Great Cowen Interview of John Cochrane

Yesterday, Tyler Cowen published his interview with Hoover Institution economist John Cochrane. It’s a lot of fun and full of insights. I recommend the whole thing.

Some fun highlights follow.

If You’re So Smart, Why Aren’t You Rich(er)?

COWEN: Brazil has very high real interest rates for decades, right? Arbitrage doesn’t seem to work.

COCHRANE: Well, that’s not an arbitrage. An arbitrage is the opportunity to make a sure profit, no risk. You got to invest in Brazil, and you got to take the risks of investing in Brazil, which include, usually, currency risk. The real interest rate is the interest that you get after the expected appreciation or depreciation of the currency. Then there’s the legal risk that they might expropriate your stuff.

It looks like there’s a profitable opportunity to invest in Brazil. Put that way, now it starts to look like everything else in finance. There’s what looks like a profitable opportunity. There’s risk. Are people properly balancing the profitable opportunity and the risks? Why is Tesla stock so high? Why are value stocks so low? There’re opportunities that you and I, as an economist, can’t quite suss out what the risks are, keeping other people from investing in. But if you’d like to buy a Brazilian gold mine, I can arrange it for you, Tyler.

COWEN: Well, but look, we know currencies are very close to a random walk, correct? You’ve seen the countries that have higher real rates of return, higher discount rates. They should have higher expected returns on their market. Brazil is small relative to the world as a whole. There’s a lot of capital that could invest more in Brazil without being systemically much riskier. You would think that simply pursuing higher expected returns — that ought to go away, and real interest rates across the world should equalize, but they don’t seem to.

COCHRANE: Well, all sorts of apparent opportunities should equalize. I urge you to start a hedge fund. [laughs]

 

COWEN: By the way, the only stock I ever sold was Brazil Fund.

COCHRANE: You sold it, and you’re telling me what a great opportunity Brazil is.

[laughter]

 

How Health Insurance Was Making Its Way to Something Sensible Before ObamaCare

COWEN: Healthcare — I’m a big fan of your proposals for what I think you called time-consistent health insurance. You buy health insurance and you buy insurance against your premium going up. If later on, you develop a serious condition, you’re insured against the fact that your insurance costs more, right? Now, why has no one done this? Because it does make sense.

COCHRANE: People did it [laughs] until it was made illegal.

COWEN: Who did it? When? Where?

COCHRANE: God, it was in the 1990s. Which insurance company? A better word for it that Mike Cannon at Cato came up with is health-status insurance, that you can insure yourself against the risk of getting sick in the future. One insurance company started offering the right to buy health insurance in the future if you’re sick now, which essentially, that’s the beginning of the idea.

Also, the good old-fashioned health insurance, starting in the 1990s, was guaranteed renewable, meaning if you bought the health insurance now, you had the right to continue buying that health insurance without your premiums going up if you got sick. That’s essentially the same thing as health-status insurance. So private insurance was working its way in this direction.

COWEN: But why did it take so long? It wasn’t dominant back then, right? This is another example of market inefficiency?

COCHRANE: Come on.

[laughter]

 Technical innovation takes a remarkably long time to spread, and this is a technical innovation. One thing is, it takes time for institutional — especially an incredibly regulated industry where you have 50 state regulators who have to bless every single contract — it takes a long time. Then it was made illegal under Obamacare, which is why it wasn’t happening. United Airlines still hasn’t figured out that Southwest knows how to get people on planes faster. [laughs] That service stuff takes time.

Why wasn’t this in health insurance to start with? When health insurance first started up, there wasn’t this thing of a pre-existing condition, of something that we get news that’s going to make you really expensive. You either died or you didn’t die, and that was the end of that. A very expensive health that is very persistent, and where you need insurance against ongoing future expenses — that can’t be done in a one-year contract. That’s also something that we didn’t have until the 1960s or ’70s.

Institutions take a while to adapt. You got to take a longer-run view here, Tyler. But I do want to advertise it for listeners who haven’t heard about it. We’re still in the pre-existing conditions as the original sin of markets, whereby the government must completely screw up your and my healthcare. That is not true. Free markets can handle the question of pre-existing conditions, your need for long-term insurance.

Term life insurance has had it forever. If you buy term life insurance when you’re young and healthy, you get to keep that insurance, no matter how sick you get as time goes on. There’s no failure of insurance markets that means we can’t have it.

 

On Regulation of Hang Gliding

COWEN: How good or bad is the government’s regulation of gliding?

COCHRANE: [laughs] An uneasy truce. Pretty bad, but just enough to let it survive. The government regulates —

COWEN: What’s the main inefficiency?

COCHRANE: The FAA.

COWEN: What should they do that they don’t? What should they allow?

COCHRANE: They have killed the domestic industry that makes gliders. There’re only a couple left in Europe. Certification of aircraft under the FAA is a disaster. This is more visible in general aviation power. Go down to your local airport, and you will see what looks like a Cuban car lot full of designs from the 1950s.

It’s just incredibly difficult to certify a general aviation airplane. Their standards for pilots’ licenses are ridiculously too high. America is one of the best places in the world. When you go around the world, you will notice — if you’re a pilot — how empty the skies are because everywhere else has regulated general aviation completely to death.

 

 

I love the Cuban car lot metaphor. That’s what I’ve noticed among flying friends: small planes made in 1958 (just before the Cuban revolution) or in the 1960s that are still used today and sell for high five figures.

Personal note: I remember John’s hang gliding well. In academic year 1982-83, John was a junior economist at the Council of Economic Advisers when I was a senior economist. (Marty Feldstein made me an offer to stay an extra year, 1983-84, and I accepted.) We were decompressing from the process of drafting, rewriting, rewriting, rewriting again, and checking for typos in the 1983 Economic Report of the President. That’s the one that Paul Krugman claims to have written most of, a claim that would surprise a number of his fellow chapter writers. John asked me if I would be willing to drive out to a corner of Pennsylvania one weekday with his friends. We would drive to the top of the mountain and he and his friends would hang glide down, catching thermals along the way, while I would drive down the mountain to the rendezvous point. It was fun, except that one of his friends stayed up way longer than agreed and my wife-to-be was pretty upset at how late I was getting back to Arlington, VA. (Good outcome, though: I was never that late again.)

 

 

 

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Noubar Afeyan on Academia, Business, Immigration, and the American Dream

Tyler Cowen has posted an outstanding interview of Noubar Afeyan, co-founder of Moderna, which produces one of the two COVID-19 vaccines approved so far by the Food and Drug Administration. Tyler is at the top of his game, asking really good questions, and you can just see the respect that that creates in Afeyan.

Some highlights follow.

On individualized medicine

We have a program in cancer vaccines. You might say, “What does a cancer vaccine have to do with coronavirus?” The answer is the way we work with cancer vaccines is that we take a patient’s tumor, sequence it, obtain the information around all the different mutations in that tumor, then design de novo — completely nonexistent before — a set of peptides that contain those mutations, make the mRNA for them, and stick them into a lipid nanoparticle, and give it back to that patient in a matter of weeks.

That has been an ongoing — for a couple of years — clinical trial that we’re doing. Well, guess what? For every one of those patients, we’re doing what we did for the virus, over and over and over again. We get DNA sequence. We convert it into the antigenic part. We make it into an RNA. We put it in a particle. In an interesting way, we had interesting precedents that allowed us to move pretty quickly.

Big question I wish Tyler had asked as a follow-on: Do you think the FDA will loosen its reins enough that Moderna and others can deal that way with individual patients without getting permission and doing large-scale tests?

The Academic Scientific Community vs. the Business Scientific Community

Look, the scientific method, the scientific community — it works on advances that are predicated on current and prior advances. Incremental advances are the coin of the realm. It’s not that they’re conservative. It’s just that the process, the communal process of accepting truth as that which can’t be negated, causes you to therefore be, in every which way, questioning everything.

I learned long ago the expression organized skepticism. That’s what science is predicated on. As a result, if you come forward with something that is not fully supported by and connected to the current reality, people don’t know what to do with it. What many academic scientists do is to spend the next 5, 10 years putting the connections in place to make what’s being proposed a natural extension of what existed before.

In industry, we don’t have that need, and the reason Moderna was able to really be the pioneer in the space of establishing a therapeutic platform, even before a vaccine platform, is because for us, the lack of connection between what we were able to do and what had been done before was marginally interesting, but we weren’t trying to publish it.

When you patent something, you don’t have to show that it’s a natural extension of what people did. You just have to describe something that is novel, that is unobvious. In fact, the less connected, the more unobvious, and/or the less connectible.

Note this sentence: “What many academic scientists do is to spend the next 5, 10 years putting the connections in place to make what’s being proposed a natural extension of what existed before.” It reminds me of the old joke about the academic who, observing that a TV works in practice, wants to understand whether it works in theory.

On Immigration and the American Dream

This next is my absolute favorite of the interview.

I also would say that as a country, there’s so many people who have the experience of coming here, that that experience can also be transmitted to people who are born here, for whom the same mindset of being willing to imagine a better . . . If you look, every single person who comes to this country imagines a better future for themselves. That’s my belief. Maybe not every single person — 99 percent.

Imagine if all of us were also born imagining a better future for ourselves. Well, we should be, but we’ve got to work to get that. An immigrant who comes here understands that they’ve got to work to get that. They have to adapt. The problem is, if you’re born here, you may not actually think that you’ve got to work to get that. You might think you’re born into it.

This will be a funny thing to say, and I apologize to anybody that I offend. If we were all Americans by choice, we’d have a better America because Americans by choice, of which I’m one, actually have a stronger commitment to whatever it takes to make America be the place I chose to be, versus not thinking about that as a core responsibility.

That brings up two memories, one old, one relatively recent.

The old memory is that when I came to this country in 1972, at age 21, I had the American dream in mind and I noticed right away that a large swath of the people I ran into in Los Angeles, whether at UCLA or in the city generally, who had grown up in the United States, didn’t.

The more-recent memory is of an interaction I had with a man who was considering running for the Republican nomination for president in 2016. I think the conversation happened in 2015, and it was at a Hoover Institution roundtable I had been invited to. I can’t name the person without violating the confidentiality rules.

He made a statement about immigrants that surprised me. He said (and I think I’m getting his words almost word for word), “So many immigrants come here and act right away as if they just arrived at home base after hitting a home run.”

When it was my turn to talk, I said, “Person X, I’m an immigrant and I thought when I got my green card I’d arrived at home base or at least at third base. I was given a list of crimes that, if I committed them, would get me booted out of the country and none of these crimes were ones I planned to commit.”

Then I made the mistake of asking about his record in a previous office he had held. He answered about his record but didn’t address my point about immigration. This man had the attitude that Afeyan attributes to many Americans: Simply by being born here, he seems to think that he’s made the rounds to home base.

I really don’t know what some politicians and some Americans expect out of us immigrants.

 

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Tyler Interviews a Liar

Tyler Cowen’s latest “Conversations with Tyler” is an interview of former CIA Director John Brennan. If you read the whole interview, you see that Tyler has done due diligence by reading background material on Brennan.

Unfortunately, Tyler doesn’t ask him a thing about Brennan’s lying to Congress about the fact that his CIA staff, at his behest, spied on Senator Feinstein and other employees of her Senate Intelligence Committee. Conor Friedersdorf lays it out in “A Brief History of the CIA’s Unpunished Spying on the Senate,” The Atlantic, December 23, 2014.

A key paragraph from Friedersdorf’s 2014 article:

CIA Director John Brennan denied the charge. “Nothing could be further from the truth,” he said. “We wouldn’t do that. That’s just beyond the scope of reason in terms of what we’d do.” It would be months before his denial was publicly proved false. “An internal investigation by the C.I.A. has found that its officers penetrated a computer network used by the Senate Intelligence Committee in preparing its damning report on the C.I.A.’s detention and interrogation program,” The New York Times reported. “The report by the agency’s inspector general also found that C.I.A. officers read the emails of the Senate investigators and sent a criminal referral to the Justice Department based on false information.”

Tyler Cowen has written a lot about what he calls “state capacity libertarianism,” which he favors. In this post, he lists 11 propositions about state capacity libertarianism. None of the 11 seems to involve holding government officials accountable for mistakes and lies. But I would think that a state capacity libertarian would see that as important.

Apparently not, at least from its main proponent.

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Is the Absolute Number of Deaths the Only Thing That Matters?

 

Answer: It depends on the question we’re trying to answer.

In a post about Covid-19 deaths, Tyler Cowen writes:

By the way, deaths as a percentage of population isn’t the right metric here.  Losing 320,000 lives (including excess deaths) has about the same moral import, whether or not there are a billion Morlocks living under the earth’s surface, though that fact would change the loss greatly as measured in percentage terms and of course make it look much smaller.

Let’s start with a question that absolute deaths is the relevant metric for.

A murderer in Andorra kills 10 people. A murderer in China kills 10 people. In each case the victims are innocent.

Question: Is the murderer in Andorra, who has killed a much higher percent of Andorra’s population, more evil than the murderer in China who has killed a much lower percent of China’s population?

Answer: No.

So here’s where Tyler Cowen’s point is correct. And of course, to his credit, he makes clear that he’s talking about the moral point.

But let’s ask a different question: Which country do you want to live in if you know that there’s a murderer at large who plans to murder 10 people in that country? (Assume everything else about these countries is the same so that we can isolate the effect of the 10 murders.)  Would you want to live in Andorra or in China?

 

 

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The Unjoined Debate

As I noted earlier this week, Tyler Cowen wrote a blog post, “David Henderson needs a reboot,” October 27, in which he responded to my three critical pieces on his two Bloomberg articles. My pieces are, from earliest to latest, here, here, and here. Cowen’s articles (gated unless you look at only a few on Bloomberg) are here and here.

Here’s the problem: Other than on one issue where he did point to a serious problem in my argument, as I noted here, Cowen didn’t join the debate about lockdowns.

Instead, he made the following statements:

David is repeatedly writing critiques of my writings on Covid-19.  (Google to them if you wish, they are so off base and misrepresentative I don’t think they deserve a link, and furthermore I find it almost impossible to track down EconLog archives under their new system.)

Making it hard for your readers to even know what the person you’re arguing with is saying is not really a good way to carry on a debate. Fortunately, raja_r, one of Cowen’s commenters, was able, with apparently much less difficulty than Cowen had, to post the links in the comments section on Cowen’s site.

Virtually all of his points revolve around simple or it seems even willful misunderstandings.

Virtually all? Really? If it’s “virtually all,” then surely we’re going to see a few examples, right? I’ll save you the suspense: he names one (other than the Russian vaccine point, which I discuss later.)

Then he goes to the one in which, I did misunderstand him. I’ve noted that already. I have no idea why he thinks it might be willful. I will grant him good faith even though he doesn’t reciprocate.

That’s it. We don’t get more examples.

Later he writes:

I could point to numerous misunderstandings in David’s recent posts, pretty much in every paragraph.

Maybe he could. He’s a smart guy. Here’s the problem. He doesn’t.

He writes:

I also think he is quite wrong on substance, allying himself with a few eccentric thinkers that hardly anyone agrees with, and who have not acquitted themselves well in debate, or made good predictions as of late, but that is another matter for a different time.

He says I’m wrong on substance. Ok. Which substance? He says I’m allying myself with “a few eccentric thinkers that hardly anyone agrees with.” He doesn’t name them. But hardly anyone agrees with them? The horror. Is iconoclast Tyler Cowen really saying we should go with majority opinion? Is that how we get to the truth?

He should pay greater heed to say Scott Gottlieb, who knows what he is talking about.

I’ve read Gottlieb’s stuff. As my Hoover colleague George Shultz once said to me after telling me he had been reading my work (I had criticized him here), “I like some of it.” It would be nice to know which parts Cowen thinks are good. I hope he would agree with me that Gottlieb’s support, while at the Food and Drug Administration, for regulating e-cigarettes, making it harder for people to quit smoking real cigarettes, was a cruel and destructive move. I’m sure his co-blogger, Alex Tabarrok, could tell him about that.

I will grant him one more point. He writes:

David’s Russian vaccine post does not misunderstand me, but I don’t think it shows a very full grasp of the issue.  I very much favor regulatory reciprocity for pharmaceuticals, vaccines, and more, but I strongly believe adding Russia to the reciprocal list would “poison the well” and doom the whole idea.  In the meantime, they are not nearly as far along for a major vaccine rollout as they claim, so probably we are not missing out on very much, even if the quality were fine.  The slightest problem with the vaccine would be blown out of proportion, most of all with DT as president and Russian conspiracy theories circulating.  If your goal is to nudge and push the FDA to move more quickly across the board, starting them off with the approval of a Russian vaccine is bad tactics and is risking the entire apple cart.  Maybe try for Mother England first?  So I think David here is quite wrong, and applying market liberalization ideas in a knee-jerk rather than a sophisticated fashion.  He called the post “Tyler Cowen’s shocking post on the Russian vaccine,” but I wonder who he thinks is really supposed to be shocked by that one.  If you read David’s comment on his own post you will see he is genuinely unable to imagine that such an argument as I present above might exist.

I didn’t think of that and I do see his point. Score one for Cowen. I do object, though, to the statement, “he is genuinely unable to imagine that such an argument as I present above might exist.” I’m quite able.

By the way, if you want to see an even better argument than Cowen’s, check the numerate discussion of the Russian vaccine that my sometimes co-author Charley Hooper has posted on EconLog.

Back to whether I’m able to understand Cowen’s argument, here’s the problem. Tyler Cowen’s writing style is cryptic. He often writes conclusions without the reasons that lead to them and also writes things that leave readers wondering what he means. Read his post that I linked to in my critique of his view on the Russian vaccine and you will find no statement of the argument he gives above.

Which brings me to my second last point. In the comment section of his post criticizing me, Cowen writes:

David, if you can’t convince a very experienced author that you have come even close to his meaning, probably you haven’t. There has been a lot of other discussion of those pieces, and the other readers do seem to have understood them. You have not.

The test of whether I’ve come close to his meaning is whether I’ve convinced “a very experienced author” that I’ve come close to his meaning? But that depends on two things: (1) how good I am at understanding his meaning and (2) how open he is to being convinced that I understand his meaning. He focuses only on the first.

Then he adds:

I should also note that Bloomberg has a truly crack, first-rate team of editors, making sure that what goes out is clear.

They failed. Take a look at this paragraph from his second Bloomberg article:

Consider 9/11, when some 3,000 Americans died. The U.S. mounted a very activist response that included new security procedures at airports, crackdowns on money laundering, increased surveillance and two wars. Not all of those choices were prudent, but nonetheless they qualify as a very vigorous response.

Any editor worth his salt would have asked “which of those choices were prudent?”

It would actually be nice to have a debate about lockdowns without getting into 9/11 and other tangential issues. The debate should be about the costs and benefits of lockdowns and among the big costs is our huge loss of freedom. That’s a debate worth having. So far, Tyler Cowen has not joined. I wish he would.

 

 

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One of Tyler Cowen’s Points is Right

 

As noted earlier today, Tyler Cowen posted about my critiques of his views on lockdowns.

I don’t have time to answer thoroughly but I do think I did him an injustice on one issue.

Cowen writes:

And my remark about “It just doesn’t seem worth it”, cited by David as me dismissing school reopenings?  Here is what I actually wrote:

Indoor restaurant dining and drinking, for example, is probably not a good idea in most parts of the U.S. right now.

Yes, many of the Covid cases spread by such activity would be among the lower-risk young, rather than the higher-risk elderly. Still, practically speaking, given America’s current response capabilities, those cases will further paralyze schools and workplaces and entertainment venues. It just doesn’t seem worth it.

I am worried about reopening indoor bars and restaurants because I want to keep schools (and other venues) open.  At my own school, GMU, I very much argued for keeping it open, which indeed we have done with success but also with great effort.  My whole point is one about trade-offs.

The above three paragraphs are from Tyler.

Now the following is David R. Henderson:

I did misinterpret him. I thought he was throwing in schools with bars and restaurants and I see now that he wasn’t.

My apologies to Tyler Cowen and to my readers.

This post is titled “One of Tyler Cowen’s Points is Right.” That doesn’t mean there aren’t others. If I find them, I will post on them. But it won’t be today. I have deadlines.

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Tyler Cowen Doubles Down

 

I criticized (here and here) a recent article that Tyler Cowen wrote in Bloomberg about COVID-19 and lockdowns. Last week he doubled down by raising the issue of the elderly. The title fits his theme, is “Yes, Covid-19 Is More Serious for the Elderly. So What?

Cowen starts with an analogy to 9/11. (Everything in the shaded areas is a quote from his article.)

Consider 9/11, when some 3,000 Americans died. The U.S. mounted a very activist response that included new security procedures at airports, crackdowns on money laundering, increased surveillance and two wars. Not all of those choices were prudent, but nonetheless they qualify as a very vigorous response.

All true, but I wonder what point he is making. Then he gets to it.

The point is this: Had 3 Americans been killed rather than 3,000 — if, say, 9/11 was a U.S. holiday the hijackers didn’t know about, so fewer people were working — the optimal response would not have been all that different. There were a lot of casualties, but it is also significant that several airplanes were brazenly hijacked and flown into major iconic buildings, the Pentagon was hit, and Congress itself came under threat.

He says that “the optimal response” with 3 deaths plus the iconic destruction would not have been “all that different.” I gather he means that it would not be all that different from what would have been the optimal response with the actual 3,000 deaths. But he does not tell us what the optimal response to that was. Isn’t that the nub of the debate over lockdowns—what is the proper response?

I count Bush’s war on Iraq as one of the most evil government policies of this century. Even if you don’t agree, it was big. So if we got close to the optimal response, then Cowen is saying that the Iraq war was close to optimal. And, by the way, in case he or you need reminding, that war caused many thousands of deaths of young, old, and in-between. Almost all were relatively innocent.

Polities that do not respond to such attacks [as 9/11] soon find themselves out of business. Not only do they invite further intimidations, but their citizens lose faith in the government’s ability to maintain public order or shape the future of the nation. The entire U.S. system of government may well have been at stake in the decision to respond to 9/11 in a significant way.

Even for things like 9/11, we should reject Cowen’s argument. It would have to apply to every government whose country is attacked. Ethical principles generalize, or they are not principles. There’s nothing special about the United States is that respect. So, for instance, when the U.S. government attacked Iraq, Cowen’s recommendation would have had to be for the Iraqi government to attack the United States. That would likely have cost thousands of lives if they could have pulled it off. They probably couldn’t have, but then we’re stuck with the non-principle that might makes right.

But Covid is not like 9/11—unless Cowen wishes to suggest that the virus was biological warfare perpetrated by a foreign power. I don’t think that’s what he’s saying.

To be sure, the number of U.S. victims is high — 220,000 and counting, plus some number of excess deaths from broader causes. But the event itself is so cataclysmic that “downgrading” those deaths by saying many of the victims were elderly doesn’t make a big difference in terms of formulating an optimal response.

Cowen errs again in likening Covid to a military or terrorist attack. Yes, the murder of an ailing 80 year old is basically like the murder of a 20 year old. But succumbing to an illness does not involve the malicious conduct of a malefactors. That takes the moral and legal question of wrongdoing out of the matter. Now we are left with plain hardship: Succumbing to an illness is much more tragic in the case of an otherwise healthy 20 year old than an ailing 80 year old. Any reasonable ethical reckoning would agree.

The focus on protecting the elderly flows simply from two facts: (1) they’re (we’re–I turn 70 next month and my wife is 71) most at risk and (2) they’re often retired and, therefore, are better able to isolate.

So I think it makes a huge difference in an optimal response. Let the people who are lower risk be out in the world. As they spread the virus, we augment immunity. That doesn’t hurt the elderly. It helps us.

Furthermore, it is likely that coronaviruses will return, which is all the more reason to excel in response now. To consider another example, during the 2002-2003 outbreak of SARS-1, 774 people died worldwide, none of them in America. The countries that took that virus seriously — Korea, Taiwan and Canada, to name a few — have performed much better during the current crisis. And many of the best biomedical responses, including vaccines and monoclonal antibodies, have evolved from very serious responses to previous pandemics.

I agree that we should excel. But how? Do you do it with lockdowns, or do you do it with deregulation, including allowing people to try various vaccines whatever stage they’re at, and allowing self-test kits for the virus to be sold, kits that could be available now for less than $10 a pop, but which the Food and Drug Administration won’t let us have?

And now Cowen’s pièce de résistance.

One final (rather outlandish) thought experiment: Imagine that an enemy of the U.S. demanded that 100 90-year-old Americans be handed over each year for execution. Of course America would refuse. The age of the victims would not be a factor in that decision.

Cowen persists in his false analogy of a terrorist or military attack.

As Ryan Sullivan, my co-author on my recent Wall Street Journal op/ed advocating that schools be opened, put it, millions of years of children’s lives are being robbed. Ryan has an autistic son in kindergarten and a daughter in first grade. Both, but especially the son, are losing a lot. Cowen’s policy is more analogous to the terrorist attack on 9/11 than the virus is.

Notice also, what’s missing in Cowen’s paragraph above: the idea of tradeoffs. Of course, we wouldn’t give over 90 to 100 year olds. But he’s willing to sacrifice the well-being of 50 million school-age children. Remember his  casual “It just doesn’t seem worth it” remark about allowing kids to go back to school. He handles the tradeoff by not mentioning it.

Both of Cowen’s pieces resemble the work of a mainstream journalist ignorant of market economics. The essence of economics is tradeoffs. Precious little in his two pieces talks seriously about tradeoffs.

 

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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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Is Cowen Right about the Great Barrington Declaration? Part 1

 

In an article yesterday, “A Dangerous Libertarian Strategy for Herd Immunity,” Bloomberg, October 15, George Mason University economist Tyler Cowen criticizes the now-famous Great Barrington Declaration.

This response is in two parts. Part 2 will follow tomorrow.

I’ll consider Cowen’s arguments one by one. The highlighted sections are his and the non-highlighted sections are mine.

But first I’ll point out two things.

First, Cowen starts with a category error. He seems to think that when three non-libertarian medical professionals write a statement at a facility staff largely by libertarians, the result must be libertarian. It isn’t. Many libertarians will like it; some will not. But it’s not libertarian. In our book, Making Great Decisions in Business and Life, Charley Hooper and I point that in any project, the biggest mistakes are made the first day. That’s because everything follows from decisions made that day. Similarly, by misidentifying the strategy as libertarian, he goes down a rabbit hole from which he doesn’t emerge. (Note: I know that editors often assign titles and Cowen might not have chosen this one. If he disagrees with the title, then ignore this criticism.)

Second, Cowen’s big-picture criticism of freedom is less like Strauss (one of his favorite words) and more like Schrodinger’s Cat. He claims, in the last few paragraphs of his article, that the declaration “tries to procure maximum liberty for commerce and daily life” and that its conception of human nature “raises the question of whether it even qualifies as a defense of natural liberty.”

Which is it? Is it trying to procure maximum liberty, which, in this context, certainly seems like defending it, or is not a defense? I’m not asking whether it’s a good defense. I’m simply pointing out that Cowen seems to want to have it both ways.

Now to the other specifics.

Debate over the declaration has centered on the concept of “herd immunity,” but that discussion has become so emotional that it is better to focus first on the concrete. The declaration stresses the notion of protecting the vulnerable, such as the elderly, and giving everyone else maximum possible freedom. That sounds good, but the declaration fails to deliver on the details.

True. It doesn’t deliver on details. I don’t think that was the intent. It’s 514 words long, only slightly longer than those short USA Today op/eds. Cowen’s piece, by contrast, is 1,399 words long, almost 3 times as long. And yet in some places, the Great Barrington Declaration gives more details than his.

First and foremost, the declaration does not present the most important point right now, which is to say October 2020: By the middle of next year, and quite possibly sooner, the world will be in a much better position to combat Covid-19.

Probably right, but it’s a guess. Moreover the middle of next year is 8 to 9 months from now.

The arrival of some mix of vaccines and therapeutics will improve the situation, so it makes sense to shift cases and infection risks into the future while being somewhat protective now.

The first clause is probably right, but the conclusion doesn’t follow. What is the cost of shifting cases into the future? Cowen doesn’t say.

To allow large numbers of people today to die of Covid, in wealthy countries, is akin to charging the hill and taking casualties two days before the end of World War I.

What does he mean by “allow?” Is he saying that people shouldn’t be allowed to take those risks? I don’t know.

Notice also how he biases the discussion with “two days.” I would bet that the authors wouldn’t have bothered with the statement if they thought we would have a vaccine in 2 days, 4 days, or even 14 days.

Not only does the declaration fail to make that point, but if anything the rhetoric conveys a sense of “letting things take their course” — after the most vulnerable are segregated from society, of course. It strikes exactly the wrong tone and stresses exactly the wrong points.

Either he thinks this is self-evident or this is a lead-in to the next few paragraphs. If the former, he’s wrong; if the latter, let’s look at the next few paragraphs.

The declaration also sets up a false dichotomy by comparing its policy proposals to lockdowns. The claim is this: “Current lockdown policies are producing devastating effects on short and long-term public health.” The health problems are very real, but in most of the U.S., the lockdowns are not severe. In my home state of Virginia, there are relatively few commercial activities I cannot partake in, were I so inclined. I even can go see a live bluegrass concert in a nightclub (I won’t, not yet).

It’s not a false dichotomy. There are real lockdowns in place. And notice that he uses the word “commercial.” K-12 schools, even ones that charge tuition, are typically not lumped under “commercial.” This doesn’t affect Cowen. It does affect a number of my neighbors’ and friends’ kids, devastatingly so. And while Cowen can go to a bluegrass concert, I bet he can’t go to a gym. In most of California, we can’t yet go to gyms. My wife’s and my Pilates instructor is facing economic devastation.

The problem is that most people don’t want to go out to such concerts, and indeed probably should not. It is this self-enforced isolation, not a government order, which screws us up, sometimes creating mental and other health problems.

Why is it a problem if people don’t want to go out to such events? And if that’s the main reason they don’t, why are governments around the country, certainly in large states like California, New York, and Illinois, banning such events?

He does get it right, though, about mental and other health problems. But some of these are due to lockdowns.

Whatever you think of the stricter policies of last spring, they are now behind us, and the emphasis on “lockdowns” is not helpful. The more useful question is whether the list of prohibited activities should be expanded or contracted. In some cases, surely, it should be expanded. Indoor restaurant dining and drinking, for example, is probably not a good idea in most parts of the U.S. right now.

Yes, many of the Covid cases spread by such activity would be among the lower-risk young, rather than the higher-risk elderly. Still, practically speaking, given America’s current response capabilities, those cases will further paralyze schools and workplaces and entertainment venues. It just doesn’t seem worth it.

The first sentence of the second paragraph is key. Finally, he’s getting to details. He doesn’t make a case, though, that those cases will further paralyze schools and workplaces. What’s his evidence? Emily Oster at Brown University differs with Cowen on this. And unlike Cowen, she actually has evidence. Moreover, to whom does it not seem worth it? Not to the people who want to do it. Cowen seems to be substituting his own values for those of others.

Even if you disagree with that judgment, the critics who emphasize lockdowns are setting up a straw man. What they’re trying to do is talk us into something more dangerous than what we ought to accept. The truth is that lockdowns are extremely unpopular, and while they may have to be reimposed in extreme circumstances, they are not the main alternative on the table in the U.S. right now.

Wait a minute. We have lockdowns. Some of them are severe. Cowen has just told us that he wants to make them more severe. But arguing against lockdowns is arguing against a straw man? Huh?

The declaration also notes the value of reopening schools. It is an inarguable point, and Sweden seems to have made it work. But schools cannot and should not be reopened unconditionally. Amid high levels of Covid-19, a successful reopening very often will require social distancing, masks and a good system for testing and tracing. It would be better to focus on what needs to be done to make school reopenings work. Reopened schools in Israel, for instance, seem to have contributed to a significant second wave of Covid-19.

Actually, I think every point is arguable. What he really means is that he comes down on the side of reopening schools. Good. On that we agree. But for someone who thinks we should look at data, Cowen really should look at Oster’s data. And notice how close Cowen comes to the Great Barrington view on this. I don’t know what the three authors would say about what needs to be done to make school reopenings work. Neither does Cowen.

A broader worry about the declaration is that, for all the talk of science, it fails to emphasize data. The declaration is a series of static recommendations, yet the situation on the ground is evolving all the time. The best policies today are not the same as the best policies two months ago, and won’t necessarily be the best policies two months from now. This reader is also struck by the document’s frequent use of the passive voice — as if there is no choice but to let a series of inevitable events slowly unfold, albeit in a minimally painless way, and to allow the pandemic to finish its work.

Cowen accuses the authors of failing to emphasize data? That’s rich. He has hardly any data. Here’s a statement from the Declaration:

We know that vulnerability to death from COVID-19 is more than a thousand-fold higher in the old and infirm than the young.

That’s data, and pretty relevant data.

Cowen points out correctly that the best policies of today are [probably] not the best policies two months from now. But the big advantage of the focus the Declaration proposes is that it allows for that.

What about the passive voice? I think Cowen needs to consult a grammar textbook. There’s not a whole lot of passive voice in the Declaration. It’s mainly active. And letting people do things has nothing to do with the passive voice.

Part 2 will be tomorrow. Stay tuned.

 

 

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Sir Samuel Brittan RIP

Tyler Cowen, over at Marginal Revolution, quite rightly laments the death of British economic journalist, the aptly named Samuel Brittan.

Like Tyler, I first heard of Brittan’s Capitalism and the Permissive Society from the late Roy A. Childs, Jr. You might think that “Permissive” in the title is used negatively. No. One of the things Brittan liked about capitalism was that it is permissive. I’m going from memory here; my copy was destroyed in my 2007 office fire.

It was either in that book or in something else that Roy Childs told me from another Samuel Brittan writing that Brittan told the story about how Milton Friedman, with one view on one issue, got him respecting free market views more: it was that Friedman was such an outspoken advocate of a free market in military labor–that is, Friedman opposed the draft.

Here’s another Brittan/Friedman story, from Wikipedia, that I hadn’t known:

[Friedman] mentioned to me a letter he had received from Arthur Burns saying that Eisenhower was turning out well as President. I expressed surprise, to which Friedman responded: “First, Burns has much better knowledge of Eisenhower. Second, given equal knowledge I would prefer his opinion to yours.” Against The Flow (2005)

 

 

 

 

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