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Brad DeLong's Grasping Reality 2020-03-27 14:32:56

Summary:
In a good world, Jim Stock would already be back in the Eisenhower old executive office building chairing the Council of Economic Advisors during this crisis. He is vastly more thoughtful, more confident, and more up to speed on the issues and the trade-offs that we face, economically, during this public health crisis. However, we are not in a good world. We are in a very bad one. Already, the United States his response to the coronavirus is the worst in the world. And it only looks as though the gap between us and other countries is going to grow over the next months: Jim Stock: Coronavirus: Data Gaps and the Policy Response https://www.jimstock.org/2020/03/coronavirus-data-gaps-and-policy.html: 'Social distancing and business shutdowns... [affect] the case transmission rate β....

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In a good world, Jim Stock would already be back in the Eisenhower old executive office building chairing the Council of Economic Advisors during this crisis. He is vastly more thoughtful, more confident, and more up to speed on the issues and the trade-offs that we face, economically, during this public health crisis. However, we are not in a good world. We are in a very bad one. Already, the United States his response to the coronavirus is the worst in the world. And it only looks as though the gap between us and other countries is going to grow over the next months: Jim Stock: Coronavirus: Data Gaps and the Policy Response https://www.jimstock.org/2020/03/coronavirus-data-gaps-and-policy.html: 'Social distancing and business shutdowns... [affect] the case transmission rate β.... [One] policy design question is how to achieve that case transmission rate while minimizing economic cost. A second... is the optimal... β, trading off... economic cost[s]... against... deaths.... [We] lack... data.... Tests have been rationed.... The fraction of tests that are positive do not estimate the population rate of infection.... The COVID-19 asymptomatic rate... estimates in the epidemiological literature range from 0.18 to 0.86. However, the asymptomatic rate could be estimated accurately and quickly by testing a random sample of the overall population. The policy response and its economic consequences hinge critically on the asymptomatic rate. As we illustrate using two policy paths for β, without better knowledge of this knowable parameter, policymakers could make needlessly conservative decisions which would have vast economic costs...

Bradford DeLong
J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

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