According to an analysis by Bocconi University professor Carlo Favero, the number of people infected with the coronavirus in Lombardy, Northern Italy, is 120,000, while official figures put it at around 24,000. Hospitalizations will peak in the second week of April. With a fatality rate of 2 percent, casualties will still rise from the current 5,400 to 25,000. The alternative scenario, with no lockdown, would be much more dramatic, with a predicted cumulative toll of 160,000.
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Corruption, lobbying, corporate malfeasance, and frauds: a weekly unconventional selection of must-read articles by investigative journalist Bethany McLean.
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Nobel laureate Paul Romer’s model shows that if we use a test to determine who gets put into isolation, the fraction of the population that needs to be confined and isolated will be dramatically smaller. These benefits are available even with an imperfect test and without any contact tracing. It does take frequent testing, however, with each person getting re-tested roughly every two weeks.
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One of the prominent economic debates to emerge during the coronavirus outbreak has been whether to continue with shelter-in-place measures that are hurting the economy but, hopefully, slowing the virus’ spread. Luigi Zingales and Kate Waldock discuss a cost-benefit analysis of social distancing and economic shutdown with Hoover Institution’s Russ Roberts.
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Princeton Professor Markus Brunnermeier and Nellie Liang, the former director of the Division of Financial Stability at the Federal Reserve, discuss the legacy of policy reaction to the 2008 global financial crisis and why this crisis is different. What is the limit of Fed intervention? What is the role of the Treasury in emergency liquidity programs? How do new measures to support corporate credit work?
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“I am in a state of shocked disbelief,” former Federal Reserve chair Alan Greenspan said during the 2008 crisis, before confessing: “I found a flaw in the model that I perceived is the critical functioning structure that defines how the world works.” Today in Chile, the same business coalitions that have always demonized state intervention are asking for help: Will they admit their approach was as flawed as Greenspan’s?
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The vindication of the public sphere does not herald the return of nation-states to their past glory. This is bad news not only for nativists, but also for traditional socialists who see the nation-state as the only viable provider of public goods. Those who believe that democracy can only function well in nation-states and not beyond will also be disappointed.
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Policymakers need to figure out which sectors we wish to keep up and running (food, health care), which sectors we want to contract rapidly but bounce back rapidly as well (education), and which sectors we do not want to protect at all and would be willing to see perish.
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Over the past few weeks, it has become abundantly clear that the US health care system is uniquely ill-equipped to deal with a crisis of this magnitude. For years, physicians, economists, and health advocates have warned that the American health care system is a disaster in waiting. Now the disaster is here.
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Republican and Democratic Senators reached a deal on a $2 trillion bill to help businesses and people hit by the coronavirus outbreak. But the bill also includes slush funds to bail out market funds and guarantee trillions of dollars of risky bank debt. At the same time, millions of small and medium-sized businesses are going to have no access to cash and revenue freezes, because of the pandemic and economic restrictions.
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“Bailouts allow investors to keep all the profits in good times without bearing the losses in bad times. Instead, bailouts impose losses on taxpayers, including those most in danger of losing their paychecks,” over 230 leading economists argue in a letter to Congress regarding the $2 trillion package that’s meant to mitigate the economic impact of the coronavirus outbreak.
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When we invested in stocks and bonds, we knew we might have to face a storm or two. The high returns we received on our investments compensated us for this risk. When the government bails out a corporation, it is letting investors like me keep all the profits in good times without bearing the losses in bad times.
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