Open thread May 29, 2020 Dan Crawford | May 29, 2020 6:50 am Tags: open thread Comments (18) | Digg Facebook Twitter |
May 28, 2020
On the Economics of Not Dying
What good is increasing G.D.P. if it kills you?
By Paul Krugman
America is now engaged in a vast, dangerous experiment. Although social distancing has limited the spread of the coronavirus, it is far from contained. Yet despite warnings from epidemiologists, much of the country is moving to open up for business as usual.
You might think that such a momentous move would come with elaborate justifications — that politicians pushing an end to social distancing, from Donald Trump on down, would at least try to explain why we should take this risk. But those calling for quickly reopening have been notably silent about the trade-offs involved. Instead, they talk incessantly about the need to “save the economy.”
That is, however, a very bad way to think about economic policy in a pandemic.
What, after all, is the economy’s purpose? If your answer is something like, “To generate incomes that let people buy things,” you’re getting it wrong — money isn’t the ultimate goal; it’s just a means to an end, namely, improving the quality of life.
Now, money matters: There is a clear relationship between income and life satisfaction. But it’s not the only thing that matters. In particular, you know what also makes a major contribution to the quality of life? Not dying.
And when we take the value of not dying into account, the rush to reopen looks like a really bad idea, even in terms of economics properly understood.
You might be tempted to say that we can’t put a price on human life. But if you think about it, that’s silly; we do it all the time.
We spend a lot on highway safety, but not enough to eliminate every preventable fatal accident. We regulate businesses to avoid lethal pollution, even though it costs money, but not tightly enough to eliminate all pollution-related deaths.
In fact, both transportation and environmental policy have in the past been explicitly guided by numbers placed on the “value of a statistical life.” Current estimates are around $10 million.
True, Covid-19 deaths have been concentrated among older Americans, who can expect fewer remaining years of life than average, so that we might want to use a lower number, say $5 million. But even so, doing the math says that social distancing, while it reduced G.D.P., was well worth it.
That’s the conclusion of two studies that estimated the costs and benefits of social distancing, taking the value of a life into account. Indeed, we waited too long: A Columbia University study estimated that locking down just a week earlier would have saved 36,000 lives by early May, and a back-of-the-envelope calculation suggests that the benefits of that earlier lockdown would have been at least five times the cost in lost G.D.P.
So why are we rushing to reopen?
To be sure, epidemiological forecasts are highly uncertain. But this uncertainty calls for more caution, not less. Open too late, and we lose some money. Open too soon, and we risk an explosive second wave of infections, which would not only kill many Americans but also probably force a second, even more costly lockdown….
Paul Krugman @paulkrugman
I’ve been doing some homework on the economics of social distancing, and its implications for reopening. Not surprisingly, the Trump admin is refusing to do cost-benefit analysis 1/
The government has spent decades studying what a life is worth. It hasn’t made a difference in the covid-19 crisis.
The U.S. government often studies the trade-off between cost and safety. But the White House has failed to release any analysis of the pandemic, which could offer clues to what’s ahead…
7:57 AM · May 28, 2020
But there have been a couple of studies estimating the payoff of social distancing relative to letting the virus rip. They conclude that the cost in GDP so far has been well worth it 2/
I’ll add a back-of-the-envelope answer to a related but somewhat different question: what would the payoff have been to moving more quickly? Columbia researchers estimate that locking down a week earlier would have saved 36,000 lives by May 3 3/
Meanwhile, we have a pretty good estimate of the effect of lockdown on GDP: around -10% (NOT 40% — that’s an annualized growth rate). That’s approximately $40 billion per week 4/
Provides a “nowcast” of the official GDP growth estimate prior to its first release.
Now, total deaths that would been avoided is more than the 36,000 avoided by early May; even 40K is lowballing it. But even that means $200 billion if we use a fairly standard estimate, taking the differential effect on older people into account, of $5 million per life 5/
The pressing question, of course, is the cost/benefit of the rush to reopen. I don’t have the numbers to do that calculation, but my strong guess is that it looks like a really bad idea. And uncertainty should be grounds for more caution, not less 6/
Of course, we aren’t having a rational debate here: if the economy were really the issue, Trump would be doing everything he could to get people wearing masks. But still worth noting that deaths versus the economy is a false choice. For most of us, not dying is worth a lot 7/
I fixed some of the links which were pulling up “404” pages (site not found). In between these links, are these your comments on the articles? This is interesting material.
Great to see you posting again.
Thank you so much and all the same…
This is an important website.
We (Dan) are in the process of modifying the site which would include a serious of other sites and articles (similar to EV), making the site conducive to IPhone and Android commenting, and also adding capabilities to the commenting section. It is going to a bit of time. I think the commenters here will like it.
We (Dan) are in the process of modifying the site which would include a series of other sites and articles (similar to EV), making the site conducive to IPhone and Android commenting, and also adding capabilities to the commenting section…
[ Wow, that will be terrific. ]
Paul Krugman @paulkrugman
I finally had time to pore over today’s personal income report a bit more, and here’s my take: it shows a high risk of a crisis in the late summer if Congress doesn’t step up with more aid 1/
2:22 PM · May 29, 2020
The biggest decline in absolute terms came in wage and salary income, which fell 11% between Feb. and April. However, about 40% of that decline was made up by increased unemployment benefits 2/
And those benefits have expanded substantially, as states work off the backlog of cases: $49 billion in April, $86 billion in May through the 27th. So UI has been a major cushion. However, expanded benefits expire July 31 3/
Also, in April state and local budget woes just beginning to bite: government wages and salaries down only 3%. But that will get much worse soon unless there’s large-scale federal aid 4/
Meanwhile, proprietors’ income — which is where small business falls — took a huge hit, declining 19.5% Fed-April. The paycheck protection program, despite terrible implementation, surely helped. But PPP’s grace period for turning loans into grants only 8 weeks 5/
So here’s what worries me: just 2 months from now, sharp cut in aid to unemployed, alongside mass layoffs of teachers and firefighters, plus small businesses folding and/or laying off their employees 6/
Call it the glums of August, although some of it may happen sooner. Completely unnecessary; won’t happen if the Senate passes something like the recent House bill. But right now we’re set for a gratuitous late-summer crisis 7/
May 29, 2020
Coronavirus (Deaths per million)
Belgium ( 814)
Spain ( 580)
UK ( 562)
Italy ( 550)
France ( 440)
Sweden ( 431)
Netherlands ( 346)
Ireland ( 333)
US ( 316)
Switzerland ( 222)
Canada ( 185)
Luxembourg ( 176)
Portugal ( 136)
Germany ( 103)
Denmark ( 98)
Austria ( 74)
Finland ( 57)
Norway ( 44)
Greece ( 17)
Japan ( 7)
India ( 4)
China ( 3)
May 29, 2020
Cases ( 1,793,530)
Deaths ( 104,542)
“A Columbia University study estimated that locking down just a week earlier would have saved 36,000 lives by early May, …”
Covid-19 has spread very rapidly around the world. All efforts to control the spread have failed. The only successes have been to slow the spread to keep from overwhelming the hospitals with too many patients at one time.
A lockdown was in place in New York City after 20 March 2020. And the virus continued to spread rapidly anyway. See the “Data” table on this webpage.
In my opinion, arguing that we could limit the spread of Covid-19 in a country of 330 million people is disingenuous.
We don’t even control travel between states, let alone travel between cities and the movement within cities is not even remotely controllable!
Now add the fact that the symptoms of Covid-19 can be so mild that many patients, probably most, do not even seek medical care. They just spread the disease.
There has been too much wishful thinking going on in this country. We only control influenza with mass vaccinations. And even those vaccinations are imperfect.
“In my opinion, arguing that we could limit the spread of Covid-19 in a country of 330 million people is disingenuous.” The objective was to control the spread so as not to overwhelm the hospitals and healthcare. This was a global effort and it worked in most cases. In Michigan, ~52000 cases of Covis and 4900 deaths . . . decimation. Practicing herd immunity without a vaccine good for one year is stupid.
Who could’ve guessed
“This isn’t the first time Trump has weighed in on a law enforcement issue in Minneapolis. He previously positioned himself as the defender of the city’s police against overly PC libs—wrapping himself in the flag of “law and order” politics. Last fall, ahead of a Trump campaign rally in Minneapolis, Mayor Jacob Frey informed police officers they could not appear at the rally in uniform. In response, the city’s police union began selling special red “Cops for Trump” t-shirts, with an American flag overlaid on the outline of the state. Trump weighed in:
Donald J. Trump
Someone please tell the Radical Left Mayor of Minneapolis that he can’t price out Free Speech. Probably illegal! I stand strongly & proudly with the great Police Officers and Law Enforcement of Minneapolis and the Great State of Minnesota! See you Thursday Night!
Get your great T-Shirts, “Cops for Trump,” at http://WWW.MPDFEDERATION.COM REALLY NICE! Thank you to Minneapolis Police Officers & Union! @foxandfriends
At the rally, Trump was joined on stage by Lt. Bob Kroll, head of the Minneapolis police union, who used his time on stage to attack former President Barack Obama for his “oppression” of law enforcement. Kroll wore the “Cops for Trump” t-shirt. Following Kroll, a procession of police officers, all wearing the “Cops of Trump” shirt, walked across the stage to shake the president’s hand. Trump even saluted one of them.
While Trump heralded the police as the most hallowed of institutions, he whipped the crowd into a frenzy against what he considered their antithesis—the city’s “America-hating” Democratic congresswoman, Ilhan Omar.”
“The objective was to control the spread so as not to overwhelm the hospitals and healthcare. This was a global effort and it worked in most cases. ”
Yes we agree about that.
And we agree that a vaccine has to be developed for use in the future. The successes that we have had this year have come at a very high price in lives lost and at a high price to American healthcare workers and to the US economy.
My point was that flattening the curve does not mean that there will be fewer cases, only that the cases will occur over a longer period of time.
I have not seen any evidence that the hospitals in the United States were turning away patients. So they were not overwhelmed. The reports were that the temporary hospital wards were torn down without having had much use. That too was a good sign. And that extra effort should still be applauded.
We did not limit the spread of Covid-19 in the US, we merely slowed it. The elderly and those with significant underlying health problems were still going to be exposed. Everything that I have read states that those two populations account for the vast majority of the deaths.
So how could more lives have been saved with a lockdown one week earlier? The study mentioned in my last comment must have been riddled with questionable assumptions.
There are real lessons to be learned.
We lacked an adequate supply of personal protection equipment for hospitals and face masks for the general public. There was insufficient time to devise and distribute enough test kits. Contact tracing was impossible as the number of “discovered” cases quickly rose.. We still can not do large random tests to determine what percentage of us have antibodies, thus were infected and probably have some immunity.
Watch video from China, or Korea, or Japan showing people on the sidewalks during the flu season and you will see them all wearing face masks. I have never seen a video showing large numbers of Americans outdoors wearing face masks. Americans have not worn them in large numbers and so there is almost no local production. We faced 2 problems, first how do Americans get face masks, and second how do we convince them of the necessity of wearing them everywhere!
Americans need to face reality. Fate has been kind to us. This could have been much worse.
I am going to number this as your discussion has grown.
1. We can agree that without stay at home and the closing of business, medical care would have been overwhelmed.
2. With every massive violation of safe practices, there have been spikes or growth > 1 in cases of Covid confirming proving R-naught is 2 to 3 and prelinm CDC studies have show it could be as high as 7.
3. Michigan is not number 1 in population and it is varied in population density. ~52,000 confirmed cases of Covid and ~4900 deaths, decimation. When we look back, we will have an accurate picture of impact particulars.
4. It appears like others who say it is just the flu, you are ok with tossing old wood on the fire or I am young and this will not hurt me. Whether you are old or young and survive, there are serious health implications resulting from contracting Covid. It is not “just” an issue of saving lives. It also concerns preserving a quality of life. Perhaps in a weakened state of health the next version of Covid coming around will snuff that life out.
5. For many of the young and middle-age who have contracted Covid, they have gone 7-8 weeks of fighting the virus (I posted personal comments by some Covid recoverees on this), and there are reports of permanent heart, lung, arterial, etc. damage. Again, we do not have an accurate statistical picture and will not for a long time to come. It pays not to contract Covid.
6. If you do not contract Covid and can be immunized, you may never have it for this year as viruses mutate over time.
7. Strangely, I read and heard the reports of people being stashed in hospital aisles in places of the country. That this did not spread to many rural areas was a boon because their resource is far less than urban areas. If half of the high in income in Michigan or Illinois were allowed to take off to the UP or northern Michigan; those areas would have had a much higher R naught and death rate.
8. Hospital capacity is challenged when an overwhelming need for care arrives at the door all at one time. Triage would have been much higher. Building excess permanent capacity is nonsensical. What is needed is flexible and variable capacity.
9. The Navajo nation in NM, AZ and UT rural areas is especially impacted by Covid.
10. The populations in places like Shanghai, Beijing, Shantou, Tianjin, etc. (where I worked from time to time) wear face masks much of the time because the quality of the air sucks. I was in Shanghai on it worst air quality day ever.
11. Companies leave the US because the Overhead to operate a business is terrible. Much of the Overhead is tied to Labor and Fixed assets. Most of that Overhead does not exist in China or much of Asia. If we wish to have capacity uninfluenced by foreign enterprise and costs, then we should not allow business to leave the US and come back and sell the same product without paying for the Overhead which exists in the US. What are you willing to give to equalize Overhead costs with Asia countries otherwise?
You had a coherent reply, thank you for the exchange.
“4. It appears like others who say it is just the flu, you are ok with tossing old wood on the fire or I am young and this will not hurt me. Whether you are old or young and survive, there are serious health implications resulting from contracting Covid. It is not “just” an issue of saving lives. It also concerns preserving a quality of life. Perhaps in a weakened state of health the next version of Covid coming around will snuff that life out.”
I have most certainly not wrote or hinted that we should sacrifice the elderly. I am one of those elderly.
I did write “The elderly and those with significant underlying health problems were still going to be exposed. Everything that I have read states that those two populations account for the vast majority of the deaths.”
The issue is, what is to be done about a deadly disease for which there is no cure? I believe that we have been doing all that we could reasonably do. Pretending that a little change here or there was going to save us should not be necessary for adults. We need a vaccine now but there is none.
We sacrificed the US economy for about 2 months without any significant complaints from the working class. But they have had enough and only arrests and imprisonment can delay reopening now.
And I don’t want to have my grandchildren locked out of their schools this fall. There is no substitute for being in the same room with a teacher.
If you want to forbid leaving the home for pure leisure, then you have my vote.
But if you want to arrest everyone who protests for a return to work then you lose me. Kentucky’s Governor did not want to re-open as quickly as we have been proceeding. But he has been facing a lot of pressure from his constituents and from the federal courts.
As of 29 May 2020, in Kentucky there had been 9,464 cases and 418 deaths. Kentucky’s population is about 4.5 million people. Perhaps eventually we will find out that the virus in Kentucky had already mutated to something very mild.
I have been adamantly against free trade since the 1992 election. Tariffs are an equalizer of sorts, they just need to be high enough.
The Observational and Empirical Case for Observational Quantitative Asset Debt Growth and Decay Saturation Fractal Macroeconomics as a Science akin to physics, chemistry, and biology…
This is an unusual posting on a recognized Great website. Angry Bear has been and is a top 20 Macroeconomic Blog website. The data that follows offsets the immediately assumed possibility of quackery.
From the December 2018 Composite Equity nadir valuation low: x/2-2.5x/2-2.5x/1.5y :: 11/26/26/15 of 16 weeks : on a daily basis nonlinearity can be observed between the 22nd and 23rd week of the second 26 week fractal. (see main page regarding second fractal nonlinearity)
This correlates to 3/7/7/4 of 5 months. On a daily basis for the CRB, the fractal progression is 5/11/10/4 of 7 days. An 1987 like collapse is expected over the next three trading days.
This web site makes the observation that the asset debt economic system is mechanistic and quantitative in its nature following simple growth and decay fractal valuation patterns so precise that ‘the mathematical laws’ and ‘self assembly’ of asset valuation growth and decay are similar to physics and chemistry and biology.
Asset Debt Saturation Macroeconomics likewise has the quality and property of a science.
The simple ever recurring and easily observed quantitative fractal ‘mathematical laws’ determined by the nadir asset valuation are:(y connotes final valuation low for the individual fractal series pattern)
and x/2-2.5x/1.5 to 2.5y
(the second fractal length of 2-2.5x determines the ideal base first fractal length; the third fractal is a 1.5 multiple of this ideal base.
Qualitatively, the facilitated creation of excessive debt leads to overvaluation, overproduction, and over-ownership of assets. The system is self correcting with liquidation of bad debt and a lower re-equilibrium of asset valuations with a lower total denominator of composite system wealth near the nadir of bad debt liquidation and lower asset composite valuation.
All individual asset valuations are denominated in first time derivative of the composite of all other valuations.
The fractal mathematical laws of the composite asset valuations of the asset debt system are elegantly simple.
While Central Banks’ interventions can cause observational rises of subfractal components, the fractal grouping patterns are still there.
In fact the observational patterns show the direct effect of central bank intervention.
The US Hegemonic Asset Debt Macroeconomic grand Fractal series had an initiating fractal base of about 18 years near the initiation of its constitution in 1790.
The first fractal started in 1807-8 and ended after the panic of 1837 in 1842-43 for a base fractal of 36 years. Its 90 year second fractal ended with nadir composite equity valuations in 1932. Its 89 year third fractal is expected to end very shortly (three trading days) in 2020. A fourth fractal is expected to end in 2074. (1.5y) The US 54 year fourth fractal will be supported with necessary debt creation.
A Look at the 1982 second subfractal series: 9/20/12 year :: x/2-2.5x/1.5y concluding US 1932 third fractal series:
The monthly fractal progression of US composite Equities from the low in 2003 was made of two fractal series: 6/13/15/10 months :: x/2-2.5x/2.5x/1.6y and a decay fractal of x/2-2.5x/1.5y : 9/20/12 months: The ideal base of a second 20 month fractal is 8 months with 1.5 times 8 months yielding a 12 month third fractal.
What was the composite equity and CRB valuation fractal effect of the global Central Bank intervention on the 2008-2009 collapse? The 2/5/5/3 month fractal series composing the 12 month third decay fractal begins a valuation climb in March 2009 at the beginning of its third 5 month fractal.
Note the x/2-2.5x/1.5y fractal similarity of the 1982 9/20/12 year fractal series (completing the 89 year US Third Fractal) to the 9/20/12 month fractal series completing the second 20 year subfractal series which started in 1990.
Sans global central Bank coordinated intervention, the expected unassisted starting point for the observed March 2009 composite nadir was at the end of the 2/5/5/3 month natural self assembly fractal series or September 2009
From the expected September 2009 low (unassisted by Central Bank assumption of toxic debt and collaborative interCentral bank money printing and interbank borrowing), the two monthly subfractal series – 2/5/4/3 and 3/7/8 months :: x/2.5x/2x/1.5y and x/2-2.5x/2-2.5y, respectively – make up a 26 month base first fractal sequence of the final 12 year third subfractal.
The final 12 year third fractal sequence of the 1982 9/20/12 year :: x/2-2.5x/1.5y decay fractal series (this second fractal subseries follow a 1932 10-11/21/21-22 53 year first fractal subseries ) is composed of 26/53/52 of 53 months. (x/2-2.5x/2-2.5y)
The second 53 month subfractal of the 26/53/52 of 53 series is composed of two fractal subseries 3/7/6 months and 8/17/17 months (x/2-2.5x/2.5x both subseries)
The third 52 of 53 month series is composed of 10/26/18 of 19 months. The integrative final series is 10/25/20 months)
The first 10 month fractal is composed of a 2/4/4/3 month series; the second 26 month fractal is composed of a 5/11/11 month series, and the third 19 month series a 3/7/7/4 of 5 months series.
The patterned asset composite valuation activity of the Asset Debt macroeconomic system is directly observational and is indisputable. What causes the ideal self assembly of mathematically precise fractal asset valuation growth and decay patterns?
What causes the mathematical laws and derived numerical constants of physics and the naturally occurring self assembly of subatomic particles, atomic particles, molecules, plant and animal embryological development, stars, solar systems, galaxies and the universe?
The observational self assembly highly patterned fractals defining the counterbalancing growth and decay of valuations of composite assets composing the asset debt macroeconomic system confers upon that macroeconomic system the properties of a science.
Interesting comment although my knowledge in this part of economics is limited. Spencer England had a post up to which you replied to earlier. If you are referencing Spencer’s post, I will inform him so he can come and read your commentary,
Regards . . .