I “Win” My Bet

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.


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Two countries, going in opposite directions

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?


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Oksana Boyko Interviews Henderson on RT

The interview went 28 minutes and is here.

I won’t do my usual time-stamping because I’m busy with other things.

What I will point out is that approximately the first half is on my Wall Street Journal article, co-authored with Jonathan Lipow, that analyzed the findings of the major cost/benefit analyses of lockdowns and other measures that were in response to the coronavirus. We get into an interesting discussion of the value of a statistical life. It also gave me a chance to use the main thing I took away from my debate with Justin Wolfers back in April: how the concept of least-cost avoider strengthens the case against lockdowns.

The second half is about my latest article for Hoover’s Defining Ideas, “Black Livelihoods Matter,” Defining Ideas, June 17.  We get into the minimum wage, Senator John F. Kennedy’s racist case for increasing the minimum wage, occupational licensure, how restrictions on housing supply drive up housing prices in San Francisco, Los Angeles, New York City, and other cities, and charter schools. Early in the second half, I dealt briefly with the issue of white privilege.

Also, right at the end, I get in a major criticism of mega-murderers Chairman Mao and Joseph Stalin.

Oksana Boyko did her homework and so the result was an excellent conversation.

P.S. I wanted to do a screenshot at the 1:27 point that shows both Oksana, me, and my Rocky movie poster, but with my new MacBook Pro, I couldn’t figure out how.



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The Data Are In: It’s Time for Major Reopening



Early in the Covid-19 pandemic, an influential economic analysis from the University of Chicago concluded that the likely benefits of moderate social distancing would greatly exceed the resultant costs. The New York Times and the Washington Post recently cited that study as evidence that the use of strict lockdowns to control the virus’s spread has been justified, and that current efforts to “open up” social and economic activity around the U.S. are dangerous and irresponsible. That is seriously misleading; the Chicago study is already out of date. More recent research supports the idea that the lockdowns should end.

This is the lead paragraph in an op/ed published in today’s Wall Street Journal. The op/ed is David R. Henderson and Jonathan Lipow, “The Data Are In: It’s Time for Major Reopening,” WSJ, June 15 (electronic) and June 16 (print).

Three things that delight me about it, in order:

1. It was published and I think it’s pretty important.
2. Although I haven’t seen the print version, a friend in the Eastern time zone tells me that it’s the lead op/ed. I’ve had over 50 op/eds in the Journal and this is only about the 4th or 5th time my piece has been above the fold.
3.The editor understands that the word “data” is plural.

Another paragraph:

That finding [that the benefit of the social distancing and lockdowns is only about $250 billion] casts major doubt on the value of lockdowns and even social distancing as a method of reducing the spread of Covid-19. While we can’t yet estimate a specific figure, the economic cost of social distancing and lockdowns will likely be more than $1 trillion. And that’s an understatement of the costs when you consider increased suicides and other social losses not captured in gross domestic product. For example, parents of young children have widely noted their kids’ gloomy outlook when not allowed to be with friends.

As always, I’m contractually obligated not to post the whole thing until 30 days from now. It’s on my calendar.


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Lockdowns are partly endogenous

In monetary policy, a common mistake is to assume that low interest rates and/or QE are indications of an easy money policy. They might be, but more often they are the effect of a tight money policy that drove interest rates to zero or below, and dramatically increased the demand for liquidity (i.e. base money.)

I wonder if something similar is true of lockdowns during the Covid-19 pandemic. Certainly there are occasions when lockdowns are reflective of an aggressive policy of containment, but perhaps just as often they reflect the exact opposite.

Germany was much more successful in containing the virus than the other major Western European powers, and as a result had less restrictive lockdowns:

This occurred despite one of Europe’s least draconian shutdowns. Though schools, non-essential shops and restaurants were closed for weeks, a large proportion of businesses and factories continued to operate as normal. Germany also left lockdown more quickly than many of its neighbours.

Some East Asian countries were even more successful than Germany, and in many cases they even allowed their restaurants to stay open.

In contrast, where the epidemic got out of control, as in Italy and Spain, extremely restrictive lockdowns were often put in place.

I often see the discussion framed as “lockdowns vs. lots of deaths”. That’s true in a few cases, but just as often lockdowns are endogenous, a sign countries have stumbled into the “lots of deaths” equilibrium.

This is why I continue to reject the framing of the debate over Sweden’s policies, a country that avoided mandatory lockdowns. In most cases, the best way to avoid lockdowns is by restraining the virus with a combination of test/trace/isolate, masks, hand washing, and voluntary social distancing, not herd immunity.  Do all that and you will likely be able to avoid mandatory lockdowns.

Neither Sweden nor Norway is the model; it’s the most successful East Asian democracies that deserve our attention.

PS.  I understand that Germany had more time to prepare than Italy.  But so did the UK.  Britain wasted valuable time flirting with a “herd immunity” approach before opting for a more conventional approach.  It ended up with the worst of both worlds—lockdowns plus even more deaths than Italy.


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Herd immunity was never a feasible option

Bryan Caplan has a post on Covid-19 that is full of sensible ideas. But I disagree with one of his claims:

18. Alex Tabarrok is wrong to state, “Social distancing, closing non-essential firms and working from home protect the vulnerable but these same practices protect workers in critical industries. Thus, the debate between protecting the vulnerable and protecting the economy is moot.” Moot?!  True, there is a mild trade-off between protecting the vulnerable and protecting the economy.  But if we didn’t care about the vulnerable at all, the disease would have already run its course and economic life would already have strongly rebounded.  Wouldn’t self-protection have stymied this?  Not if the government hadn’t expanded unemployment coverage and benefits, because most people don’t save enough money to quit their jobs for a couple of months.  With most of the workforce still on the job, fast exponential growth would have given us herd immunity long ago.  The death toll would have been several times higher, but that’s the essence of the trade-off between protecting the vulnerable and protecting the economy.

From my vantage point in Orange County, that just doesn’t seem feasible.  People here are taking quite aggressive steps to avoid getting the disease, and I believe that would be true regardless of which public policies were chosen by authorities.  Removing the lockdown will help the economy a bit, as would ending the enhanced unemployment insurance program.  But the previous (less generous) unemployment compensation program combined with voluntary social distancing is enough to explain the vast bulk of the depression we are in.

In many countries, the number of active cases is falling close to zero.  In those places, it will be possible to get people to return to service industries where human interaction is significant.  Speaking for myself, I’m unlikely to get a haircut, go to the dentist, go to a movie, eat in a crowded restaurant, or many other activities until there is a vaccine. (Although if I were single I’d be much more active.) If I were someone inclined to take cruises, I’d also stay away from that industry until there was a vaccine.  I’ll do much less flying, although I’d be willing to fly if highly motivated.  For now, I’ll focus on outdoor restaurants (fortunately quite plentiful in Orange County) and vacations by automobile. Universities are beginning to announce that classes will remain online in the fall.

If you think in terms of “near-zero cases” and “herd immunity” as the two paths to normalcy in the fall of this year, I’d say near-zero cases are much more feasible.  Lots of countries have done the former—as far as I know none have succeeded with the latter approach.  Unfortunately, America has botched this pandemic so badly (partly for reasons described by Bryan) that it will be very difficult to get the active caseload down to a level where consumers feel safe.

Don’t get me wrong, both the lockdown and the change in unemployment compensation create problems for the economy.  But they are not the decisive factor causing the current depression.  If the changes in the unemployment compensation program were made permanent, then at some point this would become the decisive factor causing a high unemployment rate.  But not yet.

BTW, I am not arguing that it wouldn’t be better if people had a more rational view of risks, as Bryan suggested in a more recent post.  This post is discussing the world as it is.

Here’s a selection of countries with 35-76 active cases (right column), followed by a group with less than ten.  Many are tiny countries and some have dubious data, but not all.

. . .



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What I’m Doing

1. The U.S. political system is deeply dysfunctional, especially during this crisis.  Power-hunger reigns in the name of Social Desirability Bias.  Fear of punishment aside, I don’t care what authorities say.  They should heed my words, not the other way around.

2. Few private individuals are using quantitative risk analysis to guide their personal behavior.  Fear of personally antagonizing such people aside, I don’t care what they say either.

3. I am extremely interested in listening to the rare individuals who do use quantitative risk analysis to guide personal behavior.  Keep up the good work, life-coach quants – with a special shout-out to Rob Wiblin.

4. After listening, though, I shall keep my own counsel.  As long as I maintain my normal intellectual hygiene, my betting record shows that my own counsel is highly reliable.

5. What does my own counsel say?  While I wish better information were available, I now know enough to justify my return to 90%-normal life.  The rest of my immediate family agrees.  What does this entail?  Above all, I am now happy to socialize in-person with friends.  I am happy to let my children play with other kids.  I am also willing to not only eat take-out food, but dine in restaurants.  I am pleased to accommodate nervous friends by socializing outdoors and otherwise putting them at ease.  Yet personally, I am at ease either way.

6. I will still take precautions comparable to wearing a seat belt.  I will wear a mask and gloves to shop in high-traffic places, such as grocery stores.  I will continue to keep my distance from nervous and/or high-risk strangers.  Capla-Con 2020 will be delayed until winter at the earliest.  Alas.

7. Tyler suggests that people like me “are worse at intertemporal substitution than I had thought.”  In particular:

It either will continue at that pace or it won’t.  Let’s say that pace continues (unlikely in my view, but this is simply a scenario, at least until the second wave).  That is an ongoing risk higher than other causes of death, unless you are young.  You don’t have to be 77 for it to be your major risk worry.

Death from coronavirus is plausibly my single-highest risk worry.  But it is still only a tiny share of my total risk, and the cost of strict risk reduction is high for me.  Avoiding everyone except my immediate family makes my every day much worse.  And intertemporal substitution is barely helpful.  Doubling my level of socializing in 2022 to compensate for severe isolation in 2020 won’t make me feel better.

Alternatively, let’s say the pace of those deaths will fall soon, and furthermore let’s say it will fall by a lot.  The near future will be a lot safer!  Which is all the more reason to play it very safe right now, because your per week risk currently is fairly high (in many not all parts of America).  Stay at home and wear a mask when you do go out.  If need be, make up for that behavior in the near future by indulging in excess.

Suppose Tyler found out that an accident-free car were coming in 2022.  Would he “intertemporally substitute” by ceasing driving until then?  I doubt it.  In any case, what I really expect is at least six more months of moderately elevated disease risk.  My risk is far from awful now – my best guess is that I’m choosing a 1-in-12,000 marginal increase in the risk of death from coronavirus.  But this risk won’t fall below 1-in-50,000 during the next six months, and moderate second waves are likely.  Bottom line: The risk is mild enough for me to comfortably face, and too durable for me to comfortably avoid.

8. The risk analysis is radically different for people with underlying health conditions.  Many of them are my friends.  To such friends: I fully support your decision to avoid me, but I am happy to flexibly accommodate you if you too detest the isolation.  I also urge you to take advantage of any opportunities you have to reduce your personal risk.   But I won’t nag you to your face.

9. What about high-risk strangers?  I’m happy to take reasonable measures to reduce their risk.  If you’re wearing a mask, I treat that as a request for extra distance, and I’ll honor it.  But I’m not going to isolate myself out of fear of infecting high-risk people who won’t isolate themselves.

10. Most smart people aren’t doing what I’m doing.  Shouldn’t I be worried?  Only slightly.  Even smart people are prone to herding and hysteria.  I’ve now spent three months listening to smart defenders of the conventional view.  Their herding and hysteria are hard to miss.  Granted, non-smart contrarians sound even worse.  But smart contrarians make the most sense of all.

11. Even if I’m right, wouldn’t it be more prudent me to act on my beliefs without publicizing them?  That’s probably what Dale Carnegie would advise, but if Dale were here, I’d tell him, “Candor on touchy topics is my calling and my business.  It’s worked well for me so far, and I’m going to stay the course.”

12. I’ve long believed a strong version of (a) buy-and-hold is the best investment strategy, and (b) financial market performance is only vaguely related to objective economic conditions.  Conditions in March were so bleak that I set aside both of these beliefs and moved from 100% stocks to 90% bonds.  As a result of my excessive open-mindedness, my family has lost an enormous amount of money.  The situation is so weird that I’m going to wait until January to return to my normal investment strategy.  After that, I will never again deviate from buy-and-hold.  Never!


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A libertarian is a conservative who has been oppressed

When I was young, there was an old saying that a conservative is a liberal who has been mugged. I suspect that the debates between liberals and conservatives are especially fierce precisely because they are generally based on genetics and random life experiences, not rational thought.

Along these lines, a Politico article by Rich Lowry caught my eye:

The intellectual fashion among populists and religious traditionalists has been to attempt to forge a post-liberty or “post-liberal” agenda to forge a deeper foundation for the new Republican Party. Instead of obsessing over freedom and rights, conservatives would look to government to protect the common good.

This project, though, has been rocked by its first real-life encounter with governments acting to protect, as they see it, the common good.

One of its architects, the editor of the religious journal First Things, R.R. Reno, has sounded like one of the libertarians he so scorns during the crisis. First, he complained he might get shamed if he were to host a dinner party during the height of the pandemic, although delaying a party would seem a small price to pay for someone so intensely committed to the common good.

More recently, he went on a tirade against wearing masks. Reno is apparently fine with a much stronger government, as long as it never issues public-health guidance not to his liking. Then, it’s to the barricades for liberty, damn it.

Ouch!  Lowry and Reno are both conservatives, but I’m guessing they are not the best of friends.

PS:  Tom Wolfe’s version is pretty close to the sentiments in this post:

If a conservative is a liberal who’s been mugged, a liberal is a conservative who’s been arrested.


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