Wednesday , June 3 2020
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Casey Mulligan: Supply and Demand

The Supply and Demand (in that order) blog by Professor Casey Mulligan (University of Chicago) examines various economic issues like fiscal policy, labor economics, and industrial organization using basic economic tools. The blog has pivoted to cover more health economics lately.

Measuring Employment between Monthly Surveys

The Employment Situation Report by the Bureau of Labor Statistics comes only monthly.  It measures only the seven-day week (or, with the establishment survey, pay period) including the 12th of the prior month, which means that this month four very interesting weeks will be skipped and that the report on that April week will not be released until May 8. Three data sources provide employment information on at least one of the missing four weeks, with the results shown in the chart below. ...

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Show us the fevers

By all accounts, hundreds of millions of us are confined to home despite being perfectly healthy.  The purpose of all of this, we're told, is to make sure that we do not bump into people infected with the coronavirus. The wise people forcing us to do so owe us some evidence that in fact the virus is out there in sufficient quantities to merit draconian measures.  They point us to deaths in New York hospitals, and growing numbers of positive test results.  But those presumably were...

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30+ million out of a job

A one-size-fits-all policy, even at the state level, has been a mistake from the beginning.  Instead policy should be favoring decentralized mechanisms over direct control and ensuring that the chosen regulations deliver more net benefits than less stringent alternatives.  It is too bad that governments are causing so much harm at this critical moment by ignoring these longstanding principles of government regulation. Expressed at an annual rate, the...

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Shutdown reduces the flow of GDP by 28 percent

New data from Alexander Bick and Adam Blandin suggest that the flow of real GDP is 28 percent less than it would be under normal circumstances.  Using two entirely different methods, I previously forecasted 25 percent and 26 percent.  Below are the details of my calculations from Bick and Blandin. Bick and Blandin (2020) find that working hours per working age adult circa April 1 declined 27 percent from February.  Moreover, among those working in February 2020, between 59 and 61 percent...

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What’s Wrong with this Reasoning?

FACT: the population density of NYC is 27K per square mile FACT: the population density of Indianapolis is 2K per square mile FACT: COVID-19 was able to be introduced and spread in a city with only 2K susceptible people per square mile (Indianapolis is such a city). Conclusion: COVID-19 will continue to spread in NYC until either (i) the number of susceptible people falls to 2K per square mile or (ii) a vaccine.  i.e., until more than 90% of NYC has contracted and recovered from COVID-19. ...

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Where did the fevers go?

This website tracks real time fevers using thermometers connected to the internet.  A first glance at their map suggests to me that: fevers spiked two week ago. The timing of the spike is similar across the country, but magnitude greater in those regions with more COVID-19 deaths. The time difference in the peak across counties is at most a few days. Does this mean that the rest of the country is not significantly lagging NYC?  Or that COVID-19 fevers are a small fraction of all...

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Is a Shutdown an Overreaction?

60,000 - 80,000 Americans died from the 2017-18 flu, without exceeding the capacity of ICU beds.  This flu was experienced around the world.  Not a single country found it worth shutting down their economies in that situation. In 2020 the forecast is that about 90,000 Americans will die from COVID-19, including some deaths due to insufficient ICU capacity.  Shutting down "nonessential" businesses is now the norm. This forecast comes from the Institute for Health Metrics and Evaluation...

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Notes on 2020 CARES Act, in reading order

Note that this law is just one of multiple new COVID-19 relief laws.  These are my notes on the labor market provisions in the law, which are all of Titles I and II, and parts of Title III. Title I KEEPING AMERICAN WORKERS PAID AND EMPLOYED ACT A.k.a., 7(a) loans "Loans" to small businesses that maintain their payrolls Payroll does not include any payments to employees making $100K+ annually The loan amount is capped by the prorated amount of payroll for the prior year The loans can be...

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An example of 7(a) perversion

Let's say that you have 700 employees in the prior year, earning an average of $50K. If you continue that between now and the end of Q2, Title I of the 2020 CARES Act will give you nothing. BUT if you fire at last 201 of those employees, and THEN apply for a $10 million 7(a) loan, the entire $10 million will be forgiven at the end of Q2 as long as you keep enough of the 499 employees that remain.  Moreover, you pay no business tax on the forgiven amount. You are eligible for the...

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