Most of the countries in East Asia have very low rates of Covid relative to the West. (BTW, That’s also true of Australia and NZ.) Some people have suggested that there is some sort of natural immunity in East Asia, and that the low Covid rates do not reflect differences in behavior.

I wouldn’t entirely rule out that hypothesis, but unless I’m missing something this seems to suggest that behavior is a factor, especially mask wearing:

Japan has suffered just 18 deaths per million people, a higher rate than in China, but by far the lowest in the g7, a club of big, industrialised democracies. (Germany comes in second, at 239.) Most strikingly, Japan has achieved this success without strict lockdowns or mass testing—the main weapons in the battle against covid-19 elsewhere. . . .

As early as March, Japanese officials began warning citizens to avoid the san-mitsu or “3cs”: closed spaces, crowded places and close-contact settings. The phrase was blasted across traditional and social media. Surveys conducted in the spring found that a big majority were avoiding 3c settings. . . .

While Americans argued over whether face coverings were an assault on personal freedom, Japanese lined up outside Uniqlo for the release of its new line of masks. During the first ten weeks of flu season this autumn, Japan saw just 148 cases of common influenza, or less than 1% of the five-year average for the same period (17,000).

Japan does have much less obesity, but it’s also a society with more elderly people than the West. Thus demographics alone cannot explain such an enormous difference in fatality rates.

But it’s the flu data that really caught my eye. Suppose there were some sort of natural immunity to Covid in Japan, how would that explain the extremely low levels of flu? Doesn’t it seem more likely that behavioral changes in Japan have reduced the flu season to only 1% of the usual level?

On the other hand, the flu is less contagious than Covid and flu rates are down sharply even in countries with high Covid rates. Thus it seems like a level of social distancing that is insufficient to stop Covid often is sufficient to stop a flu outbreak.

Another piece of evidence that behavior is important comes from the fact that Wuhan was hammered by Covid and the rest of China got off quite lightly.

To conclude, we know that social distancing stops the flu. The question remains as to whether it can stop Covid.

PS. Don’t miss the Christmas star (Jupiter/Saturn conjunction) tonight—the best in 800 years—even last night it looked very impressive. SW sky—an hour after sunset.

Update: This caught my eye:

True to form, on Friday a pro-Trump lawyer named L. Lin Wood, who spearheaded attempts to overturn Georgia’s president election results, lodged a new suit on similar lines, signing off his complaint that it he made his claims under “plenty of perjury,” rather penalty of perjury.

“I declare and verify under plenty of perjury that the facts contained in the foregoing Verified Complaint for Declaratory and Injunctive Relief are true and correct,” Mr Wood, an accomplished libel attorney with a large conservative following online, wrote in his complaint.

For once I agree; Mr. Wood engaged in plenty of perjury.

Update: On second thought, perhaps I better make it clear that I’m just joking here.

The mainstream news media, including the NYT, WSJ, WaPo, etc., frequently print stories that are highly critical of particular corporations, often accusing them of things like misleading advertising. (Think about tobacco companies, or drug companies that produce opioids.)

Yes, they could be sued for libel, but they continue to print these stories because they believe the stories are true.

Other news organizations like Fox News put out stories that they know are a pack of lies. They do so because that’s what their viewers want to see. They want to see their nutty conspiracy theories confirmed by their favorite news pundits.

Yes, they can be sued for libel. But Fox News knows that it has the option of having its news people do a groveling apology, where they admit that they were lying, if the company objects to the story.

Fox Business host Lou Dobbs aired a segment on Friday that amounted to a fact-checking refutation of claims that he and guests have made about an election tech company Smartmatic and its role in the 2020 presidential election, after the company threatened legal action.

Other similar segments will be shown on Justice with Judge Jeanine on Saturday and Sunday Morning Futures with Maria Bartiromo, a Fox News spokesperson said. Lisa Boothe will host Judge Jeanine, as Jeanine Pirro is off for the holidays

Earlier this week, Smartmatic announced that it had threatened legal action against Fox News, Newsmax and One America News Network “for publishing false and defamatory statements,” after talking heads on the outlets have pushed claims of election fraud, including unfounded conspiracy theories of rigged voting machine companies.

Love it!!

This reminds me of the Trump legal team. Trump’s associates make wild voter fraud charges when speaking to the public. (“Baseless” in media-speak.) But when speaking to a judge, his legal team claims to have no such evidence. They are afraid of the consequences of lying in court.

PS. I hate to say “I told you so”, but haven’t I been warning that Russia is the biggest foreign policy threat? Despite Trump’s pathetic attempt to implicate China, it was probably Russia that launched the recent cyberattack on the US government.

PPS. Actually, I love to say “I told you so.”

Best: Get rid of Mr., Mrs., Miss, Ms, Dr., etc. Just call people by their names.

2nd Best: Get rid of Dr. The honorific make society even more unequal.

3rd best: Apply Dr. only to people with Doctorates that did not become medical doctors. They make less than MDs and thus giving them this honor boost equality among those with PhDs.

4th best: Apply Dr. to all people with PhDs.

Worst: Apply Dr. only to physicians.

Of course we choose the worst option in America.

What’s wrong with this country?

PS. On the other hand, at least we are not Great Britain (Lord this, Sir that). And that abomination “Her Majesty”? How can anyone say something like that without laughing?

Better late than never:

Sweden announced its toughest measures yet against coronavirus, including its first recommendation to use face masks, as its death toll continued to increase.

Prime minister Stefan Lofven announced on Friday evening a range of new restrictions from Christmas Eve, including a recommendation to wear face masks on public transport in rush hour. He also said that higher secondary schools and many municipal services would be closed for a month, while entrance to shops, shopping centres and gyms would be restricted.

“This year, Christmas has to be different. The situation is still serious . . . The situation in hospitals is very strained,” Mr Lofven told a press conference.

And this reminded me of certain pollyannish commenters.

Sweden was caught unaware by the strength of the second wave after state epidemiologist Anders Tegnell repeatedly said in spring and summer that it would be spared compared with neighbours such as Finland and Norway.

Remember “herd immunity”?

PS. And speaking of masks.

In five easy steps:

Step one: Suppose Robinson Crusoe spends 30% of his time building or expanding his home, and 70% of the time catching fish and collecting fruit. There’s no money in his island economy, but you could say that in terms of hours worked, GDP is 70% consumption and 30% investment. Then Crusoe injures his arm, and his productivity falls by 10%. Call this a “real business cycle”. Economic theory predicts that Crusoe will engage in “consumption smoothing”. Most of the decline in output will show up in less investment, with very little change in consumption. He’ll keep eating, but postpone the expansion of his hut.

Step two: All business cycles predict that investment will be unusually procyclical, much more than consumption. But some models also suggest that investment shocks cause business cycles. Keynesians worry that a drop in animal spirits might depress investment, and this would reduce AD via the multiplier effect. Austrians worry that an excessive burst in investment might lead to malinvestment, and the resulting hangover could lead to a recession.

I believe those theories are misleading. Most modern recessions (except this one) are caused by unstable monetary policy (i.e. unstable NGDP.) Investment is highly procyclical, but that would certainly be true even if investment played no causal role in the recession, as in the deserted island example.

Step three: When people like Keynes and Hayek developed their business cycle theories, however, investment shocks really did cause business cycles. That’s because most developed countries used to be on some form of the gold standard. When the nominal price of gold is stabilized by monetary policy, i.e. when gold is the medium of account, then an increase in demand for gold is deflationary. It also reduces NGDP.

Barsky and Summers showed that falling nominal interest rates increase the demand for gold, which is why nominal interest rates were positively correlated with the price level under the gold standard. A negative investment shock would reduce real interest rates. Because expected inflation was near zero under the gold standard, this led to lower nominal interest rates. Lower nominal rates increased the demand for gold, which is deflationary under a gold standard.

Thus under a gold standard, negative investment shocks really could cause recessions, just as Keynes postulated. But not for the reason he assumed. Just as fish don’t notice that they are wet, Keynes never understood the way his worldview was shaped by the lack of fiat money policy regimes. In the rare cases where fiat money was used (say Germany in the early 1920s), Keynes temporarily became a monetarist.

Step four: Once we shifted to fiat money, investment shocks should no longer have led to business cycles. Monetary policy should be adjusted to offset any change in the equilibrium interest rate resulting from an investment shock, and thus maintain steady NGDP growth. But the Fed tends to be a bit behind the curve when there is a sudden change in the natural rate of interest, so investment shocks still do matter.

In the early 2000s, the Fed did an OK (but not perfect) job responding to the fall in the natural rate of interest after the bursting of a business investment boom. Unemployment peaked at 6.3% in the mild recession that followed the tech boom. That’s much better than the way they responded to the end of the investment boom of 1929!

In contrast, the Fed was far behind the curve in responding to the fall in the natural rate of interest after the bursting of a residential investment boom in 2007-08. This error was partly caused by the Fed freaking out over high headline inflation when oil prices soared in 2007-08.

Step five: So people keep thinking that investment plays a causal role in the business cycle, even though the actual problem is that the investment shocks cause the Fed to inadvertently tighten monetary policy. A successful monetary regime would cause people to no longer see investment shocks as the cause of business cycles. If you favor classical economics, you should root for a successful monetary policy, as this sort of policy regime causes people to see the economy in classical terms.

The best way of persuading people that investment shocks don’t cause business cycles is to adopt NGDP level targeting, and have NGDP futures “guardrails” guiding policy. The ideal monetary policy is one where the market always expects 4%/year NGDP growth over the next year (or two during a pandemic.) If the markets always expect 4% NGDP growth, then people won’t worry about investment shocks causing recessions.

Robinson Crusoe understood that the decline in his housing investment didn’t cause the fall in GDP. Rather his injured arm caused the “recession”, and he decided to smooth consumption during the downturn. A good monetary policy will make us all as smart as Robinson Crusoe. It will make the economy more “classical”. Less investment just means more consumption.