in which group of priority recipients (according to the State of New York’s policies) they fall.”

Please be advised, the records you are requesting, to the extent such records exist, contain protected health information (PHI) regarding the individuals referenced in your request. In accordance with New York State law and the Health Insurance Portability and Accountability Act of 1996 (HIPAA) (Federal Law 45 C.F.R. §164.524), the Department requires a duly executed HIPAA authorization form in order to release PHI regarding any individual. We note your request was not accompanied by any HIPAA authorization forms.

Accordingly, your request is denied pursuant to POL §87(2)(a) as “specifically exempted from disclosure by state or federal statute” in accordance with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) (Federal Law 45 C.F.R. §164.524), and §87(2)(b), because disclosure “would constitute an unwarranted invasion of personal privacy.”

We now know that the governor himself waited his turn and received the vaccine in mid-March with much public fanfare.

The replies to my FOIL requests, however, show something interesting. One might have thought that privacy laws were meant to protect individuals against Leviathan’s lust for private information. But these laws seem to have been hijacked to protect the privacy of the rulers themselves. Perhaps actual governments don’t work as their ideal models?

Is “highjack” exaggerated? Consider the following. If, as current legal doctrine claims, ordinary individuals have no expectation of privacy when they enter an air terminal or cross the U.S. border or relate to their loving governments in certain other ways, why would political rulers have an expectation of privacy while they serve the people and sacrifice themselves for the “public good”?

(0 COMMENTS)

Read More

How European Banks Can Support the Recovery

By Mai Chi Dao, Andreas Jobst, Aiko Mineshima, and Srobona Mitra A robust post-COVID-19 recovery will depend on banks having sufficient capital to provide credit. While m ost European banks entered the pandemic with strong capital levels, they are highly exposed to economic sectors hit hard by the pandemic. A new IMF study assesses the […]

Read More

Proactive and reactive policies

New York magazine has a good article on Covid-19:

“Basically, going back to January, they’d be like, ‘China’s not going to control it; 80 percent of the population is going to get it; all efforts to contain it are going to fail; we have to learn to live with this virus; contact tracing and testing make no sense; this is going to be everywhere; right now we need to build up hospitals’ — which they didn’t even do. But they really didn’t think it was stoppable,” she says. “And then all of a sudden you started to see, in February, South Korea stopping it, Taiwan stopping it, and China stopping it. Then, in March, New Zealand. And then Australia. And then there’s this realization of, ‘Oh, wow. Actually, it is controllable.’”

At the beginning of March, South Korea was averaging more than 550 new daily confirmed cases, compared with just 53 in the U.K. At the end of the month, South Korea had 125; the U.K. was at 4,500 and climbing. “In the UK we have had nine weeks to listen, learn and prepare,” Sridhar wrote angrily in the Guardian, berating the British regime for failing to establish basic systems for supplies, testing, and contact tracing.

Later they point out that things are not quite that simple:

Francois Balloux, an infectious-disease epidemiologist and computational geneticist at the University College of London, goes further. “It’s not obvious that different measures taken in different places have clearly led to different outcomes,” he says. “There’s a lot of idiosyncrasy, and I think it’s simplistic to say that the countries that have controlled or eliminated the virus did things extremely differently. If you just list, for instance, the interventions that places like New Zealand or Australia have implemented, they’re not drastically different — in stringency nor duration — than in some other places. The country that had the strictest lockdown for longest in the world is Peru, and they were absolutely devastated. I think the slightly depressing message,” Balloux says with a sigh, “is that there is not just a set of policies that will bring success and can just be applied to any place in the world.”

So how can we reconcile these two conflicting narratives?  First we need to distinguish between public policy and behavior.  I suspect that the relatively low level of Covid deaths in some areas of the US (Washington, Oregon, Utah, Northern New England and even the SF Bay area of California) has more to do with culture than public policy.  People behave differently in different parts of the US.  If death rates in the Pacific Northwest and northern New England are similar to those in Canada, is it so far-fetched to believe that their culture also resembles Canada more than it does much of the rest of the US?

But the big international differences may require an additional explanation.  Reading the NY magazine article, I was immediately reminded of the global recession of 2008-09.  I’ve argued that the recession was caused by tight money policies, especially in the US and Europe.  But why was Australia able to avoid a recession?  Their central bank didn’t do any QE, and didn’t even cut interest rates to zero.

In fact, what to the average person looks like an “easy money” policy is often the exactly opposite.  It’s precisely because Australia had a more expansionary policy early in the recession that they were able to avoid some of the more “reactive” policy measures employed elsewhere during the 2010s.  Similarly, the US was a bit more (proactively) aggressive than the ECB during 2009-10, and as a result the ECB ended up being forced to do aggressive (reactive) QE and negative interest rates in the middle 2010s.

So if you see news stories of positive interest rates in Australia during the global recession of 2008-09, do not conclude that easy money is not stimulative.  And if you see news stories of restaurants being open in Taiwan, Australia and New Zealand during the Covid pandemic, do not conclude that social distancing is not helpful.  Rather the positive interest rates are a sign that Australia took proactive steps to prevent a deep fall in NGDP growth, and the open restaurants are a sign that they got on top of the pandemic early on, with an aggressive policy aimed at driving Covid rates down close to zero.

There’s another interesting comparison between Covid and the 2008-09 recession.  In both cases, bloggers were often ahead of the experts in diagnosing the problem and recommending appropriate policies.  Bloggers pointed out that the Fed’s October 2008 decision to begin paying interest on reserves would have a contractionary effect.  Today, that criticism is widely understood as being correct.  Indeed in his memoir, Ben Bernanke acknowledges that monetary policy was too tight after Lehman failed.  Similarly, bloggers like Alex Tabarrok and Tyler Cowen have been consistently right in their criticism of the public policy response to Covid.

PS.  The US is currently at 1670/million Covid deaths.  Canada is at 595/million, or halfway between Utah and Oregon.  Here are the lowest 7 states:

Note:  The 15 highest Covid death rates are in both northern and southern states, as well as both urban and rural.

(0 COMMENTS)

Read More

Did Price-Gouging Laws Increase Covid Deaths?

An interesting working paper was published this month by economists Rik Chakraborti (Christopher Newport University) and Gavin Roberts (Weber State University), “How Price-Gouging Regulation Undermined COVID-19 Mitigation: Evidence of Unintended Consequences.”

These price controls created shortages, which, according to economic theory, would have been more severe in the 42 states that already had price-gouging laws on the books or (inexplicably for an economist) rushed to legislate them after Covid hit. The federal Defense Production Act, invoked by Donald Trump, added more biting price controls on pandemic-related supplies (such as personal protection equipment) but is not considered in the Chakraborti-Roberts paper.

The authors used a database of cellphone-tracked mobility to calculate “average exposure of smartphones to each other within commercial venues.” Comparing states with and without price-gouging laws between January 22 and May 3, 2020, the econometric study confirmed that these laws were associated with more physical visits to commercial venues (especially from individuals in the lowest income quartile), as people were frantically looking for sanitizer and other goods in shortage. This increased shopping is likely to have increased contacts and infections. After controlling for state population density (which can have a compounding effect on infection), lockdown orders, and other factors, the econometric estimates suggest that price-gouging laws explain at least 25% of the early-April, first-wave Covid deaths in states with such laws.

We’ll have to see if these results are confirmed by other studies but they make economic sense. The regulatory welfare state may not be as nice as we thought, at least in its consequences. As for intentions, an old saying in many languages suggests that the road to hell is paved with them.

(0 COMMENTS)

Read More

1 2 3 15