Professor of Political Science, and Director of the PPE Certificate Program. His primary research focus is on the functioning of markets, regulation, and government institutions. He has taught at Dartmouth College, University of Texas, and University of North Carolina (where he was Director of the Master of Public Administration Program), as well as working as a staff economist at the Federal Trade Commission during the Reagan Administration. He is a past President of the Public Choice Society, an international academic society of political scientists and economists with members in 16 countries. He was North American Editor of the journal Public Choice for five years, and is now a Co-Editor of The Independent Review.<\/p>\n","protected":false},"excerpt":{"rendered":"Professor of Political Science, and Director of the PPE Certificate Program. His primary research focus is on the functioning of markets, regulation, and government institutions. He has taught at Dartmouth College, University of Texas, and University of North Carolina (where he was Director of the Master of Public Administration Program), as well as working as a staff economist at the Federal Trade Commission during the Reagan Administration. He is a past President of the Public Choice Society, an international academic society of political scientists and economists with members in 16 countries. He was North American Editor of the journal Public Choice for five years, and is now a Co-Editor of The Independent Review.","protected":false},"author":13,"featured_media":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_acf_changed":false,"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","episode_type":"audio","audio_file":"http:\/\/podcasts.la.utexas.edu\/cepa\/wp-content\/uploads\/sites\/21\/2020\/06\/Policy-at-McCombs-Summer-2020-Mike-Munger.mp3","podmotor_file_id":"","podmotor_episode_id":"","cover_image":"","cover_image_id":"","duration":"","filesize":"66.88M","filesize_raw":"70128704","date_recorded":"25-06-2020","explicit":"","block":"","itunes_episode_number":"","itunes_title":"","itunes_season_number":"","itunes_episode_type":""},"tags":[83,94,74],"categories":[],"series":[2],"class_list":["post-544","podcast","type-podcast","status-publish","tag-financial-market-regulation","tag-ftc","tag-political-science","series-policymccombs","entry"],"acf":{"related_episodes":"","hosts":[{"ID":693,"post_author":"38","post_date":"2020-10-29 17:58:44","post_date_gmt":"2020-10-29 17:58:44","post_content":"\n
Carlos M. Carvalho is an associate professor of statistics at McCombs. Dr. Carvalho received his Ph.D. in Statistics from Duke University in 2006. His research focuses on Bayesian statistics in complex, high-dimensional problems with applications ranging from finance to genetics. Some of his current projects include work on large-scale factor models, graphical models, Bayesian model selection, particle filtering and stochastic volatility models.<\/p>\n\n\n\n
Before moving to Texas Dr. Carvalho was part of the faculty at The University of Chicago Booth School of Business and, in 2009, he was awarded The Donald D. Harrington Fellowship by The University of Texas, Austin.<\/p>\n\n\n\n
Dr. Carvalho is from Rio de Janeiro, Brazil and before coming to the U.S. he received his Bachelor's degree in Economics from IBMEC Business School (Rio de Janeiro) followed by a Masters's degree in Statistics from the Federal University of Rio de Janeiro (UFRJ).<\/p>\n","post_title":"Carlos Carvalho","post_excerpt":"","post_status":"publish","comment_status":"closed","ping_status":"closed","post_password":"","post_name":"carlos-carvalho","to_ping":"","pinged":"","post_modified":"2020-10-29 17:59:59","post_modified_gmt":"2020-10-29 17:59:59","post_content_filtered":"","post_parent":0,"guid":"http:\/\/podcasts.la.utexas.edu\/cepa\/?post_type=speaker&p=693","menu_order":0,"post_type":"speaker","post_mime_type":"","comment_count":"0","filter":"raw"}],"guests":[{"ID":597,"post_author":"42","post_date":"2020-07-03 20:10:02","post_date_gmt":"2020-07-03 20:10:02","post_content":"\n
Professor Munger received his Ph.D. in Economics at Washington University<\/a> in St. Louis in 1984. Following his graduate training, he worked as a staff economist at the Federal Trade Commission<\/a>. His first teaching job was in the Economics Department at Dartmouth College<\/a>, followed by appointments in the Political Science Department at the University of Texas at Austin<\/a> (1986-1990) and the University of North Carolina at Chapel Hill<\/a> (1990-1997). At UNC he directed the MPA Program<\/a>, which trains public service professionals, especially city and county management.<\/p>\n\n\n\n He moved to Duke in 1997, and was Chair of the Political Science Department from 2000 through 2010. He has won three University-wide teaching awards (the Howard Johnson Award, an NAACP \"Image\" Award for teaching about race, and admission to the Bass Society of Teaching Fellows<\/a>). He is currently director of the interdisciplinary PPE Program<\/a> at Duke University.<\/p>\n\n\n\n Munger\u2019s recent books include \u201cChoosing in Groups\u201d (coauthored with his son, Kevin Munger) and \"The Thing Itself,\"<\/a> both in 2015. His research interests include the study of the morality of exchange and the working of the new \"Middleman Economy.\" Much of his recent work has been in philosophy, examining the concept of truly voluntary exchange, a concept for which he coined the term \"euvoluntary.\"<\/a> His newest book addresses the sharing economy, and is entitled \"Tomorrow 3.0.\"<\/a>.<\/p>\n","post_title":"Michael Munger","post_excerpt":"","post_status":"publish","comment_status":"closed","ping_status":"closed","post_password":"","post_name":"michael-munger","to_ping":"","pinged":"","post_modified":"2020-07-03 20:10:03","post_modified_gmt":"2020-07-03 20:10:03","post_content_filtered":"","post_parent":0,"guid":"http:\/\/podcasts.la.utexas.edu\/cepa\/?post_type=speaker&p=597","menu_order":0,"post_type":"speaker","post_mime_type":"","comment_count":"0","filter":"raw"}],"transcript":" Welcome to policy, Emma. A data focused conversation on tradeoffs.
\n\ue5d4
\nI’m Karla’s core value from the Saddam Center for Policy at the University of Texas at Austin.
\nIt’s a pleasure to have Professor Mike Munger from Duke University, professor of Political Science and Economics.
\nMike, thanks for joining us. It’s a pleasure. Glad to be here, Carlos. So, Mike, we’re we’re
\nrecording this video is trying to understand peoples process of thinking about the spent Demick
\nfrom from the very beginning. And so we’re now in any bit in particular, we’re healthy, our students
\nand the people that engage with us here at the Salem Center to understand the process that goes into
\npolicymaking. So that is the sort of objective of all our chat today. Let’s go back to March or
\nearly February. Well, when were you started? We just started thinking about
\nthis. When you started like being like, huh? It’s something coming our way here. What’s to be done?
\nWhat was your thinking then? First time I thought it was an early march. I had
\njust been up at Trinity College in Hartford, Connecticut,
\nthe last week of February and had met with a lot of students and flown
\nand hadn’t thought anything about it. And then the first week of March, the Public Choice Society
\nmeetings were scheduled, and I had one of the past presidents of the Public Choice Society members
\nin 16 countries. And we had to decide whether we were going to hold or cancel the meetings.
\nAnd they were in Los Angeles. And within a week, I went from saying,
\nwell, this is nonsense. Obviously, we should have the meetings to saying we have to
\ncancel. Even if we still have to pay the hotel. And it turns out that unsurprisingly,
\nthe hotel said, you’re right, we’ll refund your deposit. So for
\nme, it was telescoped into just a week from thinking this is something that won’t affect
\nme to canceling the public choice society meetings for the first time in almost 60 years.
\nSo what was the debt deal? What was the data that sort of like got into a utility function there
\nand now you’re processing that allowed you to make the change? Well, part of it was easier because
\nit was in Los Angeles, which was one of two hot spots in the United States at the time, Seattle and Los
\nAngeles, where the worst very quickly New York passed them. And so just having to go through the airport
\nin Los Angeles was a kind of uniquely dangerous thing. A lot of our professor
\nI’m 62, but I’m relatively young for some of the gray beards that come there with their walkers
\nand your horns. So for elderly people, it clearly by then
\neven become pretty dangerous. What I started to think about next was
\nthe impact on what the way that universities might react and
\nwhat might happen to the economy. And so one of the reasons that I
\nlike doing talks like this is that I actually have to try to think about those questions, which normally I think,
\nyou know, I don’t know enough. But one problem with public policy, as your students will find out,
\nI should say, Carlos, that I was the dean of a master of public administration program
\nat USC Chapel Hill. We expected our students to be better than we were because faculty
\ncould say, well, let’s do another study, let’s try to get more data, whereas decision makers actually
\nhave to decide, you have to say, and not deciding is a choice. And it’s one that
\nyou the prudence does not always require that you do nothing. Sometimes prudence requires
\nthat you act. And so I have been thinking about universities and about
\nthe economy. And I did an interview with Nick Gillespie, who was a reporter for
\nReason magazine, and he did it online. And when I started to think about what’s
\ngoing to happen to unemployment, what’s going to happen to the central cities.
\nI arrived at a prediction that I hope is wrong, but is pretty grim.
\nI now believe that by the middle of July, there will be martial law in
\nNew York, Chicago and Los Angeles, and that will have military style
\nfood rationing. Because the weather, for good or ill,
\nthe economy has been devastated. And there are people who won’t have jobs.
\nThey still won’t have jobs. Millions, tens of millions of people still in those central cities still won’t have
\njobs. And I expect that the result will be riots
\nout of desperation. Also, political demagogs will use this opportunity to blame
\nothers and say we have to use this as an opportunity to use violence
\nto achieve our aims. So I went from thinking, well, it was nice to travel back
\nfrom Hartford, Connecticut, to worrying about martial law with armored personnel
\ncarriers on the main street corners in our large cities giving out
\nrice and beans. And so more like Venezuela. Not so not a functioning
\nmarket system, not a functioning system of supply chain delivery,
\nbut military vehicles coming in with bags of rice and beans and then rationing
\nthem using ration cards. No functioning markets for substantial parts of the country.
\nThat wasn’t. What was that interview in March you said on March 10th? Our stance, well,
\nhis view, you’re not that wrong. I hope that I’m still wrong.
\nI hope I’m still wrong. It’s only June if it’s this bad in June, because there are a lot of
\nthe reason why there are riots in large cities is economic uncertainty. The spark
\nwas of the actions of the police in Minneapolis. But there
\nis an economic problem, I said. So thinking about the tradeoff that we’re facing
\nearly March. You saw. But did you see? Did you think about the trade off?
\nLook, what if we do nothing? Do you think that your prediction then was we’ll be indifferent to doing nothing
\nversus going into the lockdown that we did? I knew for a fact that I didn’t know
\nenough to be able to say what the correct course of action was.
\nSo the biomedical concern was pretty traditional one about just flattening the curve.
\nThere’s two strategies that we might use. One is mitigation. And mitigation
\nmeans that we’ve just reduced the worst parts of the effect until we’ve achieved herd immunity
\nand maybe get to the point where we have a vaccine. The other is suppression. And suppression
\nmeans that we think that the loss of lives that will happen as a result
\nof the epidemic are so great that any economic consequence
\nis acceptable. And I was a fan of mitigation, not of suppression. So what I thought was we
\nhave to reduce the number of cases to the point where the hospital
\nsystem can handle the number of people that are sick at any given time.
\nBut that’s because I thought we’re all going to get this. I thought it was like the flu and we’re all going to get
\nthis. Now, it’s not so clear we’re all going to get this, but we have suppression and not mitigation.
\nAnd so my prediction was more once it was clear we were going to use suppression. What are
\nthe economic consequences going to be? So I’m not an expert, but the choice between mitigation
\nand suppression. I can’t say which is better. I do know that an obvious consequence
\nof partial suppression strategy is to devastate the economy to such an extent
\nthat we will no longer have food delivery systems in our major cities by the middle of the summer. I know that.
\nAnd unfortunately, I think that those two strategies in mitigation suppression, as you point out, it’s
\nit it was somehow confused by not not but put forward
\nclearly by our by our policymakers who say, okay, here’s our choices and we’re choosing this one and we understand the
\nconsequences of this one. It was not before forward. I don’t think there was there was a lot of until you
\ncould tell that happened, because we made these plans to have to have tents and we emptied
\nall of the hospitals. So all of the hospitals had to put off the elective surgery that they
\ndepend on for their budgets. So the paradox is we have hospitals going bankrupt.
\nAs a result, we’re empty. We have hospitals going bankrupt because they’re empty. We chose suppression
\nwithout really making it clear that’s what we were choosing. So I don’t know if they were confused or it was a bait and
\nswitch, but we ended up choosing suppression. We didn’t come anywhere near our medical capacity
\nexcept in New York for about two weeks or even New York. I think
\nthat New York had a stockpile at some point of thirty thousand ventilators. It’s at its peak use
\nfive thousand. So it’s it’s it’s even there. When was the worst we’ve seen in the world in
\nsome ways was not as bad as as as expected. So
\ngoing back to the suppression idea that the government actions
\nneeded for suppression are something that that, you know, you know
\nyou know, my general tendencies and thinking about government, I distrust their ability to plan very carefully
\nto have the knowledge necessary to make something work. Especially at that scale.
\nBut also there’s that our social contract, we have some notion of what governments can or cannot do.
\nHow are you thinking about that or how we know under our system of government? What was your sort of reaction
\nto this use of emergency powers to to create the
\nso-called lockdown set that we saw everywhere? Again, I’m not
\nsure about that because I’m not good enough at epidemiology to know,
\nbecause there’s there’s two factors to this disease. One is how contagious it is and how it’s
\ntransmitted and the other is how deadly. So at some point, if you don’t know those two things,
\nyou know that you don’t know. And prudence might require that you act to forestall the worst
\noutcomes. Now, the difficulty is a government that tries to do everything
\nis unlikely to be able to do anything well. And so there was a one of the best podcasts
\nthat I’ve heard in the last year was a comparison on Planet Money on National Public Radio.
\nA comparison between South Korea and the United States, both South Korea and the United States
\nfound out their first case on January 20th. The reaction
\nof South Korea was immediately to enlist private labs under a contract,
\neach to try to, at the local level, develop a plan for contact tracing.
\nSo it was much more bottom up. They used a contracting system and they enlisted the private sector.
\nThe United States, a great beacon of capitalism. Immediately centralized everything
\nin the CBC. And they actually had some tests that already worked and decided that they would start
\nthe start over start on their own. And they botched it. So this this NPR podcast
\non Planet Money surprisingly honest about the way that the US, by relying on bureaucracy,
\ngot this wrong. And South Korea, which is a much more centralized system,
\nrecognized that they need two things. One is decentralized,
\nwhere the man on the spot knows about the value of local action, just like Friedrich, I said.
\nBut the other is to enlist the power of the private sector
\nto mobilize the supply chain. What the private sector does is already has these can
\nthese contacts. So you can mobilize the supply chain. So if I say, all right,
\nwe’re going to have a government action. And in fact, that for a while we talked about using
\nthe Defense Production Act, which was going to take General Motors and they’re
\ngoing to make all these ventilators. Well, that would have worked, except we tried to do it top down
\nrather than having regional or even more decentralized system,
\nwhich is what South Korea did. Now, to be fair, South Korea is tiny, quite comparison.
\nIt’s extremely densely populated. The United States is really spread out in the state systems
\ndon’t articulate very well together. So in some ways, my criticism is
\nunfair. But the two things I would say, it actually counts
\nmore in the United States, in a federal system with geographically diverse
\nand expansive, using a decentralized market based approach like South
\nKorea did was actually even more imperative for the United States. So many of the
\nUS wounds, both in terms of deaths and in terms of economic devastation,
\nare self-inflicted. So when you talk about decentralization and using the private sector
\nin markets, again, the markets need neat, neat, clear signals to act. Right.
\nAnd the government, by trying to centralize things, stop the flow of information to
\na source, not only true for thescene, but it’s true for ease or ditlev materials for
\ndevelop, vaccine for allocation of resources, etc. I think you talk about
\nprice price gouging a lot and and explain to us a little bit about your thinking
\nin that because you get an emergency. That’s also something that comes up right. All the sudden we’re out of toilet paper
\nand whomever has toilet paper wants to sell for a little bit more money. And then all of a sudden there’s some politician comes
\nalong and says, well, put you in jail because you’re gonna try to Prescotts toilet paper. Is that did that dynamic
\nplay a role, you think, in our in our botching of the process here? Well, the dynamic played a really big
\nrole. And what’s interesting is to recognize that people don’t really understand what price gouging
\nis. So I actually had quite a few people block me on Twitter because I was
\ngleeful for several days after Governor Cuomo in New York
\nsaid, please send us your PPE, we will pay a premium. That’s
\nprice gouging. Remember that in an economy, scarcity
\nis a shortage of products that are needed. High prices are a signal
\nof that scarcity. If you have a policy that suppresses prices,
\nyou destroy the signal and you do nothing to address the problem of scarcity. In fact,
\nyou make it worse. So the choice in an emergency is between
\ntwo not very good options high prices or empty shelves.
\nHigh prices are better than empty shelves. And Governor Cuomo proved that by saying we will
\npay more. So if I can pay a premium and get my workers
\nthe PPE that they that they have to have in order to do their jobs, that’s what the price
\nsystem is telling you. And let me say one other thing about prices. Prices are
\na signal of scarcity. And three things happen when prices go up. First,
\nconsumers have a moral incentive to take into account the needs of other people.
\nIf you have price suppression, which is what price gouging laws are,
\nyou’re saying there’s plenty. Take all you want. But if prices are high, I think, oh, the
\nother people must need this, too. That’s a really important signal. So the first thing
\nprices do is it tells you to leave some for some other people who are behind
\nyou and then they’re literally behind you. They might say, hey, leave some for me and I’ll feel bad, but they
\nmay not get there for an hour. They’re trying to order it online. So prices are an abstract, decentralized
\nsignal that tells everybody, look, there’s not enough of this stuff. We need this for
\nsomeone else. Second thing higher prices do is tell. To make more,
\nI ashamed to admit that just today from Wal-Mart, the Munger family received
\na shipment of 96 rolls of toilet paper.
\nHow big is the household? It’s well, it’s what we’re stocking up. But the fact is
\nthat the high prices meant that it happens. I also owe thirty five acres
\nof Timberland that some of which pine trees that we knew will cut. Part of it and sell it for
\npaper. The price of pine is gone very high. A bunch of people have switched
\nfrom being construction crews to harvesting pine trees. So price without
\nanybody giving any orders. Price told people all over the country. Stop what you’re
\ndoing and find ways to make more of this stuff that people need. Third.
\nHigh prices tell entrepreneurs to find ways to make substitutes, and
\nthere aren’t really substitutes for toilet paper, although apparently demand for bidets has gone way up. I
\nwas gonna say I have a friend who bought one of those Japanese automatic. For
\nmost people, that’s not a viable option. But there were a bunch of N-95
\nmasks. We had bought some before because I tend to be one of those people
\nthat is a prepper. I’m worried about having thanks for an emergency. So we donated
\nthree hundred pairs of gloves and masks because we had quite a bit we donated them,
\nbut now we just got several very nice cloth
\nmasks and those never existed before. These are washable cloth masks that also have a filter
\nin them. Entrepreneurs thought of ways to say, you know, we can actually make these with cloth in
\na way that for many people, not first responders, not people that work in hospitals, but
\nfor people like me, it’s a perfectly adequate way to do it. So the price system said
\nleave some for somebody else, make more if you can, and find substitutes.
\nPrice gouging laws prevent all three of those things. Now, I do have some sympathy
\nfor saying that we needed not to have price gouging for PPE
\nbecause. My argument about price gouging assumes that the elasticity
\nof supply, which means the less that the responsiveness there is possible to increase
\nthe supply. If you only have a limited amount, maybe we do need some other form of rationing.
\nSo this is not an argument that we would if we were in a small town and you have a hospital.
\nPeople should donate PPE to the workers that we have a duty of charity. But most
\nof the time it is possible to get a pretty quick supply side response and back.
\nThat is what is happening. We have plenty of this stuff now. It’s expensive, but we have plenty of this stuff.
\nSo price gouging laws do nothing to solve the problem of scarcity, but
\nthey suppress the signal that would tell people try to solve the problem of scarcity.
\nSo they’re a disaster. So can you talk a little bit about that in the context of
\nthe vaccine? I think one of the things that we’re seeing right now is that, of course, there’s a huge incentive to for us to develop
\nvaccine to cover it. But at the same time, it costs them an enormous amount of
\nmoney. So, again, we have a choice of trying to do this centralized by the central planner or by allowing
\nour pharmaceutical companies all over the world to invest and try to find a solution for it.
\nBut that’s only going to work if they have, again, the signal of prices to be able to
\ncash on this if they are able to do it successfully. There’s a lot of discussions about, oh, who
\ngets his versus his moral foreign, let’s say, the United States to pay its way and get it first before other poor countries,
\net cetera, et cetera. How do we think about it differently in that situation?
\nVaccines kind of a unique problem. And if I’m a pharmaceutical company, I weigh
\nthe very high costs for certain against the extremely
\nuncertain prospect of being the first to discover and patent a usable
\nvaccine. So I don’t know if I want to get that business, if I’m a pharmaceutical company.
\nSo the this in a way, it reminds me of what the British government did to
\ntry to encourage people to figure out a way to measure longitude.
\nTo do that, you had to come up with a clock that worked on board a sailing ship
\nfor at least six months. It was accurate within a second. So they paid a huge bounty to
\ndo this because nobody individually had enough incentive to do it. Well, it may
\nbe that the some sort of subsidy for kind of the basic science
\nthat leads us to the point where we know enough about the vaccine itself
\nmay be required. But the decentralized search means that many
\ndifferent companies are going to be searching on many different dimensions.
\nAnd it may be an RNA vaccine. And RNA vaccine
\nis really easy and fast. It’s just extremely expensive to make and it’s really perishable.
\nSo it’s a difficult thing to to get the supply chain for that together.
\nI don’t expect that we will have a widely available and usable vaccine
\nbefore at least February of next year. So we pretty much have to plan without it.
\nIt’s just too expensive to put it together and get it tested. And to be fair,
\nthe testing part of it is really important. You want to make sure that it actually is effective and doesn’t have side
\neffects and it takes months to be able to learn that. So you have a pretty large but I don’t
\nthink that vaccines are as good a hope as what I think
\nwould be a better plan. And that is how a lot more private
\nlabs involved in testing and not testing for president for the
\npresence of the pathogen have testing for presence of the antigen.
\nSo I can tell if you have antibodies, it doesn’t mean you’re immune, but you’re much more resistant.
\nThat means that you could work in a restaurant. It means that you could work as a first responder
\nbecause your substantial and pay the more let labor price gouge. That’s
\nanother reason a lot of people blocked because they would set, you know, those nurses. They should make more money. And I
\nset your price gouger, shouldn’t you? You’re you’re charging higher price just because we need
\nthis. Well, it’s not price gouging. Let’s pay those people that are able
\nto get the economy and the health system back on track. Let’s pay them extra. That would be great.
\nBut what I would focus on in the near term is much more wide
\ndistribution of testing about the presence of antibodies, because if we could do that, that’s
\nan intermediate step towards reopening. Final question on this
\ntopic. The same way that that, again, the price signals are so important
\nfor ramping up production of something that Scarr site, we have Gamez decided to
\nlay down laws that said you are essential versus you are not essential. And things like,
\nyou know, you’re essentially if you sell groceries. Well, but you selling groceries. A lot of different things that go in the
\nprocess of selling groceries that government may not understand are essential parts. So decision by governments and bureaucrats
\nthis side of what’s essential? Not rely on on on mostly the political process
\nunnecessarily. Someone has to do with with resource allocation to a market economy. So
\nI was very concerned about that in the beginning. I was concerned that all of a sudden it was SIRC shortages
\nof really important days because, you know, I don’t know what goes into the production of a lot of things. Like, for
\nexample. Right. Like toilet paper maybe is one of those things a cycle or whatever, whatever it is, I’m actually sort of surprised
\nthat we got to be where we are. And it seems that almost nothing is really
\nin deep shortage right now. And I’m sort of really, really glad that the American economy
\nis so resilient. But that was one thing that I was concerned in the beginning. And
\nso anyway, so. So did you see any alternatives to that at that point in time when government saying
\nwe need to we’ve got to shut down, we’re going to intervene and shut down what you saw? It was bad, but to me, there was an eco
\nsurnow like all of us. I’m going to break down the chains of production because we don’t understand how they work. Nobody does
\nwell. And that was part of your question earlier. There is some confusion between
\nmitigation and suppression. And at some point, we can’t have complete suppression
\nbecause people have to eat. They have to have basic services. And so we
\nin the economy, we basically tried to mitigate and it was essential. Maybe it was economically essential.
\nHow do we normally decide what’s essential for people? We let them decide. And so
\nif they want to go out and they were not to pay money for this, they’ve decided that’s essential.
\nInterestingly, the model of many people on the left, Sweden, that model of socialism,
\nthey chose mitigation exclusively. They didn’t do any suppression.
\nAnd so the restaurant stayed open. They did have quite a few deaths, but the damage to their economy
\nhas been much less. I think it’ll be interesting that the epidemiologist who supported
\nthis for Sweden because they were trying to establish herd immunity faster, it said we probably would do it
\ndifferently now if we had it to do over. So there there is a there’s quite a bit of room between
\nhaving the central government decide, all right, you’re essential and you’re not knowing don’t get it wrong in
\nways that are likely. We’re not going to see for a while that parts of the economy
\nare devastated. They’re actually dead. So it looks like looking at a coral reef, it looks OK, but it’s
\nactually dead. There’s nothing there but Paul and the Sweden,
\nwhich has had quite a few deaths. The economy’s in pretty good shape. They may
\nrecover pretty quickly. And if they have herd immunity, their deaths are going to start falling
\nand cars are going to continue cause flattening the curve means that you have many more deaths
\nfor a much longer period. The United States is still doubling. We’re only doubling every two months,
\nbut we’re still doubling. That means that if that continues every two months, another
\nhundred thousand deaths, that’s a lot. And so the Sweden, in trying to get
\nthrough this fairly quickly, may have threaded a needle. They may not have. But
\nto your question, Sweden said we’re going to leave it up to the individual to decide what’s
\nessential in the United States. We tried to say the government’s going to decide what’s essential.
\nAnd the kicker, which is really unfortunate. Suppose that I work at a grocery store
\nin a central city in a pretty rough neighborhood and I make $12
\nan hour. There are people that got laid off, got
\nunemployment from the government for six hundred dollars a week. I make
\nfour hundred and fifty a week and I’m working and I have to leave my children at home. So
\nall of the incentives were for people not to find work, not to participate.
\nSo I suppose that the grocery store is trying to hire someone. This is essential. Well, I’m not gonna go
\nwork at a grocery store for four fifty a week when I get six hundred a week for staying home.
\nSo the government actually made it very difficult even for what it called essential
\nwork to be carried out because they did a perfectly sensible thing. And that
\nis we’re going to have unemployment compensation to try to keep people from starving. So the
\nthe combination of lack of information and perverse incentives made this much
\nworse than in retrospect it had to be. So let’s fast forward to now. We learn
\na lot about about about this disease since March, when a lot of the sort of suppression
\nideas were put in place. Right. And now it seems that every
\nsingle state is moving into a mitigation strategy. Everybody
\nis opening with some restrictions, with some sort of like understanding that is going to be with us for a
\nwhile. As you said, to be desk for a while until we get to herd immunity or a vaccine. And
\nit might be the case that, as you said, also, that doesn’t matter really what we did, as long as there’s no vaccine,
\nwhether we do a bunch of that at once or we do it at over a year. The total number is the same.
\nOne strategy might have killed us in the long run. One strategy might not have killed us in the long run.
\nSo we are we are now learning that a couple of things. I think that that the the the
\nspread seems to be not as bad as we thought it was gonna be. And the fatality rate is not
\nas bad as we thought initially. So those two things are positive updates. Still pretty bad. Still not
\nnot you. But I like to compare to the flu. It’s three to five times the flu,
\nwhich is not not pleasant, but we are in a mitigation strategy, I think particularly how
\nhow you see these is unfolding now. And it also, I guess from the federal system that we have,
\nwe did this a different thing to different states. Do you expect a significant
\ndifference in the recovery process between the states that went up early versus states that are still in
\nlockdown for similar levels of the disease? It’s very
\nlikely that there’s going to be a second wave and that the dramatic rate of
\nincrease in particular hot spots is going to be really hot. And
\nit’s very difficult to predict when. So let me ask you why. Why you say that’s very likely
\nand why. The reason I ask is you’re using Sweden as an example. It seems that day by doing mitigation,
\nthey were able to just avoid the exponential growth. And just to say that chugs along and why not expect
\nthose places to have similar process from now on? A very substantial part of their population
\nis probably had it so that now we’re back to my point about being able to test for antigens,
\nbeing able to test for antibodies. Well, it appears that 40 percent of Sweden
\nhas had less than 5 percent of the United States has had it. And
\nit is interesting that the flu influenza generally.
\nWell, the way that this flu works and the reason why it’s hard for antibodies to find it is that
\nthe influenza is RNA. It enters a cell and it replicates it
\nreplicates really badly. It’s like a fuzzy Xerox machine. And so there
\nmay be a hundred different copies and 50 or 70 different varieties of
\nthe virus. Both of them are not viable, but some of them are slightly different from the virus
\nthat went in. Some of them are going to be more deadly. So if you look at the great influenza epidemics,
\nincluding the one in 1918 and I’m I’m happy to blame Spain for a lot of things,
\nbut the reason that we called it the Spanish influenza was that
\nSpain was honest about reporting their statistics. It actually started in Kansas. It started
\nat a military base in Kansas and then was taken to Europe by American G.I.s
\nand then it died out. And then the second wave was catastrophic. The second wave was the one
\nthat was really damaging. So if you look at the great influenza epidemics,
\nthere seem to be four waves. The first is bad. The second is terrible. The third is not
\nso bad. In the fourth one is almost negligible. The reason is that the virus is
\nbeing trained not to kill its host in evolutionary terms. But viruses don’t
\nwant to kill their hosts. They want to survive. But the second wave is the one that has
\nbeen in the past has been virulent. So I am worried that the second wave
\nin the fall, people are more inside. We’ve opened the economy. We’re not taking as many
\nmeasures against. It may be very significant in some states. And
\nthat means that we need a decentralized approach. We need the individual states
\nto respond to this and the way to respond. I hate to keep talking about South Korea and Sweden.
\nBoth South Korea and Sweden are pretty kind of centralized authoritarian places,
\nbut they provide a model for how this might be done, keeping the economy open
\nand using contract contact tracing so that you you
\nactually can tell who has it immediately and then isolate only those people
\nrather than the prophylactic isolation of the entire population, which has just
\nterrible consequences. And not just economic, it’s health consequences. So spousal abuse,
\nstress, all sorts of deaths are going to happen that wouldn’t have happened
\nthat are not directly covered 19, but are going to happen as a result of this isolation.
\nSo I’m worried about a second wave in the fall and us reacting to it
\nbadly. I’m afraid that if that comes up
\nand I’m still hopeful that it won’t, and given some of the I guess maybe looking
\nat the positive effects of mitigation, a lot of places, I’m hoping that we can keep this chugging
\nalong without like a big a big city, like almost nobody in Texas
\nhas had it. That’s right. So that’s one of the things that we stopped way too early here.
\nAnd, you know, some economists are talking about the timing of a lock down if you were to do a lock down. It’s
\nnot worth it to do it too early unless you’re able to kill it. But there’s no way to kill it once there’s enough
\ndisease out there and in this reintroduction. So doing too early is incredibly expensive. And I think
\nwe did too early. Texas taxes, the lowest per capita death rate in the country for any given
\nfor any large state. Maybe Wyoming is a little below us, but that’s an account.
\nAnd only an economist would say that’s bad. But economics. You recognize
\nthat the optimal number of deaths is usually not zero given the
\nopportunity cost. And that’s the thing. Is this important for students to recognize the opportunity
\ncost of just a quarter solution focusing on just one target imposes
\ncosts that include deaths and health. This is not economy versus health.
\nThis is health versus health. So the Texas decision to have a prophylactic lockdown
\ntoo early did almost no good in health terms. But it’s going to have bad health
\nconsequences. So how come? How come? How come they become that became sort of
\nlike like educated opinion and conventional wisdom seems that that we had a herd.
\nMentality on this to a point where, you know, I was attacked. He thought
\nto you the questioning that. That that particular idea early on and been
\nquestioning from the. From a trade off perspective. Exactly. From opportunity cost perspective. It seems that even the economics
\nprofession was very silent on this. I mean, one of the few papers early on talking
\nabout talking about the opportunity costs, it had like silly metrics like, well, we threw value every
\nlife at 10 million dollars. Then do whatever it takes. But.
\nThat’s not a number that I think, you know, pass muster. If you look if you look more carefully at it, well,
\nwe tell people is the object to the idea of talking about tradeoffs with lives.
\nBut again, we’re back to whatever day we talked about it at the beginning. Not making a decision is
\nstill a decision. You have to say I have to record it. Once you think of opportunity
\ncost in terms of the health consequences. The other thing that I
\nthink is interesting and I’ve actually I’ve worked with physicians on this and
\nsome physicians are sort of bravely questioned this. They
\nare there’s an ideology that’s the most important thing is the preservation
\nof life. And so that means that if you’ve got someone in a coma who’s
\nliving on tubes and a ventilator, they may be very reluctant to disconnect
\nthose things. And so in two years, you spend five hundred thousand dollars to care
\nfor someone who had no real chance of recovering. But the medical profession hasn’t.
\nYou know, I want fighter pilots to be arrogant jerks because they will need to think they can
\ndefeat the enemy. I want physicians to really, really be
\nfocused on health care. The problem is that they should not be in charge of
\npublic policy. We need economists to be in charge of public policy, because you have
\nto think in terms of tradeoffs. Now, I don’t blame people for mistrusting economists, given how
\nbotched a lot of the government economists have made policy with the bailout.
\nSo economists have lost their position of being able to say we should worry about tradeoffs
\nbecause the economics profession doesn’t talk in terms of opportunity costs. It talks in terms
\nof optimization. It’s the sort of applied mathematics that you learn in a micro economics
\nclass doesn’t help this out very much. So think thinking in terms of
\nhumility, uncertainty and decentralised solutions is what economists
\nshould be doing. So the reason economists were silent about it was I think they rightly thought
\nwe don’t know how to optimize this. I can’t write out the objective function or the constraints because
\nwe’ve gotten away from political economy. We’ve gotten away from thinking about this
\nas a combination of policy and a moral proposition. And somehow the
\ndoctors and other theologies were the first ones to to to talk to governments. And I suppose, you know, they’re they’re
\nthey’re biased in their focus. And it’s so, you know, on health, which they should have. That’s not a problem.
\nThey shouldn’t do it. But even that, as you pointed out, there was a tradeoff in health. I am.
\nSome doctors pointed it out. As I mentioned, we had some here know discussions with us.
\nBut like like I did the paradox that you mentioned in Guinea, we’re concerned about overrunning the health care capacity.
\nSo we’re gonna do is shut down the hospital for two months. It’s like, wait. Well, I
\nthink a lot of logic is impeccable. Yeah, a lot of doctors now would say, OK,
\nthat that didn’t work out, particularly in states that are not
\nNew York, Washington and California. So the Iowa had
\nvery few cases and they bankrupted their rural hospitals. So there weren’t many rural
\nhospitals anyway. They’re gone. So let’s talk a bit about
\nthe governments again and their ability there, I guess even their
\ntheir legality on doing what they did. One can look at at a shut locked down,
\nas you know, violating a constitutional amendment of taking squaws right now. Lot to take something
\nfrom me without fair compensation. And you did. You took from me my business. Lots of business would take you by
\nfiat through the actions of government right now. One might argue
\nthat no states have the right to do so on emergency powers, a constitution that the courts have been
\nin general, that they have deferred to governments in situations of public health emergencies.
\nBut they have we need safeguards. I mean, one of the things that worries me the most about this is that we’ve just learned
\nthat if you cry wolf a government, we have a mini dictatorship in the US
\non 50 states based on 50 people. What are the safeguards we have against that? Because,
\nyou know, this wasn’t a real bad one. In some ways, it could have been worse. And we were
\ndoing those things right now. Are there safeguards that did not we didn’t look carefully at? Should we be looking
\nat revision, those safeguards? Do you have any thoughts on that?
\nWell, after 9\/11, we established an enormous
\nbureaucracy in airports, if nothing else, that engaged in security
\ntheater and made traveling much more uncomfortable and had
\nprobably very little impact on actual safety because there’s plenty of instances of people
\nthat actually made it on. Because through ineptitude or whatever else, we’re not able to solve the problem
\nafter the financial crisis. We spent a trillion dollars,
\nmore than a trillion dollars added to the deficit. We have a bunch of new safeguards
\nthat actually make the financial industry much less nimble and able to respond to emergencies
\nunder the guise of having increased reserves. So we have two emergencies.
\nWe created enormous obstructive bureaucracies that made things worse
\nas a result. I certainly think that as a result of this third great
\ncrisis, we’re going to do exactly the same thing. We’re going to create a health
\nbureaucracy that is going to be on top of everything else.
\nCompanies will probably have to advise, have advisers, and it means that it’s going to be much
\nharder to smart to start a small company. It’ll be much more difficult to participate in the economy
\nif you were an entrepreneur. And the benefits of this are negligible. We’re always
\ntrying to fight the last war. So, look, the just on prudential grounds,
\nI think it’s a bad idea to do that. Ask the constitutional question. And
\nI would say on its face, the Constitution would say the federal government cannot do what it’s done.
\nThat it doesn’t have that kind of police power. And in fact, just recently
\nthere have been some attempts by the Trump administration to assert a federal police power.
\nAnd just yesterday, there was a district court judge that said it was a Trump appointee
\nthat said there is no federal police power. The 10th Amendment says the states
\nhave the police power. Full stop. So if the courts start to intervene
\nand say there is no federal police power, this is up to the states, then
\nthe federal government could suggest it could win, to be fair. This this
\nactually did mostly work out in the states. But the federal attempts,
\nI think are likely in a panic. Most of us think are the federal government is the one that should take care
\nof this. And the part of the reason is they can borrow. Most states cannot. Most states have a constitutional
\nevent where they can’t run a deficit. And we the idea is we need an enormous amount of resources.
\nI guess I think it’s pretty rare to see a situation so bad that the federal
\ngovernment cannot make it worse. I agree with that,
\nbut but still, states went in and violated safeguards that have been incorporated
\nto do due to an individual’s right. You answered your own question. The courts deferred to
\nthat. Deferred to them. So although I think there won’t the exception be Wisconsin,
\nwhere they had in their state constitution some rule about how emergency powers should be given to
\nthe governor, that a process and the government did not follow the process. It turns out that to follow that he
\ndidn’t have the evidence that’s needed to follow the process. Therefore, he stopped. He didn’t even try
\none. One answer might be that people could look to Wisconsin and say, we
\nneed to have a process that’s more like that. I think that’s unlikely.
\nSo InTech, I maybe see that being likely in a place like Texas, but not but not
\nTexas didn’t do much anyway. Texas was relatively less intrusive, although it was
\nwhatever Texas did, it was pointless. Right. Rioted. But it’s it’s funny because we’re less
\nintrusive at the state level and then localities in particular, the more left leaning localities
\nwere incredibly intrusive. All right. Yeah, exactly.
\nAnd I learned about a position that know as an elected position that I thought was just like a figure that
\ndidn’t have any power or the county judge. Turns out the county judge in this particular situation
\nhas an enormous amount of power and a power to actually block me in my house,
\nto put me in house arrest. The county judge had the power and nobody in that town can name that person,
\nwhich is which is my bodily. Until the governor said, no, I to remove your powers because he has the ability
\nto do so. I hope that you’ll pay attention, but they vote for going forward into a county judge.
\nBut I’m not. I hope. But I don’t really hope. I don’t think’s gonna happen. I don’t think it’s possible.
\nSo I wonder if there’ll be a little bit more of an attempt at least to to think more carefully about
\nthe local government arrangements in order to avoid something like that. Again, especially
\nif we go into waves of a state goes something goes bad, they go in, lock down again and
\ndamage further. They’re there. I I think that we will do like
\nwe did with 9\/11. And the financial crisis will create a new separate bureaucracy
\nwith the power to act swiftly and unaccountably that will make things much worse.
\nAll right. Let me ask you a final question. And that relates to one of your books. So you wrote a book
\nrecently called Tomorrow 3.0, where you talk a lot about the sharing economy and how that dad
\nis going through this new revolution of what technologies allowing us to reduce transaction costs by so much
\nthat that lots of things that were deemed not gonna have anything to just share a lot of things. And
\nthat’s going to allow us to do a lot of things more efficiently. In your book, you talk
\nabout the role of cities in that revolution in the sense that density becomes even more beneficial
\nin it to the to the that the new economy, the new paradigm that we’re developing
\nnow, we have a pandemic that seems to be much worse in the best place and riots
\nthat may end up leading to people again questioning the value of the city. Do you
\nrethink that, that idea at all, or do you think there’ll be the value of cities
\nsomehow going to take a hit, given what we’ve just lived through 2020?
\nWell. I have an advantage in a way that’s being
\nold and a professor. If I think about something, I get to write about it.
\nSo my new book is called Platforms Perils and Paul Promise that be out
\nnext month. And in it, I took back
\nsome of the claims that I made into tomorrow 3.0 book, Network 3.0 book. I really concentrated
\non sharing and reduction in transactions cost and the commodification of excess capacity
\nin Uber was kind of my model. I would now say that Wikipedia
\nis my model. Wikipedia is a platform. And so if you remember,
\none more night was in Texas. My claim was there’s three kinds of transactions cost triangulation,
\ntransfer and trust. Platforms are a piece
\nof software, an organization, an entity that solve all three of those problems.
\nAnd it doesn’t have to be with money and it doesn’t have to be with sharing. And so it means that a decentralized
\nsolution may be possible. So let me just briefly say why Wikipedia is so interesting. Wikipedia
\nsolves the problem of triangulation by people who identify themselves as being interested in the topic.
\nThey write on it and other people look at it. Judge whether it’s good or not and give the reviews.
\nTransfer means that I get to claim credit for having edited it because you can look at a whole edit chain
\ngoing all the way back and trust. Wikipedia did an amazingly smart thing to make
\nit really easy to get rid of bad changes.
\nSo whoever is managing the page, there’s just one button that says revert.
\nIf I click revert all of the changes. So you you wanted to hack
\nmy Wikipedia page. The micro monger Wikipedia page, you go and you put a bunch of bad stuff.
\nGuy looks at it the next morning and says, all this is wrong. And it’s reverse. So the five hours that you spent
\nreading, writing terrible things, but it’s all gone. So Wikipedia,
\ntool libraries, source software that allows us to share things
\nin ways that don’t really require markets. But it’s a more toelke valiant and approach to sharing.
\nIt still requires association with the association. The logic of what you’re talking
\nabout is right, but I’m not. I’m not so sure it’s important anymore. I think that
\nplatforms are able to redirect themselves to solve this problem.
\nAnd that means that ways of sharing that do not involve physical proximity
\nor touch are going to be the next thing that people should invest in. I’m not smart enough
\nto know what that is, but that’s the value proposition is to be able to share without requiring
\nproximity or touch. So I would now say that platforms are more important than
\nI thought they were before and new ways of sharing are likely to replace this. And you’re absolutely
\nright that the Corona virus is going to make it. It’s a big problem
\nfor the sort of rental model that I was thinking about five years ago. I don’t necessarily want
\nto use your power drill. It’s always fun to see how innovators who will
\nthink through this and figuring it out. So, anyway, Mike, thanks so much for joining
\nus. A pleasure. It was great. Thank you. Thanks so much. Absolutely.
\nThanks for listening to Policy McCombs.<\/p>\n"},"episode_featured_image":false,"episode_player_image":"https:\/\/podcasts.la.utexas.edu\/cepa\/wp-content\/uploads\/sites\/21\/2021\/05\/SC_PolicyMcCombs_Art-scaled.jpg","download_link":"https:\/\/podcasts.la.utexas.edu\/cepa\/podcast-download\/544\/mike-munger-covid-19-interview.mp3","player_link":"https:\/\/podcasts.la.utexas.edu\/cepa\/podcast-player\/544\/mike-munger-covid-19-interview.mp3","audio_player":null,"episode_data":{"playerMode":"light","subscribeUrls":{"apple_podcasts":{"key":"apple_podcasts","url":"","label":"Apple Podcasts","class":"apple_podcasts","icon":"apple-podcasts.png"},"google_play":{"key":"google_play","url":"","label":"Google Play","class":"google_play","icon":"google-play.png"},"google_podcasts":{"key":"google_podcasts","url":"","label":"Google Podcasts","class":"google_podcasts","icon":"google-podcasts.png"},"spotify":{"key":"spotify","url":"","label":"Spotify","class":"spotify","icon":"spotify.png"},"itunes":{"key":"itunes","url":"","label":"iTunes","class":"itunes","icon":"itunes.png"}},"rssFeedUrl":"https:\/\/podcasts.la.utexas.edu\/cepa\/feed\/podcast\/policymccombs","embedCode":"Mike Munger – COVID-19 Interview<\/a><\/blockquote>