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Eric Kramer



Articles by Eric Kramer

Ezra Klein is mad at the Democrats over automatic stabilizers

1 day ago

The HEROES act passed by House Democrats did not include a formula that would keep expanded unemployment insurance benefits in place until the economy has recovered.  The always thoughtful Ezra Klein is very critical of this omission.  His argument can be boiled down to two points:
If Biden wins the presidency, Republicans will predictably try to destroy Biden politically by refusing to extend economic supports needed to protect families and promote an economic recovery. Automatic stabilizers are critical to protect a possible Biden presidency from Republican sabotage.
Republicans need an economic stimulus package in the run up to the November elections more than Democrats do. This gives Democrats the bargaining power they need to force Republicans to

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COVID-19 progress, take 2

5 days ago

In response to the comment on my last post . . . rolling 7 day average death rates with the peak for each country set to 100.

We peaked later than most countries other than Germany, which seems to be making better progress than us.  We may be doing as well (or as badly) as the U.K.  It seems like France and Spain are also outperforming the U.S. on this metric.

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COVID-19 progress?

5 days ago

We seem to be doing comparatively poorly at getting the COVID-19 epidemic under control:

Is this a useful metric for measuring progress?  To what extent does this reflect policy choices?

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A simple plan to produce billions of N95 masks

21 days ago

We desperately need to increase our capacity to test for COVID-19, to trace contacts, and to produce masks and other forms of personal protective equipment.  This will allow us to keep the virus under control and to cautiously re-start economic activity as we await development of a vaccine.  Unfortunately, President Trump has made it clear that he will not lead a mobilization against the virus.  His goal is simply to avoid blame for failures.
Congress cannot force the president to act, and it certainly cannot force him to be competent or honest.  Instead, Congress needs to go around the president.  This is not easy to do, but in the case of personal protective gear there is a simple law Congress can pass to greatly increase supplies.  To illustrate, here

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Yes, the Democrats can play hardball with McConnell

25 days ago

Voters typically hold the President and his party responsible for the state of the country at the time of elections.  This means that Trump and the Republicans have a strong incentive to support an aggressive federal response to the Covid-19 epidemic and the economic collapse.  Under normal rules of political engagement, this should allow the House Democrats to extract concessions from the Republicans in negotiations over the government’s response to the crisis.
So far, however, this has not happened.  Republican Senate Majority Leader Mitch McConnell has been a cagey negotiator, pretending to oppose economic relief measures that Republicans clearly need.  This strategy has forced Democrats to negotiate for desperately needed public health policies and

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Lockdown socialism, the substance

29 days ago

Arnold Kling writes (my bold):
Yesterday’s post on lockdown socialism was unusual for me, in that it was not aimed at persuading someone who might disagree. Let me approach the topic by trying to make the best case for the other side.
If I were a lockdown socialist, I would argue as follows.
We want people to engage in less economic activity, because we believe that will save lives.
[details omitted]
Because we want everyone to comply with lockdowns, we have to make sure that they do not suffer privation. Therefore, we have to send checks to every household so that they can afford necessities, we have to make sure that people are not evicted from their homes for failure to pay rent or mortgages, we have to bail out key industries, we have to protect

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Conservative rhetoric, COVID-19, and Lockdown Socialism

April 30, 2020

Arnold Kling has a recent post up on “Lockdown Socialism”:
I’ve seen headlines about polls showing that people are afraid of restrictions being lifted too soon. To me, it sounds as if they prefer what I call Lockdown Socialism.
Under Lockdown Socialism:
–you can stay in your residence, but paying rent or paying your mortgage is optional.
–you can obtain groceries and shop on line, but having a job is optional.
–other people work at farms, factories, and distribution services to make sure that you have food on the table, but you can sit at home waiting for a vaccine.
–people still work in nursing homes that have lost so many patients that they no longer have enough revenue to make payroll.
–professors and teachers are paid even though schools are shut

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Real options and social distancing

April 24, 2020

I missed this when it first came out:
We think that the debate regarding extreme social distancing has a clear verdict — it is imperative that we should engage in this social distancing (shelter in place for all but essential workers) at least for the foreseeable short-term, but for reasons that both sides have missed.
Our country does not need to decide today whether it is worth shutting down the economy for a prolonged period to protect against coronavirus. Instead, we only need to decide what to do for now. And for now, the health benefits of extreme social distancing clearly exceed the costs to the economy regardless of your chosen economic model. To understand this, it is critical to appreciate the concept of real options.
Recommended.

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Quick take on the Payroll Protection Program and Health Care Enhancement Act

April 24, 2020

The House yesterday approved the Payroll Protection Program and Health Care Enhancement Act.  The PPP part of the law quite literally just increases the amount of money allocated to the program.  That’s it.  The law does almost nothing to fix the serious defects of the program in the original CARES act.  This is remarkable because the initial law was so poorly drafted:
The sign-up process was first come, first served, which favored larger businesses with better access to credit and stronger banking relationships – firms least likely to need assistance to survive.
The sign-up process appears to have disfavored areas that and industries that are hardest hit by the economic downturn.
The act requires businesses to rehire staff to get loan forgiveness, but

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Why a failed opening today may lead to a slower recovery when the epidemic has faded

April 22, 2020

Matt Yglesias has a good piece up explaining why “opening” the economy now won’t save the economy.  The reason is that people will continue to avoid contact with others until the epidemic is brought under control.  Simply allowing restaurants, theaters, and workplaces to open will not change this basic fact.  Indeed, airlines are still open for business, but the demand for air travel has nosedived as people (understandably) avoid being sealed in a poorly ventilated metal tube for several hours with dozens or hundreds of potentially infected fellow travelers.
In fact, a failed opening now may make it harder for the economy to recover after the epidemic is under control.  Right now, many people probably expect a V-shaped recovery, with rapid growth when the

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The Stanford / Santa Clara county study

April 19, 2020

A bit of a post-mortem on my last post.  Andrew Gelman discusses the Santa Clara county study here.  He focuses on sample imbalances, selection bias, and especially the way the authors deal with the specificity of the test.  See his post for the gory details, but he is quite critical of the study, to the point of asking for an apology from the authors for wasting our time:
I think the authors of the above-linked paper owe us all an apology. We wasted time and effort discussing this paper whose main selling point was some numbers that were essentially the product of a statistical error.
I’m serious about the apology. Everyone makes mistakes. I don’t think they authors need to apologize just because they screwed up. I think they need to apologize because

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How should we update our priors on COVID-10?

April 18, 2020

I want to think about how two pieces of news should change my thinking about COVID-19.  (Warning:  I have no expertise in medicine or public health, and you have no reason to take my thoughts seriously – but you knew that already.)
A new serological study in Santa Clara county (discussed by Kevin Drum here) suggests that far more people have been infected with COVID-19 than researchers had previously believed.  This is only one study and full of uncertainties, but it suggests that the infection fatality rate of COVID-19 (the chance that you die if you get the virus) may be much lower than was previously believed.  The authors suggest an IFR of .12% to .2%.  The Imperial College study, in comparison, used a rate of .9%.
It is tempting to say that a lower

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Epidemiologists, government failure, and COVID-19

April 17, 2020

Jason Brennan has a new post up doubling down on his earlier criticism of epidemiologists and government policy in response to the COVID crisis.  I responded to his earlier blog posts here.  I am still not convinced, but there are useful lessons to be learned from going through his argument.
Brennan continues to claim that epidemiologists produced bad statistical analysis, and that we should not take their advice seriously (all bolding is mine):
I’ve been criticizing epidemiologists–including the ones publishing in JAMA, the Lancet, NEJM, etc., and the famous ones who were making apocalyptic predictions on TV last month–for doing what is clearly bad work. My main complaint is, again, that their estimates about the danger of the virus are based on the wrong

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What does the COVID-19 epidemic teach us about the role of government?

April 16, 2020

What lessons should we draw about the role of government from the COVID-19 epidemic?  I want to address this question in a few posts.  I’m going to start by examining a blog post by the libertarian philosopher Jason Brennan.  Brennan makes the following claims:
Many medical journals published misleading papers based on bad statistical analysis and incomplete data; in particular the case fatality rate may have been overestimated because the total number of people infected was not (and still is not) known
Many of the models used by researchers are “quite poor”
Intellectual standards are low in medical research, the flawed papers accepted by medical journals would have been immediately rejected at economics journals
Government has acted on this bad research

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The Democratic COVID-19 Testing Strategy

April 16, 2020

Senator Patty Murray has released a Democratic proposal to increase our capacity to test for the coronavirus.  The report quite rightly emphasizes that expanded testing is critical for containing the epidemic and re-opening the economy.  It criticizes the Trump administration for it’s failure to recognize the need for extensive testing:
Democrats demand a clear, detailed plan to rapidly scale and optimize COVID-19 testing in the United  States. This plan must take a “whole of society” approach that, led by the federal government, will quickly scale and optimize COVID-19 testing, mitigate additional community spread, and help get America back to work.
The proposal is summarized as follows:
Testing is one of the most critical elements to beating this virus.

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News flash: Libertarian invents new reason not to help people!

April 14, 2020

Thinking about the coronavirus is bleak, so let’s do some political philosophy to cheer ourselves up.
Libertarian philosopher Jason Brennan has a new post up claiming that our obligations to help strangers are much weaker than we might think they are, and may not exist at all, because most people are “morally very bad”.
Brennan begins with this question:
To what degree are our moral obligations to provide help and assistance to strangers reduced because those strangers are likely to be morally bad people?
He answers this question in 3 steps.  First, he argues that you do not have any reason to keep Bob, a rapist or child molester, from starving, even if you can easily afford to help.  Second, he argues that even if Bob has not actually done anything wrong,

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Can the House Democrats drive a hard bargain on CARES 2?

April 12, 2020

Michael Grunwald argues in Politico that House Democrats have a lot of bargaining power in negotiations over the next coronavirus relief bill, but that they are not aggressively using their leverage.  He suggests that Democrats are holding back because they are worried about being labeled obstructionist and getting blamed if legislation does not pass.
I agree with some of his analysis and have doubts about other parts.  But here I want to make a suggestion for getting an aggressive but narrowly-tailored bill through Congress.
Suppose that House Democrats quickly put together a new Democratic CARES 2 bill that aggressively attacks the epidemic.  The CARES 2 bill should include more aid for small business, funding for state and local governments, hospitals,

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Where-oh-where would we be without Trump’s firm leadership in this crisis?

April 9, 2020

Kevin Drum reminds us that our fearless leader restricted air travel from China after the airlines had already done so.
And today’s New York Times:

New research indicates that the coronavirus began to circulate in the New York area by mid-February, weeks before the first confirmed case, and that travelers brought in the virus mainly from Europe, not Asia.
“The majority is clearly European,” said Harm van Bakel, a geneticist at Icahn School of Medicine at Mount Sinai, who co-wrote a study awaiting peer review.
A separate team at N.Y.U. Grossman School of Medicine came to strikingly similar conclusions, despite studying a different group of cases. Both teams analyzed genomes from coronaviruses taken from New Yorkers starting in mid-March.
The research

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Trump’s blame-avoidance is politically shrewd

April 7, 2020

Trump’s handling of the Covid-19 pandemic is predictably chaotic, vengeful, irresponsible, and impulsive.  His actions have worsened the epidemic, they have led to unnecessary deaths and to a very painful economic lockdown.  Coming in the year before he is up for re-election, this seems self-defeating:  if Trump could re-run history I have little doubt he would take aggressive action to nip the epidemic in the bud.  That said, the political strategy that is emerging from his chaotic approach to emergency management is actually quite shrewd.
As President, Trump will naturally get credit if things go well.  If the epidemic ends quickly and the economy roars back to life he can take a victory lap even if his actions make this outcome less likely.  Trump

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Mass testing for Covid-19: economics, politics, and policy options

March 30, 2020

The Covid-19 epidemic is creating a painful dilemma for policymakers.  On the one hand, we need to practice social distancing to keep people healthy and to prevent our hospitals from being overwhelmed.  Unfortunately, this strategy is causing a severe economic contraction as people avoid contact with others.
An ideal response to this dilemma would have three basic components.  First, we would implement a hard, nation-wide lockdown to slow the spread of Covid-19.  This would “flatten the curve” and save lives by preventing hospitals from being inundated with patients in the next few weeks.  It would also buy time to put in place the testing, prevention, and surveillance measures we will need to start cautiously re-opening our economy.  Putting these

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Business interruption insurance and pandemics

March 26, 2020

Not surprisingly, many business owners are upset to discover that their business interruption policies do not cover losses due to pandemics.  Although it is easy enough to understand their frustration, it is important to understand the underlying economics.  (Full disclosure, I worked in the property casualty industry for many years.)
The main business of insurance companies is risk pooling.  They take premiums from (say) large numbers of drivers, and then use those premiums to pay claims for the small number of drivers who have accidents each year.  What is essential to the viability of this business model is that risks are uncorrelated or independent:  the chance that you have an auto accident must be largely independent of the risk that your neighbors

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Insider trading by members of Congress

March 25, 2020

The recent insider trading by members of Congress (notably but not exclusively by Senator Burr) is appalling.  One policy response – advocated for by Elizabeth Warren – would prohibit MOCs from investing in the stock of individual companies, requiring them instead to invest in mutual funds.  This would prevent the type of corruption evident in the Chris Collins case.  However, under this proposal MOCs could still have cashed out of stock funds and moved into bond funds based on their advance knowledge of the coming epidemic.
An alternative or complementary approach would be to require MOCs to place their buy and sell orders in advance – say, 6 or 12 months in advance.  This would prevent them from trading on private information, such as classified

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Coronavirus links

March 23, 2020

From Adam Levitin, a summary of the Senate economic rescue package.  Recommended.  Why can’t the news media provide information like this?  Don’t answer that.
Via Cowen, a discussion of bankruptcy.  Some kind of bankruptcy reform is quite possibly the best way to preserve established relationships, but apparently not under active consideration.
Some economic charts from WAPO.  FWIW, I think the Goldman prediction of a sharp bounceback in the third quarter is optimistic.  Could happen, but there is a real chance we will not contain the epidemic, with geographically uneven measures allowing the virus to continually resurface in new locations and reinfect areas where the epidemic is brought under control.
From TPM, the view from Thailand and Nepal.  Grim.  As

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Thanks, Milton Friedman . . .

March 23, 2020

On Sunday, our war time president:
“We’re a country not based on nationalizing our business. Call a person over in Venezuela,” Trump told reporters. “How did nationalization of their businesses work out? Not too well.”
Trump administration officials pointed to voluntary actions from companies, such as 3M announcing more masks are being shipped to New York and Seattle.
“We’re getting what we need without putting the heavy hand of government down,” White House adviser Peter Navarro said at Sunday’s briefing with the president.
Russ Roberts did an Econtalk episode with Tyler Cowen on the epidemic a couple of days ago.  From the transcript:
[This is Roberts] And my thought–it’s hard to have a libertarian moment or a classical liberal moment in these times–but,

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Corona virus thinking . . .

March 20, 2020

I am still trying to wrap my head around the coronavirus disaster.  Here is some current thinking . . .
The immediate cause of the economic slowdown is a collapse in both demand and supply due to social isolation.  This will have at least two knock-on effects.  First, the initial collapse in economic activity will be magnified by a traditional demand multiplier effect.  Second, the collapse in economic activity will lead to widespread formal and informal bankruptcies as unemployed workers are unable to pay rent, mortgages, car payments, etc., and businesses and non-profit institutions are unable to service their debts or cover their fixed costs.  These bankruptcies could trigger a financial crisis as banks and other financial intermediaries end up with

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Let’s get real about coronavirus testing . . .

March 19, 2020

We do not know how severe the covid-19 epidemic will be or how much economic and social pain it will cause, but it clearly has the potential to kill hundreds of thousands or even millions of Americans, and the economic consequences could include a deep recession and even a financial crisis that will cause misery to tens of millions of people.
Testing is key to getting the epidemic under control, and it is not clear to me that policymakers are being nearly as aggressive about expanding testing capacity as they should be.  Think of two alternative testing strategies.  One strategy is to selectively test people who have symptoms or who may have been exposed to someone with the disease.  The alternative strategy is to develop the ability to do mass screenings

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Biden or Sanders?

March 6, 2020

I want to weigh in briefly on the Biden/Sanders debate that’s been going on here over the past few days. No links, this is a quickie.
There are two issues for Democratic primary voters to consider: 1) who will be a better president and 2) who is more electable in a race against Trump. Both questions are hard to answer.
It is very difficult to say who would be a better president, even for people on the left of the Democratic party. Presidents have very little influence over legislation. If Congress decides to pass a much less aggressive health care bill than Sanders and his supporters want, what is Sanders going to do about it? Yell at some Congress people? The fact is that the legislative agenda of Congress will be shaped by the need to secure the votes of

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Bargaining power, progressive maximalism, and Medicare for All

February 21, 2020

The HuffPo has reported on a minor dust-up between Bernie Sanders and Alexandria Ocasio-Cortez over the politics of Medicare for All (see here, here, here, also Paul Waldman here).  The tl;dr summary is that AOC suggested that it is good politics for Sanders to insist on MFA, because this will give him more leverage in negotiations over a final bill, but that compromising on a public option is an acceptable outcome that would represent real progress.  Sanders shot back that his bill is already a compromise.  Of course, Sanders’ reply is consistent with AOC’s comments – he may be trying to maximize his bargaining power by pretending to rule out the possibility of further compromise.
My view (here) is that the only significant effect of insisting on MFA will

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How to roast the planet with good intentions: The Climate Equity Act

February 20, 2020

I have suggested (here and here) that idealism is leading progressives astray.  Unfortunately, climate policy offers many examples.
Consider the Climate Equity Act of 2019.  The CEA was, I believe, the first concrete piece of legislation proposed as part of the Green New Deal.  Unfortunately, it illustrates several of the problems with progressive idealism.  The CEA is moralistic rather than strategic.  It does not take policy analysis seriously; it assumes that Congress can simply write a law requiring justice and that justice will magically appear.  In practice, the CEA will do little to promote justice, but it will put a powerful weapon in the hands of opponents of a clean energy transition.
The purpose of the CEA is to ensure all people a right to a

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