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We have nothing to fear except a lack of fear itself

Summary:
Lots of people are scratching their heads about the relative strength of the stock market. By that I mean strength relative to the underlying economy, where unemployment is probably about 20%. The election odds favoring Trump are another mystery.This twitter thread by Ryan Booth suggests the virus may be almost gone by the end of August. I won’t say I “believe” this, but I also don’t see any reason to assume he’ll be wrong. Here’s part two of the thread. Now of course there’s the “second wave” theory for the fall and winter. But the severity of the second wave is hugely dependent on the severity of the epidemic in late summer. This is hard to grasp, as the severity of the first wave did not depend at all on the level of the epidemic at the beginning—one case

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Lots of people are scratching their heads about the relative strength of the stock market. By that I mean strength relative to the underlying economy, where unemployment is probably about 20%. The election odds favoring Trump are another mystery.

This twitter thread by Ryan Booth suggests the virus may be almost gone by the end of August. I won’t say I “believe” this, but I also don’t see any reason to assume he’ll be wrong.

Here’s part two of the thread.

Now of course there’s the “second wave” theory for the fall and winter. But the severity of the second wave is hugely dependent on the severity of the epidemic in late summer.

This is hard to grasp, as the severity of the first wave did not depend at all on the level of the epidemic at the beginning—one case was enough to lead to 10 million (although of course in practice there was more than one case from overseas.)

But with the first wave we made no attempt to prevent it from getting out of control until it was too late. This fall will be the exact opposite. We will madly overreact to any new outbreaks. We’ll be all over it like a **** on **** (I forgot the metaphor). Perhaps not as insanely over-reactive as the Chinese, but pretty insanely. If we have only a few cases going into September, then it’s likely we’ll be able to prevent the second wave from getting out of control, just as many other countries have already been able to do.

I’ve always assumed that we could no longer do the things the Australians and New Zealanders are doing, because Covid-19 has already become so far out of control in the US. But if the US caseload really does fall to extremely low levels in late summer, then we would be able to replicate the success of the places that are currently successful.

The thing that makes me most skeptical of this rosy scenario is that there’s a sort of natural tendency for R0 to move back toward 1.0. (Homeostasis?) As things become safer, people will react rationally and become more reckless. So we have to hope that the same Americans that are irrational scaredy-cats (i.e., excessively afraid of nuclear power, flying in planes, chemicals in food, second hand smoke, child kidnapping, etc.) will also be overly frightened of Covid-19. We need the continued irrational cowardice of Americans, now more than ever.

Please Americans, don’t let me down when we most need your innumeracy, your irrational fear of risks that you cannot see!!

Please, cower in fear.

PS. Today, NPR interviewed some guy recommending meditation as a way to control one’s fear of Covid-19. I recommend the opposite for most Americans, a nonstop diet of the most hysterical twitter threads, blogs and cable news shows.

Then life will become truly wonderful for numerate people like you and me, as we take blissful, uncrowded vacations in relative safety.

HT: Razib Khan




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Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment".

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