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Alex Tabarrok

Alex Tabarrok

Alex Tabarrok is Bartley J. Madden Chair in Economics at the Mercatus Center at George Mason University and a professor of economics at George Mason University. He specializes in patent-system reform, the effectiveness of bounty hunters compared to the police, how judicial elections bias judges, and how local poverty rates impact trial decisions by juries. He also examines methods for increasing the supply of human organs for transplant, the regulation of pharmaceuticals by the FDA, and voting systems.

Articles by Alex Tabarrok

Every Stock is a Vaccine Stock

22 hours ago

Barrons: General Electric stock was racing higher Tuesday, but not because of anything the company did or announced. Recent Covid-19 vaccine news is serving as a catalyst, and every stock these days feels like a vaccine stock.
Indeed, every stock is a vaccine stock. When vaccines or other treatments do well, all stocks do well which is why stock prices are now highly correlated:
Bloomberg: From beginning the year with a correlation of 0.19, the gauge of how closely the top stocks in the S&P 500 move in relation to one another spiked to 0.85 in mid-March, toward the peak of the coronavirus sell-off before leveling off around 0.8. A maximum possible correlation of 1.0 would signify all stocks are moving in lockstep.
It’s not surprising that when Moderna reports good vaccine results, Moderna

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Vaccine Testing May Fail Without Human Challenge Trials

4 days ago

In Why Human Challenge Trials Will Be Necessary to Get a Coronavirus Vaccine I asked, “What if we develop a vaccine for COVID-19 but can’t find enough patients–healthy yet who might get sick–to run a randomized clinical trial?” Exactly that problem is now facing the Oxford vaccine in Britain.
An Oxford University vaccine trial has only a 50 per cent chance of success because coronavirus is fading so rapidly in Britain, a project co-leader has warned.
…Hill said that of 10,000 people recruited to test the vaccine in the coming weeks — some of whom will be given a placebo — he expected fewer than 50 people to catch the virus. If fewer than 20 test positive, then the results might be useless, he warned.

As I wrote, “A low infection rate is great, unless you want to properly test a vaccine.”

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Vaccines: Billions in Costs, Trillions in Benefits

4 days ago

Bloomberg: As sections of the global economy tip-toe toward reopening, it’s becoming clearer that a full recovery from the worst slump since the 1930s will be impossible until a vaccine or treatment is found for the deadly coronavirus.
Consumers will stay on edge and companies will be held back as temperature checks and distancing rules are set to remain in workplaces, restaurants, schools, airports, sports stadiums and more.
China — the first major economy consumed by the virus and the first to emerge on the other side — has been able to revive production but not demand. The lesson for other economies: it’ll be a stop-start path back toward normal.
There’s also the risk of new flare-ups. Some 108 million people in China’s northeast region have been put back under varying degrees of

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Oliver Williamson, RIP

6 days ago

Oliver Williamson won the Nobel in 2009 with Elinor Ostrom. My post on that event is reprinted below (no indent). See also Tyler here.
——————

In Adam Smith there is the pin factory and the market and from that beginning we trace the long literature in economics focused on the twin questions, What price to set?  How much to produce?  Following Coase, Williamson asks different questions, Why a pin factory?  Why are the 18 steps to make a pin performed by a single firm rather than two or more?  Why are there many firms instead of one large firm?  Why does the pin factory not vertically integrate upwards to buy the steel factory and downwards to buy the retail hardware shop?
Williamson’s answers rest on the notions of bounded rationality, contract incompleteness, asset specificity and

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Alan Merten, RIP

7 days ago

Alan Merten, former President of GMU, has died after a battle with Parkinson’s disease. I got to know Alan just a little when we visited China together in 2008. Our visit was part of GMU’s 1+2+1 program in which students in China earned their degree by doing 1 year at a partner university in China, 2 years at GMU and then a final year in China. We were touring the partner universities to participate in their graduation ceremonies. It was a great trip. I visiting the Great Wall, stayed in a Hutong in Beijing, and visited Kunming in Yunan province.
I also found it exhausting as we traveled from graduation ceremony to graduation ceremony. One night at the beginning of another such ceremony I said to Alan “I guess your job is to go to a lot of these events” and he turned to me beaming and full

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Income Share Agreements Looking Up

7 days ago

The Federal Reserve Bank of Richmond has a good piece reviewing income share agreements, aka income-contingent loans, including a timely example:
ISAs provide students with funding to cover their education expenses in exchange for a portion of their income once they start working. Under a typical contract, recipients pledge to pay a fixed percentage of their incomes for a set period of time up to an agreed cap. For example, a student who has $10,000 of his or her tuition covered through an ISA might agree to repay 5 percent of his or her monthly income for the next 120 months (10 years), up to a maximum of $20,000. ISAs typically also have a minimum income threshold before payments kick in; if the recipient earns less than the minimum, he or she pays nothing. This means that ISAs offer

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Incentivizing Plasma Donation for Convalescent Therapy

9 days ago

Kominers, Pathak, Sonmez, and Unver apply market design tools to incentivize convalescent therapy:
COVID-19 convalescent plasma (CCP) therapy is currently a leading treatment for COVID-19. At present, there is a shortage of CCP relative to demand. We develop and analyze a model of centralized CCP allocation that incorporates both donation and distribution. In order to increase CCP supply, we introduce a mechanism that utilizes two incentive schemes, respectively based on principles of “paying it backward” and “paying it forward.” Under the first scheme, CCP donors obtain treatment vouchers that can be transferred to patients of their choosing. Under the latter scheme, patients obtain priority for CCP therapy in exchange for a future pledge to donate CCP if possible. We show that in

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Does coronavirus mean the end of traditional education?

10 days ago

I will debating/discussing the topic “Does coronavirus mean the end of traditional education?” @ the Cambridge Union. A bit disappointing not to be in the hallowed hall but should be interesting nonetheless. The debate will be live-streamed at 2pm ET on Wednesday.
Will a move towards digital, decentralised teaching transform a model that once seemed so entrenched? Will the loss of exams become permanent for many? In an online panel with the Cambridge Union, four world-renowned figures share their perspective on what the future holds for education in the wake of the coronavirus pandemic.
Speakers:
Justine Greening served as Secretary of State for Education under Theresa May, following stints at International Development and Transport. Having left Parliament, Greening now chairs the Social

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From Lockdown to Liberty

13 days ago

Puja Ahluwalia Ohlhaver and I have a piece in the Washington Post talking about a Federalist plan to move from lockdown to liberty. You won’t be surprised to learn that it involves testing, testing, testing. I know, you have testing fatigue. So do I. It’s important, however, to not give up on testing too early. We are really only 6-8 weeks into the US crisis and while everyone is frustrated at the slow pace I think we will start to see leaps in capacity soon as major labs come online.
The piece makes two points. First moving too quickly can kill grandma and the economy:
The dangers of reopening without disease control — or a coronavirus vaccine or therapeutic breakthrough — are illustrated by events at the Smithfield Foods meatpacking plant in Sioux Falls, S.D. Smithfield offered workers a

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What is the FDA Doing Now??!

13 days ago

My long-running skepticism about the safety and efficacy of the FDA is fast becoming conventional wisdom. Even normal people can’t believe what they are doing. This piece on the FDA in the New York Times reads like something I might have written for CATO.
An innovative coronavirus testing program in the Seattle area — promoted by the billionaire Bill Gates and local public health officials as a way of conducting wider surveillance on the invisible spread of the virus — has been ordered by the federal government to stop its work pending additional reviews.
…the program, a partnership between research groups and the Seattle and King County public health department that had been operating under authorization from the state, was notified this week that it now needs approval directly from the

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Will Our Military State Fail Us?

15 days ago

I always assumed that for all its failings the US government was good at blowing things up. Now, I am not so sure. We did better than I expected in Desert Storm and I don’t blame the military for failures in Iraq and Afghanistan but those were not exactly major powers. I certainly don’t want war but could we handle one if it came to us? David Ignatius writing in the Washington Post says no:

Here’s a fact that ought to startle every American who assumes that because we spend nearly $1 trillion each year on defense, we have primacy over our emerging rival, China.
“Over the past decade, in U.S. war games against China, the United States has a nearly perfect record: We have lost almost every single time.”
That’s a quote from a new book called “The Kill Chain: Defending America in the

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Human Challenge Trials

18 days ago

What if we develop a vaccine for COVID-19 but can’t find enough patients to run a randomized clinical trial? It sounds absurd, but this problem has happened in the past. Ebola was identified in 1976, and candidate vaccines were proven safe and effective in mice and primates in 2004 and 2005, respectively. But no human vaccine was produced [at that time] because it was extremely difficult, bordering on impossible, to trial an Ebola vaccine. The problem? Ebola is so deadly that people take precautionary measures long before a vaccine can be tested.
A few pieces have been written about human challenge trials, clinical trials in which healthy people are infected with a disease in order to see if a treatment or vaccine works, but most of them focus on the ethical issues. I don’t think there are

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The Risk of Immunity Passes

19 days ago

I argued earlier that if we have Immunity Passes they Must Be Combined With Variolation because “the demand to go back to work may be so strong that some people will want to become deliberately infected. If not done carefully, however, these people will be a threat to others, especially in their asymptomatic phase.” Thus, if we have immunity passes we must also have controlled infection.
In a new paper, Daniel Hemel and Anup Malani run the numbers and verify the intuition:
…Our topline result is that strategic self-infection would be privately rational for younger adults under a wide range of plausible parameters. This result raises two significant concerns. First, in the process of infecting themselves, younger adults may expose others—including older and/or immunocompromised

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The Miracle of the Internet

20 days ago

The internet has performed incredibly well in the crisis. Charles Fishman, at the Atlantic, gets an inside picture from AT&T:
The surge in traffic, on the internet as a whole and on AT&T’s part of the network, is extraordinary in a way that the phrase 20 percent increase doesn’t quite capture. AT&T’s network is carrying an extra 71 petabytes of data every day. How much is 71 petabytes? One comparison: Back at the end of 2014, AT&T’s total network traffic was 56 petabytes a day; in just a few weeks, AT&T has accommodated more new traffic every day than its total daily traffic six years ago. (During the pandemic, the AT&T network has been carrying about 426 petabytes a day—one petabyte is 1 million gigabytes.)
It’s not an accident. Like HEB in Texas
…AT&T rehearses for disaster. Last May,

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World’s Largest Producer of Rubbing Alcohol Can’t Manufacturer Hand Sanitizer

20 days ago

How many stupid, outrageous, maddening government failures can you document in just 500 words? Jim Doti and my former colleague Laurence Iannaccone should win a prize for this piece in the WSJ:
…the U.S. is, by far, the world’s largest producer of alcohol. That distinction is a result of the Energy Policy Act of 2005, which required fuel producers to blend four billion gallons of corn ethanol into their gasoline by 2006 and 7.5 billion by 2012. The immediate result was a spike in the price of corn and an increase in food prices world-wide. U.S. farmers soon solved this problem by diverting millions of acres of land to growing corn. Ironically, this increased overall CO2 emissions, much to the chagrin of the environmentalists who had championed the mandate as a way of fighting global

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Save Grandma, Save the Economy

22 days ago

The meat supply is starting to fail. Meat processing factories seem especially susceptible to COVID-19 probably because of mist, chilled air circulation, the creation of aerosols and close worker contact. What other industries could be affected? What would happen if the energy, transportation, or pharmaceutical sector failed? We aren’t even sure which industries are critical. Who would have thought that nasal swabs would be a critical industry? In researching vaccine production I was stunned to learn that glass vials may be a bottleneck. Glass vials! How then do we best protect the workers in our critical industries? Should everyone else practice social distancing, closing of non-essential firms and work from home or should everyone else return to work as if everything were normal?
Social

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What to Watch

22 days ago

My viewing habits are less hi-brow than Tyler’s, perhaps especially now when I am seeking escape and mind rest. Here’s a few things I have enjoyed and some that I have not.
DEVS on Hulu. If you know what the Everett interpretation is you will probably enjoy this science-fiction drama with big ideas on quantum computing and free will but also enough suspense, action and human relationships to drive the drama forward. From the director of Ex Machina. Sonoya Mizuno steals the show, super charismatic in an off beat way.
Westworld on HBO. A few interesting scenes but mostly disappointing.
Formula 1: Drive to Success on Netflix. I have no real interest in car racing but this documentary–each season is a season–is very well produced. Great shots from within the cars and each episode is tightly

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Online Education is Better

23 days ago

The COVID-19 crisis is accelerating a long-term trend, the shift to online education. I’ve long argued that online education is superior to traditional models. In an excellent essay in the New York Times, Veronique Mintz, an eighth-grade NYC student agrees:

Talking out of turn. Destroying classroom materials. Disrespecting teachers. Blurting out answers during tests. Students pushing, kicking, hitting one another and even rolling on the ground. This is what happens in my school every single day.
You may think I’m joking, but I swear I’m not…during my three years of middle school, these sorts of disruptions occurred repeatedly in any given 42-minute class period.
That’s why I’m in favor of the distance learning the New York City school system instituted when the coronavirus pandemic

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In the Race for a Coronavirus Vaccine, We Must Go Big

25 days ago

Today in the New York Times I have an op-ed with Susan Athey, Michael Kremer and Christopher Snyder. We argue for a big program to invest in vaccine capacity before any vaccine is tested and approved. We agree with Bill Gates that we want the vaccine factories to be warmed up by the time a vaccine is approved. We can’t leave it all to Gates, however. The US economy is hemorrhaging $150-$350 billion a month so the benefits of a vaccine to society are huge and we should go big.
Today, the U.S. government could go big and create a Covid-19 vaccine A.M.C., guaranteeing to spend about $70 billion on new vaccines — enough to make direct investments to support capacity installation or to repurpose capacity and to pay, say, $100 per person for the first 300 million people vaccinated.
An investment

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Corrupted by Commerce?

April 27, 2020

Many people claim that commodification, transforming a good or activity into a commodity bought and sold on a market, corrupts that good or activity. As Michael Sandel puts it:
Putting a price on the good things in life can corrupt them. That’s because markets don’t only allocate goods; they express and promote certain attitudes toward the goods being exchanged.
But few people have tested this idea which is why I loved Stephen Clowney’s Does Commodification Corrupt? Lessons from Paintings and Prostitutes. Clowney does something simple. He interviews art appraisers and male escorts, people who live with commodification, and asks them about art and sex. In short he uses the “lived experiences of those affected by commodification” to test whether commodification corrupts.
Does appraising art,

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The Decline of the Innovation State is Killing Us

April 26, 2020

The latest relief bill contains another $320 billion in small business relief and $25 billion for testing. Finally, we get some serious money to actually fight the virus. But as Paul Romer pointed out on twitter, this is less than half of what we spend on soft drinks!!! (Spending on soft drinks is about $65 billion annually). Soda is nice but it is not going to save lives and restart the economy. Despite monumental efforts by BARDA and CEPI we are also not investing enough in capacity for vaccine production so that if and when when a vaccine is available we can roll it out quickly to everyone (an issue I am working on).
The failure to spend on actually fighting the virus with science is mind boggling. It’s a stunning example of our inability to build. By the way, note that this failure has

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Quarantining at Work

April 24, 2020

The Washington Post has good piece on one factory practicing an idea I mentioned a few weeks ago in my post on safety protocols, quarantining at work:

For 28 days, they did not leave — sleeping and working all in one place.

In what they called a “live-in” at the factory, the undertaking was just one example of the endless ways that Americans in every industry have uniquely contributed to fighting coronavirus. The 43 men went home Sunday after each working 12-hour shifts all day and night for a month straight, producing tens of millions of pounds of the raw materials that will end up in face masks and surgical gowns worn on the front lines of the pandemic.
…Nikolich said the plants decided to launch the live-ins so employees could avoid having to worry about catching the virus while

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A Digital WPA

April 23, 2020

Earlier I suggested that that we offer unemployed people jobs that could be done from home:
A 21st century jobs program would pay people to stay home and isolate, support people without work, and produce some useful output all at the same time.
Instead of paying people to dig and then fill ditches we could pay people to help train machine-learning apps, enter data, subtitle videos. take surveys, maybe even fold proteins to disrupt viruses.
Writing at Brookings, Apurva Sanghi and Michal Lokshin provide some more ideas:
Another high-potential area is document digitization: Only 10 percent of the world’s books are digitized. Even with the current level of optical character recognition (OCR) technology, for a book to be digitized, an independent person needs to check it for errors, problems

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Spit Works

April 23, 2020

A new paper finds that COVID-19 can be detected in saliva more accurately than with nasal swab. As I mentioned earlier a saliva test will lesson the need for personnel with PPE to collect samples.
Rapid and accurate SARS-CoV-2 diagnostic testing is essential for controlling the ongoing COVID-19 pandemic. The current gold standard for COVID-19 diagnosis is real-time RT-PCR detection of SARS-CoV-2 from nasopharyngeal swabs. Low sensitivity, exposure risks to healthcare workers, and global shortages of swabs and personal protective equipment, however, necessitate the validation of new diagnostic approaches. Saliva is a promising candidate for SARS-CoV-2 diagnostics because (1) collection is minimally invasive and can reliably be self-administered and (2) saliva has exhibited comparable

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The Roadmap to Pandemic Resilience

April 21, 2020

Led by Danielle Allen and Glen Weyl, the Safra Center for Ethics at Harvard has put out a Roadmap to Pandemic Resilience (I am a co-author along with others). It’s the most detailed plan I have yet seen on how to ramp up testing and combine with contact tracing and supported isolation to beat the virus.
One of the most useful parts of the roadmap is that choke points have been identified and solutions proposed. Three testing choke points, for example, are that nasal swaps make people sneeze which means that health care workers collecting the sample need PPE. A saliva test, such as the one just approved, could solve this problem. In addition, as I argued earlier, we need to permit home test kits especially as self-swab from near nasal appears to be just as accurate as nasal swabs taken by a

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COVID Prevalence and the Difficult Statistics of Rare Events

April 19, 2020

In a post titled Defensive Gun Use and the Difficult Statistics of Rare Events I pointed out that it’s very easy to go wrong when estimating rare events.
Since defensive gun use is relatively uncommon under any reasonable scenario there are many more opportunities to miscode in a way that inflates defensive gun use than there are ways to miscode in a way that deflates defensive gun use.
Imagine, for example, that the true rate of defensive gun use is not 1% but .1%. At the same time, imagine that 1% of all people are liars. Thus, in a survey of 10,000 people, there will be 100 liars. On average, 99.9 (~100) of the liars will say that they used a gun defensively when they did not and .1 of the liars will say that they did not use a gun defensively when they did. Of the 9900 people who

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Pollution is an Attack on Human Capital

April 18, 2020

Here’s the latest video from MRU where I cover some interesting papers on the effect of pollution on health, cognition and productivity. The video is pre-Covid but one could also note that pollution makes Covid more dangerous. For principles of economics classes the video is a good introduction to externalities and also to causal inference, most notably the difference in difference method.
Might I also remind any instructor that Modern Principles of Economics has more high-quality resources to teach online than any other textbook.

The post Pollution is an Attack on Human Capital appeared first on Marginal REVOLUTION.

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When Will The Riots Begin?

April 16, 2020

I was surprised when Trump won. The economy was doing well, Trump had charisma but was erratic and made what seemed like many missteps (like disparaging people in the military) that it didn’t seem plausible he could win. Yet, he plowed through the Republican primaries and gathered such a large and powerful base of support that people like Ted Cruz and Lindsey Graham, who have good reasons to hate his guts, even they kowtowed. I don’t want to revisit the debates about why Trump won but one of the reasons was that his base felt disrespected by coastal and media elites–their religion, their guns, their political incorrectness, their patriotism, their education, their jobs–all disrespected.
And now maybe it is happening again. From the point of view of the non-elites, the elites with their

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PPE Shortages and the Failure to Increase Prices

April 16, 2020

Ryan Peterson, Flexport Founder and CEO, has an excellent piece on Why There Aren’t Enough Masks, and How to Get More. One part of the problem is a lack of working capital brought about in part by a fear of raising prices:

Typically, buyers of PPE, whether hospitals or medical distributors, expect to place purchase orders and only pay for products upon delivery, or even later.
But when demand surges by 20x, vendors simply don’t have the money required to scale production. Factories need money to add production lines, buy raw materials, and hire workers. They need down payments so they can move.
Buyers prefer to pay upon receipt of goods for two reasons. The first is to ensure quality: They can refuse payment if the goods they receive don’t meet their standards. The second reason is they

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