Notes from the Cowen-Roberts Talk about the Corona Virus

Russ Roberts and Tyler Cowen got together to talk about the corona virus some days ago, and what follow are my notes from reading the transcript. If you want to listen to the talk, or read the transcript, here is the link.

Excerpts above, my notes pertaining to the excerpt below.

 

I think Skype coffee is a really good thing. I recommend that to everybody. People you might normally have coffee with, get a cup of coffee and sit on Skype or Zoom and chat with them, and that way it’s not so bad. It’s not great, but it’s not so bad.

Skype or Zoom, and coffee or beer. Whatever works best for you, but socializing is important, and be sure to not under-rate it.

The understanding that it may be really some period of time before you are able to resume normal movements and interactions. Any given day it may seem fine, but what mental readjustment are you making?

The reason I excerpted this is because people here in India – at least the ones I speak to – seem to assume that everything will be back to normal in a matter of days, at worst a couple of weeks. I wish that were the case, but we’re going to be in for the long haul. At the absolute least, a month – almost definitely more. That’s the kind of timeline we’re looking at.

But nonetheless, if something is doubling every five to seven days, some very bad events are not so far away. But because they’re not vivid people, including a lot of economists I know, they’re not able to make that mental leap. I think my background with thinking about economic growth is a significant reason why I think I’ve seen some of the dangers here coming.

Take a look at the chart below (this is from Gapminder):

In particular, take a look at the horizontal axis. Each tick is a doubling, as opposed to the vertical axis, where each tick is the standard 10 units. The bubbles on the right are waaaaaay further apart than are the bubbles on the left. I said that, and you understood it, but your brain refuses to acknowledge or remember it, because we are a visual species, not a mathematically oriented one. Exponentials are hard for us to grasp, and we therefore can’t understand what doubling every five days means.

There seem to be many open questions, but the risks do seem to be rising and I would include the global front, the economic front. Tensions between the United States and China are much worse than they had been. China is calling it a virus from America. Trump is calling it the Chinese virus. It’s even possible, that’s the single worst outcome of all of these events.

If you’re confused about the how and the why, here’s a tweet:

And it’s as if we’re trying to put the economy in a coma, to cite an analogy Larry Summers gave. So I think we should be trying to put the economy in a coma. I’m okay with government doing that, but I think personally we need to be doing that quicker than what the government is up to.

In this blog post that I put up a while ago, a student had asked about how long we can afford a lockdown, implicitly asking what economic costs we were willing to tolerate to defeat this. Tyler Cowen’s response above is effectively saying that there’s no limit, no matter what the cost, this needs to be defeated. Or, if you want another way to put it: economic prosperity is the means to an end, not an end in itself.

I know one of my proposals is we should have things that make it more fun for people to be at home. So some of the entertainment companies are having free streaming on cable of some of their back catalog. Maybe that’s a marginal effect — but if it saves a few lives? So whatever we can do so that people are willing or indeed maybe even in some cases eager to stay home, making childcare issues easier.

Restaurants should be shut, but not takeaways, bars should be shut, but delivery of alcohol should be legalized, internet broadband should be a critical service, Netflix et al could chip in with some shows being made freely available – and so on. Note that there is always YouTube!

That’s the actual destruction going on is the relationships, the organizational capital, the intangibles that will decay. Not over two weeks, probably not over four weeks but over four or five months or longer. Then I think that’s a matter really of great concern.

I have only glanced through the book, not read it in detail, but reading this excerpt reminded me of The Third Pillar, by Raghuram Rajan.

This is from a Prakash Loungani review of the book: “Still, Rajan argues, markets and the state have usurped communities’ power, and the balance needs to be reset. Power must devolve from global and national levels to the community. Rajan notes that as machines and robots begin to produce more of our goods and services, human work “will center once again around inter-personal relationships.” Communities could well be the workplace of tomorrow.”

Not only is Rajan almost certainly right, but the current virus allows for an opportunity to the third pillar to be stronger than before. Governments and markets by themselves will struggle, community needs to come to the fore.

So I think the reopening decisions, especially in more bureaucratic corporations, it will be very hard for everyone to sign off and agree. Yes, we’re going to go ahead. There’s going to be an open Disneyland again. We’re going to have spectators at NBA games. The risk of bad publicity, social media storms against companies whether true or not, someone might have died as a result of going to a game. Over some time horizon social norms may shift and a lot of people might just say, “Look, we’re just going to take these chances and deal with it.” But I don’t think we’re close to that. And certainly, our legal system is not close to that. And human resources departments are not close to that.

You are responsible for five people’s jobs, and you need to sign a letter authorizing them to come back to work in mid-April. If you sign that letter, and they come to work, and they get the corona virus, then is it on your head? Would you sign that letter? What if it’s five hundred? Five thousand? 1.3 billion? Again, this will almost certainly last for more than two weeks.

I think the upside is to believe that at least biomedicine will be far swifter and better funded and less regulated, in the good sense of that word, and our response capabilities, when all this is over, for the next event will be far, far greater. We may overreact in some 9/11 kind of ways like we’ve done arguably with airport procedures, but if there’s one part of the economy that will get a huge, beneficial boost, I think it is our biomedical capabilities and our public health infrastructure.

If I may offer my two cents on this, specific to India: offices will now be very, very reluctant to buy desktops for their employees. I work in a college, and can attest to how many jobs are literally tied to their desk. Not as important as bio-medicine, but a change nonetheless. Second – and I hope this is true – classes will not be the same ever again.

Given that most people are not at all harmed by coronavirus, the safety of the vaccine has to really be very high. Right?

First, do no harm!

I think the thing I’m recommending for a lot of people now is to find a sphere of activity, no matter how small or how local, that you feel you can control and you can do at home and you can contribute to. This feeling of powerlessness may set in, that will cause people to panic more or become too depressed or just make them much less productive, or spread to their families, or maybe cause them to go out and want to get drunk and become a spreader in some manner, so really to think long and hard.

Teach something to somebody. If nothing else, teach into the void: create YouTube videos on a subject that you are an expert in. That’s my personal recommendation.

The degree of optimism or pessimism, it really seems to matter for economic stimulus.

Yup.

Buy the patent rights at auction, give them a huge prize, tens of billions of dollars, if they deserve it, I’m all for this. Even if you think it has no impact this time, this is not our last pandemic. It will matter for the next time around. I think those prizes should be large and credibly promised, and I would like to see us get on this.

Getting the incentives right for designing expensive-to-produce but needed-by-everybody medicines is very, very tricky. Even if you have read the entire transcript, please go back and read this section again.

Like they’re taking tools out of the toolbox from the last crisis. Things they thought should have been done and weren’t and saying now is the time to see I was right all along. It makes me very nervous. I’m seeing high levels of epistemic non-rationality. But that said, I really am not here trying to argue for doing nothing. I don’t think we can let all the cards fall to the ground. What’s your view on that?

I think of this as a statistician. When we have guests over, I and my wife often argue about how much food we should make/order. I usually argue for making too much, and she worries about leftovers. But here’s the thing: it’s almost impossible to get it just right. It’s a very hard problem to solve! So, if you must make an error, which one? Order too much or too little?

It’s the same problem at play here. We’re never – never – going to get fiscal policy just right. Give up that dream right now. You can either err by giving too much fiscal aid, or too little. What would you rather do? My personal opinion: the same as with the food. I’d rather have too much fiscal policy than too little. This time, you see, is different.

But that being said, the specifics are going to be a headache. Does anybody have the answers? Right now, no.

I think some schools will do online education well for a subset of classes and we’ll end up in a world where 20% of what is now done face to face will be done online and that will be cheaper and better. I fully get, you cannot do a face to face discussion humanities class that way, but I think we’ll see much more online education.

Again, that’s a good – nay, wonderful! – thing.

Going around and talking about redistributing the wealth, letting in so many more immigrants, whatever you think of those points of view, I think they will have much, much less social impact and we will be more inward looking, more nationalistic, less cosmopolitan. I think you’ll see this already.

Tribalism will rise, in short. And that’s a horrible – and tragic! – thing. But he’s right: it will rise.

I think there’ll be a huge wave of promiscuous sex once there’s the first break in the virus for instance.

Nothing will ever explain the principle of diminishing marginal utility better. Ever. Especially to undergraduate students.

Don’t trust everything you read out there. The degree of misinformation is very high. The degree of uncertainty from the best and most reputable sources is very high. There’s no magic bullet on how to figure out what’s going on. I can’t quite say, “Oh, trust the authorities.” It’s not exactly how it’s gone, but there’s not any single way to really know what’s happening. That’s very frustrating. I would say do your best and keep in mind that’s a highly imperfect endeavor. There’s a lot you won’t know and some of the things you think you know are probably wrong.

Potentially the most underrated part of this conversation, and I’ll expand on this. First the obvious: treat everything you receive on WhatsApp as a joke. Discount most of what you read, particularly when received as forwards, in emails, in discussions. But, and this is where it gets hard, even stuff that you read on really reputed sites, treat with a pinch of salt. Not because the people who came up with that content want to lie to you, but because there is nobody on this planet who really and truly knows everything.

And that applies to this site too, of course. Read everything, trust nothing, and tread carefully. Macro is easy in comparison.

Once again, the link to the conversation.

 

 

 

 

 

Quick Notes from Tyler Cowen’s Interview of Garett Jones

We’ll see how this goes, but a very quick introduction before we get started. A friend, Aadisht Khanna, has a blog with a very ambitious aim (and name): Aadisht Logs Everything. Every now and then, I speak to him about some of these posts, and we end up having a lot of fun talking about stuff we get reminded of as a result of he writing these posts and I speaking to him about them. They’re all available here, should you want to check it out.

But why not try and take quick notes on everything I see, read and here? The idea isn’t to write long and detailed posts – that’s happening on the blog, slowly but surely.

But an ongoing repository of my notes on stuff I have read, listened to, viewed, not to mention conversations I’ve been a part of – maybe that’s a good idea too? We’ll see how it goes.

We begin with the thing I read the most recently, which is an episode from what is probably my favorite podcast: Conversations with Tyler.

The episode I read most recently was the one with Garett Jones. Here we go.

  1. The first section was essentially about getting incentives right. The idea is simple, the devil lies in the details is the big takeaway for me, and that applies to practically everything in life.
  2. New Zealand’s contract for its central banker is a form of skin in the game, and that is a gloriously unexplored idea. My own take on this is what if professors were paid a part of their salary on the basis of students who chose to attend their class, and all classes were made optional in terms of enrollment and attendance? Refer to point 1 before you rush to criticize!
  3. The Rajya Sabha elections are staggered in much the same way, of course, and as I understand it, for the same reason as staggered elections in the House of Representatives, and I agree: it is an excellent idea.
  4. About Garett Jones and Tyler Cowen’s discussion re: governance in Europe, does it imply too much centralization, and isn’t that, on balance, a bad thing? Need to read up more about this.
  5. And Scott Sumner’s question about Switzerland is along those lines only, no?
  6. I haven’t read the book in question, but I found it interesting that one of the chapters was titled “The Big Benefits of a Small Increase in Democracy”. Either extreme isn’t desirable, in other words: not too much democracy, but not too little of it either. The Truth Lies Somewhere in the Middle!
  7. This was immensely thought provoking for me, along so many dimensions:

    That’s true, but that’s partly because the rich white elites are acting as the self-appointed representatives of other individuals and groups in society.

  8. Again, thought provoking, and the basis on which the point was made is added to the must-read list:

    Once he pointed out, in sort of the climax of the book, that long-run cooperation focusing on some kind of cultural norm and infusing that throughout the system was crucial to firm success, and that failed firms will be those often that failed to coordinate on a good equilibrium, I decided that was central to seeing not just how firms work, but how societies work as a whole.

  9. If you ask me, Seth Godin and Tyler Cowen should have a conversation, and we should get to listen to it/read it. Here’s one reason, here’s the second, and what follows is my third:

    JONES: Yeah, that’s the thing — figuring out which things within capitalism — what is it about living in a free society with competitive markets where, at least in our youth and middle age, we feel a need to sell ourselves as valuable creators. There’s something about that that probably is what’s most valuable for boosting cognitive skills. It’s a sort of demand-side desire to try to use our minds in socially productive ways. And I think in communism, we can —

    COWEN: So marketing makes us smarter?

    JONES: That’s what I would say, yeah.

  10. Chad Jones, Paul Romer and diminishing returns reminded me of this book, and this TED talk.
  11. Isn’t this one more reason to admire Tyler Cowen more as well?

    Oh, that’s so hard. I’d say Buchanan because he . . . Tullock had more weird ideas. Buchanan took the time to do something that I personally am not that skilled at and not that interested in, which is building an intellectual empire, building an organization and a culture that shares those ideas. And that’s really how you get important ideas into an ecosystem, by taking the time to build an organization, to build a culture, to work with people, and Buchanan did that. That gave him a power that Tullock couldn’t quite have.

  12. And isn’t this a a macro-description of point 11, applied to a nation?

    There is this case that America, at its top 20 percentile of experience — it’s been a nation that’s been built on a hope and vision, not American exceptionalism in that it’s something you’re endowed with, but it’s an American exceptionalism in the sense that it’s something that people create. And a sense of adventure that is central to the American experience. You could think of it as a pioneer. It’s a mixture of a pioneering spirit with an element of strong social capital.So to me, of course, the Mormons then are the embodiment of this. They’ve got this strong social capital, strong enough to stand up to other people, but at the same time, willing to take huge risks and endure great persecution in order to build a new world.And that’s an extreme version of what Americans have done for quite some time. It’s this rare blend of social capital and adventurousness at its best times. And that’s not just a 0.1 percent experience; it’s more like 20 to 30 percent of the US experience. And that’s something that a lot of countries just never get.

Livemint Interviews Cass Sunstein

Quick update, especially pertinent given the behavioral economics workshop at Gokhale Institute: Cass Sunstein interviewed by Anil Padmanabhan.

 

Who is Cass Sunstein, you ask?

Here’s a slightly old profile. Here’s the link to his Amazon author page. Here is an interview he did with Tyler Cowen. Here is his faculty page. Here’s a piece I loved reading (written by him).