Archive for December 2021


Random thoughts

1. For Christmas, we have a truly heartwarming story of entrepreneurial success from the WSJ:

TikTok really was everywhere this year.

The app, known for its silly dancing videos, was the world’s most visited site on the internet in 2021, surpassing last year’s leader, Alphabet Inc. GOOG 0.13% ’s Google, according to Cloudflare Inc., NET 0.34% a cloud-infrastructure company that tracks internet traffic.

The app, owned by Beijing-based ByteDance Ltd., has had a rapid rise, hooking people with its secretive algorithm, which delivers video clips that it thinks you would like. It has turned dancing influencers Addison Rae and Charli D’Amelio into household names, getting cast in TV shows, commercials and movies.

I seem to recall that about 18 months ago the media was full of stories that Tiktok and WeChat were a threat to American national security. (As you may recall I was skeptical of those claims.) Trump promised to protect us with a ban, or at least force a sale. And yet here they are 18 months later, bigger than ever. So why don’t we see more news stories about how Tiktok is hurting American national security? Where are the exposés?

The only “dark side” mentioned by the WSJ has nothing to do with national security:

Like other social-media sites, TikTok has its dark side. The video-sharing app’s algorithms can drive minors to videos about sex, drugs and eating disorders, investigations by The Wall Street Journal have found.

2. Because our medical ethicists opposed challenge studies, it took far longer than necessary to test the Covid vaccine. Thousands died. Because a bunch of medical experts discouraged Pfizer from filing with the FDA as soon as it was apparent that the vaccine was highly effective, the filing was delayed. Thousands died. Because the FDA took weeks to consider the application, despite the fact that the evidence was overwhelming, another delay took place. Thousands died. Because a bunch of demagogues peddled phony conspiracy theories that the vaccine was risky or less than highly effective, vaccination rates remained disappointingly low. Thousands died.

3. The Washington Post has a story headlined:

While omicron explodes around the world, covid cases in Japan keep plummeting and no one knows exactly why

Right under the headline is a photo of a crowded street in Tokyo, where everyone is wearing a mask. Further down in the story is a photo of London, where almost no one is wearing a mask. Hmmm.

The WaPo story actually discusses two issues. One issue is why Japan has a low rate of Covid transmission at the moment, a fact that is largely unrelated to masks. But the article also discusses the issue of why East Asian countries like Japan and South Korea have had low rates of Covid throughout the pandemic, an issue which clearly does relate to mask wearing. (Although In South Korea testing is also a factor.)

4. It’s even worse than we thought:

In Cape Girardeau County, the coroner hasn’t pronounced a single person dead of COVID-19 in 2021. 

Wavis Jordan, a Republican who was elected last year to serve as coroner of the 80,000-person county, says his office “doesn’t do COVID deaths.” He does not investigate deaths himself, and requires families to provide proof of a positive COVID-19 test before including it on a death certificate.

Meanwhile, deaths at home attributed to conditions with symptoms that look a lot like COVID-19 — heart attacks, Alzheimer’s and chronic obstructive pulmonary disease — increased.

“When it comes to COVID, we don’t do a test,” Jordan said, “so we don’t know if someone has COVID or not.”

Nationwide, nearly 1 million more Americans have died in 2020 and 2021 than in normal, pre-pandemic years, but about 800,000 deaths have been officially attributed to COVID-19, according to Centers for Disease Control and Prevention data

A majority of those additional 195,000 deaths are unidentified COVID-19 cases, public health experts have long suggested, pointing to the unusual increase in deaths from natural causes. 

And where are most of these unreported deaths? Do you even have to ask?

These trends are clear in small cities and rural areas with less access to healthcare and fewer physicians. They’re especially pronounced in rural areas of the South and Western United States, areas that heavily voted for former President Donald Trump in the 2020 presidential election. 

5. People sometimes tell me they don’t get why Scott Alexander is regarded as such an impressive blogger. Here he discusses why some doctors might be reluctant to prescribe fluvoxamine:

I could blog for 20 years and never write a paragraph that amusing.

6. I frequently use the term “Puritan” to describe recent cultural trends in the West, but Ed West suggests that a better analogy is the transition from the Regency era to the Victorian:

Ironically, just as those pushing for empire were the forebears of today’s sanctimonious decolonialists, Victorian moral campaigns against homosexuals were led by moralising Nonconformists, forerunners to today’s progressive campaigners. Acts such as the Criminal Law Amendment Act outlawing ‘any act of gross indecency with another male person’ were put forward by radical MPs, not by Tories. Quaker families who were involved in those early campaigns against sexual impropriety today often bankroll the moral campaigns against racism. The same urge to improve the world drives them, the same sanctimony. . . .

By 1842, Flashman laments that ‘respectability was the thing: breeches were out and trousers came in; bosoms were being covered and eyes modestly lowered; politics was becoming sober… the odour of sanctity was replacing the happy reek of brandy, the age of the dandy was giving way to that of the prig, the preacher to the bore’.

Those Regency men raised in the 20th century must feel the same way about this new age, even if it is a better world in most ways. The new Victorians may preach about different sins, but the sanctimony is the same.

Read the whole thing.

And Merry Christmas everyone!

(But then if you were the sort of person who celebrated Christmas, you wouldn’t be reading my bad blog today.)

Influencing the zeitgeist with a long and variable lag

Jay Powell was asked about long and variable lags in monetary policy, and his answer caught my eye:

You know, the question of long and variable lags is an interesting one. That’s Milton Friedman’s famous statement. And I do think that in this world where everything is — or the global financial connect
— markets are connected together, financial conditions can change very quickly. And my own sense is that they get into — financial conditions affect the economy fairly rapidly, longer than the traditional thought of, you know, a year or 18 months. Shorter than that, rather. But in addition, when we communicate about what we’re going to do, the markets move immediately to that. So, financial conditions are changing to reflect, you know, the forecasts that we made and — basically, which was, I think, fairly in line with what markets were expecting. But financial conditions don’t wait to change until things actually happen. They change on the expectation of things happening. So, I don’t think it’s a question of having to wait.

Matt Yglesias made the following comments, just five days prior to the Powell press conference:

But one problem with this view is that empirically when the Fed cuts its target interest raise or announces some new QE, bond yields sometimes go up rather than down.

One way to deal with this is to invoke Milton Friedman’s idea that monetary policy operates with “long and variable lags,” so you shouldn’t expect any immediate operation of the hydraulic mechanism. The long part could make sense, but long and variable suggests a flight away from inquiry and toward a kind of superstition. “Long and variable” means there is no empirical test of whether or not the mechanism is working. It takes time to operate, and there’s no way of knowing in advance how much time.

And I think it ultimately makes more sense to think of the whole thing as mostly a conjuring trick. A QE announcement can make rates go up because it is creating expectations of faster nominal growth in the future.

The really important thing, though, is that the bond market is not the only financial market. If traders all raise their expectations of nominal growth, the price of commodities and of stock shares will also rise. This generates wealth effects that can fuel spending. It also directly encourages investment in producing commodities and indirectly encourages investment in startups and tangible business equipment.

Now there are lags here, but they are lags in the sense that financial investments (the price of copper going up) happen faster than physical investments (because copper is more expensive now, the copper mines increase production). But the proximate mechanism is essentially instantaneous. If your goal in an inflationary environment is to reduce expectations of future nominal growth, then you can tell more or less immediately whether or not that happened by looking at financial markets. And critically, while doing things can and does influence expectations, so does talking about doing things.

I like that “superstition” remark. The final paragraph echoes the “no wait and see” point I used to make about policy initiatives.

PS. I hope Yglesias will forgive me if this unusually long quotation violates copyright rules, but I’m actually trying to send business his way. Powell already seems to be a subscriber.

PPS. When Abe took office at the beginning of 2013, Japan switched to easier money and tighter fiscal policy. A similar shift took place in the US at about the same time. NGDP growth sped up in both countries, clearly signaling that monetary policy is more powerful than fiscal policy. But The Economist has a new article out claiming that the lesson of the 2010s is that fiscal policy is more powerful than monetary policy.

Sometimes I feel like I’m just beating my head against the wall.

What it means to “tax the rich”

I have often advocated a progressive consumption tax. If you try to “tax the rich” without reducing their consumption, then you aren’t actually taxing the rich. Who are you taxing in that case? Perhaps you are reducing the amount that the rich put into investment projects. Or maybe you are reducing the amount that the rich donate to charity. But if you are not reducing the consumption of the rich, then it’s hard to see how you are freeing up resources that can be used to help the non-rich.

In a recent post, Matt Yglesias did a nice job of explaining how public policy is ultimately not about moving money around, it’s about shifting resources from one use to another:

I do see the view, from a standpoint of abstract cosmic justice, that it’s annoying to see someone like Elon Musk or Jeff Bezos get so rich without contributing more to the Treasury. So there is a case for taxing wealth or unrealized capital gains or at a minimum changing the stepped-up basis rule. But fundamentally, I do think there are profound reasons why things like VAT and payroll taxes are the workhorses of European welfare states. Musk is not employing 10,000 butlers who can be taxed away and turned into preschool teachers. Inducing him to liquidate financial assets and fork over the proceeds does not generate any real resources that are available for new use. What a Nordic-style tax system does is broadly constrain consumption in order to free up resources for more extensive consumption of health, education, and other social goods.

Unfortunately, it’s politically difficult to tax the consumption of the rich because Republicans don’t like taxes at all and Democrats don’t like taxes that cost jobs in industries that make luxury goods for the rich, such as yacht building.

Yglesias’s post is entitled “The case against ‘creating jobs'”, and is well worth reading.

A disappointing Fed inflation forecast

Forecasts are generally judged on the basis of their accuracy. But when it comes to Fed forecasts of inflation, another criterion is appropriate; is the forecast consistent with the Fed’s announced policy goal?

The Fed’s new long run forecasts for PCE inflation have been raised significantly since the previous set of forecasts, three months earlier. That’s not how a sound central bank operates. You don’t raise the inflation forecast, you adjust policy so that the average inflation rate over the 2020s remains at 2%. Here’s the data (and change from previous forecast):

2020: 1.3%

2021: 5.3% (+1.1%)

2022: 2.6% (+0.4%)

2023 2.2% (+0.1%)

2024: 2.1% (unch.)

2025-29: 2.0% (unch.)

So the Fed has raised its average inflation forecast for the 2020 from 2.2% to 2.36%. Why?

Yes, the Fed has a dual mandate, and thus a bit of leeway to adjust inflation. But nothing in the labor market has changed over the past three months that would justify a higher average inflation rate for the 2020s. Even worse, I suspect that inflation will end up being even higher than the Fed is currently forecasting. This is a very disappointing forecast.

Even if inflation comes in right at 2.36% for the 2020s, that outcome will not be consistent with the Fed’s announced 2% FAIT regime. If you are going to set a target, then why not try to hit the target? Why forecast failure?

PS. A few months ago the Fed thought 2.2% met the dual mandate. In that case, I wish that today the Fed had adopted a policy predicted to lead to PCE inflation of:

2020: 1.3%

2021: 5.3% (+1.1%)

2022: 2.4% (+0.2%)

2023 2.0% (-0.1%)

2024: 1.9% (-0.2%)

2025-29: 1.8% (-0.2%)

That would have left their inflation forecast for the 2020s unchanged at 2.2%, despite the recent surge in prices.

Yes, 2.36% is not a disaster; we’ve seen worse (the 1960s, 1970s, 1980s, 2010s, etc.) But why settle for anything short of optimal?

PS. Yes, inflation is a bad indicator. But NGDP growth in 2022 is also likely to be excessive.

The Chinese Covid cover-up

Just about everyone (including me) believes the Chinese government covers up embarrassing information. But what sort of information?

The New Republic has an article severely critical of a new book suggesting that Covid escaped from a lab in Wuhan:

A series of recent discoveries, however, has undermined Viral’scentral themes: Newly discovered wild bat viruses from Laos have proven not only more genetically similar to the Covid-19 virus than any previously known to science, including the Wuhan Institute of Virology’s RaTG13 sequence, but also directly infectious to humans via the same mechanisms that the Covid-19 virus uses to infect human cells. These findings make Viral’s breathless speculation about the Mojiang mine and the origins of RaTG13 completely obsolete. This discovery also suggests that whatever “preadaptation” was needed to make Covid-19 infectious to humans could have happened in the wild over many years of natural selection. The Laos bat preprint was published in mid-September, by which time it may have been too late to address it in the book.

The article also explains why it’s so difficult to resolve these theories—the whack-a-mole problem:

The through line in all of these possible scenarios is that there is no through line. There’s no overarching coherent narrative about when or how this “lab leak” happened. And in making that clear, Viral also shows why the very weakness of the lab leak case is also its greatest strength: The great part about suspicions—from a conspiracy theorist’s perspective—is that they don’t have to gel into any coherent theory. You can just have a bad feeling that becomes someone else’s job to resolve for you.

This is why the lab leak theory will never die, no matter how much evidence virologists are patiently accumulating on the side of natural origin. It’s all about suspicion and innuendo. And when one supposedly suspicious event is unpacked, it’s usually a long and boring explanation nobody wants to hear. Meanwhile, the theorists have already found 10 more things that seem spooky to them. Conspiracy theories, we’re learning, are even harder to eradicate than infectious diseases.

Meanwhile The Atlantic has a somewhat more even-handed article comparing the lab leak and animal market hypotheses:

The mere existence of these two opposing arguments doesn’t make them equal. One coincidence may seem bigger than the other, and thus more likely to reflect the true origins of COVID-19. I tend to think that the market theory has a bit more heft, based on what we know right now—but what we know right now remains limited to disclosures by Chinese authorities. This much is clear: Both circumstantial cases, for a laboratory origin and for a market spillover, have been made in the absence of crucial evidence that might very well exist.

In my view, there is far more evidence of a Chinese government cover-up of the animal market than a lab leak. Some people make a big deal about a WIV data set being taken offline on September 12, 2019, but that’s far too early to be plausibly part of a Covid cover-up. Meanwhile, there’s lots of evidence that the Chinese government destroyed evidence pointing to the animal market.

The National Review has a piece quoting from CNN medical correspondent Dr. Sanjay Gupta’s recent book, World War C. Here’s Gupta:

Gao did not even know that there had been an outbreak of respiratory illness in the Wuhan Institute of Virology back in the fall of 2019. (The antibody testing of those lab workers did not reveal coronavirus exposure, but those lab results were not independently confirmed.) Three researchers from the lab got sick enough to seek hospital care. This was weeks before Beijing later said its first confirmed case was a man who fell ill on December 8.

In November 2019, Wuhan was in the midst of a major flu outbreak. And unlike in the US, it’s normal for people in China to go to the hospital when sick, in order to get an excuse to present to their employer. So that evidence means nothing.

Had Redfield been able to better assist his friend with twenty or thirty people on the ground in those first few weeks in January, he thinks the pandemic’s plotline would have changed.

Really? How would it have changed?

There was other evidence the Chinese knew and were not telling. Toward the end of January, as we wall watched the Chinese hastily build two massive coronavirus hospitals in just over a week, people like Redfield and Fauci thought, Wait a minute. Why are building hospitals overnight if you’re not that worried?

I’m confused. By late January the Chinese had announced that the virus could be transmitted between humans. I was hiking in New Zealand at the time, but even I was aware enough about Covid to attempt to buy a mask in a NZ drug store in late January (they were sold out.) If I knew this, why weren’t American authorities preparing for a pandemic?

By late January, the Chinese had banned travel to and from Wuhan. The disease was rapidly spreading through Wuhan. Why shouldn’t they have built temporary hospitals? I don’t get it–what makes Dr. Gupta suggest the Chinese were claiming that there was no reason to worry?

The National Review article itself is even worse:

We also know that the Chinese government as a whole kept putting out false information — otherwise known as lies — about the contagiousness of the virus for at least three weeks, and perhaps as long as six weeks.

Actually, we don’t know that.

The U.S. is sitting on a giant mountain of evidence that we are in year three of a pandemic that has killed more than 5.3 million people around the world, with more than 271 million known diagnosed cases, because of the actions of the Chinese government.

This is a strange charge. It’s true that the Wuhan local government did not move aggressively enough at the beginning of the outbreak, worried about tourism. What else is new? But at that time no one knew how bad it would become. It’s likely that local officials thought it would be no worse that the 2003 SARS outbreak. The governments of the US and various European countries have no such excuse. In February, we sat around twiddling our thumbs while Covid ravaged Wuhan, acting like it would never come here. Chinatown parades in NYC. Mardi Gras in New Orleans. We were acting out a real life version of Poe’s Masque of the Red Death.

The National Review wants us to believe that it’s all China’s fault, and use that information to whip up nationalistic hysteria in favor of a new cold war with China (which would hurt both countries.)

We’re in this mess because of the Chinese government’s decisions and actions. And for some odd reason, the Biden administration doesn’t want to dwell on that — even though that would seem to be a powerful and galvanizing argument for those seeking to isolate the Chinese regime.

Last year, I argued that the Chinese government was somewhat incompetent in the way they handled the initial outbreak. But once I saw our own response, I recalibrated what it means for a government to be incompetent. Remember when Trump said we shouldn’t test so much because it makes the situation look bad?

I don’t approve of the repressive tactics of the CCP, but if controlling Covid is the National Review’s criterion, then consider the following:

China: 4636 Covid deaths (fewer than Slovenia)

USA: 822,076 Covid deaths, and counting

And China had no advance warning!

China has had zero Covid deaths in the past 10 months. If the rest of the world had taken Covid as seriously as China, then the virus would have been eradicated from the face of the Earth by the summer of 2020. The only reason China still faces any Covid threat is because other countries did not contain it, and it occasionally leaks back into China.

I’m happy to accept a million Covid deaths in America as the price we pay for freedom. I don’t want to live in a country controlled by the CCP. China’s been too restrictive. But let’s not pretend this global crisis is caused by Chinese government incompetence. That lets Western governments off the hook far too easily. The virus escaped from China before the Chinese leadership understood the severity of the problem (which was roughly when they imposed the travel ban on Wuhan), and once it got out the Western world did almost nothing to contain it for many weeks.

PS. For those who still believe in the lab leak hypothesis, check out this podcast.