Friday, October 31, 2014

Kaci Hickox is being treated in a capricious, arbitrary, and illegal way.

I have no problem forcing sick people into quarantine.   But government actions that impinge on people’s rights need to be based on science and costs and benefits.   There is no scientific basis for the actions against Kaci Hickox.  These actions would not pass any rational cost-benefit analysis.

The actions taken against Kaci Hickox, first by the governor of New Jersey and next by the governor of Maine, were motivated by whimsy and caprice.  

There is a very large economic and philosophical literature on the proper role of government.   My thoughts on this topic are partially formed by the Michael Sandel’s televised course on justice.

A Comment on Justice and Government:  Sandel’s courses discusses different views of the role of government.   He contrasts the libertarian view with its emphasis on individual rights and the utilitarian view with its emphasis on a government that bases decisions on costs and benefits.  He also looks at Locke’s attempt to rationalize these approaches.

An analysis of the draft based on Locke’s world view, may be the best analogy to quarantine issue.  Drafts are permissible if they are not arbitrary or capricious.    A draft of people with green eyes would be both.  A nation may draft a person and order him to a position leading to certain death.  The army has almost absolute power.   But as Sandel states in one of his lectures no officer in command can take a dime from the draftee.

Comments on Hickox’s Treatment:

Comment One:  She was detained for seven hours in New Jersey and isolated in a tent.   She had been in close quarters on the plane with many others for probably around 10 hours.   To the best of my knowledge, none of the other people on the plane with her were detained or tested.

Comment Two:  It has been confirmed that she does not have Ebola.   People who were hospitalized with Ebola have been set free from the hospital and hugged by politicians within days.  Why would it be permissible for a person who tested positive for Ebola to be released within a week and continue to detain a person who never tested positive for 21 days?

Comment Three:  It is possible that Governor Christie and Governor LePage moved against Hickox because of their political interests?    This is not permissible.    Remember the analogy to the draft.    The military can order you to certain death but they can’t take a dime from you. 

I recently read that the Democrat opposing LePage in the election in a few days supports the quarantine.   This is disgusting.   The Democrats have a major problem in their inability to stand for basic principles.

Concluding Comments:

Comment One:  there have been other pandemics in the past that have killed people.

I wrote a post suggesting that government can and should be more proactive.

I am not against all forced quarantines --- only capricious politically motivated ones that have not medical rationale.   

Despite the ACA we still have a large number of people in this country without health insurance.    The uninsured often only get a quick exam at an emergency room before being sent home.

The number one thing that needs to be done to prevent health insurance is to increase and expand the quality of insurance coverage so people with Ebola and other diseases are not routinely sent home from the emergency room back into the community.

Quarantining an Ebola-free nurse is not useful.

Friday, October 24, 2014

Lava flow in Hawaii is all President Obama’s fault

Lava flow in Hawaii is all President Obama’s fault

Lava is flowing in Hawaii.  It is one mile away from a small town.

President Obama is to blame.   This is clear to me and should be to you.

If Romney had been elected President the army with is high-tech lasers would have created a force field at least three weeks ago and we would not be in this situation.

Clearly, this is not the only crisis that can be blamed on President Obama.  

President Romney would have given tons of arms to the rebels in Syria and there would be a Democratic Syria with no ISIS in the region.  (None of these weapons would have been seized by ISIS.)

President Romney, with his background in economics would have ignored the cost-benefit studies and would have banned traffic to Africa, thereby protecting us all from Ebola.

Also, President  McCain or Romney would have increased the number of people with health insurance perhaps by creating a law that allowed for state exchanges as an alternative to employer sponsored insurance.   This new insurance would have been adopted by states like Texas and people without insurance and with Ebola would not be turned away from emergency rooms.

Emergency rooms are key to early identification of many diseases.   Empirical studies find that uninsured do not have much access to health care even at emergency rooms.   I will find my old papers on this topic and will post them next week. 

President Obama’s resistance to comprehensive health insurance reform is weakening us in the war against Ebola.

Clearly, everything is President Obama’s fault. 

Some random thoughts on third parties

There is a real possibility that the 2016 election will be a rematch of Bush vs. Clinton.    This, if it is happens, is a status quo election.   People who don’t like the way the nation is headed would have to vote for a third candidate.   This post ruminates over the likely importance of third-party candidates.


The most successful third-party candidate in history was Theodore Roosevelt in the election of 1912.  He took 27.4% of the vote, a higher total than the Republican nominee William Howard Taft.  Roosevelt took 88 electoral votes compared to 8 for Taft.

A fourth candidate Eugene V. Debbs the socialist took 6%

A fifth candidate Eugene Chafin from the Prohibition party took 1.4%.


By comparison, third party candidates were inconsequential in 2012. 

In 2012, the libertarian party got 0.99% of the vote and the Green party got 0.36% of the vote.

The 2012 results suggest that third parties are down for the count but not so fast.


The 2014 elections suggest that third party influence is not trivial and could grow again.

Third party candidates could affect key Senate races in 2014.  

Best evidence of this is what happened in 2008 in Georgia and in North Carolina the Libertarian candidate got over 3% of the vote.  

In 2008, the Libertarian forced a runoff between the top two candidates in Georgia.   The Republican won the runoff handily because Democrats did not turn out for the runoff.     The same could happen this year but I believe Michelle Nunns is proving to be an adept candidate and could make the race about her not Obama.

Democratic Senate candidates are in third place in both Kansas and South Dakota.   

In Maine there is a viable independent running for governor.

In Florida, the Democrats nominated a Republican to be their nominee for governor.

In two states Kansas and South Dakota the Democrats are in third place in the Senate contest.  In Kansas the independent is likely to win.

In Kentucky, the Democratic Senate candidate won’t even acknowledge having voted for President Obama.  If this strategy proves successful then Kentucky, like Kansas and South Dakota, is a place more favorable for Independents than Democrats.  

The TV show Scandal:

The TV show scandal in the third season had a storyline of a three-way election -- A Democrat, a moderate Republican and a social-conservative Republican.   The script writer interrupted the election with a bunch of scandals.  (It came out that the Democratic nominee knew he was killing his wife’s lover not a rapist.   The chief of staff for the President could have stopped a bombing and the President won reelection because of sympathy over the death of his kid.   Spoiler alert:  The kid was killed by a secret service agent by order of the former head of B613, Olivia Pope’s dad. )

I guess this section of the post qualifies as a digression.  In my view, the writers of Scandal should have deadlocked the election and thrown it to the courts and the House.   The Scandal components would have continued and been mixed with a realistic political drama.

Implications for 2016:  Could we have a deadlock in 2016 due to a third-party candidate?   Well if the two main candidates are Clinton and Bush or Clinton and Romney we have a Seinfeld election, one about nothing.  

I have previously written about the prospects of Hillary running again. 

Will write more about this after the election.    My main points are is that we as a nation need some discussion on issues and potentially new approaches to break deadlock.    This is not going to come from Hillary or Jeb – both smart dedicated people.

A third candidate win in Kansas could decide the Senate.

A victory by a third candidate in one or two states in 2016 will throw the election to the House or the Courts or both.  

I hope the Scandal screen writers read my blog.  

Tuesday, October 14, 2014

Alison Grime’s right to privacy?

Alison Grimes continues to refuse to state whether she voted for Barack Obama.  She claims a right to privacy because the Constitution guarantees a secret ballot.

My comments:

Comment One:  Alison Grimes is running for office as a Democrat.   Typically leaders when they are running for office let people know where they stand.   She has no legal obligation to announce her vote.  Candidates typically waive this privacy right.

Comment Two:  The right to a secret ballot protects people from persecution.  The Senate candidate from Kentucky does not need to be protected from prosecution.  

Comment Three:  President Obama is being vilified in a personal way that differs from the way politicians are typically treated.   Alison Grime’s refusal to state whether she voted for President Obama plays into the Republican narrative that President Obama is different – perhaps even evil.

Comment Four:  I have differences with President Obama but let’s face it he is not really as liberal as depicted.   Alison Grimes whiffed on a lob.   Here is a response:

Did you vote for President Obama?

Yes but this does not mean I support everything he has done.

I can’t imagine what America would be like if John McCain had won the 2008 election and the economy continued on the course that existed then.

Unlike my opponent I want to modify and not repeal the ACA.   Repeal of ACA would lead to many (give number) Kentuckians losing their health care.

Yes I voted for President Obama.  If in the future a Republican gets elected I will work very closely with the new President to help Kentucky and the nation.    My opponent chose to put his partisan agenda ahead of the state and national interest.   The results have been tragic. 

Comment Five: Her inability to state that she voted for a two-term Democratic President is demoralizing.    She is going to deflate her own turn out, especially among blacks.

Comment Six:  Alison Grimes, like Hillary, believes that one can run for office and not tell the people where she stands.     Where does Hillary stand on Keystone, on Social Security COLAs, on student loan debt proposals on charter schools, ……..  The only way we will find out is if strong candidates  -- A-list candidates – challenge her.

Comment Seven:  Alison Grimes despite her relative lack of experience was not challenged for the Senate nomination in Kentucky.  She was hand picked by the Clintons and is a child of privilege.   This is what happens when nepotism guides the candidate selection process and you don’t test your candidates.

Concluding thoughts:  Most Democrats don’t agree with President Obama on everything.  This is a main difference between Republicans and Democrats.   President Obama is a good man who took on a tough job and should not be vilified.   Alison Grime’s inability to state she voted for the President plays into a Republican narrative that the President is evil.  It is demoralizing.  

Paint Kentucky red. 

Monday, October 13, 2014

Thoughts on the Economic Costs of Pandemics

So it is clear, at least to the Republicans, that President Obama’s approach to Ebola has been lackadaisical.   The truth is that the government generally favors a go-slow approach to disaster preparedness especially when the response could disrupt the economy in some way. 

Most economists believe that policy actions should be based on a cost benefit analysis.   Several years ago the Congressional Budget Office estimated the economic costs of a pandemic.  

It is not clear to me that cost benefit analysis should guide our response to potential disasters, especially when worst-cases costs are much larger than likely costs.

The CBO found that the likely cost of pandemics were small.   The CBO report did not contain policy recommendations but this view continues to guide government policy.

Below I discuss the CBO view of pandemics.

A Discussion of the Report:

The CBO provides an assessment of the likely impact of an avian flu outbreak on the U.S. economy.  The CBO forecasts the likely impact of two pandemic scenarios on GDP:

(1)  A severe epidemic similar in size and scope of the 1918 pandemic
(2)  A milder scenario that resembled pandemics in 1957 and 1968.

The CBO found that the severe pandemic could produce a short run impact on the worldwide economy similar in depth and duration to that of an average postwar recession in the United States.  The CBO also found that a milder pandemic would have a much smaller impact, “which might be indistinguishable in the macroeconomic data.”

The CBO projects that in a severe pandemic 30% of workers in each sector (except for the farm sector) would get ill and that 2.5% of these workers would die.  The death rate is assumed to be lower in the farm sector because of the lower social interaction in this sector.  This disease rate and death rate is consistent with the death of more than 2 million people in the United States alone.  The CBO assumes that in this scenario, survivors would miss three weeks of work either because they were sick or because they needed to care for someone who was sick.

The CBO projections for the mild scenario assume that 25% of workers (except in the farm sector) got sick and that 0.1% of these workers died.  This death rate is consistent with the death of 100,000 people.  The CBO assumes that in this scenario survivors missed 4 days of work again either because they were sick or taking care of others who were sick.

The projections of changes in GDP from the pandemic involve a supply and a demand effect.  The supply effect is simply a function of the lost employment for the year.  Workers who die are assumed to lose the entire year. Workers who survive lose 3 weeks for the severe pandemic and 4 days for the mild pandemic. 

The demand effect is based on an examination of GDP by industry.  CBO assumed different declines in demand for different industries based on judgments about the degree of social interaction in each industry.  The report acknowledges that this process is subjective.

“Given that there is little historical evidence available to form these estimates, they are admittedly extremely rough.”   (Page 42 of the CBO report.)

Table A2 lists the assumed demand effects by industry.  The demand impacts for the severe scenario are:

  • 80% decline for arts and recreation, accommodations and food service.
  • 67% decline for warehousing.
  • 10% decline for most other private industries.
  • 5% decline in government services.
  • 0% change in information, finance, professional services, and education.
  • 15% increase in the utilization of health care.

The CBO subtracted the supply-side impact of the pandemic from the demand-side impact for each industry in order to avoid double counting.

A Discussion of Issues Raised by
 The CBO Report

Comment One:  The CBO report does not allow for any involuntary unemployment.  The entire supply effect is the result of voluntary employment stemming from missed work attributable either to personal or family illness.  However, some industries, (hotels, amusement parks, casinos, movie theaters, and life theater) are assumed to experience an 80 percent drop in demand.  Substantial layoffs would occur in these industries.  Involuntary unemployment will be larger than direct absenteeism due to health effects.

Comment Two:  The CBO report does not consider the impact of large regional impacts in particular regions, which would further exacerbate the declines in output.  The regional impacts would be especially large in cities and states that specialize in tourism and recreation.  In the midst of an epidemic that was killing 2 million people few people would travel to Las Vegas and visit a crowded casino and few families would travel to Orlando for an amusement park.  Epidemic rates would be especially high in crowded cities.  Involuntary employment could be substantial in the cities most affected by a pandemic.  The health situation and economic impacts of a pandemic might, like the impacts of Katrina, be highly concentrated in a few states and cities. 

Comment Three:  The report does not allow for the pandemic to cause decreased real estate prices and defaults on mortgages.  The severe pandemic scenario would adversely impact housing markets through several channels. First, the pandemic increases the number of empty houses through the 2 million flu-related deaths.  Second, increased unemployment from absenteeism or involuntary unemployment will increase mortgage defaults, especially among homes with little equity.  Third, decreased wages will lead to reduced demand for homes.  Fourth, mortgage default would increase because of household solvency problems attributable to increased health problems.  House values and other forms of wealth have a direct impact on consumption, the key component of aggregate demand.  The negative impact of pandemics on housing would further reduce consumption, the primary component of aggregate demand because consumption is a function of wealth.

Comment Four:  The report does not consider the possibility that a pandemic will decrease stock prices or cause corporations to default on their bonds.  A decrease in demand of 60% to 80% in some industries would lead to massive corporate defaults.  This increase in corporate defaults would increase the cost of capital and decrease investment.   An increase in corporate defaults and decreased stock prices reduce wealth and decrease consumption.  These corporate defaults could impact the solvency of life insurance companies, which could in turn impact mortgage defaults.   The CBO does not consider any of these potential impacts in their assessment of the potential impacts of a pandemic.

Comment Five:  The CBO analysis assumes that an increase in the demand for health care will partially offset decreased demand in other sectors.  However, the CBO report on page 28 to 32 points out that there is little or no excess capacity in the health care system and that a pandemic would reduce capacity because many health care providers would become sick.  The CBO discussion on strategies for providing additional health care includes increased training of home health care providers and an increased role for the military.  Neither of these channels results in increased GDP.  Home health care services are a non-market based transaction that is not included in GDP.  The military, as part of government spending, has already been included as part of GDP.  The inclusion of increased demand for health care results in the CBO overestimating GDP in a recession.

Comment Six:  The CBO assumption of a 0% change in demand for information, finance, professional services and education is unrealistic.  Even if demand for media remains unchanged this sector is impacted by decreased advertising revenue.  Second, large layoffs by industry will decrease demand for health insurance policies 401(k) enrollment and group life insurance sales.  Individual life insurance sales could rise because of the pandemic.  Third, the demand for education will fall because schools and universities are places where the virus can easily spread.

Comment Seven The calculation on the supply effect assumes that the pandemic increases real wages.  However, the impact of a pandemic on real wages is theoretically weak.  Why would workers be able to claim wage increases over inflation during a disaster when corporate profits were down?

Comment Eight:  The report says “the analysis ignores the possibility that productivity among workers who remain on the job would be likely to rise.”  (Page 42.) In fact, firm productivity could fall in a pandemic even if the actual productivity of survivors rose.  The replacement of key workers will lead to productivity decreases because of the resources needed to train the replacement.   Also, productivity could decrease because firms will spend resources to insure that infections are not transmitted on the job.

Comment Nine:  The decrease in GDP is only one of the economic costs associated with a pandemic.  It would be useful to calculate the impact of the pandemic on wealth, corporate and personal bankruptcy, and most importantly the value of the lost life.

Comment Ten:  The cover letter attached to this report refers to impacts on the worldwide economy.  The analysis inside the report pertains to the U.S. economy.  Presumably worldwide impacts could be much larger if avian flu is more severe in Asia and the Middle East. 

Comment Eleven:  The CBO assumes a lower death rate in the farm sector because of the lower social interaction in this sector.  However, the farm sector is where the birds are and cases to date have involved bird to human transmission.

Concluding Thoughts:  Many people believe the current Administration has under-reacted to the threat of Ebola.  Basically, economists who have studied this issue have concluded that the likely impact of Pandemics on GDP is manageable (around the size of a typical recession).   The approach taken by the current Administration is consistent with these cost estimates and the way past Administrations have reacted to the threat of pandemics like Avian flu.