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Economic Policy for the age of Coronavirus

A broad topic (at least it is close to the field in which I am most nearly expert).

I am going to write about policy to deal with the economic effects of the Covid 19 epidemic.
There has already been an amazingly quick and huge policy response, which generally seems fairly well designed (with different reasonable approaches in different countries). Also there is, of course, an active discussion of what remains to be done and what could have been done better.

I see two huge topics. One is the simplest possible — preventing a huge increase in poverty due to the huge increase in unemployment. Another is the coming debt crisis (see also). Bankruptcy is very costly with huge amounts of money going to lawyers and accountants (whose hard work to earn the money is a social cost) and with disruption of normally profitable socially beneficial activities because it isn’t clear if people will get paid 100 cents on the agreed dollar.

As usual, I am much influenced by Paul Krugman and Brad DeLong. Krugman in his newsletter (no link) DeLong google jubilee. Also I had a twitter debate with @Frances_Coppola whose position was similar to Krugman’s.

1. Fighting poverty.
Here the problem is extraordinarily simple. Without a huge intervention, there will be huge suffering because the decline in total income is concentrated among the unemployed. The reason the problem is extraordinarily simple is that the unemployment is efficient, at least a lot of it is. Many people who interacted with the public *should* stop working and can best contribute to social well being by staying home. The clearest examples are waiters,bartenders and bariste. It’s time for some home production of food, coffee, and hell cocktails it’s not like we are driving anywhere soon.

This actually simplifies the problem, because normally we want to help people with low income but we don’t want the safety net to be used as a hammock. Right now, in many many cases, we do want the safety net to be used as a hammock.

I don’t have a proposal, I do have praise for the 2.2 trillion relief bill called the CARE act. It includes an extra $600 per week per unemployed person. 4 Republican Senators held up the bill for a few hours saying this must be a drafting error as many people will have higher income when unemployed than they did when working. Lindsey Graham said that this will cause people to quit demonstrating that he doesn’t know that unemployment insurance is not paid to people who quit (unless they quit because of harassment which is how the word first appeared in the legal discussion).

I applaud the US Congress. I understand they first considered a simple 100% replacement ratio and switched to the even simpler $600 per week on top of state benefits because the Department of Labor said they couldn’t handle anything more complicated immediately and time was of the essence. But I also think that $ 600 per week is better policy. My argument is simple, the income of unemployed people is distributed more equally this way. The point is that, normally, the 4 Republicans would have a point. Replacement ratios over 100% discourage job seeking. Normally that’s bad. Right now that’s good. Unemployed people should NOT search for jobs for two reasons. In the USA the unmeployment rate is suddenly 13% not 3.5% so a whole lot of searching per job found would be needed. Also job search is a way to spread Covid 19. At some point it includes some kind of job interview which is the sort of thing which we should NOT encourage.

This actually has an implication for a proposed improvement. I think the $600 a week should not be paid only to the newly unemployed. I think it should also go to families which have no labor income even if they have long had no labor income. In other words, I advocate welfare, not just a return from TANF back to AFDC but much broader and more generous than that.

The logic is exactly the same as the logic of the current US policy. Normally we don’t want welfare to be too generous, because excessive generosity discouraging job seeking. But now that’s a good thing. Not just for the newly unemployed but also for the long unemployed, not in the labor force and especially (as always) the unemployable. The problem is unusually simple. We can do what we always wanted to do without worrying. Of course we, who always wanted to give lots of money to the poor, will learn that they, who argued about bad incentive effects, were always lying. They don’t want to give those people money and don’t care that the argument they made against welfare no longer applies. It was always BS. But it’s time to fight it.

Before going on, the increase in unemployment is *partly* efficient. However, there is a spillover effect as low income causes low demand for goods (mostly) and services (not so many) the production of which is still socially desirable. This means that income support pls the 1200 for each adult and 500 for each child are good policy too. There will be low aggregate demand and the usual case for fiscal stimulus remains valid, even if low aggregate demand isn’t the main problem and aggregate demand stimulus is only part of the correct policy response.

The second topic after the jump

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Hydroxychloroquine and Covid 19 Update

Given Donald Trump’s enthusiastic participation, the debate on hydroxychloroquine and Covid 19 has become very heated. As I wrote

here I agree with Trump. This is unusual (not unique he and I both advocating cutting interests rates long ago before the Fed Open Market Committee cut them to 0-0.25 again). My view (and as far as I can make sense of anything he says his) is that it is wise to prescribe hydroxychloroquine for patients with Covid 19 even though there is not decisive evidence that it helps.

I think this because it inhibits coronovirus reproduction in vitro, and sometimes in vitro results lead to clinically useful therapies (I tend to guess more often they don’t not that I really know (I think it is known but I don’t know)). Currently it is being used in many hospitals. I also don’t know what fraction of Covid 19 patients are taking 400 mg of hydroxychloroquine a day, but it is clearly large. It is officially recommended in China.

What if it turns out in the end that it just doesn’t work ? I will not consider myself to have been wrong. My view is that the weight of, currently very limited, evidence makes it reasonable to infer that the expected benefit (taking expected values over a reasonable posterior probability distribution) is greater than the expected cost. The costs are real and important — hydroxychloroquine slows the heart beat and can be dangerous especially for people who already have irregular heart beats (remaining a non physician, I would recommend an EKG before prescribing). Prolonged use can also damage the retina, so people who take it regularly have to have their eyesight checked.

The debate should be resolved soon as there are ongoing large scale (phase III) clinical trials.

This update really has three parts (after the jump)
1) what about that study in Marseilles (TL DR it’s crap)
2) what about other studies ? (TL DR mixed evidence including proof that it is not a miracle drug)
3) what about the debate (TL DR even if Trump says something, that isn’t proof it is false — no one is perfect not even Trump)
4) Name 2 non physicians who are pontificating about this in spite of having (identical) irrelevant formal qualifations (TL DR Peter Navarro and Robert Waldmann (who is about to scream after typing that)).

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Remdesivir III

I told you so on March 2 2020

The first Covid 19 case diagnosed in New Jersey

Around 3 a.m. on March 10, Balani arrived at the hospital. The medicine had come in, and she did not want to wait until the morning to administer it. With Balani in the room, a nurse woke Cai up so that he could sign the legal papers. Soon after, he was hooked up, intravenously, to the drug.

The next day Cai’s fever, which he’d had for at least nine days, finally broke. Even before he received the remdesivir, his oxygen levels started to stabilize. Now they indicated he was on the mend. He was still so weak in the following days that he could barely speak without exhaustion; every time he tried, he was racked by coughs. But the progress was steady

Chloroquine also ran, It was used for a day while the Remdesivir was in the mail,

Cai’s boss, Dr. George Hall, also made a call, not long after Huang spoke to the infectious-disease doctor on call. He spoke with another doctor on Cai’s caregiving team, a hospitalist named Danit Arad.


Hall explained …that the Chinese National Health Commission had just published the seventh edition of guidelines on how to treat coronavirus. It was true that they were based more on clinical experience than on published studies, but he urged Arad to follow some of its protocols, which included prescribing two drugs that were commonly given to patients in China soon after they showed symptoms like shortness of breath: chloroquine, an antiviral drug once used to treat malaria, and Kaletra, another antiviral that had once been used to treat H.I.V.


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Coronavirus Thoughts

I’m not even going to try to organize this post.

I am in self quarantine 6 days after having either the mildest cold I can remember or a mild case of Covid 19 (this means alone in an Air BnB away from my family too). The pattern is the same I have read about countless times on the web. A brief mild fever and 5 coughs. Then nothing for about a week. Now I can expect nothing or maybe my lungs seize up.

I am sure my experience is very common. When this rotten pandemic is over, I will get the antibody test to find out if I have had Covid 19 or not.

Last week I taught twice my normal load (I will Not say how little that is) all by web. I have read again and again that, when working from home, one should get out of bed and put pants on as a matter of … for some reason. I have ignored this advice (I show pdfs to the class as my disembodied voice explains them — they don’t see me).

I am now all alone and bored (just normal teaching next week starting 17.5 hours from now). I will bore you after the jump.

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A Dog that Didn’t Bark

The USA is about to experience the largest fiscal policy shift since World War II. The House is debating whether to add $ 2,200,000,000,000 to the Federal Budget Deficit (counting loans as if they were expenses because that’s what they do). There appears to be a near consensus as all are speaking in favor. It is just possible to guess which are Republicans

I’m sure there is a similar near consensus that Rep Thomas Masie of Kentucky, who made them fly to DC by threatening to call a quorum, is a jerk (the Rep. is short for reprehensible). I don’t really wonder if someone is going to get knifed in the members only men’s room.

The Supply of Treasury securities is about to experience the largest shock in history. So what is happening to the price in anticipation of the huge supply shock ?

Quick find the shift from arguing about $ 2.5 billion vs 8.5 billion to arguing about $ 100 billion more to discussing $ 1800 billion more to approving $ 2200 billion more on the graph.

The rate is not quite at the all time record low, but it is close. One might argue that a huge Federal Debt will crowd out investment, beause it will create an illusion of wealth which makes people consumer more so the Fed will have to achieve high real interest rates in order to keep the economy from overheating. One can argue that the huge debt will cause high inflation (perhaps because the Federal Government is the world’s main dollar debtor and can make the dollar worth as little as they want) which will imply high nominal interest rates.

But one will not be able to convince investors of this. the invisible bond vigilantes clearly have got their hands on Harry Potter’s invisibility cloak.

This isn’t even a matter of much debate (except for Massie). It is clear that stimulus will help the USA and also, in particular, the GOP. When the interests of the USA and the GOP allign there is (almost) no debate, because Democrats care about the country and not just about hurting the other party. In 2009 Republicans demonstrated that they were partisans not patriots. Today, Democrats are demonstrating they are patriots more than they are partisans.

Many economists (some winners of the Nobel memorial prize) should admit that they were totally wrong. But of course they won’t.

Some economists whose response to the horrible Trump tax cut was more debt no problem can say “I told you so”

I told you so.

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Rome Update

For 3 days from an abundance of caution, 4 hours a day of online teaching responsibilities and extreme laziness, I have stayed in an apartment usuaally in a bed. Rome is a bit different than was I went into hibernation. There are people walking around without dogs on a leash. Some cars.

There was a guard outside the supermarket absolutely waiting for someone to come out bfore letting someone in. No crowds: no line at cashier. The Deli lady (who I thanked for risking her life to give me 100 g of spek + 100 g of bresaola said it’s a lot more pleasant this way.

Shelves a tiny bit less stocked than usual. The only thing I couldn’t get was garbanzo beans

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Hydroxychloroquine update

A clinical trial of hydroxychloroquine with 30 patients (15 treated 15 controls) has been completed in Shanghai. It is the first genuine randomized trial. It reports no evidence that hydroxychloroquine works at all.

It is true, that given the principal outcome measure defined in advance, the trial has no power. Not low power, 0 power. In a hypothetical, if all patients treated with hydroxychloroquine became healthy immediately with no symptoms and no detectable virus, then the report would be that there was not a statistically significant diference in the principal outcome measure for the treated and control subgroups.

The principal outcome measure was “can virus be detected 7 days after treatment starts”.
the answer was yes for 2 people in the treated group and 1 person in the control group.

Given that 14 out of 15 people in the control group had no detectable virus, the best outcome for hydroxychloroquine would have been 15 out of 15 in the treated group. Again a hypothetical, what if all the treated patients were assessed as cured after a week (best possible value of the principle outcome measure). This would reject the null that the probabilities were the same against the 1 sided alternative that treatment was better at the 50% level. It would reject the null against the two sideded alternative at the 100% level (not a typo).ù

So exactly zero power. Not low 0, zero, nada, niente.

With the benefit of hindsight, the researchers write that they could have designed the trial better. This does not mean that mistakes were made. When in a crisis, one has to act and must not make sure that one doesn’t do anything which is clearly suboptimal with the benefit of hindsight. That would imply sitting around thinking. They didn’t have time for that.

The secondary outcome measures provide statistically insignificant evidence that one is better without hydroxychloroquine. As noted by the authors, none of this evidence is strong enough to affect best practice of medicine (I still think that all patients without counterindications should be given hydroxychloroquine (I am not a doctor)).

The trial

At the clinical trials register, it is tagged “completed”, but the results are not yet uploaded (given the absolutely rigid standard format this takes the time of someone who is probably very busy).

The results are reported here.


googling for the link above, I found Hydroxychloroquine Is Ineffective In Treatment Of Patients Hospitalized With Covid-19, According To Small Controlled Trial From Shanghai

To that headline I say no No NOOOOOOO. Failure to reject the null is not a finding that the null is the truth. that would only be the case if all tests had power 100%. Since this test happens to have power 0%, the error is extreme. The error of rejecting the null is universal. It is a simple mistake – a failure to understand the Neyman Pearson framework.

Since I am a big fan of the alternative in this case, it is a delicate time to point out that the headline is simply incorrect. But it is.

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Not Just Covid 19, Cancer Too

Chloroquine and Hydroxychloroquine are being tested as components of multi-drug cancer chemotherapy. I have noticed that when I tweet this, people conclude that I am insane.

However this is not a tiny literature. \

Repurposing Drugs in Oncology (ReDO)—chloroquine and hydroxychloroquine as anti-cancer agents
is a long review article and meta analysis. It cites seven peer reviewed article which report the results of clinical trials and dozens of ongoing trials.

This is why I became interested in chloroquine and hydroxychloroquine. My family was very amused to find those drugs appearing in the news on Covid. I learned about Donald Trump playing doctor on TV, because my father immediately e-mailed me that now Trump is saying that stuff too (he I note does not think I am crazy — but he wouldn’t would he).

It is very easy to keep up with clinical trials, because there is a Clinical Trials Registry. To prevent publication bias and cherry picking, studies must be posted there, and a principal outcome measure must be chosen in advance. Otherwise the FDA considers any data to be irrelevant.

So see there are 21 Studies found for: chloroquine | cancer (at least one terminated because there was no sign the Chloroquine was helping — others with promising results — many others ongoing)

There are 74 studies of hydroxychloroqine & cancer

There are currently 5 Studies found for: hydroxychloroquine | Coronavirus

There is a (very overlapping) set of 6 studies of covid 19 & hydroxychloroquine

MY mania was triggered months ago while I was searching the Clinical Trials Registy.
https://clinicaltrials.gove is addictive

Hmm only 2,236 studies of addiction, one is
“Smartphone Addiction and Physical Activity” now I do have to look at that one on my phone (having neither the inclination nor the Prime Minister’s permission to engage in physical activity

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It is Clear that Hydroxychloroquine and Chloroquine are Currently Used to Treat Covid 19 in the USA

Patient privacy prevents precise calculation of the fraction of Covid 19 patients in the USA being treated with Hydroxychloroquine or Chloroquine. However, Hospitals are purchasing hugely increased amounts

Christopher Rowland reports.

Data gathered in the first 17 days of March by Premier Inc., a large group purchasing organization for 4,000 U.S. hospitals, showed a 300 percent week-over-week increase in orders of chloroquine and a 70 percent week-over-week boost in orders of hydroxychloroquine.

I think that, because of the association with Trump, this is presented as a bad thing. Certainly there is a problem of short supplies. Hydroxychloroquine is used to treat Lupus Erythematosus and Rhumatoid Arthritis and those people have trouble making sure they get their medicine, because of the sudden new demand.

The article begins with the odd reference to the FDA as if the FDA regulated off label prescription of drugs. The only legal effect of an FDA finding that the drugs work when treating Covid 19 is that manufacturers would then be allowed to claim this in advertisements. This is extremely irrelevant. The drugs are off patent and produced by many firms — there are no huge profit margins there. Also the free publicity dwarfs any possible ad campaign. The FDA has no relevant authority here.

It seems that there is an idea among many people that doctors shouldn’t do anything unless it is proven to work in a clinical trial. I recall (but can’t find) and article in which Dr Arnold Relman (editor of the New England Journal of Medicine and pretty much head of the medical establishment) denounced this. Waiting for clinical trials is a decision. It is a decision which has caused deaths. There is no option to stop the clock while the trial progresses. Patients who could benefit from or be harmed by novel treatments exist.

The idea that the practice of medicine should be vaguely like the approval of pharmaceuticals is definitely new. I am 100% sure that the main driver is fear of malpractice suits. It is very necessary to have an official published standard of care — following this standard is the only protection against malpractice suits when outcomes are bad &, you know, we all end up dead in the end.

But doctors must practice also when there is no standard (that is no committee of respected doctors is willing to take the moral not legal responsibility of drafting one). Obviously there is no standard of care for Covid 19. Also obviously many doctors are sensible enough to look at the balance of evidence in the absense of proof and make decisions which they believe are best for the patient in the absence of certain knowledge and knowing that they might regret the decision with the benefit of hindsight.

I don’t understand why official talk about medical care is so different from the current actual practice. I think it is partly about practical action vs scientific research. In scientific research it is perfectly fine to have open questions. If there is a patient on the edge of death, it is necessary to decide now.

But I am more confident than I was that small c conservatism is not killing as many people in the USA as it might.

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Hydroxychloroquine, Anthony Fauci and Kevin Drum

This is a comment on “Is Anthony Fauci Really Our Truthteller-in-Chief?” by Kevin Drum. I will briefly summarize. Drum quotes from the latest press conference

“Is there any evidence to suggest that, as with malaria, it might be used as a prophylaxis against COVID-19?

DR. FAUCI: No. The answer is no.”

Later after Trump says hydroxychloroquine is the cure for Covid 19 Fauci changed his line to

Q I would like Dr. Fauci, if you don’t mind, to follow up on what the President is saying. Should Americans have hope in this drug right now? . . .

DR. FAUCI: No, there really isn’t that much of a difference in many respects with what we’re saying. The President feels optimistic about something — his feeling about it. What I’m saying is that it might — it might be effective. I’m not saying that it isn’t. It might be effective. But as a scientist, as we’re getting it out there, we need to do it in a way as — while we are making it available for people who might want the hope that it might work, you’re also collecting data that will ultimately show that it is truly effective and safe under the conditions of COVID-19. So there really isn’t difference. It’s just a question of how one feels about it.

Drum thinks more highly of Fauci’s first answer than of his second answer. He guesses

“It’s obvious what he really thinks, after all: hydroxychloroquine is nonsense, period. ”

The problem is that Fauci’s first answer was simply incorrect, wrong, a false assertion on a matter of fact. I am sure he was not lying, but there absolutely 100% no doubt about it and no grounds for debate, there is “evidence to suggest that, as with malaria, it might be used as a prophylaxis against COVID-19?@

I link to the top general science journal

Hydroxychloroquine, a less toxic derivative of chloroquine, is effective in inhibiting SARS-CoV-2 infection in vitro,” Jia Liu, Ruiyuan Cao, Mingyue Xu, Xi Wang, Huanyu Zhang, Hengrui Hu, Yufeng Li, Zhihong Hu, Wu Zhong & Manli Wang, Cell Discovery, 18 March 2020

That is not proof that it is effective in vivo. However, given the fact that side effects, interactions etc are very well understood, I think there is no excuse for not prescribing it absent the well known counter indications.

Asserting that it is clear that Fauci thinks Hydroxychloroquine for Covid 19 is nonsense, and that he should say so Drum and others risk convincing people not to use it and risk causing deaths.

Why do people assume that they understand the evidence ? I do because I have noted the pattern that when I disagree with doctors about patient care, they end up saying what I originally said (I promise you I am not the only person who perceives this pattern).

The rule that Trump is always wrong is as near to perfect as any rule of inference can be, but it is always best to double check. Say by googling [hydroxychloroquine inhibits Coronavirus ].

Also read angrybearblog

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