Wrap Up for March 2020

"Useful writing makes claims that are as strong as they can be made without becoming false."

There are similarities between bank runs and public contagions.
"The challenge of re-establishing public confidence that it is safe to venture out bears striking similarity to the one that authorities face in stemming a bank run. Our ability to identify and quarantine people infected with COVID-19 is analogous to our ability to recognize and isolate a bank bordering on insolvency."

NGDP fluctuations are sometimes logical in relatively uncommon supply side recessions.

Mark Koyama reviews Escape From Rome.

$175 billion in improper payments.

James Pethokoukis and Branko Milanovic discuss what future capitalism might look like.

The speed at which ideas are adopted, depend in part on how quickly their effects can be ascertained.

Perhaps the momentum to put an end to single house zoning is starting to build.

Hal Varian considers the future of technology, with James Pethokoukis.

It would not be a good idea to give rights of ownership to artificial intelligence.

"Can physician assistants help solve America's rural health care problem?"

Technology is not just an exogenous force that exists outside of ourselves. It could also be utilized to improve the skill sets we already have. "A fundamental reason why society under-invests in innovations that benefit ordinary people has to do with the distribution of power."

Arnold Kling reviews 10% Less Democracy by Garrett Jones.

"the COVID-19 crisis is hitting the world economy when growth is already soft and countries are wildly overleveraged."

More than ever, the Fed needs to "stabilize the growth of nominal gross domestic product."

Some basic economics for U.S. healthcare.

How do markups affect knowledge diffusion?

For all the value GDP holds as a measure, it is still incomplete for what nations would like to express.

Arnold Kling details costs of production for Econlib.

Given all the depressing news re COVID-19 of late, this 3D printed neighbourhood was one of the recent bright spots.

James Capretta looks at policies which affect the number of physicians in the U.S.

Greg Mankiw offers his thoughts re the pandemic.

Even though monetary policy can't solve the coronavirus crisis, it can prevent secondary effects.

Kevin Bryan explains the economics of social distancing.

Tim Harford reviews Uncharted by Margaret Heffernan.

"The 1920s were the decade of leisure because people could afford to relax. The 1930s were the era of frantic problem solving because people had no other choice."

Healthcare systems now need to surf the curve.

Timothy Taylor highlights a working paper, re potential lessons from the "Spanish Flu" a century earlier.

Bryan Caplan shares methods by which he gradually learned to reduce more than twenty years of chronic pain.

"This pandemic could stall or reverse American urbanization." Joel Kotkin also notes how pandemics function as a deterrent to urban life.

The challenge of a supply shock, is ensuring that follow on reductions in demand don't lead to additional cycles of contractionary shocks.

3D printers are finding ways to help healthcare workers.

Coronavirus will also disrupt intermediate goods and services production. And, how do shocks in some industries affect other industries?

Carmen Reinhart believes we lack historical comparisons for how the pandemic could ultimately unfold.

A useful guide for emergency homeschooling.

State and local governments are not a part of the new big lending programs.

Centralized healthcare systems are ill suited for pandemics. Many patients could be treated at home, a process which would also reduce the spread.

A list of policy proposals to mitigate virus impact, from Tyler Cowen.

"The real pandemic danger is social collapse." Also, labour demand is undergoing a dramatic shift.

Joshua Gans explains production possibilities in a time of pandemic.

Rural areas which are popular for tourists are vulnerable now, other rural areas are likely to be more vulnerable later on.

"Longer-run economic consequences of pandemics"

"the lower the amount of medical infrastructure, the longer it takes to build immunity."

The Mercatus Center suggests a way forward.

Explaining the rationale for social insurance payments.

Many of us will be reexamining our present and near future projects in the months ahead.

"in lower-income countries the notion of employment through firms cannot be taken for granted"

Emergency reforms have provided a little additional supply side capacity.

Addressing the pandemic in four phases.

The recent shock goes beyond what stress tests are normally expected to gauge.

"How many jobs can be done at home?"

Some Considerations re Economic Stability

Already it is evident that pandemics don't provide easy answers, when it comes to maintaining economic stability. How to know, who or what could most benefit from assistance over extended periods? Appropriate fiscal policy is no easy feat, yet governments have few options to directly address workplace losses which have occurred practically overnight.

Granted, fiscal support for pressing healthcare needs will remain crucial in the immediate future. Access to testing and other vital services, will also play roles in the time it takes to regain normalcy. But while support for healthcare systems is paramount, some aspects of financial stabilization may not prove optimal in the months ahead.

Determining where financial stabilization could help most, is even more difficult in a time of growing budgetary pressures and extensive long term debt obligations. Hence two questions on many minds at state and local levels, basically come down to this: Which spending options are discretionary? Or, which spending is absolutely essentially for individuals, firms and organizations - regardless of what happens? It helps to recall that while fixed production costs are generally associated with private firms, individuals and families have relatively close equivalents, in many instances.

Washington has finally completed its deliberations for a massive stimulus package, yet this might only be the first. For example, James Pethokoukis expressed concern that the current round of fiscal stimulus may only address a months' worth of necessities.

Fiscal assistance for supply side losses is all the more challenging, since policy makers are tasked with taking the fixed costs of businesses and citizens alike, into consideration. Still, governments still have little choice but to pick favorites, with a fiscal policy approach. Even now, there are ways in which monetary policy functions more efficiently, to "get in the cracks" where fixed cost remedies can't be readily ascertained.

Nevertheless, monetary policy will face its own challenges, due to extensive supply side disruptions from millions of people staying at home. Given this reality, will central bankers remain willing, to preserve full monetary representation at present capacity? In particular, rising unemployment is going to be a real issue in coming months. A record 3.28 million workers filed for unemployment last week, and as the WSJ noted, "The long run of American job growth has ended." Gred Mankiw adds further perspective from data compiled on hourly employees. Already, "hours worked by hourly employees is down by more than 50 percent", and this is approximately 60% of the labour force.

Fortunately, there are improvements to unemployment claim processes in the stimulus package, which will provide additional access for small businesses and the self employed. With a little luck, once people start to return to their workplaces and the economy begins to improve, today's short term fiscal assistance can gradually transition to the broader stabilization methods of monetary policy.

Will monetary policy prove capable of restoring long term growth, once employment levels normalize? Hopefully, yes. Just the same, perhaps better methods are needed, which can take into account the non discretionary obligations which all citizens face, regardless of workplace participation levels. These non discretionary obligations are vital to general equilibrium dynamics, and the act of recognizing them, might better ensure that full monetary representation continues to take place. Non discretionary fixed costs in our daily lives, are an important focus of current fiscal policy. But hopefully, a broader range of non discretionary obligations will gain prominence in monetary policy, once fiscal remedies are no longer necessary.

Utilitarian Capitalism (Could Be) Anti-Fragile

How sturdy will our capitalist systems prove to be, in a time of international pandemic? More specifically, are our present day organizational structures more fragile than we previously imagined?

If only it were possible to address this crisis with more utilitarian options, additional fiscal stimulus might prove worthwhile. Instead, most current fiscal stimulus - other than provisions for pressing healthcare needs - will scarcely alleviate the financial burdens which emerge during the course of this pandemic. And unfortunately, too much of our non tradable sector capacity is structured in ways that are profoundly anti-utilitarian. A lot of fiscal stimulus is going to be lost to portions of the economy which are not basic to getting things done, in the days ahead.

In recent decades, much of our supply side capacity became focused on experiential and "quality product" markets. While these markets are valuable, all too often they leave few options for lower income citizens - as consumers - to meet life's basics first. For the most part, our non tradable sectors chose anti-utilitarian routes, in that they were largely designed to create the greatest good for the least number of participants. As governments come to the aid of these now (unexpectedly?) fragile systems, policy makers will find it difficult to meet the needs of their most vulnerable citizens. Unfortunately, the sum total of fiscal stimulus in the days ahead, will create additional debt burdens which still don't address overall economic stability or a safety net for lower income levels.

Eventually, people are likely to demand more basic and utilitarian systems than we presently have, for what are largely non discretionary needs. As Arnold Kling noted in a recent post, "Normal is not an option...Expect supply chains in the future to have a lot more redundancy and to be less driven by cost minimization." An important challenge, however, is to also preserve wealth and productive economic complexity as best we can. The sooner we bring a more utilitarian and flexible approach to our non tradable sector markets, the better.

Regular readers know how much I've praised tradable sector activity in general, since much of its dynamism stems from a uniquely utilitarian impulse. How so? Tradable sectors tend to create the greatest economic good for the greatest number, via product options which represent all income categories, not just those of the middle and upper classes. This is a profound utilitarian result which underlies the prosperity of the recent era we have mostly taken for granted.

But achieving such results in our domestic settings, would mean a refusal to arbitrarily limit supply side definitions in (mostly) non discretionary markets. Until non tradable sectors gain some room to breathe freely, our economic systems are going to become increasingly fragile. Alas, it has finally become evident that strict adherence to specific definitions of quality product, costs lives. At a White House conference earlier this week, Dr. Deborah Birx defended our late start in diagnostics testing for COVID-19, and in doing so she often repeated the need for "quality" product. I must have cringed every time she did so. While the quest to allow only "quality" product is understandable, unfortunately it has led to fragile and incomplete markets, especially in housing and the use of time centered knowledge and skill.

Only recall for example, how continuous calls for quality product eventually led to losses of healthcare provision in rural areas. David McCullough wrote in The Pioneers that when Dr. Samuel Hildreth settled in Marietta, Ohio (1808), the town had "about 180 dwelling houses, and nearly 1500 inhabitants". Yet Dr. Hildreth would be sharing his new practice with five other doctors who were already there!

In all of this, there are both physical and intellectual dimensions to the kinds of utilitarian markets which are urgently needed. Once we finally open the participation of applied knowledge to all citizens, we may also gain greater chances of surviving pandemics. Likewise, should we decide to build a full range of living options representative of all income levels, utilitarian capitalism could come to the rescue of both lives and financial systems. Granted, all such efforts will take time. But it is worth pursuing them now, to make a difference for personal and economic stability in the years to come.

A Kind of Isolation I Scarcely Expected

Presently, everything is in too much flux with the emerging pandemic, to make realistic calls on what may actually happen in the near future. At any rate, this post is mostly observations how it all feels right now. Believe me, I especially feel for those experiencing difficulties in their efforts to observe social distancing. Even though - at 65 - I've had ample time to adjust to relative social isolation, it can still be depressing at times. While there are plenty of ways to cope, it will take time before each individual can determine what works best for them.

Meanwhile online, a do something/anything impulse is going into hyperdrive. Despite the proposed fixes and "solutions" of various observers, much about the pandemic will doubtless remain outside of anyone's control. And even if outcomes could somehow be effectively managed, who would determine, what the most important societal priorities actually are? As Diane Coyle noted in a review of Dark Data, "sometimes the uncertainty is irreducible, as we are learning now." An old song comes to mind, "Que Sera Sera", whatever will be, will be.

Much of my grocery stockpiling took place a few weeks earlier, once I realized the early stage asymptomatic aspect of COVID-19 would likely lead to community spread. Fortunately where we are, I can still venture out for fresh grocery items. I finally bought a sturdy wagon which makes it possible to fill up water jugs when I'm out walking. That's a lot easier than having to rely on the old truck sitting in the garage, which is nearing the end of its useful life. I'm also surprised what a relief it is, to be able to bring the wagon inside the store, in part because no wiping down of grocery cart handles is necessary.

Even now, some public officials remain reluctant to discuss the asymptomatic nature of COVID-19 spread, despite its importance. I also found cause to question some of the public official complaints about hoarding. Granted, a few people are going out and buying too much toilet paper at one time. Nevertheless, plenty of grocery store hoarding is quite rational, given the fact no one knows how long it would be best to remain relatively isolated. Indeed, given the amount of conflicting information in the news, I appreciated this defense of toilet paper hoarders from Marketwatch. Too many warnings from the authorities are incomplete and often devoid of appropriate context.

Also, some of the usual arguments about price gouging don't readily apply, since current circumstance could go beyond the simple one off effects of hurricanes or natural disasters. Rather than raising prices on the most sought after items, grocery chains are generally more inclined to use such items as "loss leaders" to encourage other buying while the customer is in the store. It's only as more people have become aware of impending social distancing, that store shelves are temporarily emptying before they can be restocked the next day.

Hence time considerations are important for what we ultimately pay. By the time I finally decided to get extra bottled waters, so had everyone else. So now I'm more likely to pay full price for bottled water, as the less expensive loss leaders and their pricier substitutes are both flying off the shelves. As supply chains become further disrupted, some grocery stores might need to revert to basic offerings (less product variety) for a longer period of time than is generally necessary with one off interruptions.

Some of my own initial anxieties dissolved into relief, once people where I live began to realize the reality of the pandemic threat. Being in a relatively rural area, we didn't have the panic shopping which led to completely empty store shelves, such as more heavily populated areas have experienced. What gives me hope, however, is that earlier skepticism and denial appears to be giving way to a broader understanding that we are all in this together. Now that's a really good feeling, for if it can be preserved, it might just help us through many of the uncertainties which lie ahead.

Notes on Personal Reciprocity vs Social Reciprocity

Between keeping up with developments re COVID-19, and efforts to clarify my own perceptions in regard to reciprocity, I deleted more material in the last post than was actually kept. So today I'll try again, to explore relevant differences between (what could be considered) personal and social reciprocity.

Free markets are often described as voluntary forms of exchange. Even so, too many time based economic interactions, are not as spontaneous and voluntary as they could be. When it comes to other forms of product, prices can usually do a good job of representing and coordinating the voluntary actions of individuals and groups. It's when final product contains substantial time based and experiential components, that people face too many obstacles in what they might otherwise create or provide for one another. Money is a tremendous price and signal, but it could perform even better, if mutual time preferences could also function as prices, signals, and stores of economic value.

Many activities take place either through the personal reciprocity of individuals, or the social reciprocity of groups. While personal exchange allows individuals to negotiate for common purposes, social reciprocity seeks to build bridges and common "middle ground", as well. Since beginning this project, I've tended to focus more on personal reciprocity, than social reciprocity. However the reality is they are equally important, for they often need to function simultaneously in many social circumstance. Even as personal reciprocity creates starting points between individuals, it's the larger group context of social reciprocity which encourages a cohesive and constructive whole. In other words: When minds "think alike" in terms of aspirations and personal commitments, individual daily contributions in this context, are more likely to create circles of social sustainability.

Both social and personal reciprocity require understandable social patterns which are voluntary and not forced. People are far more likely to continue reaching out to other individuals, once it becomes obvious their efforts will generally not be in vain. What's more, societies and their institutions cannot expect immediate family members to assume too much personal reciprocity in the form of internal family roles. When this occurs, human capital potential is limited, as is also the potential of group interactions as a whole.

Plus, when individual family members have plenty of options in group settings for time based services provision, each family member stands a better chance of maintaining their personal autonomy and self respect. Indeed, family relationships tend to be more positive and supportive, so long as all family members have ample opportunity to benefit from the personal reciprocity and social reciprocity of group settings. We often observe this now in the services generation of high income communities, for instance. The more possibilities each individual holds for time arbitrage, the less the chance that everyday interactions will be of a forced nature.

How might we create reliable patterns for mutual reciprocity which are more voluntary in nature than present day institutions?  Skills arbitrage - for all its monetary value - has proven insufficient for the generation of services, knowledge, and personal autonomy which societies aspire to, particularly during times of economic uncertainty. Time arbitrage could ultimately tap into more sources of human capital, than skills arbitrage is capable of. Eventually, time arbitrage could lead to sustainable forms of services generation, which take place via common and easy to understand frameworks.

In order to function effectively, time arbitrage would include recognizable elements of both personal and social reciprocity. As to the latter, new communities could be established, where common interests could be pursued as a long term continuum for the maintenance and care of applied knowledge. Best, these new sources of human capital could rely on internal organizational patterns to generate new wealth. Indeed, one might dare hope, that when societies falter for any reason, such communities would serve as repositories of human potential, economic integration, and long term economic stability. In these settings, personal reciprocity could become the base which is strong enough for the larger goals of social reciprocity.

Mutual Reciprocity Could Alleviate Fragile Systems

One of the main issues many communities now face, is the fact that neighbors who live in close proximity to one another, lack reliable methods for mutual assistance on a regular basis. What were once common and spontaneous forms of social reciprocity, have gradually been supplanted by formal service roles. However, these more recent patterns of social and economic organization, feature "empty spots" which are exacerbated by unfortunate events such as the COVID-19 threat. Regular readers are familiar with my advocacy for time arbitrage. I remain convinced that a marketplace for time value, could help to fill empty areas where there are now few roadmaps for mutual reciprocity.

In the months ahead, attempts to control the spread of COVID-19 will doubtless add more burdens to healthcare and financial systems alike. Ultimately, societies are going to need more than centralized patterns of knowledge and skill, to bring productive agglomeration in services to areas where it is needed most. How might we build a stronger economic context, for time based services at local levels? After all, decentralized patterns for the use of applied knowledge and skill, could help restore personal autonomy to average citizens. Plus, local patterns for skilled services generation, would make it simpler for all individuals to assist one another, during all kinds of public emergencies.

Healthcare providers already struggle with the limited capacity of present day healthcare systems. The U.S. in particular, is ill prepared to fully respond to widespread health threats. For example, self quarantine might become an important strategy, since little additional hospital capacity exists if millions become seriously ill at once. It would not take much, for a pandemic to overwhelm what our present systems can realistically provide.

Another way to think about what is possible for local services coordination, is the integration of lifetime education with local strategies for applied knowledge. Only consider what could be gained, if local property taxes were redirected to support local educational efforts which augment the possibilities of informed mutual assistance. Fortunately, there are viable ways to create stronger knowledge use systems. Long term commitments to the time value of all citizens, would help address the systems fragility of our times.