By Poul M. Thomsen Europe, like the rest of the world, faces an extended crisis. An element of social distancing—mandatory or voluntary—will be with us for as long as this pandemic persists. This, coupled with continued supply chain disruptions and other problems, is prolonging an already difficult situation. Based on updated IMF projections released last […]
Toward the end of a recent podcast, Tyler Cowen remarked that the pandemic could have been much worse, and because we’ve been through this we’ll be much better prepared next time.
At first I agreed with both observations. But while I still believe that we’ll be much better prepared next time, I have doubts as to whether it could have been much worse. This might have been the worst possible epidemic that could possibly have hit the world in 2020. It all depends on what economists call “elasticity”, which means responsiveness of behavior to changes in incentives.
I don’t doubt for a moment that one can imagine viruses that are much more deadly than Covid-19, including SARS, AIDS and Ebola. But just because a virus has a higher case fatality rate (CFR) doesn’t necessarily mean it leads to a higher total death toll, or a longer economic depression. The damage depends on both the CFR and the number of cases. And in general, the number of cases will be inversely related to the CFR, other things equal.
The best way to see my argument is to look at some data. When looking at incentive effects, I am going to use the term “response” rather than “policy”, because I’m interested in the response of both governments and private individuals, not just governments.
Germany has a fatality rate per million that is between 1/4th and 1/6th the rate of other populous countries such as Italy, France Spain and the UK. It seems plausible that the difference in death rates is due to a difference in response (although of course other factors such as genetics and luck may play a role.) If the disease had been 5 times more deadly, then it seems quite possible that the other big European countries would have responded as effectively as did Germany. They’d still do more poorly than Germany (which would also respond more strongly to a deadlier epidemic), but not more poorly than they actually did with Covid-19. In a deadlier epidemic, the Italians would respond more like the Germans did in this case, and the Germans would respond more like the Chinese did in this case.
[If you are thinking that Italy had the disadvantage of being hit first, then compare Germany to the UK in this thought experiment.]
Some readers may be thinking, ‘You can’t compare Germany to the other four countries, as Germans are more disciplined in following rules and their government has more state capacity.” If that’s what you are thinking, then you’ve completely missed the point. Those cultural differences are likely real, but they merely explain why Germany did better than the other four when faced with this particular epidemic. It tells us nothing about counterfactuals of how Germany and the other four would have reacted to a much more serious epidemic.
Italy responded to the epidemic in March and April far more effectively than in February. Basic Italian culture did not change in one month—they simply became more aware of the need to try to control the epidemic. Chinese provinces outside of Hubei had death rates that were only a tiny fraction of the death rates in Hubei province. That’s not because the non-Hubei provinces of China had a different culture, rather they responded differently to the epidemic because they knew more about the risks by the time it got there. The response of the population is hugely important.
So don’t confuse cross sectional comparisons of response for a given epidemic, with counterfactual responses in the same country for a wide range of hypothetical epidemics. Young people would not be having Covid-19 parties if the death rate were 50%, and almost everyone would be wearing masks. There’d be a sort of WWII mobilization push for test/trace/isolate (which helped keep the German epidemic under control.)
We know that lots of countries controlled the epidemic more effectively than the US or Western Europe. And there are wide variations even within areas like Western Europe. Had the epidemic been far worse, then many more countries would have responded much more strongly. Taiwan had a death rate of 0.3 per million from Covid-19 (so far). Assume their case fatality rate were 100 times worse, making the disease close to 100% fatal. Even in that case, and even in the worst case with no behavior response, the fatality rate in Taiwan would have been only about 30 per million. That’s less than 1/20th the UK rate. So even a highly deadly epidemic doesn’t kill that many people if controlled effectively. And the UK actually had more time to prepare than Taiwan. My claim is that if Covid-19 had been as deadly as AIDS, then the UK (both public and government) would have taken steps so that the total number of British deaths was no higher than the actual number—roughly 45,000.
So maybe it could not have been much worse; maybe this was the perfect storm. Just deadly enough to shut down the global economy, but not deadly enough to make most countries take Taiwanese-style precautions.
PS. Australia was recently hit by a second wave. We know the specific mistakes that led to this happening, and it seems very unlikely these mistakes would have happened if the CFR had been 50%. (Guards were partying with quarantined airline passengers.)
PPS. You can think of this in economic terms, where the societal demand for safety is roughly unit elastic. This is different from individual demand elasticity, as there is a public good aspect to public health.
PPPS. I have doubts as to whether my argument applies to poor, densely populated countries with low state capacity. Perhaps in some places there was no feasible level of response that could have prevented disaster if the CFR had been high. (Recall the Black Death.) But we know that’s not true of developed countries, or even many developing countries such as Vietnam.
By Vitor Gaspar and Gita Gopinath The ongoing COVID-19 pandemic has already prompted an unprecedented fiscal policy response of close to $11 trillion worldwide. But with confirmed cases and fatalities still rising fast, policymakers will have to keep the public health response their No. 1 priority while retaining supportive and flexible fiscal policies and preparing […]
By Mariya Brussevich, Era Dabla-Norris, and Salma Khalid The COVID-19 pandemic is devastating labor markets across the world. Tens of millions of workers lost their jobs, millions more out of the labor force altogether, and many occupations face an uncertain future. Social distancing measures threaten jobs requiring physical presence at the workplace or face-to-face interactions. […]
In mid-March I made a bet with my good friend and co-author Charley Hooper about the number of U.S. deaths there would be from COVID-19. The terms of the bet are here. In my post, I said why I thought he might win. Of course I hoped he would win. Unfortunately, he lost. And over 100,000 U.S. residents lost much, much more.
I waited this long because he and I both agreed that there could be a substantial number of deaths of people with the disease but not of the disease. We both agree, though, that of the 133,844 U.S. deaths so far, at least 100,000 of them are due to COVID-19.
I actually had bought much of Charley’s reasoning, which is why I titled my March 16 post “My Bet on Covid-19 and Why I Might Lose.” I asked Charley last week, when we both were becoming convinced that he lost, what he attributed his loss to. He answered that he didn’t expect various governments to be so incompetent, and he highlighted the role of New York’s governor Andrew Cuomo and some other northeast governments in making the problem much worse by insisting that nursing homes admit people with the disease.
James Fallows has a very good article in the Atlantic, documenting the many failures in the US government response to the Covid-19 epidemic. While I don’t contest his specific points, some of which document appalling lapses in intelligence gathering and processing, I do not accept his framing of the problem. The failure here went well beyond government incompetence—there was a major failure of imagination.
By the middle of March, Trump had switched to blasting the “Chinese virus,” which he continued doing through much of the month. On March 11, he gave a poorly received national address from the Oval Office, in which he bungled the announcement of an upcoming ban on most (or maybe all; it wasn’t clear) air travel to the U.S. from Europe. Several people who have dealt with past disease outbreaks told me that, in a normal administration, one option for mid-January would have been a temporary, but total, ban on all inbound international flights to the United States. “A serious option in all contingency planning would be total closure of the airspace,” a former senior official with experience in pandemic response told me. “We learned from the bird flu that as long as the airspace was open, we were completely vulnerable as a population. It is a draconian approach that could strand thousands of people. But as we look back—when taking early intelligence into serious consideration from the start—this one option would be an early choice for the president to make. It would be followed immediately by humanitarian support, and then transitioned through hubs to permit a measured flow of people to key locations. Follow-on screening would also take place prior to any further travel.”
Hindsight is 20-20. It’s very unlikely that a “normal administration” would have imposed a travel ban in mid-January. The first European travel ban was January 31st, the same day as the US ban. Fallows underestimates just how deep the failure of imagination actually was.
On January 23rd, 2020, I knew that Covid-19 was a major problem. I knew that it was transmittable between humans. I knew that some experts suggested that it could become a worldwide pandemic. I knew that the Chinese government was so concerned that they took the unprecedented step of locking down an entire province of 60 million people. The US government also knew this. The Canadian and European governments knew this. The media knew this. The Democrats knew this. The Taiwanese knew this.
Unfortunately, all of those groups (except the Taiwanese) didn’t take the threat seriously. We didn’t even ban flights from China until January 31st, and some people even opposed that ban. A ban on flights from Europe did not occur until mid-March, by which time large numbers of infected people had flown from Europe to the East Coast.
In my view, this was a failure of imagination. My initial view was that “this is another SARS”. I’m pretty sure that most other people felt the same way at the time—despite having all the relevant facts that we have today. Only when it began to spread widely in the West did we start taking it seriously, but by that time it was too late to stop.
So yes, in retrospect a total ban on all inbound flights in mid-January would have been ideal. That might have allowed the US to achieve a much lower death total (albeit only with effective follow-up steps). But there was almost no support for such a move at the time because Westerners were unable to imagine how bad it would get. We had the facts (by January 23rd at the latest, but actually earlier); we simply refused to believe the doomsday predictions that were being made by a few epidemiologists.
There is no bureaucratic fix for a failure of imagination, just as there is no bureaucratic fix for the failures of imagination that led to 9/11 or Pearl Harbor. All we can do is learn from our mistakes.
The next 10 times this occurs we’ll almost certainly overreact, just as we overreacted to later 9/11 and Pearl Harbor type threats. Most of those next 10 virus outbreaks will be less severe—more like the first SARS epidemic than the Covid-19 epidemic. But having seen what happened in 2020, we’ll react more like Taiwan did this time, if not even more vigorously.
That’s just how the world works (horse, barn door). People don’t have enough imagination to take steps to prevent disasters until they’ve seen the effects of a disaster. After our electrical system gets knocked out for months by a huge solar flare, then we’ll start stocking up on some extra transformers. We’ll have arms control after the next accidental nuclear war. It’s not that we don’t understand the risks at an intellectual level, it’s that we can’t really imagine the worst-case outcome.
HT: David Beckworth, Matt Yglesias
Tyler Cowen linked to a tweet that mentioned the fact that:
On a per-capita basis, of the European majors only Germany has done better than the US in death rate
The “European majors” include Spain with 46.8 million people but not Poland with 37.8 million. So the cutoff seems to be a rather arbitrary 40 million people.
Let’s start with a list compiled by Worldometer, which includes 215 “countries” (actually entities.)
The US shows up 9th in Covid-19 deaths per capita. Only 8 of 215 countries are worse. But obviously that’s just a first pass, and is just as arbitrary as the tweet. So I’ll look at the data from a variety of perspectives, and reach a VERY tentative conclusion.
1. Many of the countries are tiny. If we exclude places with fewer than 5 million people (roughly the population of Denmark, Norway, Finland or New Zealand), then we have 122 countries, 6 of which did worse than the US. That doesn’t look good for the US.
2. There are likely some other countries that are actually doing worse than us, but have underreported deaths. Mexico is an example. On the other hand, for various reasons I believe the US would be fairly near the top in death rates with an accurate list. First, most countries have death rates far below the US level. Second, most countries don’t underreport deaths as much as Mexico. And third, even the US likely underreports Covid-19 deaths, relative to places like Belgium. I believe we’d probably still be top 15 on an accurate list.
3. It’s also a dynamic process. We are gradually catching up to places like France, but others below us (like Brazil) are gradually catching up to us.
4. It’s not clear why the “European majors” are the right comparison group for the US. Yes, we are a big country, but places like The Netherlands are far, far more densely populated than the US. Parts of the US that have closer to Western European population density (say Massachusetts or New Jersey) have outcomes that are much worse than most of Europe. Of course there are also parts of Europe like Milan and Madrid that are far worse than the European average. So you have a real apples and oranges problem in deciding how to compare.
5. It’s not clear why a place like Spain is a better comparison to the US than Japan, Australia or Canada. If race/culture is somehow the issue, then Canada and Australia might be best. Some people point out that the US isn’t doing much different from Canada, if you exclude the northeastern US. But if you remove Quebec, then the rest of Canada is doing far better than the US outside the Northeast. Again, the apples and oranges comparisons are tricky. What is the right set of countries or regions? Is climate decisive? Density? Exposure to BCG vaccines? Percent elderly? Without a model, it’s hard to know how the US is doing. I live in suburban Orange County, and feel that it’s much easier for me to avoid the virus than if I lived in a dense European city.
Finally, it’s important to be consistent in your approach. You do NOT want to make both of these two arguments:
1. The early failures in places like Sweden and New York were not costly, as herd immunity is the inevitable endgame everywhere.
2. Outside the Northeast, things aren’t so bad. Thus the US isn’t doing that bad.
If the first argument is true, then the second argument is kind of pointless. If herd immunity is the endgame, then all of the US will eventually be hammered as hard as the Northeast. (I don’t expect that to happen, BTW.)
This issue inevitably becomes politicized, and I see people on both sides who cherry pick data and arguments, and ignore data points that conflict with their preferred analysis.
A year from now we’ll have a much better idea of how the US did. If by the time that an effective vaccine or drug comes along the US ends up with 160,000 dead, then the implications for our policy response will be vastly different from if we end up with 500,000 dead. That’s because if we end up with 160,000 dead then we’ll know that herd immunity was not the endgame, and in that case the high death toll in April and May will seem like a very costly policy error. If we end up with 500,000 dead then it will seem possible that the early mistakes were not that consequential; herd immunity was the only practical endgame. (I say “possible” because even then you’d need to look at the endgame in places like Australia.)
In my view, both the US and 4 of 5 European majors had a poor response to the crisis. But I understand how people would disagree with me—it’s hard to prove either way.
PS. This post is not primarily about President Trump. I am describing the response of 330 million American people to the virus, including me, the FDA, the CDC, Trump, Governor Cuomo, and people who refuse to wear masks in crowded stores.
The Wall Street Journal has an interesting article on the Covid-19 situation in the US and China:
In recent days, many U.S. states have been forced to reverse course and shut down restaurants and bars and require face coverings in public settings as new daily infections surpassed 50,000 on Wednesday for the first time.
The new wave of coronavirus infections and restrictions on business activity threatens to throw a nascent recovery off course, after the U.S. on Thursday reported a second straight monthly drop in the jobless rate in June.
That doesn’t sound good. Meanwhile, in China the virus seems under control:
In China, meantime, health authorities have aggressively attacked even small outbreaks as they emerge across the country. The most recent cluster, which broke out at Beijing’s largest wholesale food market last month, prompted a swift and vigorous response from the local government, including the testing of millions of citizens and new restrictions on people’s movements in and out of the capital.
On Friday, Chinese health authorities reported just two new locally transmitted infections in the country for the previous day, both of them in Beijing.
This may allow the Chinese economy to boom in the second half:
The Chinese economic data released on Friday showed the number of total new businesses rising at the sharpest rate since August 2010, as service providers made plans for increases in consumer demand in the coming months, Caixin said. . . .
Sporadic outbreaks in China shouldn’t derail its economic recovery, said Lian Ping, an economist at Zhixin Investment Research Institute. The Shanghai-based economist is forecasting year-over-year economic growth of more than 6% in the latter half of 2020—roughly in line with the 6.1% gross domestic product growth rate China reported in 2019.
Of course there are much better models than China, such as Taiwan, South Korea, Australia and New Zealand. The bottom line is that it’s misleading to speak of a trade-off between a healthy population and a healthy economy. The two go hand in hand.
Happy Fourth of July!
PS. Note that while China was taken by surprise by Covid-19, the US had several months to prepare a response. How did we spend that time?
By Ulric Eriksson von Allmen, Purva Khera, Sumiko Ogawa, and Ratna Sahay The COVID-19 pandemic could be a game changer for digital financial services. Low-income households and small firms can benefit greatly from advances in mobile money, fintech services, and online banking. Financial inclusion as a result of digital financial services can also boost economic […]
by Chang Yong Rhee For the first time in living memory, Asia’s growth is expected to contract by 1.6 percent—a downgrade to the April projection of zero growth. While Asia’s economic growth in the first quarter of 2020 was better than projected in the April World Economic Outlook—partly owing to early stabilization of the virus […]