Creative Destruction

I think that the gravest problem with this Wall Street Journal editorial:

The market has figured out that American commerce is shutting down right before our eyes with no end in sight. Hotels are at 10% occupancy, airline flights are two-thirds-empty except for college kids on spring break who think they’ll live forever. U.S. car makers suspended production Wednesday to reduce danger to their workforce and because people don’t buy cars when they’re at home.

This national economic shutdown is accelerating by the day, and second quarter GDP could fall by 10% or more. For comparison, the worst single quarter during the financial panic was minus-8.4% at the end of 2008. Mass layoffs could begin soon in the hardest hit parts of the economy, spreading and growing if there’s no sign of recovery.

The market has also figured out that Washington is even more panicked than the markets and is throwing money at the wrong problem in the wrong way. The Fed is deploying its 2008 tools to ease constraints in money markets, and that’s useful for the economy’s financial plumbing and banks. The commercial paper facility is good for the biggest companies. But this doesn’t address the dramatic and immediate need for liquidity—financing, i.e., loans—across the breadth of American business to survive this unprecedented economic shutdown.

is that they, too, are trying to solve the wrong problem. We are presently enormously over-invested in banks and other financial institutions, airlines (particularly international flights), the hospitality industry, interstate highways, higher education, and, dare I say it, health care. We are tremendously under-invested in primary and secondary production.

We will inevitably increase our national investment in health care during a health care crisis. But pouring money into banks and airlines will mean that you have richer bankers and airline executives rather than more solvent banks and more profitable airlines. That the CEO of General Motors has pledged to use idled GM plants to manufacture ventilators tells you one thing without a shadow of doubt: there are idled General Motors plants.

We should also avoid pouring money into bureaucracy-laden dinosaurs like General Motors. We need to be able to respond in an agile fashion to changing circumstances and that means less centralized responses and more smaller companies.

The COVID-19 outbreak will undoubtedly be studied in public policy and B-schools for decades to come. I wonder what they’ll determine has caused empty shelves in retail stores? What will they decide the relative roles of panic-buying by consumers, market consolidation, issues inherent in just-in-time inventory practices, and just plain delays in moving product from where it is to where it’s needed might be? I doubt they will decide the problem is a lack of liquidity.

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Is the CDC at Fault?

I guess there is more than one way to look at the unfolding story of the spread of COVID-19 in the United States. One way is that it’s all Trump’s fault. He should have recognized the risks earlier. He should have taken unspecified actions quickly. This article at the Wall Street Journal makes a pretty good case that the Centers for Disease Control flubbed the response simply by performing the way the CDC does:

While the virus was quietly spreading within the U.S., the CDC had told state and local officials its “testing capacity is more than adequate to meet current testing demands,” according to a Feb. 26 agency email viewed by The Wall Street Journal, part of a cache of agency communications reviewed by the Journal that sheds light on the early response. The agency’s data show it tested fewer than 100 patients that day.

When the CDC first dispersed test kits in early February, it shipped them to a network of state and local government labs and restricted testing to people with virus symptoms who had recently traveled to China, where the virus first emerged, or had been exposed to a known case. Federal officials hoped the virus could be contained—even as they disputed alarms from those on the front lines that the CDC’s guidelines weren’t keeping up with the outbreak’s spread, emails between the U.S. agency and local officials show. The government left other laboratories on the sidelines for crucial weeks.

The narrow effort is “a failing,” said Anthony Fauci, a government doctor who has become the de facto face of the Trump administration’s coronavirus response, in congressional testimony last week that for many in Washington was a wake-up call.

and

CDC officials botched an initial test kit developed in an agency lab, retracting many tests. They resisted calls from state officials and medical providers to broaden testing, and health officials failed to coordinate with outside companies to ensure needed test-kit supplies, such as nasal swabs and chemical reagents, would be available, according to suppliers and health officials.

When the U.S. Food and Drug Administration, also involved in the response, finally opened testing to more outside labs, a run on limited stocks of some supplies needed for the CDC-developed test quickly depleted stores, lab operators and suppliers said. Hospital and commercial lab operators said the government didn’t reach out to enlist their help until it was too late.

and

“This was kind of a perfect storm of three separate failures,” said Tom Frieden, who directed the CDC from 2009 to 2017, citing the botched test, overstrict FDA rules and sidelined private labs. He cautioned he didn’t have direct knowledge of details.

Now, the U.S. is testing far fewer patients than public-health and infectious-disease experts say is necessary and just a fraction as many as other countries that rolled out wide-reaching diagnostic programs. South Korea as of Tuesday was testing up to 20,000 patients a day, more than half the total of U.S. patients who have been tested since the outbreak began.

The test shortage hurt U.S. efforts to contain the virus, said Neil Fishman, chief medical officer at the Hospital of the University of Pennsylvania and an infectious-disease specialist.

“If we would have had a true understanding of the extent of disease several weeks ago, implementation of social-distancing measures could have prevented the escalation of the disease,” Dr. Fishman said, and demand for the test is now huge.

Health-care officials say the current state of testing reflects both technical and planning failures, as well as a broader failure of imagination. Leaders including President Trump and Health and Human Services Secretary Alex Azar early in the outbreak appeared unable or unwilling to envision a crisis of the scale that has now emerged, and no one stepped up to effectively coordinate among federal agencies or the private-sector labs, medical providers and manufacturers needed for a large-scale testing push, they say.

My own view is that the longing for a top-down solution would be fine for China or the Soviet Union or maybe even Germany but not for the U. S. Our real strength is in the American people and opening up the search for a good, reliable, inexpensive COVID-19 test to private labs and companies from much earlier in the process including, yes, the profit motive would have been a better solution than putting so many eggs in the CDC basket.

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Pluses and Minuses

Minus

I’m over 70.

Plus

I have no diagnosed underlying health conditions (other than chronic pain).
I take no medications.
I am able to work from home.
In a typical day I don’t encounter many people other than my wife.
I cook from scratch.
My grocery store delivers.
While I am normally a daily shopper, I have been able to cut my trips out of the house way back and could cut them back even more.

My wife and I intend to donate anything we might receive from the federal government. We’re in a lot better shape than most people.

Update

An email has just come through advising us that a case of COVID-19 has been diagnosed in an individual working on the floor above that on which my employer’s offices are located. That means I might have encountered that individual in the elevator on any given day. Perhaps my climbing the stairs up all those many flights has reduced my exposure.

The building has been closed for an undetermined period. Looks like we’ll all be working from home.

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The Next Plague or Another, More Virulent Flu?

This CNN article is one of many in the media that is finally coming to terms with the notion that the struggle against COVID-19 will be lengthy:

(CNN)Nearly two months since the first US coronavirus case, the federal government is now preparing for a pandemic that could last up to 18 months or longer and “include multiple waves of illness,” a report obtained by CNN shows.

Hospitals have already sounded the alarm on quickly vanishing supplies as the outbreak in the US shows no signs of slowing — in just 24 hours, cases soared by more than 40%.

The US government announced this week it would help make up for potential medical supply shortages and deploy two hospital ships to help increase medical capacity.

Slowly but surely I believe they will come around to the realization that far from being like the plague, which killed 30% or more of Europe’s population in the 14th century, it’s more like another, more deadly flu. I believe it will be around forever from now on, possibly seasonal but possibly not.

I also don’t believe that in the absence of a willingness to rally scarce resources to where they are most needed testing will be that useful. On a per case basis how does testing change how medical professionals deal with the patient? I don’t think it does at all. I think that it’s too late for containment or even mitigation and has been since the first diagnosed case of COVID-19 arrived in the United States from China in late January.

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COVID-19 Timeline

There is a very handy timeline for the COVID-19 outbreak at Axios.

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Different Models of Virus Response

There are presently several differing models of national response to the COVID-19 outbreak. Let’s consider some of them.

China


Presently, the only “success story” in dealing with the COVID-19 outbreak is China. China’s number of new cases and present reported cases of COVID-19 are declining, people are recovering from it, and fewer who have it are dying.

In late December trains entering or leaving Wuhan were cancelled. On January 23 Wuhan and other cities in Hubei Province were “locked down”, i.e. neither people nor information was allowed to leave. By January 29 all cities in Hubei Province had been quarantined.

In my opinion these lockdowns and quarantines were not particularly effective since by January 29 every mainland Chinese province had one or more cases of the virus diagnosed.

To the best of my ability to determine the Chinese have been treating COVID-19 patients with some combination of modern and traditional Chinese medicine.

Frankly, I don’t believe the information we are receiving from the Chinese authorities at all. I don’t believe their case reports, recovery reports, or death reports. That’s a problem because none of the other countries’ approaches have been an unalloyed success.

South Korea


The approach taken by South Korea has been somewhat different. It has not engaged in the lockdowns of the Chinese response but has relied instead on an aggressive testing regime.

That has reduced the number of new cases but it has not, unfortunately, reduced the number of new cases to zero. Recently, there has been an uptick in the number of new cases. Whether that will result in a new wave remains to be seen.

The apparently lengthy recovery period remains a substantial complication. As long as those who are infected don’t recover and more people become infected, you don’t have the downward-sloping curve that the experts seem to be relying on.

It should be noted that at least 20% of all diagnosed South Korean cases derive from a single cluster.

Japan

Japan’s approach has been similar to South Korea’s but to my eye appears to have relied more closely on identifying and isolating clusters of infections.

Its infection rate has remained quite low (7 per million population) but given that there has been a recent uptick in diagnosed cases that may just mean that Japan is lagging behind other countries.

Conclusion

I am at a loss to explain Italy’s situation. IMO either Italy’s R, for unexplained reasons, is a lot higher than anywhere else, or the virus began to spread in Italy a lot earlier than they think it did. I simply don’t think that the numbers add up otherwise.

What that means for the U. S. I have no idea. If there are many, many more cases than we presently know about, that means that the virulence of the virus is actually lower than we presently think it is—closer to that the seasonal flu. More testing might allow us to identify clusters faster and more reliably. Then what?

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COVID-19 Status Report 3/18/2020

On my regular morning walk with Kara I saw even fewer people and cars than yesterday. 2 cars, 3 people plus 5 men in a lawn crew (not exercising “social distancing”). That and the very low voter turnout in Illinois convince me that Illinoisans in general and Chicagoans in particular are beginning to take the advice they’ve received seriously. IMO they’re misapplying and misinterpreting it but they’re taking it seriously.

I have never been prouder of Illinois Gov. Pritzker than when he refused to eliminate in-person voting, going on to point out that was beyond his legal authority. When I cast my primary vote I was the only voter in the polling place and there were only two election judges, the minimum number legally required, one bold man in his 70s and a young woman.

As I said to my siblings (via text) last night, I have laid in a plentiful stock of single malt American whiskies. When we run out we will be forced to subsist on food and water. I have enough food to last us for months.

Last night in recognition of St. Patrick’s Day I made baked salmon and colcannon. Corned beef and cabbage are American. Salmon is Irish as is colcannon. I slimmed the recipe down a bit. For two

2 medium red potatoes, peeled and sliced
1 small leek, sliced fine
2 cups of green cabbage, sliced and chopped fine
1/4 cup milk
1 Tbsp. olive oil
2 pats butter
Salt and pepper

I microwaved the potatoes in a small amount of water until they were quite soft, about eight minutes. While the potatoes were cooking I sauteed the leeks and cabbage in the olive oil until they just started to brown. Then I added a couple of tablespoons of water, covered the pan, turned down the heat, and continued to steam the vegetables for three minutes, checking occasionally to ensure they did not burn.

While the leeks and cabbage were steaming I mashed the potatoes, adding just enough milk to make them smooth and palatable. Then I mixed the mashed potatoes, cabbage, and leeks, adding salt and pepper to taste. I topped each serving with a pat of butter.

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Or Maybe It’s Been Here Awhile

For a really divergent view of COVID-19 check out this article at Medium by Justin Hart who presents some data suggesting that it’s circulating in the population for at least a year and is, indeed, one of the explanations for the exceptionally virulent flu seasons we’ve had the last couple of years:

Influenza surveillance across the country nationally shows a significant increase YoY from the 2018–2019 season and seems to be challenging the severe 2017–2018 season. For reference, the flu “season” usually starts the last weeks of September and goes until April or May.

If that’s the case, the efforts to contain the virus are not only too late but well over a year too late. I have no idea whether any of this is true or not. As I’ve been saying we just don’t know what we don’t know.

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Literacy Tests Are Bunk

I hold no particular animus towards Cuba. I’m sorry for the people there because I think that whatever their government did a half century ago it is now retarding the country’s development. I wish that the author of this Wall Street Journal op-ed, Paul E. Peterson, recognized that it’s not just the reports of Cuba’s academic advancement that are bunk:

Bernie Sanders has spent decades preparing to lose the Florida primary. In a 1985 interview, Vermont’s self-described socialist said of Fidel Castro that “he educated their kids.” He still praises the Communist regime’s “massive literacy program.”

Mr. Sanders is not alone in his admiration for Cuban education. In 2016 President Obama quoted himself as telling Raúl Castro, Fidel’s younger brother and successor: “You’ve made great progress in educating young people. Every child in Cuba gets a basic education.” Dan Domenech, executive director of the American Association of School Administrators, visited Havana in 2017 and exulted: “Cuba’s education system might as well be considered the ultimate wrap-around institution for children.” In 2007 Stanford’s Martin Carnoy published a book called “Cuba’s Academic Advantage.”

It’s all bunk—though it’s hard to prove, because Cuba refuses to participate in international tests such as the respected Program for International Student Assessment. The only external tests in which Cuba did participate were the 1997 and 2006 waves of the Latin American Laboratory for Assessment of the Quality of Education, sponsored by the United Nations Educational, Scientific and Cultural Organization and nicknamed Laboratorio. This was the main evidentiary basis for Mr. Carnoy’s book.

But the Cuban government supervised the administration of the Laboratorio tests, and the results strongly suggest it cheated. The median language-arts score for Cuban third-graders in 1997 was 343 points, compared with 264 in Argentina, 256 in Brazil and 229 in Mexico. If these scores are to be believed, the median child in Cuba learns by grade three what equivalent students elsewhere don’t learn until at least grade six.

In math, median Cuban third- and sixth-grade students scored 1.5 standard deviations higher than Chileans in 2006. (A standard deviation is about two years’ worth of learning.) Is Cuba a standout within Latin America, even though it won’t subject itself to comparison with developed countries? That seems unlikely. Chile performed only 0.9 standard deviation lower than high-flying Finland on the Program for International Student Assessment’s 2018 math test.

Belying Cuban students’ sky-high scores, they don’t seem to learn much from one grade to the next. In Argentina, Brazil, Chile and Mexico, fourth-graders scored 22 to 25 points higher than third-graders on the 1997 math test. In Cuba an additional year of schooling was good for only five points. Why? One possibility is that teachers corrected the answers so that many students in both grades received perfect or near-perfect scores.

Similarly suspicious is the narrow gap—only 0.05 standard deviation—between urban and rural schools in Cuba. In Mexico and Brazil urban schools do better by 0.62 and 0.66 standard deviations, respectively.

but the whole notion of global academic achievement tests. Nowadays just about every country in the world other than sub-Saharan African countries, Afghanistan, and a few others reports astonishingly high literacy rates including countries in which a large percentage of the population doesn’t have education beyond the primary level at all. How do they accomplish this feat? By fudging. They either redefine literacy to mean something other than genuine literacy (like the ability to read street signs) or they redefine the population by limiting the people who will take the tests.

Heck, I don’t believe Chicago’s reported academic achievement scores. Why should I believe China’s or Qatar’s?

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How It Spread

I wish I could share with you the entirety of this infographic-filled article at the Wall Street Journal explaining how COVID-19 has spread, presumably from Wuhan, China to all of China and from there to all the rest of the world. I found it extremely interesting. One barchart, a bar for every country reporting cases of COVID-19 and ordered by the date on which the country first reported a case, stretches for most of two pages. Here’s the first few inches:

I wish the heat map aspect of it was regulated based on cases per million population rather than by total number of cases. I suspect that would tell a very different story.

The case of Japan is particularly interesting. Japan has substantial contact with China and a large population but the outbreak there has been relatively mild. Why? Same with Taiwan. IMO there’s more going on there than just testing.

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