For reasons I still don’t understand

Here’s Alex Tabarrok, reacting to news that Operation Warp Speed was more like Operation Warped Values:

In our discussions, we were talking about at least a $70 billion dollar program and optimally double that and we continually faced the sticker shock problem. Investing in unapproved vaccines seemed risky to many people despite the fact that the government was spending trillions on relief and our model showed that spending on vaccines easily paid for itself (the mother of multipliers!). I argued that this was the world’s easiest cost benefit calculation since Trillions>>Billions. But it was hard to motivate more spending—not just in the United States but anywhere in the world. For reasons I still don’t understand anything out of the ordinary–big spending on at-risk vaccines, spending on testing and tracing, challenge trials–was met with a kind of apathy and defeatism. As I said in July:

“Multiple people [in Congress] have told me that things move slowly, no one is stepping up to the plate, leadership is absent. “Who is John Galt?,” they sigh. Ok, they don’t literally say that, but that sigh of resignation is what it feels like in the United States today at the highest levels of government.”

(The entire post is excellent. Tyler’s post is also highly recommend.)

This all seems so familiar. During late 2008, I kept thinking that for reasons I still don’t understand, the Fed remains strangely passive in response to the Great Recession. Why haven’t rates been cut to zero? Why don’t they adopt level targeting, an idea that Bernanke had previously recommended for the Japanese? Why not a “whatever it takes” approach to QE? How about negative interest on reserves? There was this strange passivity that was completely incommensurate with the scale of the disaster.

In retrospect, I suspect the problem is that big bureaucracies cannot turn on a dime. The only way to make this work is to have the system in place before the disaster strikes. Average inflation targeting is a small but important step toward being more proactive. I hope the Fed doesn’t stop there; we’ll know much more 12 months from now. Indeed I suspect the next 12 months will determine whether Powell’s tenure will be a success or a failure.

PS. Should the Pfizer vaccine be given in one dose or two? Please answer the question from a utilitarian perspective.



21 Responses to “For reasons I still don’t understand”

  1. Gravatar of Carl Carl
    8. December 2020 at 11:12

    If the numbers I’ve read are right, you get 50% immunity with one dose and 95% with two. That would mean you’re getting close to the same number of people with immunity either way, but the two dose method gives you certainty about who is immune. That certainty would augment the efficacy both in reducing severe problems and reducing spread by allowing you to target vulnerable individuals and superspreaders with precision.

  2. Gravatar of ssumner ssumner
    8. December 2020 at 11:15

    Carl, I read that you get 89.9% immunity with one dose.

  3. Gravatar of copans copans
    8. December 2020 at 11:38

    Let us assume that 2 doses gives immunity almost 95% of the time. I think anything over 80% effectiveness for stopping at one dose is the inflection point. If we were purely rational creatures, that number would be more like 66%, but we have to worry about the reputation of vaccinations and I am not sure how I would feel if I only had 2/3 a chance of being protected. I could see a lot of people balking at only 50% when other options will be forthcoming.

    But at 89%, being able to double the numbers covered (assuming the dosage is the same), seems like a no-brainer. Right?


  4. Gravatar of bill bill
    8. December 2020 at 12:05

    One dose. For now. You can always give a second dose in 5 or 10 months after everyone has gotten a first dose. Am I missing something?

  5. Gravatar of ChrisA ChrisA
    8. December 2020 at 12:21

    Would it not be better to avoid entirely the need for massive bureaucracy on decisions like whether to take a vaccine or not? I can understand that there needs to be an independent review of medical claims but people should be allowed to independently make a decision themselves without waiting on any conclusions if they so decide.

  6. Gravatar of ssumner ssumner
    8. December 2020 at 12:24

    ChrisA, Agreed.

  7. Gravatar of Gene Frenkle Gene Frenkle
    8. December 2020 at 12:53

    In 2008 the Fed was “strangely passive” because they didn’t understand what was undermining the economy…so because they didn’t know what was broken they couldn’t fix it. Considering Bernanke floated the GSG theory in 2005 he had a vague idea of what the problem was but he must have known his theory wasn’t 100% correct. I know what caused the Housing Bubble/Financial Meltdown…and I know why America was able to eventually fix what caused the dysfunctional 2001-2009 economy.

  8. Gravatar of Carl Carl
    8. December 2020 at 13:04

    Given those numbers, the one dose regimen seems like a no-brainer.

  9. Gravatar of Thomas Hutcheson Thomas Hutcheson
    8. December 2020 at 14:12

    But this just begs the question(s).

    Why wasn’t the Fed using some combination of price level targeting and employment targeting before 2008? Congress never told the Fed to worry about interest rates; it told the Fed to seek stable prices and maximum employment?

    Why did the CDC not have massive testing of asymptomatic people in the arm of the plan in which people are infectious before they show symptoms?

    Why does unemployment insurance not provide a hefty percent of compensation (including health insurance) lost whenever a person becomes — unemployed?

    Why do we not transfer funds to states and local governments to make up for declines in tax revenues when recessions reduce tax revenues?

  10. Gravatar of Garrett Garrett
    8. December 2020 at 15:02

    My understanding is that “90% effectiveness” means something like “100 out of 1000 people in the control group got covid while 10 out of 1000 people in the treatment group did”. So 95% vs 90% is 5/1000 vs 10/1000.

    It seems pretty obvious then that doubling the number of people who can get it is worth more on a utilitarian basis than increasing the effectiveness 5%.

  11. Gravatar of Benjamin Cole Benjamin Cole
    8. December 2020 at 15:49

    One dose. One thing the experts always said, which seems to be true, is that “if R is less than 1 then you have no epidemic.”

    I will read your 55-page Mercatus paper on interest rates (although I already agree with it). I also read your excellent paper, co-authored with Kevin Erdmann, on housing.

    Maybe I can be returned from exile.

  12. Gravatar of Russ Abbott Russ Abbott
    8. December 2020 at 16:27

    As I understand it, we don’t know how long one-dose immunity lasts. We also don’t know whether a delayed second dose is as good as an on-schedule second dose. We need lots more information before a true utilitarian answer can be given.

  13. Gravatar of foosion foosion
    8. December 2020 at 16:51

    ChrisA, the vaccine will be in short supply for months and allocating by price is not acceptable politically. Letting people decide does not fit neatly in light of those constraints, does it?

    Given all that, how do you suggest allocating doses?

  14. Gravatar of aram aram
    8. December 2020 at 16:54

    If we are going to allocate by price then can we start genetically sequencing viruses, reconstructing infection trees, and allowing lawsuits so that people internalize the externality of getting other people sick?

  15. Gravatar of Cartesian Theatics Cartesian Theatics
    8. December 2020 at 17:34

    Relatedly, I’d like to see a market analysis of why there wasn’t previously investment in manufacturing and distribution capacity, given that many were confident that a major virus was eminent. Was there some hold back? What incentives need to be in place to ensure there’s a market for protection against catastrophic downside?

    PS. Not that I’m an expert obviously, but I’ve been saying for many months we have the ability to design vaccines in hours, so so we should not be remotely satisfied with the outcome we’ve had. I sure hope the world can somehow learn the right lesson here.

  16. Gravatar of aram aram
    8. December 2020 at 19:23

    @Cartesian, there is a lot of theory and empirical evidence that the positive externalities of vaccines mean underproduction. This led to the idea of advance market commitments, which informed OWS. Here is an early paper on the topic.

  17. Gravatar of Cartesian Theatics Cartesian Theatics
    8. December 2020 at 22:33

    @aram, very interesting, thanks.

    Off topic, for those who aren’t yet black pilled on this whole thing…

  18. Gravatar of Todd Ramsey Todd Ramsey
    9. December 2020 at 07:01

    Powell’s tenure is already a success. In March the Fed acted boldly, in unprecedented scale. And it worked.

  19. Gravatar of J Mann J Mann
    9. December 2020 at 07:49

    This question of why can’t people react to emergencies is one that has interested me for a long time. It really seems like we’re constrained into limited choices.

    1) In the case of the pandemic, lots of countries were OK with shuttering their economies for weeks at a time, and some countries were OK limiting health care privacy and travel rights.

    The question is, given the prospect of either avoiding some of the economic shock, or saving lives, why didn’t any country allow voluntary challenge studies, some deliberate infection studies on how the virus spreads, or even controlled variolation?

    2) Global warming is similar — given that it is widely believed that (a) there is a substantial risk of catastrophic climate change and (b) realistic carbon limitation will only reduce that risk slightly, you would think that some countries would be looking into more drastic actions like global climate engineering through space mirrors or giant fog clouds or something.

    But for some reason, clamping down on the economy is a realistic choice for both, but loosening restrictions on voluntary studies or geoengineering are seen as beyond the pale. It’s interesting.

  20. Gravatar of ssumner ssumner
    9. December 2020 at 11:07

    J Mann, Good example.

  21. Gravatar of Cartesian Theatrics Cartesian Theatrics
    9. December 2020 at 12:21

    Jay Mann, don’t you know climate change is ushering in a new pandemic era?

    “Fauci and Morens point out, one of the main drivers is the climate crisis, which is shaking up the natural world and rewriting disease algorithms on the planet.”

    Can’t make this stuff up.

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