Like most people, I find it difficult to wrap my mind around complex issues. It’s easiest to boil it down to one or two key factors, and focus on those perspectives. But that doesn’t always work.
Consider global warming. If we are going to address that issue in the most cost effective way it will probably involve:
1. The development of many types of carbon free energy (wind, solar, hydro, nuclear, geothermal, etc.)
2. Conversion of coal plants to natural gas, as an interim method to reduce carbon emissions.
3. Energy conservation occurring in a wide variety of ways, too numerous to mention.
4. Planting lots of trees.
5. Genetically engineered cows that emit less methane.
6. Less burning of forests in Indonesia, Brazil, etc.
7. Geoengineering to block a modest amount of sunlight, as an interim solution.
And I’m sure there are many more. So if you read an article that suggests “It’s hopeless because even if we did X . . . “, ask yourself if they are considering all of the ingenious ways that society could address this issue.
Many of the solutions discussed above could be sped up with a suitable carbon tax/subsidy system that encouraged innovative solutions. When it was first proposed that we reduce sulfur emissions from coal-fired power plants, the estimated costs were quite high. That’s the “engineering approach” to cost estimation. But once a system of tradable pollution permits was put into place, the genius of market forces quickly discovered far most cost effective solutions, and the final cost ended up being dramatically lower than estimated.
Karl Smith has an excellent Bloomberg piece with the following subtitle:
Even economists tend to underestimate just how dynamic and adaptable U.S. businesses and consumers are.
Smith was not discussing global warming; he was discussing the coronavirus epidemic. Just so that I don’t sound too Pollyannish, let me concede right up front that there is no obvious equivalent to the carbon tax in the battle against Covid-19. But some of the broader implications of the global warming battle apply here as well. This is a battle that should simultaneously be fought on many different fronts.
If with think of the problem in any single dimension, it’s easy to become very pessimistic. It seems like the only two choices are 30% unemployment lasting for a year or two, or else an epidemic that gets out of hand and overruns our hospital system. Maybe those are the only two choices, but that’s not obvious to me.
I can imagine this battle being fought on at least 4 fronts:
1. A massive push for treatments such as a vaccine, or a drug to reduce the severity of the illness. Deregulation would help here, as it’s at least possible that the benefit to society of gains on either front might exceed the estimated cost of mistakes.
2. A WWII-style push to improve the capacity of our medical system to deal with the issue. Don’t ever think in terms of “capacity” as being something that is fixed. Two months ago, Taiwan had the capacity to produce only 2.44 million surgical masks per day. Now they produce nearly 13 million a day, and have no shortage of masks. Deregulation of production and removal of price gouging laws (and norms) can vastly speed up the supply response. Just as the ban on compensating kidneys donors kills tens of thousands of Americans each year (more than the coronavirus is likely to kill), price gouging laws and burdensome regulations are also likely to kill many Americans in this epidemic.
3. Testing, testing, testing. There is evidence from South Korea, and also the town of Vo, Italy, that widespread testing can dramatically reduce the spread of the illness. It does this by determining who is infected, so that those individuals can stay home and avoid infecting others. If you think I’m claiming that testing will “solve the problem”, you aren’t paying attention, I’m arguing this battle must be fought on many fronts.
4. New labor management practices for industries such as construction, manufacturing, office work and restaurants. We should probably just accept that a few industries would stay out of business until a vaccine is developed. Obviously this includes cruise ships, but perhaps also entertainment events with large crowds. But there may be industries where new practices reduce the rate of infection to an acceptable level.
The coronavirus is often said to have a reproduction rate (“R0”) of 2 to 3, which causes it to grow at an exponential rate. But that rate is not a characteristic of the virus itself; it also reflects our social practices. I presume the R0 was higher during Mardi Gras in New Orleans than in rural counties in North Dakota. It would nice to have a R0 of zero, but our goal should be getting the rate down below one, where the caseload grows at a manageable rate.
I don’t know exactly how this should be done, indeed that’s the whole point of this exercise; no one person knows. Readers are presumably aware of Hayek’s explanation of how markets allow society to benefit from widely dispersed knowledge. Yes, the “externality” aspect of epidemics makes this case tougher, but it doesn’t make the Hayekian perspective any less useful.
So without claiming the following would definitely work, let me just throw out an example of the sort of thing I have in mind. Perhaps some construction sites could have workers wear facemasks and gloves. I’ve actually done so myself when working on a particularly dusty construction project, such as tearing down old plaster. Indeed many construction workers are already used to working under those conditions. The same for certain manufacturing plants. Perhaps restaurants could re-open with a rule that all groups of customers sit at least 10 feet apart, and someone working in the restaurant had to wipe down door handles and faucet handles with disinfectant every 20 minutes. Waiters could wear masks and/or gloves.
I do understand that the ideas I’m throwing out don’t “work” in a 100% effective sense. The goal must be to fight this battle on many fronts. We need to accept a certain number of cases of coronavirus, because there are tradeoffs between health and economics (something we implicitly acknowledge when we set speed limits at 65 mph, not 35 mph.) And yet I’m not in the “rip the band aid off” group that suggests allowing the virus to infect half the population to build up herd immunity. In my view, the medical costs of that approach are too high. I believe we need substantial social distancing for some period of time.
What I’m suggesting is that we should not accept 30% unemployment for a year or two. Rather if we have 30% unemployment in April, we should aim for something considerably lower in May, and still lower in June, etc., etc., as we gradually learn how to cope with the problem.
Never underestimate the ingenuity of market forces in coming up with solutions.
And read Karl Smith’s excellent piece
PS. And don’t forget monetary stimulus, so that we have adequate nominal spending once businesses are able to offer goods and services.
Here’s Vo, Italy.
Update: After writing this post, I noticed that Alex Tabarrok made some similar points.
READER COMMENTS
Alan Goldhammer
Mar 26 2020 at 3:11pm
There are a lot things that are obvious to those of us who spent our careers in the biopharma industry that ended up as lost opportunities regarding addressing the current SARS-CoV-2 pandemic. I’ve been doing a daily email letter to a bunch of retired colleagues and compiling a set of “lessons learned” that I hope to put into paper when all is said and done. In my reading of clinical and drug discovery pre-prints I have been amazed how much has been done by the research community in a few short months.
Prior to my retirement, I was the project manager for a large observational medical outcomes data project that the pharma industry funded for the first three years at a cost of $60M or so. It was all public source stuff and we ran a couple of contests for folks to come up with better algorithms to do the “needle in a haystack” search (IIRC, one of the winners was a freshman computer science major). This project started in 2005 with the first business plan. Many of the researchers have stayed connected and this week they are doing a virtual on=line meeting, looking at a variety of data sets and analyses of work that has been done. See: https://www.ohdsi.org/covid-19-updates/ for more information.
Stuff like this goes under the radar screen, just as all the computational work that has been done to screen currently approved drugs along with those in trial for other uses that might interfere with SARS-CoV-2 binding and/or replication. this is difficult work but it’s getting done at a speed much faster than even a decade ago. I’ve seen maybe 100 different drugs that could be trialed for use here.
I see lots of blog posts here or responses to posts discussing the economic consequences of many current state policies regarding social distancing. This is the right thing to do. I am not one who models data for a living but would ask any economist who does to look at the impact of continuing business as usual. Assume there is a 60% infection rate (normally observed with a new virus with no prior immunity). We know that most people under the age of 30 have very mild symptoms, BUT in the main these are not the people working in factories, driving delivery trucks, working in retail, etc. If a moderate infection means 7 days of lost work, what is the impact on the economy of lost work hours that force major slowdowns (I’ll leave aside the problem of hospital ICU space for critically ill patients). Maybe there are some economists who have taken some of the disease projection data coming from the public health literature and figured out what the GDP impact might be. My hunch is that there would be a significant economic impact.
I’ll conclude by saying that I’m somewhat optimistic. There will be a lot of short term pain to be sure but I think if people do what’s right we will figure out how to get some sectors of the economy up quicker than is thought (but not by Easter Sunday). I’ll leave it at that.
Robert Johnson
Mar 26 2020 at 3:27pm
Planting trees – man! We’ve got three trillion. Not sure if we can plant enough to move the needle. I mean, just an increase of 1% is… alot!
Matthias Görgens
Mar 26 2020 at 9:46pm
I’ve read some calculations on that.
Planting enough trees to move the needle won’t be cheap, but still cheaper than lots of ‘Green New Deal’ projects that have been dreamed up.
Some countries have already started on the planting. The good thing is that trees not only help a bit against global warming, but they have much bigger local effects, so there’s plenty of incentive to plant them.
Michael Sandifer
Mar 26 2020 at 3:43pm
As long as you’re referring to evidence-based approaches to relaxing restrictions over time, I’m with you. One of the benefits of our federal system is we can observe the results of different approaches to containing the virus by different states and municipalities. We should carefully examine relevant data as it comes in.
That said, extended periods of 20-30% unemployment are not unprecedented in US history and we can and will provide much more fiscal support to the unemployed and underemployed than we did during the Great Depression. We can survive a year or two of such unemployment, if needed. I doubt it will be.
I also agree that a WW2-like push is needed to meet the supply demands of the medical system. We’re already seeing production of ventilators by automakers ramp up.
I end by saying that lifting official lockdowns might not make as much a difference as some seem to assume. Here in Jacksonville, FL, and in some other areas of the country, private individuals and businesses have been far ahead of the government in the lockdown efforts, voluntarily.
Scott Sumner
Mar 26 2020 at 4:48pm
Michael, You said:
“Here in Jacksonville, FL, and in some other areas of the country, private individuals and businesses have been far ahead of the government in the lockdown efforts, voluntarily.”
Yes. I’ve made similar points in earlier posts
Michael Sandifer
Mar 26 2020 at 5:08pm
Scott,
Yes, you have made that point at least once or twice, and you also made the broader point that leaders are often led by the general zeitgeist, which seems to apply in this case. Trump can try to force restrictions to be lifted by Easter, but the zeitgeist will determine what happens. That’s one reason he’s so inconsistent with his positions on so many questions. Nearly everything is subject to influence by popular reaction.
Floccina
Mar 26 2020 at 5:28pm
For AGW solutions I’ll plug one that does not get as much attention as abatement. That is removal from the air. Biochar and enhanced weathering are possible ways.
ee
Mar 26 2020 at 6:30pm
An important front to me is getting kids back in school. Maybe smaller schools need to open.
Matthias Görgens
Mar 26 2020 at 9:52pm
Scott, Singapore might early on have accidentally (?) hit on a system that internalised the externalities:
From almost the beginning of the pandemic we had home quarantine for travelers returning from infected areas.
As a young and healthy person myself, I’m not much worried about a small chance of catching the virus. But certainty of home quarantine (and a chance of further inconvenience at the border) would affect my life a lot.
The extra hassle might be roughly in line with the extra negative externalities that might come from spreading the disease. Thus aligning incentives.
It’s much cruder than a fine tuned carbon tax, of course.
Lorenzo from Oz
Mar 26 2020 at 11:21pm
The sun may be cooperating to give us extra breathing space on the global temperature front …
https://www.youtube.com/watch?v=JyyuouPSNEA
Scott Sumner
Mar 27 2020 at 1:54pm
Don’t trust videos; read scientific papers. Most videos are peddling junk science. I lasted just 5 minutes with that one. They might be right, but their approach to explaining the theory leaves me skeptical.
Lorenzo from Oz
Mar 28 2020 at 3:06am
But podcasts with economists are OK?
Scott Sumner
Mar 28 2020 at 2:55pm
I would not trust them, unless I already trusted the speaker based on reading his or her work. If it’s someone I had never heard of, then no.
Lorenzo from Oz
Mar 30 2020 at 1:49am
YouTube has lots of lectures by prominent scientists and researchers, but then YouTube is not creating the “product” it is just distributing it. Much the same with interviews — who is being interviewed is much more important than how the interview is being distributed.
The problem here is that you do not find the academic in question persuasive, not that it is on YouTube. (And it is always more persuasive when there are links to actual scientific papers.)
On the matter of expertise, trying finding the evidence base for the “food pyramid” “eat several times a day” etc of the official nutritional advice. I have done enough reading of actual scientific papers in the area to venture that is depressingly likely that the official nutritional advice offered, particularly in the Anglosphere, (including its effects on regulation) since c.1980 has inflicted more damage on the health of Westerners than any other aspect of modern life.
Mark Bahner
Mar 27 2020 at 6:52pm
I won’t make any such concession. There is a much, much better in the battle against COVID-19 than a carbon tax. Everyone in the U.S. should be wearing at least a homemade cloth mask (but better would be a dust mask, and even better than that, an N95 respirator). And everyone in the U.S. should be wearing some cloth gloves that they wash separately from anyone else every night, with a couple tablespoons full of bleach per gallon of water. The face mask and washable cotton gloves should be worn *everywhere* indoors and *everywhere* outdoors when in close contact with the public.
If we had done that, we could literally have saved trillions of dollars and probably prevented several thousand deaths in the U.S. alone.
And for the NEXT virus attack, we should all have N95 respirators infused with copper:
Copper-infused anti-influenza face mask
The federal government could probably buy 3.3 billion of them (10 for every single person in the U.S.) for under $15 billion, and could store them essentially in perpetuity if they were stored in a vacuum and at a proper temperature.
And next time, the washable gloves should also be infused with copper or silver, or other substances known to have biocidal properties. Two pair for everyone in the U.S. might cost $20 billion.
But we did not do the simple masks and gloves for COVID-19. And we won’t pay to have the copper-infused respirators or copper/silver/biocide-infused gloves made for the next nasty virus.
Why not? Because we’re idiots.
Mark Bahner
Mar 27 2020 at 11:07pm
Hi,
I made a comment that had at least one hyperlink, and probably two. I often have more than one Econlog posting open, so it might have gone to another post. And I was having computer problems, so it might not have been sent at all. (I hope so, I didn’t make any copy.)
Is there any record of it in the comments?
P.S. Uh, oh! Maybe I hit “submit comment” but forgot to include my name and email address, and then closed without looking any further…?
Mark Bahner
Mar 28 2020 at 7:51am
Hi,
Did my comments yesterday ever get to Econlog? The comments that contained references to respirators? If somehow they never arrived, I’ll try to re-create them. But if they did arrive and somehow went to spam (I think they contained two links, including one to a product), if they can be retrieved from spam I’d really appreciate it).
Thanks!
Mark
Mark Z
Mar 28 2020 at 8:50am
I figured one way many businesses could cope – especially stores, but maybe others as well – would be to assign potential customers (whether by location, first letter of one’s last name, age, whatever) specific time windows (which could be enforced by law or just voluntary) during which you can go there and shop. Costco has sort of done something like this with their twice weekly ‘senior hours.’ This way you can spread out your business over time and reduce the likelihood of transmission in stores; might cut labor costs too since fewer customers at any given time means fewer employees necessary.
Anyway, there are indeed lots of individually small ways to salvage economic activity at minimal public health cost that collectively could greatly mitigate the economic burden of dealing with the epidemic.
LK Beland
Mar 28 2020 at 4:46pm
Another good aspect of more testing means that we’ll have a better idea of the propagation rate in real-time, which will send a signal to the policy-maker about the effectiveness of anti-contagion efforts, and help decide if they should be decreased or increased.
Mark Bahner
Mar 29 2020 at 11:33am
I know how it should have been done. And I know how it should be done the next time.
The federal government should buy 6.6 billion N95 particle respirators. That’s 20 N95 respirators for every man, woman, and child in the U.S. N95 respirators infused with copper would be particularly good:
Copper infused N95 respirators for viruses
The total cost of this? Let’s estimate that each copper-infused respirator is significantly more expensive than a conventional N95 respirator, and the federal government pays $3 a piece for each copper-infused respirator. That’s $20 billion for 6.6 billion respirators…20 respirators for every man, woman, and child in the U.S.
The federal government gives the respirators to the states for storage. The respirators should be stored in a vacuum and a proper temperature, and at such conditions should easily have a shelf life of a decade or more. States should not store all their respirators in one place, but should disperse storage sites around the state roughly comparable to population density.
Then, the federal government should buy 6.6 billion washable white cotton gloves. Again, that’s 20 for every man, woman, and child in the U.S. Disperse those to the states, too, according to population. These gloves can be purchased at Walmart for less than $1 a pair, so let’s say the federal government can buy them for $1.50 a pair. (Heh, heh, heh!) So that’s approximately another #10 billion.
So the federal government has spent $30 billion for 20 copper-infused N95 respirators and 20 pairs of washable white cotton gloves for every man, woman, and child in the U.S. When a particularly nasty virus strikes, the states distribute the respirators and gloves. People must wear them in order to get into any NCAA tournament basketball game, NBA game, school, hospital, store, restaurant, bar, bowling alley, etc. etc. etc.
After people have used the respirators, they double bag them and return them to a central location. The location takes them out and either decontaminates them or disposes them. But before that, if there is a suspicion that the person was positive for the disease, or that the person was potentially exposed, the inside and outside of the mask could be tested for the virus.
That’s how this whole multi-trillion dollar problem–I’m talking about the U.S. alone, not the whole world!–could have been easily avoided. But we didn’t do that with COVID-19. And we won’t do that with the next nasty virus either. So why didn’t we do it with COVID-19, and why won’t we do it next time?
Because we’re idiots.
Comments are closed.