Navy hospital ships, once thought critical, see few patients

By JULIE WATSON of the Associated Press.

"About a month ago, with Los Angeles girding for a potentially crippling surge of coronavirus cases, a massive white Navy hospital ship chugged into port: a powerful symbol of the government's response to the pandemic.

The USNS Mercy, with 1,000 hospital beds and giant red crosses on its sides, was welcomed by California Gov. Gavin Newsom and Mayor Eric Garcetti. Both officials were making grim predictions that LA could soon look like New York City, the epicenter of the U.S. outbreak, and Garcetti noted the ship immediately became his city’s largest hospital.

That day may have been the high-water mark for the Mercy, which suffered a virus outbreak among its crew and was the target of a train engineer who hijacked a locomotive and crashed it near the ship. He told investigators the vessel was part of a government plot.

Ultimately, Los Angeles hasn’t been overrun with virus cases, and so the Mercy has not had to play its envisioned role of being a safety net in order to allow hospitals to focus on treating those infected with the virus. 

The Mercy is not alone: As virus infections have slowed or fell short of worst-case predictions, the globe is dotted with unused or barely used temporary hospitals. The Navy’s other hospital ship, the USNS Comfort, left New York on Thursday as the outlook improves there. It treated 182 patients.

Since arriving at the end of March, the Mercy has treated just over 70 non-coronavirus patients for everything from heart and lung conditions to gastrointestinal problems. On Thursday, it had just nine patients on board. Its 750 medical crew members cycle through to provide treatment but otherwise are staying at local hotels to avoid another outbreak.

Even with hundreds of empty beds, there are no plans to send the Mercy home to San Diego.

“We’re encouraged by data which suggest the curve is flattening, but the threat remains," the Federal Emergency Management Agency, or FEMA, said in a statement. “When appropriate, we will work with the city and state to determine if the mission is complete."

Brian Ferguson, a spokesman for the California governor's Office of Emergency Services, said talks are ongoing about how the ship’s medical workers can be used elsewhere.

Officials around the world have offered similar assessments of other temporary hospitals: Their lack of use reflected the need to over-prepare, and they could still be used in a second wave.

But the longer the Mercy stays in port with few patients, the harder it will be to justify the costs, said Bryan Clark, a senior fellow at the Hudson Institute, a conservative-leaning Washington, D.C.-based think tank.

“There was a need to reassure people that something was being done, and hospital ships are very good for that,” said Clark, a former special assistant to the chief of naval operations.

But he warned: “Once its need passes, it can turn from a symbol of commitment to a symbol of inefficiency.''

FEMA estimates the Mercy's mission will cost it about $7.5 million, though the final bill will not be known until the assignment's been completed, the agency said in an email to The Associated Press.
Military officials did not immediately provide a figure for costs on their end.

According to a military briefing document to the U.S. Northern Command obtained by the AP, the defense secretary approved $3.5 million for the Mercy to help cover expenses starting April 20 for the following month.

The Mercy's Capt. John Rotruck said the ship can accept more patients. But those decisions are up to federal, state and local officials, and the health care facilities.

“We just haven't had a request," he said.

And the Mercy does have limitations. It can accept only patients not infected with the coronavirus and who are mobile.

The Navy recently expanded its mission by sending 40 doctors, nurses and corpsmen, most of whom were on standby to serve on the ship, to a state-run, skilled nursing facility near Los Angeles, and more personnel are available, Rotruck said.

For most people, the new coronavirus causes mild or moderate symptoms. For some, especially older adults and people with existing health problems, it can cause more severe illness and lead to death, and nursing homes have been hit hard.

This is not the first time Navy hospital ships have been criticized for being underused; the Comfort was when it was deployed in 2017 to hurricane-ravaged Puerto Rico.

In the pandemic, the Comfort also took flak because it was initially not allowed to treat virus patients, even as hospitals in New York City became overrun.

Following the outcry, the ship did end up treating COVID-19 patients.

New York Gov. Andrew Cuomo said this week federal “protocol" also prevented the ship from accepting residents of a Brooklyn nursing home that lost 55 people to the virus.
Nonetheless, Cuomo said the ship had saved lives.

The 894-foot-long (272 meter-long) converted supertankers are the largest military hospital ships in the world. They were built in the 1980s to treat war casualties; they have assisted after major natural disasters.

While their capabilities run the gambit from treating bomb injuries to replacing pacemakers, the ships' wide-open treatment bays are not designed to handle highly infectious diseases that require keeping patients far apart.

Still, President Donald Trump said the ships were proving so valuable that the government was looking to build two more of a similar size. Experts believe smaller, faster ships would better serve today's needs.

The Mercy, meanwhile, has been reconfigured as nine crew members recovered from the outbreak.
About 300 to 400 crew members come on board daily to staff 250 beds, staggered over three shifts. While not on board, some crew drive vans to pick up doctors at hospitals or do in-take when new patients are transferred, Rotruck said.

Some are taking time off, having worked long hours when the ship was treating about 20 patients a day, Rotruck said.

“We were able to be a relief valve in anticipation of something that didn’t quite get as bad as anybody thought that it might,” he said."

Should we have “challenge studies” where participants are deliberately infected with Covid to test vaccines?

See Shouldn't the public decide? by Scott Sumner.

"Right now, about 7.8 billion people are intensely interested in the question of when the coronavirus problem will abate. Even those living in poor tropical countries with low rates of infection and a very young population, say Nigeria, are impacted by the huge drop in commodity prices.

While there is a great deal of promising research on vaccines, the process takes a long time. But what if there were a way to speed up the process of vaccine development through deregulation? In fact, there is such an option, although it is controversial.

When vaccines are tested, it is difficult to get statistically significant results if the infection rates are low. Thus a random group of 1000 volunteers might end up not being exposed to the virus, especially in this era of social distancing. For this reason, medical scientists often rely on “challenge studies” where participants are deliberately infected with a virus.

You can probably already see the problem—is it ethical to deliberately infect people with a dangerous virus?

On the other hand, this idea is not as wacky as it might seem:

1.  We do challenge studies with flu vaccines.  Yes, the coronavirus is more dangerous than the flu.  But these studies would be done with young adults, for whom the risk is only modestly higher than for the flu, not dramatically higher as with a 70-year old.  (I mean only slightly higher in absolute terms; I’m not sure how much higher the risk is in relative terms.  But with ethical questions, it’s absolute distinctions that matter.)
2.  A recent article in Nature suggests that challenge studies of Covid-19 vaccines might well be ethical, and indeed might even be beneficial for the participants themselves.
3.  There are vaccines that might be available as soon as September, but also might be held back for a long period due to the inability to do challenge studies.  Given how severely this pandemic is damaging the world (in terms of health, wealth and happiness), this potential roadblock is a really big deal.

I’d favor paying volunteers, but given what’s at stake it might be possible to find 1000 people to volunteer without pay.  Lots of young people volunteer to fight in wars.  We could give each of them a Presidential Medal after it’s over.

Some fear that providing financial incentives would “prey on the poor”:

I happen to be a bioethicist who doesn’t have huge objections to attracting study participants by offering financial incentives. But I think in this study, ensuring a high level of public trust is important, and I would advise researchers not to attract volunteers through high payments. This would have the advantage of making sure that the study doesn’t prey on the poor.

If that’s really such a problem then you could have income quotas, where the percentage of poor and non-poor participants is roughly in line with the US population.  I actually think that sort of quota would be “preying on the poor”, not helping them; I’m just saying that none of the traditional objections actually hold water.  If we really want to do this, we can find an ethical way of doing so.
The Nature article advocating a challenge study suggests the participants would be divided into two groups, one of which gets a placebo.  But while I understand that’s standard procedure, I wonder if it is necessary in this case.  Someone correct me if the following is wrong:

Don’t we already know from numerous natural experiments that a very large proportion of people exposed to the virus will become infected?  And that’s in natural conditions such as passengers on the Diamond Princess or workers in a Korean call center.  If the virus challenge were more direct and intentional, wouldn’t the infection rate be extremely high, so that the vaccine could be tested without a (unprotected) control group?

This is a highly contagious disease, indeed one that some scientists believe 50% of people are likely to contract at some point.  Under those conditions, how dangerous is a challenge study giving a vaccine that has already provided strong hints of effectiveness (in previous studies) to a bunch of healthy young people?

Right now, these decisions involving the well being of the entire world are not being made by you or me or Xi Jinping or President Trump or the US Congress.  They are not being made by free individuals making free choices. Rather, they are being made by a few medical ethicists.  My hunch is that the public as a whole is more “utilitarian” than the average medical ethicist.  Should a decision this important be made by the public?  Shouldn’t they at least be consulted.

Notice how the media slides over this issue.  Here’s a story from Business Insider:

“We may get enough data in a couple of months to see if the vaccine works, but if transmission levels drop, this could take up to six months,” the group said on Thursday.

No mention of the fact that medical ethicists might put the planet through 4 additional months of misery by banning challenge studies, and the public doesn’t even know that.

Of course I might be wrong, and I look forward to clarification in the comment section.  I have an open mind.  I request, however, that you read the Nature article, and don’t just assume I’m an economist who “just doesn’t understand these issues”.  Nature is a prestigious outlet, which doesn’t typically publish papers written by crackpots.

It’s also possible that the roadblock is not medical ethics, but some other problem such as our dysfunctional tort law system.  However, I was already skeptical of medical ethicists, due to their frequent support for laws banning kidney markets.  These laws kill tens of thousands of Americans each year."

The Impact of Additional Unemployment Insurance Benefits on Employment and Economic Recovery: How the $600-per-Week Bonus Could Backfire

By Drew Gonshorowski and Rachel Greszler of The Heritage Foundation.

"Congress’s creation of an additional $600 per week in unemployment insurance benefits allows a majority of Americans to earn more from unemployment than employment. Economic studies show that higher unemployment benefits translate into higher levels of unemployment claims and longer durations of unemployment, which translate into lost goods and services. Two Heritage Foundation economists estimate that the impact of the additional $600 bonus will cause 13.9 million more people to file unemployment claims and reduce GDP by between $955 billion and $1.49 trillion. To prevent unnecessary losses and to allow the economy to recover more quickly, policymakers should cap unemployment benefits at no more than 100 percent of workers’ wages and tighten eligibility requirements for claiming benefits to prevent misuse and abuse."

Nursing Homes Are in Crisis. Shutting Down the Economy Won’t Help Them

As states begin to adjust their lockdown policies, they should consider a more targeted approach that accounts for the outsized risk faced by nursing homes

By Todd Zywicki. He is a George Mason University Professor of Law.

"Reports are rolling in about the role nursing homes play in the COVID-19 pandemic and the numbers are horrifying. In Minnesota, 73 percent of all COVID-19 deaths are related to nursing homes. In Massachusetts, the figure is 55 percent. More-systematic reporting and data-collection efforts have resulted in upward revisions in many states of the percentage of deaths associated with nursing homes. Connecticut significantly revised its estimate upward this week, concluding that over half of all coronavirus-related deaths in the state involved nursing home residents instead of its earlier estimate of one-third. Colorado this week announced that 64 percent of its COVID-19 deaths were in nursing homes, a stunning increase of 84 percent in just one week. In communities such as Kirkland, Washington, home of one of the country’s first virus outbreaks, virtually all of their COVID-19 deaths have been related to nursing homes.

The U.S. is not alone in experiencing nursing home trauma. A multi-country study published last week reinforces the emerging U.S. trend, finding 57 percent of the deaths in Canada and approximately half of all deaths in Europe from COVID-19 were related to nursing home patients, including 64 percent in Norway, 49 percent in hard-hit Belgium, and an estimated 53 percent of the total deaths in Spain.

Nursing homes are not representative of the general population, and by ignoring this reality we overstate the risk of the virus to the general population and are failing to protect the most vulnerable among us.

The United States has responded to the pandemic like most countries throughout the Western world, by imposing a society-wide shutdown aimed at “flattening the curve” by shifting infections into the future to prevent the health care system from being overwhelmed by a surge of cases. The economic, social, and personal costs have been massive. Over 26 million Americans have lost their jobs in the past month, trillions of dollars of savings have been incinerated, GDP has plunged, the federal debt has exploded, and many small businesses have been shuttered and will never reopen. Aside from the economic carnage, depression, alcohol abuse, and domestic abuse have all soared during the lockdown period.

A more effective approach would protect our most vulnerable citizens and alleviate the burden on our health-care system while also minimizing the harm to society and the economy.

First, most obvious, we should invest resources where they will do the most good — reducing the harm sweeping through nursing homes. Nursing homes present unique challenges of both infection and mortality that bear little resemblance to the world outside their walls. High residential density, shared common spaces, and shared staff increases both the spread and intensity of infection. Once infection descends, the presence of an older population, many with multiple co-morbidities, raises the risk of mortality.

Nursing homes have already aggressively responded to the crisis by ramping up staff training, sanitation standards, use of personal protective equipment, and other precautions. But these precautions have driven up costs while revenues have fallen as a result of declining populations, driving many homes to the verge of bankruptcy. For a fraction of what the government is spending on unemployment benefits and trying to save small businesses from bankruptcy, it could support even more intensive and effective interventions, such as reducing residential density, eliminating shared rooms, and relocating more active residents to off-site apartments or more independent living facilities. Nursing homes also should receive priority access to testing resources. None of the useful steps that could help to protect nursing homes from greater harm requires shutting down the economy or eliminating anyone’s business or livelihood.

Even strategies designed to “flatten the curve” should begin by preventing mass outbreaks in nursing homes. Consider the city of Lombardy, Italy, the early warning sign that alerted the world to COVID-19’s potential for overwhelming a nation’s health-care system. According to news reports, up to 53 percent of recorded coronavirus-related deaths in Italy may have occurred in care homes and “the majority of the care home deaths have been in Lombardy.” As the experience in Lombardy suggests, focusing efforts on preventing future nursing-home outbreaks will go a long way toward protecting the health system from being overwhelmed while minimizing the impact on the general public.

Including nursing home deaths in overall COVID-19 data can paint a misleading picture of coronavirus risk if those figures are extrapolated and applied to the larger society. For example, researchers at Massachusetts General Hospital recently conducted antibody tests on 200 random members of the general public in Chelsea, Massachusetts. They found 32 percent of those tested had antibodies, which suggested that about 12,800 people in the city had been infected, of which 41 died, an infection fatality rate of about 0.3 percent. Yet of those 41 victims, 27 were residents of just two of the city’s nursing homes — accounting for approximately two-thirds of the city’s coronavirus-related deaths. Whatever the actual infection fatality rate turns out to be in the end (the study’s precise findings are subject to caveats), including nursing-home deaths in the overall assessment inflates the perceived risk of the virus to the public, including to the non-nursing-home elderly, and hinders our evaluation of the benefits and costs of policy interventions. The overrepresentation of nursing-home residents among Covid-19 victims might also impede our ability to assess the effects of general population lockdowns, as huge numbers of nursing-home deaths in many states could swamp any marginal benefit from restrictions on the general public.

Easing restrictions on the general public not only would reduce the costs of combating the virus’s toll, it might also have important benefits, most especially to vulnerable Americans. The “flattening the curve” strategy itself recognizes that quarantine restrictions mainly will delay but not eliminate the eventual spread of the virus through society. But this grim reality has benefits as well as costs — gradually building immunity among the general population may be the most effective way of protecting the vulnerable. Locking down society for the past month has not prevented nursing-home outbreaks and permanent isolation of nursing home residents from society will be neither feasible nor desirable. But even more important than building general immunity might be building specific immunity among particular low-risk individuals, who potentially could serve as a cohort of people who can safely come and go from nursing homes — including staff members, delivery drivers, and medical professionals — while minimizing the risk of future outbreaks.

Understanding the full scope of the nursing-home problem has been frustrated by a lack of comprehensive and consistent data. Last week the Centers for Medicare & Medicaid Services announced nursing homes will be required to start reporting data on Covid-19 cases directly to the Centers for Disease Control and Prevention, which should improve our understanding of the risks from the virus to both nursing home residents and the general public.

This is a welcome move. Recognizing the important role played by nursing homes will help us to better understand the real nature of the enemy, and to attack it with policies that provide the largest benefits at lower costs to our personal liberty and economic future."

Evasive Entrepreneurialism and Technological Civil Disobedience in the Midst of a Pandemic

By Adam D. Thierer of Cato.

"A pandemic is no time for bad governance. As the COVID-19 crisis intensified, bureaucrats and elected officials slumbered. Government regulations prevented many in the private sector from helping with response efforts. The result was a sudden surge of evasive entrepreneurialism and technological civil disobedience. With institutions and policies collapsing around them, many people took advantage of cutting‐​edge technological capabilities to evade public policies that were preventing practical solutions from emerging.

Examples were everywhere. Distilleries started producing hand sanitizers to address shortages while average folks began sharing do‐​it‐​yourself sanitizer recipes online. The Food and Drug Administration (FDA) looked to modify hand sanitizer guidelines quickly to allow for it, but few really cared because those rules weren’t going to stop them. Gray markets in face masks, medical face shields, and respirators developed. Some people and organizations worked together to make medical devices using off‐​the‐​shelf hardware and open source software. More simply, others just fired up sewing machines to make masks—and then, faced with an emerging public health consensus, the guidance from the federal government shifted dramatically: where formerly ordinary people were instructed not to buy or use masks, within a matter of days, the policy reversed, and all were encouraged to make and use cloth protective masks.

Meanwhile, doctors and nurses started “writing the playbook for treating coronavirus patients on the fly” by improvising treatments and then sharing them on social media. A few doctors even converted breathing machines to ventilators themselves using 3-D printed parts to address shortages for their patients even though the FDA had not yet authorized it.

Social media sites were also suddenly filled with discussions about how average people might come together to build tools or share information to assist with virus testing or treatments. A 17‐​year‐​old used his coding skills to build one of the most popular coronavirus‐​tracking websites in the world (ncov2019.live) after noticing how hard it was to use government sites. And two high school science teachers in Tennessee set up testing operations in their school lab to help reduce testing time in their area.

Meanwhile, journalists and columnists like the Wall Street Journal’s Andy Kessler cheered on such activity, encouraging the public to “innovate from your couch.” Modern digital technologies and platforms that had been pariahs and the target of a regulatory‐​minded “techlash” just a few months earlier suddenly became essential public services that were showered with praise for helping people cope with social distancing and the solitude associated with shelter‐​in‐​place requirements. Headlines in major media outlets explained how “Facebook Is More Trustworthy than the President” and “Twitter Is Making the Coronavirus World a Better Place.”

Philanthropists like Bill Gates were also funding their own solutions. The former Microsoft founder and CEO pointed out that, in an effort to find testing solutions and vaccines, private groups like his Gates Foundation could likely mobilize faster than governments. Gates likely had grown frustrated with government responses after a Seattle‐​based lab that the Gates Foundation funded figured out an effective way to test for coronavirus, only to be blocked from expanding it by over‐​cautious federal bureaucrats. Frustrated by federal intransigence, that Seattle lab started testing for COVID-19 anyway to prove they indeed had an effective test. Commenting on the case study, the New York Times expressed exasperation about “how existing regulations and red tape—sometimes designed to protect privacy and health—have impeded the rapid rollout of testing nationally.”

Wait, Isn’t All This Illegal?

What is interesting about all these examples of bottom‐​up innovation and evasive entrepreneurialism is that they are remarkably inspiring, but also mostly illegal. Almost all these activities butted up against longstanding regulations governing medical devices, practices, or therapies. Some of those rules are enforced by large and powerful federal bureaucracies like the FDA and Centers for Disease Control and Prevention (CDC).

Others take the form of state‐​based occupational licensing limitations or certificate‐​of‐​need laws, which require healthcare providers to first obtain permission before they open or expand their facilities or services. This crazy quilt of medical laws and regulations accumulated steadily over time, creating what constitutional scholar Timothy Sandefur calls a “permission society,” which values proceduralism and conformity over practicality and common sense.

Eventually, however, the mountains of red tape that the permission society is built upon start to collapse under their own weight. Laws and agencies that previously commanded obedience are now viewed as an opaque, ossified, and confusing morass of one‐​size‐​fits‐​all mandates, prohibitions, and penalties that actually undermine the very health goals they were put in place to achieve. Suddenly, headlines in every major newspaper screamed of how, as it pertained to virus testing procedures, “The Government Failed” (Wall Street Journal) because of “Flawed Tests, Red Tape and Resistance” (Washington Post) and this resulted in “The Lost Month” (New York Times) in the United States.
Eventually, people take notice of how regulators and their rules encumber entrepreneurial activities, and they act to evade them when public welfare is undermined. Working around the system becomes inevitable when the permission society becomes so completely dysfunctional and counterproductive.

Technological Empowerment vs. the Status Quo

What’s going on here, and what lessons can we derive from it?

In a new Cato Institute book, Evasive Entrepreneurs and the Future of Governance, I document how the sort of behavior we have recently witnessed was growing rapidly even before the COVID-19 crisis. In many different contexts, evasive entrepreneurs—innovators who don’t always conform to social or legal norms—are using new technological capabilities to circumvent traditional regulatory systems. They at least want to put pressure on public policymakers to reform or selectively enforce laws and regulations that are outmoded, inefficient, or counterproductive.

Evasive entrepreneurs rely on a strategy of permissionless innovation in both the business world and the political arena. They push back against the permission society by creating exciting new products and services without always receiving the blessing of public officials before doing so. While evasive entrepreneurialism has always been with us to some extent, many of the responses to the pandemic would not have been possible even just a few decades ago. Recent advancements have supercharged in a more technologically empowered world of information abundance and decentralized, inexpensive tools.

As I show in the book, evasive entrepreneurs are taking advantage of the growth of what we might think of as technologies of freedom or resistance. These are devices and platforms that let citizens circumvent (or perhaps just ignore) public policies that limit their liberty or freedom to innovate or to enjoy the fruits of innovation. These can include common tools like smartphones, computers, and various new interactive platforms, as well as more specialized technologies like cryptocurrencies, private drones, immersive technologies (like virtual reality), 3D printers, the “Internet of Things,” and sharing economy platforms and services. But that list just scratches the surface. When the public uses tools such as these to explicitly evade public policies on moral grounds because they find then offensive, illogical, or perhaps just annoying, we can think of that as technological civil disobedience.


Common Sense Prevails

Evasive entrepreneurialism and technological civil disobedience accelerated during the pandemic because both the practicality and morality of government policies came into question in stark fashion. The first month of the crisis witnessed “a torrent of governmental incompetence that is breathtaking in scale,” my Mercatus colleague Scott Sumner argues. “There are regulations so bizarre that if put in a novel no one would believe them,” he notes. “In contrast, the private sector has reacted fairly well, and has been far ahead of the government in most areas.”

Indeed, the pandemic has been a stress test for our institutions, and many of them have failed it. Confusing rules and inflexible agencies that should have been reformed years ago were suddenly exposed and judged harshly. Philip K. Howard, founder of Common Good, says that “Covid‐​19 is the canary in the bureaucratic mine.” Bloated bureaucracies and overbearing regulatory systems, he argues, have created a “toxic atmosphere that silenced common sense” and managed to “institutionalize failure.” Cato’s Paul Matzko has documented how the FDA has been particularly guilty of blocking sensible forms of progress on simple things like face mask production or distribution.

While countless others lambasted the practical failures of our institutions, the morality of government policies was also coming into focus. Why should citizens have their innovative efforts to help others stifled at seemingly every juncture? Must we really follow the law when it undercuts the basic human need to care for others and ourselves?

These are the issues addressed in my new book, which explains the practical reasons why evasive entrepreneurialism is on the rise and then provides a moral defense of it. When innovators and average citizens use tools and technological capabilities to pursue a living, enjoy new experiences, or improve the human condition, they often disrupt legal or social norms in the process. That is not necessarily a bad thing. In fact, evasive entrepreneurialism can transform our society for the better because it can help expand the range of life‐​enriching (and often life‐​saving) innovations. Evasive entrepreneurialism can help citizens pursue lives of their own choosing—both as creators looking for the freedom to earn a living and as individuals looking to discover and enjoy important new goods and services.

Defending evasive entrepreneurialism is easy after it occurs, but few defend it before or as it is happening. I argue in the book that the freedom to innovate is essential to human betterment—for each of us individually and for civilization as a whole—and that freedom deserves to be taken more seriously today. The COVID-19 pandemic has made this more apparent than ever before.

There are few things more human than acts of invention. At its root, innovation involves efforts to discover new and better ways of solving practical human needs and wants. People have a right to innovate and create technologies because they possess a more general right to take steps to improve their lot in life and the lives of others around them. When misguided or archaic government programs and policies blocked that potential during the pandemic, people began ignoring or evading them. That was both practically sensible and morally justifiable.

Innovation as the New Checks and Balances

By extension, the response to the pandemic has proven the second thesis set forth in my book: Evasive entrepreneurialism and technologically enabled civil disobedience can actually help us improve government by keeping public policies fresh, sensible, and in line with common sense and the consent of the governed. Evasiveness and technological disruption can act as a sort of relief valve or circuit breaker to counteract negative pressures in the system before things break down completely. By challenging legislators and regulators to reevaluate the wisdom of their policies, evasive entrepreneurs can help us break political logjams and force governments to become more adaptive and accountable.

The proof is in the pudding. As the crisis unfolded, agencies at the federal, state, and local levels were forced to suspend hundreds of regulations that were clearly undermining helpful responses. These “rule departures” would not have been necessary if governments had engaged in periodic spring cleanings earlier. When COVID-19 hit, it became essential to suspend or repeal hundreds of misguided old rules that clearly undermined public health. The only question now is whether those inefficient, counterproductive policies will be put back on the books to do harm again in the next crisis.

But even before the current crisis, rule departures by government actors were becoming more common because even government officials could no longer understand their own rules. Just as private citizens have increasingly resorted to evasive techniques to get things done, many regulatory agencies have given up trying to “go by the book” themselves because endless regulatory accumulation has made it impossible to understand what the law means.

My book documents many cases of public officials essentially ignoring their own policies and making up governance solutions as they go along. This is another sign of profound institutional failure, yet it should also give us some hope that even policymakers themselves now realize that government cannot just grow forever without breaking down at some point. The need for comprehensive reform is now abundantly clear, and the pandemic has moved the so‐​called “Overton Window” (i.e., the acceptable range of possible policy reforms) on many fronts.

A New Approach to Governance

Policymakers need a new approach for technological governance that is more in line with modern realities. Flexibility and humility will be essential. Regulators do not need to throw out the old rulebooks altogether, though. Some precautionary rules still make sense, particularly in cases involving extreme risk. But why not embrace the entrepreneurial spirit of the citizenry and allow more experimental trials, flexible testing procedures, and perhaps even prizes for particularly innovative ideas?

When enforcing the rules that remain on the books, policymakers should also consider targeted waivers and ex post regulatory reviews as opposed to ex ante regulatory prohibitions on any and all evasive innovations. Liability rules can also be tweaked so innovators do not have to live in constant fear of getting sued for trying to make the world a better place. Finally, post‐​market monitoring and recall notices can also be used to ensure flexible experiments have some regulatory guardrails.

But shutting down creative solutions and unique thinking simply because they run counter to some crusty old rulebook is never the right response. We should view evasive entrepreneurialism as an important part of a broader discovery process that incorporates the profound importance of ongoing, decentralized, trial‐​and‐​error experimentation to the process of societal learning and improvement. Lawmakers should find a way to accommodate a little more outside‐​the‐​box thinking and innovating—and not just when our lives are on the line."

Rubio with Another Call for Industrial Policy

Veronique de Rugy.

"Senator Marco Rubio is out with yet another call for industrial policy. His recent piece in the New York Times is called “We Need a More Resilient American Economy.”

The piece is vague and full of debunked clichés, which would be too long even to list in this column. That said, there are a few points worth making here.

First, Rubio laments what he asserts has been policymakers’ hand-off approach over the past few decades. But the current size and scope of our government say otherwise. Second, even if we assume, for the sake of argument, that he is right and that the government has been too lax about demanding that the private sector prioritize (as he puts it) resiliency over efficiency for the sake of being prepared for a pandemic such as that of COVID-19, Senator Rubio’s proposed solutions aren’t going to cut it. Finally, it cannot be too often said that the lack of government’s preparedness for this pandemic is evidence of a massive government failure. And to the extent that the private sector wasn’t prepared, a lot of this ‘failure’ is the consequence of the many government regulations that got in the way. More importantly, unlike the private sector, the government will not learn from its mistake or improve its resiliency.

Let’s examine the senator’s case in some detail.

First, he alleges that policymakers left too much leeway to private companies to pursue profits at the expense of the common good:

Over the past several decades, our nation’s political and economic leaders, Democratic and Republican, made choices about how to structure our society — choosing to prize economic efficiency over resiliency, financial gains over Main Street investment, individual enrichment over the common good.

Any prudent policymaker should recognize that both efficiency and resiliency are values we should prioritize and seek to balance. But that’s not what we have done in recent decades. Those choices, from offshoring to building an economy based on finance and service, have produced one of the most efficient economic engines of all time. But a pendulum can swing too far in one direction. And when an economy lacks resiliency, it can be devastating in a crisis.

It’s astonishing that a senator first elected during the Tea Party rebellion supposes that the details of American society are, or should be, ‘structured’ by Washington. Moreover, he is hopelessly vague. What does he mean, for example, by prizing “financial gains over Main Street investment?” Who is the “we” here? Does he mean that policymakers have allowed the corporate world to structure its activities the way it did without constraints? Or does he mean this has happened because of policymakers’ incentives? Does Rubio distinguish between policymakers consciously arranging for the corporate world to be structured as it is, from policymakers simply keeping aloof and allowing whatever structures the market creates to emerge? And what exactly does he mean by “resiliency?” What does he mean by “efficiency?” How precisely is resiliency at odds with efficiency? Not clear at all, but what is sure is that this vagueness does most of the work for his poorly designed argument throughout the piece.

But assume, as seems likely, that Rubio is arguing that policymakers have been too lax. This argument is laughable, considering the scale of our regulatory regime, the size of government’s spending, annual deficits, and ballooning debt. The senator might respond by insisting that he means that policymakers have been too lax in the particular areas that matter for whatever it is he thinks “the economy” should accomplish. For instance, he might accuse policymakers of having cut taxes on corporations in ways that reduced incentives to invest in R&D. But if so, how would he explain that for the longest time the U.S. has had one of the most punishing corporate tax codes in the OECD? (Rubio has a weird and misguided obsession with stock buybacks, which he repeats in this column.) It is also hard to argue since every line in a federal budget has been going up in nominal terms. Some lines may have seen their rate of growth reduced but that doesn’t mean that spending has been cut.
But even leaving these questions aside, I would really be curious to know what Rubio thinks the ‘right’ outcome should be. My hunch is that he observes patterns that he does not like, calls these patterns “market” or policy failures, and then creates a whole argument around them. Put differently, he observes only what he identifies as the costs of the current economy without bothering to ask if and how these costs are, or might be, connected with benefits. John Tamny rightfully scolds Rubio for ignoring the bounty produced by the very financial system that the senator decries. And, of course, the senator makes no efforts to think realistically about what the world would look like under this scenario (not what he wishes it would look like).

Rubio, in short, demonstrates that as a policymaker he is the opposite of prudent.

Second, even if we assume that all the shortcomings with the current system are as real and as significant as the senator claims, his solutions are neither clever nor new. They are simply tired policies that big-government types who suffer from serious superiority complexes predictably propose whenever they think that they see something they don’t like. There are many good reasons to dismiss Sen. Rubio’s assertion that politicians and bureaucrats should be trusted to take over from the private sector more power to allocate resources. This is particularly true when he calls for harebrained policies like “the re-shoring of supply chains integral to our national interest — everything from basic medicines and equipment to vital rare-earth minerals and technologies of the future.”

 A “Buy American” mandate is the opposite of prudent and, based on past evidence, I can predict that it will be terrible for both economic resiliency and efficiency. And, of course, re-shoring our incredibly complex supply chain sounds good until one realizes that the very notion of supply chains is false. And where is Rubio’s acknowledgement of the role that Trump’s tariffs (a protectionism in the same vein as the one he proposes) played in reducing the imports of medical supplies needed during this pandemic? But, I guess I shouldn’t be surprised since this is the same Rubio that favors sugar protectionism, which results in the doubling of the price of sugar in the United States compared to the world price, at great cost to many American producers and lower income consumers.

Finally, I do not share Senator Rubio’s faith in the government’s ability to bring greater foresight and long-term focus. Nor do I understand why he supposes that politicians and bureaucrats can “plan” better than what the competitive market process delivers.

Let’s not forget that if there is a core legitimate role for the federal government it includes dealing with situations like this one. But we were not prepared. In fact, I suspect that by now there are very few people today who would defend the way the CDC and FDA have handled this pandemic. This crisis has already made obvious the stupidity and distortions created by thousands of regulations imposed by all levels of governments – regulations that have made it very hard for the private sector to prepare for, and to respond to, this event.

And let’s talk about the federal stockpile. According to Rahm Emanuel:

As the current shortage of ventilators, gloves and masks makes clear, Washington needs to augment the stock of medical supplies. Mr. Clinton established a program along these lines in 1999, and George W. Bush expanded it dramatically in 2005. The reserve was never fully replenished after Washington went to war with previous pandemics.

The way I read this comment is that neither Presidents Obama nor Trump judged this stockpile to be important enough to replenish. Maybe they were surrounded by people who failed to tell them how important it is to do so. Nevertheless, such incompetence testifies to why we should not trust that this same government will use industrial policy to make our economy stronger and more resilient, or to figure out which drugs, or pharmaceutical ingredients, are essential and which aren’t.

This is also the same government that enacted a “stimulus bill” that was incredibly poorly thought through and will likely make the recovery even more difficult. Between an unemployment-benefit expansion that pays people more not to work than to work, to assigning to the Small Business Administration responsibility for the payroll protection program in spite of that agency’s incredibly long history of failing on such fronts, we have no reason whatsoever to think that government officials’ shortsightedness and hubris will miraculously be replaced, if an industrial policy comes, with long-run vision and wisdom.

Talking about shortsightedness, let’s talk about how representatives in Congress and the White House have managed to accumulate so much spending and debt during good times instead of planning for the inevitable bad times. It’s not as if they haven’t been warned about the risks of their spendthrift behavior. They have. Let’s talk about our representatives, those of both parties, being utterly unwilling to reform entitlement spending despite data showing the looming insolvency of these programs and the harmful impact on the fiscal landscape.

As a result, Americans have been asked to choose between their incomes and their lives to a degree that wouldn’t have been necessary if we had been better prepared. And now we are all locked up in our homes and told that we won’t be freed until the government sees a clear way out. (If that’s the case, alas, it will take forever because we still do not have enough tests or a cure.)

Is the private sector perfect? No, far from it. However, I trust that the consumers, entrepreneurs, business owners, investors, and innovators who make up that system will learn important lessons from the mistakes that might have been exposed during this pandemic and fill the gaps they identify. Do I trust the government to do the same? I don’t. Sorry."

The Anti-Stimulus Bill

By David Henderson.

"Yet the CARES Act cannot property be called a stimulus bill, as an examination of the various provisions shows, nor should it be a stimulus bill. The act really is industrial policy in all but name, with a large dose of cronyism thrown in. One major provision, a federally provided $600 weekly addition to unemployment insurance, will delay a recovery until August. The law is a disgrace and the only person in Congress who comes out looking good is Thomas Massie, a Republican member of the House of Representatives from Kentucky’s 4^th Congressional District. Massie insisted on a quorum but failed to get a voice vote.

This is from David R. Henderson, “The Anti-Stimulus Bill,” Defining Ideas, April 23, 2020.
On bailing out airlines:

One other prediction is that for the next year or two, people won’t want to fly as much. That makes the subsidy to airlines one of the worst aspects of the CARES Act. Without subsidies, would some airlines go bankrupt? Absolutely. Would that mean that airplanes would vanish into thin air, so to speak? Absolutely not. Indeed, you have probably flown on airlines that were in bankruptcy. Adding to the dysfunction is that to qualify for the subsidy, airlines must fly a minimum number of times a week, even if they carry few, or no, passengers. So the subsidies cause airlines to waste valuable employee time and millions of gallons of fuel by flying almost empty planes.
Two airlines, JetBlue and Spirit, realizing the idiocy of this, petitioned the Department of Transportation (DOT) to let them drop certain routes. According to the Wall Street Journal, “JetBlue had asked permission to temporarily suspend service to cities including Albuquerque, Minneapolis, Dallas and Houston. Some of those are major hubs for competitors, and JetBlue said it was struggling to fill flights.” The Journal article noted that passenger numbers “have fallen by 95% or more from pre-pandemic levels.” And how did the DOT respond? It denied most of JetBlue’s and Spirit’s requests to cut routes and/or flight frequency. The DOT stated that the airlines had “not persuaded the Department that we must strike a different balance.”

On how we are guaranteed massive unemployment at least through the end of July even if all the lockdowns end immediately:

I’ve saved one of the worst provisions of the CARES Act for last: the $600 per week addition to normal state unemployment insurance (UI) benefits through the end of July. This one provision assures that whatever recovery we have, it will not begin until August. If you believe that the federal government should supplement state unemployment benefits, the responsible way to do that would have been to increase benefits as a percentage of previous pay. State unemployment benefits typically cover about 50 percent of previous pay. Putting philosophical objections aside, could it have made sense for the federal government to add, say, 30 percentage points so that UI would cover 80 percent of previous pay? That would have made workers who lost their jobs almost whole, while still maintaining some incentive to work.
But by adding $600 per week, the federal government ensured that over 10 million, and possibly 20 million, unemployed workers would be paid more by remaining unemployed than they would be paid if they return to their jobs. I warned about this on March 25 while the bill was still being debated. Interestingly, a restaurant owner named Maria Martz commented on my post on April 8 that she applied for Paycheck Protection, but that it requires her to retain or rehire the same employees. She then wrote, “My employees will make more money getting unemployment, so why would they want to keep working???” Indeed. She beat fellow restauranteur Kurt Huffman to the punch by 13 days. In the April 21 edition of the Wall Street Journal, Huffman wrote that many of his employees are making hundreds of dollars more per week by staying unemployed than by returning to work. Jamie Black-Lewis, owner of two spas in Washington state, thought she hit the lottery by getting enough money through Paycheck Protection to keep her employees on the payroll. Wrong! Many of them were angry because they realized they would be paid more if she laid them off. Asked the frustrated Black-Lewis, “On what planet am I competing with unemployment?”"

Top‐​Down Regulations for COVID-19?

By Chris Edwards of Cato.

"Governments often fail because they tend not to learn lessons. They make similar mistakes over and over for reasons described in this study.

The FDA botched its COVID-19 response by using its regulatory powers to monopolize the development of virus tests. I have not heard any apologies for the failure or that any officials have been fired. As a Wall Street Journal investigation of HHS leadership suggests, the gross testing failure has led to lots of finger pointing, but not institutional reforms.

After the testing debacle, one might think that federal leaders would hesitate to impose further one‐​size‐​fits‐​all solutions for COVID-19. But no—the Wall Street Journal reports that House Democrats want to require OSHA “to order all companies to implement comprehensive plans to protect workers who continue in their jobs during the pandemic. The new, emergency standard would have to be issued within seven days after any legislation is signed into law.”

Thus, in seven days federal bureaucrats would apparently write‐​up a Giant Safety Plan to impose on millions of businesses in hundreds of industries across our huge and diverse nation. That makes no sense.

Federal policymakers seem to have little comprehension that their actions often sideline the vast brain power and innovation that lives outside of Washington. At the stroke of a pen, federal regulations nullify the experimentation, dynamism, and speed that America’s private sector can mobilize to solve problems.

As they consider imposing COVID-19 safety regulations, policymakers should ponder the pro‐​active steps that businesses are already taking or actively considering, as discussed in another Wall Street Journal article. Businesses are separating workspaces, taking temperatures and screening health at work entrances, testing employees before they get to work, closing lunch rooms, installing workspace partitions, adjusting shifts, modifying production lines, changing entrances and exits, closing facilities and tracing contacts if workers test positive, placing materials down rather than handing them to others, sanitizing workspaces, having safety experts instruct workers, spacing bathroom urinals, wearing electronic bands to alert workers if others are too close, and providing masks, gloves, and hand sanitizer.

A central plan quickly thrown together in Washington could not impose a “best” way for millions of businesses to install these sorts of changes. Every business is unique. Here are some reasons why allowing businesses to address their own safety challenges is superior to top‐​down federal mandates:
Trial‐​and‐​Error. The Journal story puts a negative spin on diverse business approaches to safety as a “patchwork” and “ad hoc.” But anyone who studies innovation knows that trial‐​and‐​error processes are crucial to economic and societal improvements. Private institutions change direction all the time as they try different things and receive feedback from stakeholders. To discover the best ways to adjust each workplace for COVID-19, businesses need the freedom to experiment and to change course.

Government regulations undermine the steady improvements that are the hallmark of markets and free societies. Imposing COVID-19 safety regulations would reduce business incentives to implement new and better approaches. The question around every workplace would change from “Are we doing this safely and can we do it better?” to “Are we conforming to the OSHA rules?”

Horizontal Learning. Volkswagen is reopening some of its European factories after making 100 workplace changes. VW has been flooded with requests from other businesses about the safety procedures it is using, and so the company has posted its ideas online. American businesses are also studying Chinese businesses that were able to open safely. This sort of horizontal learning is superior to the often‐​ill‐​informed edicts from Washington. Similarly, horizontal sharing of resources during crises is better than vertical intervention, as discussed here.

Costs and Benefits. In theory, federal bureaucrats are supposed to design regulations by comparing the costs and benefits of various possible rules, but the process is a crude way of making decisions in an economy, even after rules have been studied for years. In the current crisis, regulators would have little time to even try and make balanced decisions. Business leaders know their own facilities, employees, and customers, and they can make better reopening decisions based on their local knowledge.

Flexibility. The nature of the COVID-19 threat will change over time. Scientists may learn more about virus transmission on surfaces and in the air. Drugs may be developed to reduce the health risks. New safety approaches and technologies may be developed. As such, businesses need the freedom to adjust their safety procedures over time. Regulations would lock‐​in rules that may be quickly outdated as conditions change."

The Unintended Consequences Of The Kitchen Sink (Covid bills passed too fast)

By Ryan Bourne of Cato.

"As the $2.2 trillion CARES Act sailed through Congress, the general mood was that money had to get out the door as quickly as possible to provide relief for households and businesses.

Details were of second‐​order importance – lawmakers simply wanted dollars flowing to businesses through loans and payroll support, to households through checks, and to those laid off because of COVID-19 through more generous unemployment insurance benefits. One might say Congress threw everything but the kitchen sink at the relief effort, in the hope that at least one program would cover everyone suffering.

Well, it turns out there are unintended consequences of throwing dollars through programs with different aims simultaneously. One obvious example is how the more generous benefits for unemployment insurance and the small business‐​focused Paycheck Protection Program come into conflict.

The CARES Act’s Pandemic Unemployment Assistance waived job‐​search requirements for unemployment insurance and hugely expanded eligibility for those affected by the pandemic. Most importantly, the federal government agreed to pay anybody eligible $600 per week on top of their state unemployment insurance benefits.

As a result, many workers would now be better off out of work than in work, even more so given going to work brought greater risk of contracting the virus. Senator Lindsey Graham, and several commentators, pointed this out as a problem at the time. But his concerns were largely dismissed — paying people to stop activity was seen as a feature, not a bug.

At the same time, the recently expanded Paycheck Protection Program aimed to supply small businesses, hospitality industry companies, and some other eligible businesses with federal guaranteed loans to cover costs, such as payroll, rent, and utilities. But the main aim of the program was for businesses to keep employees on payroll. To do this, businesses were given a financial incentive: the loans would be forgiven if the business avoided cuts to headcount or curbs on wages over eight weeks after funds were dispersed. The more payroll outlays fell, the smaller the part of the loan forgiven.

Can you spot the problem businesses face yet? 

Employees might often find themselves financially better off in the short‐​term if they are laid off. But if employers want to have the PPP loan forgiven, they have to avoid having reduced headcount. Some employees are urging employers to lay them off, while many employers are desperate to retain or quickly rehire those same workers to keep their businesses viable through a forgiven loan.

Now, employees can’t just leave the business unilaterally to start claiming unemployment insurance. At least in theory, they must be fired. But what we are seeing is that these laws combined are putting business owners in a very difficult position.

CNBC reports on a spa owner informing her staff of success in obtaining a PPP loan, for example:

When Black‐​Lewis convened a virtual employee meeting to explain her good fortune, she expected jubilation and relief that paychecks would resume in full even though the staff — primarily hourly employees — couldn’t work.
She got a different reaction.
“It was a firestorm of hatred about the situation,” Black‐​Lewis said.
The animosity is an unintended consequence of the $2.2 trillion coronavirus relief package enacted last month.
…
The anger came from employees who’d determined they’d make more money by collecting unemployment benefits than their normal paychecks.

On Twitter, one business owner said that he tried to keep a skeleton food service going, but workers were anxious about interacting with each other, so he laid them off so they could claim unemployment insurance. Yet that made applying for PPP problematic, because he would have had to rehire staff who currently would prefer not to work. So he passed up on the PPP, meaning he is still facing bills with no assistance. NPR reports too of a coffee shop owner in Harlan, Ky. who closed her doors after employees urged her to lay them off so that they could obtain unemployment insurance.
Meanwhile, business owner Kurt Huffman wrote for the Wall Street Journal:

…we realized that we needed to hire back some of our staff to help with the demand. That proved harder than we expected.
We started making the calls last week, just as our furloughed employees began receiving weekly Federal Pandemic Unemployment Compensation checks of $600 under the Cares Act. When we asked our employees to come back, almost all said, “No thanks.” If they return to work, they’ll have to take a pay cut.

More generous unemployment insurance, in other words, is making laid off workers less likely to accept re‐​hiring and current employees more likely to request employers lay them off. But PPP loan forgiveness for businesses is conditional on them not reducing headcount or wages by June 30th. So businesses suffer financially for doing what is financially better for many of its employees. The two programs directly clash in terms of incentives and are producing discord in the businesses Congress sought to keep mothballed."

Quarantining at Work

By Alex Tabarrok.

"The Washington Post has good piece on one factory practicing an idea I mentioned a few weeks ago in my post on safety protocols, quarantining at work:

For 28 days, they did not leave — sleeping and working all in one place.

In what they called a “live-in” at the factory, the undertaking was just one example of the endless ways that Americans in every industry have uniquely contributed to fighting coronavirus. The 43 men went home Sunday after each working 12-hour shifts all day and night for a month straight, producing tens of millions of pounds of the raw materials that will end up in face masks and surgical gowns worn on the front lines of the pandemic.

…Nikolich said the plants decided to launch the live-ins so employees could avoid having to worry about catching the virus while constantly traveling to and from work, and so the staff at the factory could be closed off to nonessential personnel.

The article also indicates why price increases are critical to increase supply:

They were paid for all 24 hours each day, with a built-in wage increase for both working hours and off time, the company said. It did not disclose the specific percentages."

Why the travel ban did not work

By Scott Sumner.

"On January 31st, the US imposed a travel ban of flights from China. At the time, I didn’t have strong views either way, but it seemed like a reasonable response given the uncertainty associated with the coronavirus epidemic. Today, we know that the travel ban failed completely. (As did the Italian travel ban on China, imposed on the same day.)  In this post, I’d like to explain why.

By the time the US imposed a Chinese travel ban, China had already imposed a quarantine on the entire province of Hubei, and had tightly locked down the entire country. As a result, there would have been no flights from Wuhan to the US even without the travel ban, and only a tiny number of infected passengers would have arrived here from other parts of China—probably less than ten.
In contrast, we received many infected people from Europe during the month of February, and this is one reason why the pandemic is so much worse on the East Coast than the West Coast (albeit not the only reason—density, climate, and a slightly later lockdown may also play a role.)

It’s possible that the travel ban created a false sense of security in February, which made the problem in the US even worse. But even if the travel ban did not create a false sense of security, and even if it did prevent a few infected people from reaching the US, it did not end up helping at all. Rather, at best, it delayed the epidemic by a few days.

With a few exceptions such as Taiwan, in most countries the government and public did not react until the caseload reached a certain threshold. While a travel ban could be helpful for countries with an effective anti-coronavirus policy, they are of no help at all in places where social distancing does not begin until the epidemic reaches X% of the population, such as the US and Europe. If you think of those famous graphs illustrating “flattening the curve”, it merely shifts the curve slightly to the right, without changing its size at all.

There are some countries, such as New Zealand, that require a 14-day quarantine for all new arrivals, and a ban on travel from most countries.  Unlike the US, however, New Zealand has in place a set of policies likely to completely eradicate the virus in the near future.  In that setting, travel restrictions may be helpful.  But they are basically useless in places such as the US and Europe. Today, new arrivals to the US have about as much impact on our caseload as a small stream has on the water level in the Pacific Ocean.  A drop in the bucket.

If the Chinese travel ban was justified in January, it is completely useless today. A random visitor from Canada is probably 1000 times more likely to infect an American as a random visitor from China.  (And if the Chinese data is off by a factor of 10, then 100 times more likely.)  So why do we allow visitors from Canada but not China?  I’m not certain, but I’d guess that an honest account would include the word “spite”.

PS.  Travel from Canada to the US is restricted to essential people such as those engaged in commerce, but not banned."

More Bureaucracy Is Not the Answer to COVID-19

By Veronique de Rugy. 

"In times of crisis like the one we are now going through, calls to grow an already-bloated bureaucracy abound. Whether it's through more centralization, more powers to the federal government, or the creation of new bureaucracy to address the pandemic, the hope is that next time around, a new arrangement will allow for a better and faster response. Not likely.

Yet, it happens each time there's a crisis. After the 9/11 terrorist attacks, the federal government created the Department of Homeland Security and a centralized airport security agency, the Transportation Security Administration. Oh, and don't forget about the Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act, which expanded many other government powers.

Similar growth in government occurred after the Great Recession. For instance, the federal government created the Consumer Financial Protection Bureau, the Financial Stability Oversight Council, the Federal Insurance Office, and many other bureaucracies and programs meant to prevent the next financial crisis. Uncle Sam also accumulated more control over the extension of credit, both mortgage and personal.

This crisis is no different. For instance, former Chicago Mayor Rahm Emanuel recently called for the creation of another program or cabinet-level department to prepare for, and fight, the next pandemic.
Please don't.

First, even if one assumes that the problem with our lack of preparedness was excessive government decentralization, I'm curious as to whether Emanuel would agree to get rid of the many agencies and programs that already exist, like the Centers for Disease Control and Prevention, that would become redundant under his plan. The only thing this new growth would do is add another agency to interfere with the others already charged with doing the same tasks.

Second, a lack of preparation for the COVID-19 pandemic is a government failure of epic proportions and has nothing to do with an inadequate budget or a lack of programs and agencies supposedly charged with preparing for such a risk. This failure is the product of the well-documented and terrible incentives that exist in government. These disincentives spring from the absence of market discipline that each private-sector business faces if it doesn't perform. And these perverse incentives within government are enhanced by the fact that bureaucrats and politicians carelessly spend other people's money. The product is a slew of dysfunctional agencies and programs that often focus on goals that have nothing to do with what the agencies and programs were created for.

Consider the CDC. Preparing for a pandemic like COVID-19 should have been at the forefront of what it does. But instead, bureaucrats there waste most of their resources on fighting things like teen vaping. Create a new department and we'll soon see its original intent buried underneath many other new and politically shiny priorities. And like all bureaucracies, it would find a way to continually expand its purpose and budget.

So, the creation of a new agency would not make us more prepared for the next pandemic. Any new bureaucracy would be part of the same unwieldy government that failed us during this pandemic, botched the launch of the Affordable Care Act website, and pushed us into a 17-year war in Iraq under the notion that it threatened us with weapons of mass destruction. Why would we believe that a government that fails repeatedly will somehow suddenly perform better if only we add another agency?

A better alternative is to continue the deregulatory trend that is helping combat this pandemic. The private sector has proven to be more resilient and flexible than the government. The private sector is far better at delivering solutions for this crisis.

My Mercatus Center colleagues Matthew Mitchell, Adam Thierer, and Patrick McLaughlin have proposed what they call the "Fresh Start Initiative," modeled after the Department of Defense's Base Realignment and Closure, or BRAC, Commission. Their proposed commission would identify and study all the rules revised or suspended during the current crisis and then make recommendations for each rule to be terminated or reformed, thereby crafting "a plan and timetable for automatically sunsetting or comprehensively reforming those policies or programs as part of a single reform package."

If it works as well as BRAC did, many of these useless rules will be permanently terminated. That beats creating more bureaucracies."

We Would Not Be Better Off With Medicare for All

By Stephen C. Miller. He is a professor of economics at Troy University.

"The spread of COVID-19 virus has prompted predictable criticisms of U.S. health care, which has a deserved reputation of being bureaucratic and inflexible. While the presumptive Democratic nominee Joe Biden is hesitant to commit to such a plan, with so many people deemed as “non-essential” losing their jobs, many argue that now is the time for the United States to move to a Medicare For All plan with no copays or deductibles. According to Newsweek public support for Medicare for All has risen in the wake of coronavirus fears. Is Medicare For All an effective treatment to the disease plaguing our country’s health care market?

First, it is important to point out that Medicare For All would likely make the biggest problem with health care markets even worse: the way people behave when they’re spending other people’s money. One of the scariest things about a pandemic is the thought of not being able to get the care you need because of a shortage of beds, ventilators, or simply a lack of available health care workers to treat the sick. Just because people would have health insurance does not mean they would receive health care when they need it most. What we see now during the pandemic is that in countries where everyone is covered by national insurance, the shortages are just as bad as in the U.S., if not worse.

What is needed in a crisis is a health care system that is responsive and flexible, and to move resources like masks, ventilators, and doctors quickly to where they are most needed, prices must be flexible. Insurance need not thwart that flexibility, but health insurance does just this when it prevents prices from working, as it does in the U.S. today. Simply expanding insurance to all would not make the problem go away, and would likely make things much worse.

To illustrate how health insurance distorts prices and peoples’ behavior, we can compare it to a different, and more familiar insurance market: auto insurance. Auto insurance doesn’t protect you against injury, nor does it protect your car against damage. Instead, it protects you from the financial consequences of a car wreck. This is good for you as a driver and car owner, but it’s bad if the protection from those consequences leads drivers in general to take more risks that lead to more accidents and higher premiums for everyone.

So what do auto insurance companies do? They mostly cover unlikely but expensive costs, like the high costs that come from a wreck or theft. Smaller, predictable expenses like new tires and tune-ups are understandably the responsibility of the owner. If you have collision insurance, for example, then you only have to pay your deductible and the insurance company takes care of the rest.

But there’s more to it; after a wreck the insurance company also has you get an estimate before your car’s damage can be repaired. That estimate isn’t perfect, but usually it’s close to the actual cost of the repair.

When was the last time you were presented with an estimate at the doctor’s office prior to receiving your care? Our guess is never. On some occasions, you may be given an estimate of how much the visit’s cost will be to you, but the total cost is something you only learn later, if you bother to read the statement you get in the mail. Because of this, patients never actually know how much their medical care costs up front and cannot make informed decisions about which treatments to seek and which doctor’s office to seek them from. In fact, oftentimes we don’t even know what our own actual cost is going to be until we receive a bill from the doctor for what insurance did not cover. Often, the doctors themselves do not know how much the patient and insurer will be billed for treatment and medicine. There are several reasons for this, but the core problem is that the insurance is treated as if it were a shopper’s card at a grocery store, meant only to provide discounts to people, instead of as a means to reduce uncertainty.

What does this mean for Medicare for All? The most that expanded health insurance can do is protect you from the financial consequences of illness or injury. On the surface, this sounds wonderful. Who could argue against relieving millions of people from the financial burdens of the most expensive healthcare systems in the world? Having insurance itself, no matter how generous the coverage, is no guarantee of care; doctors, nurses, beds, and ventilators are still scarce and must still be allocated somehow. Medicare for All would do little to address this and would likely even exacerbate it by even further removing prices as a means of transmitting information about which medical resources are needed where and when.

Fixing the healthcare sector is a huge task that will likely require several changes. One fix is incredibly obvious: we need transparency in prices up front to allow patients a more informed choice in which treatments to seek. Doing so carries with it the added bonus of forcing hospitals and doctors offices to compete with one another, which would drive prices down as informed consumers shop around to compare prices for similar procedures and treatments. But for price competition to work, there need to be competitors, not cartels who lobby Congress to obfuscate the cost of healthcare from the consumers. The result would be a more flexible health care system, one that in a sudden crisis can shift resources to where they are needed most."

How Wrong Were the Models and Why?

By Phillip W. Magness.

"The epidemiology models used to justify and extend the ongoing coronavirus lockdown are starting to come under much-needed scholarly scrutiny. A new working paper published by the National Bureau of Economic Research (NBER) presents a detailed statistical examination of several influential models, and particularly the study out of Imperial College-London (ICL) that famously predicted up to 2.2 million COVID-19 deaths in the United States under its most extreme scenario.

The ICL model presented an array of scenarios based on different policy responses, but this extreme projection – also referred to as its “do nothing” scenario – grabbed all the headlines back in March. Although the ICL paper described its own “do nothing” scenario as “unlikely” given that it assumed the virus’s spread in the absence of even modest policy and behavioral responses, its astronomical death toll projections were widely credited at the time with swaying several governments to adopt the harsh lockdown policies that we are now living under.

The Trump administration specifically cited ICL’s 2.2 million death projection on March 16^th when it shifted course toward a stringent set of “social distancing” policies, which many states then used as a basis for shelter-in-place orders. In the United Kingdom, where the same model’s “do nothing” scenario projected over 500,000 deaths, the ICL team was directly credited for inducing Prime Minister Boris Johnson to shift course from a strategy of gradually building up “herd immunity” through a lighter touch policy approach to the lockdowns now in place.

Plainly, the ICL model shifted the policy responses of two leading world powers in dramatic ways.
Indeed, the ICL team played no small role in hyping the projections of its “do nothing” scenario, even as its own report downplayed the likelihood of that outcome in favor of more conservative projections associated with an array of social distancing policies and suspensions of public gatherings. On March 20^th ICL lead author Neil Ferguson reported the 2.2 million death projection to the New York Times’s Nicholas Kristof as the “worst case” scenario. When Kristof queried him further for a “best case” scenario, Ferguson answered “About 1.1 million deaths” – the lower boundary of the ICL “do nothing” model.

It’s worth noting that even at the time of its March 16^th public release, the conditions of the ICL’s “do nothing” scenario were already violated, rendering its assumptions invalid. Most governments had already started to “do something” by that point, whether it involved public information campaigns about hygiene and social distancing or event cancellations and the early stages of the lockdown, which began in earnest a week earlier. Voluntary behavioral adaptations also preceded government policies by several weeks, with a measurable uptick in hand-washing traceable to at least February and a dramatic decline in restaurant reservations during the first two weeks of March. When read in this context, Ferguson’s decision to hype the extreme death tolls of the “do nothing” scenario to the press in mid-to-late March comes across as irresponsible.

Nonetheless, the alarmist death toll projections dominated the public narrative at the time and – citing the ICL model – the United States went into lockdown.

A month later, it has become readily apparent that the 2.2 million death projection was off by several orders of magnitude, as was its UK counterpart of 500,000 projected fatalities. Ferguson and the ICL team shifted their public commentary to emphasize other scenarios with more conservative projections in the tens-of-thousands (in some cases this was misleadingly depicted as a revision to their model, although it actually used the milder scenarios in the original March 16^th paper).

Nonetheless, the damage from the over-hyped ICL “do nothing” scenario was already done. Indeed, as of this writing, President Trump is still citing the 2.2 million projection in his daily press conferences as the underlying rationale for the lockdowns. The New York Times’s COVID reporter Donald McNeil was also still touting the same numbers as recently as April 18^th, and even a month later it remains something of a social media taboo for non-epidemiologists to scrutinize the underlying statistical claims of credentialed experts such as Ferguson.

“Stay in your own lane,” we’re told, and let the experts do their own work. Epidemiology has its own proprietary methods and models, even as their most alarmist scenarios – the ones that Ferguson publicly hyped to the media a month ago – falter in visible and obvious ways.

Enter the new NBER paper, jointly authored by a team of health economists from Harvard University and MIT. Its authors conduct a measured and tactful scrutiny of the leading epidemiology forecasts, including the ICL model at the heart of the lockdown policy decisions back in March. Among their key findings:

“The most important and challenging heterogeneity in practice is that individual behavior varies over time. In particular, the spread of disease likely induces individuals to make private decisions to limit contacts with other people. Thus, estimates from scenarios that assume unchecked exponential spread of disease, such as the reported figures from the Imperial College model of 500,000 deaths in the UK and 2.2 million in the United States, do not correspond to the behavioral responses one expects in practice.”

As the authors explain, human behavior changes throughout the course of an epidemic. Even basic knowledge of the associated risks of infection induces people to take precautionary steps (think increased handwashing, or wearing a mask in public). Expectations about subsequent policy interventions themselves induce people to alter their behavior further – and continuously so. The cumulative effect is to reduce the reliability of epidemiological forecasts, and particularly those that do not account for behavioral changes.

If this sounds familiar, it is the critique that my colleague Will Luther made on March 18^th, only two days after the ICL model came out. He similarly noted this implication when Ferguson shifted the emphasis of his public commentary to the more conservative scenarios in his model at the end of March. I also pointed to the importance of behavioral adaption around this time when considering the many policy responses to COVID-19, from public health advice to lockdowns to border checkpoints in certain states.

The NBER paper authors further critique the ICL paper and four other epidemiology models for overstating their own certainty about their many projection scenarios. Behavioral adaptation, among other factors, reduces the accuracy of long-term forecasting. The presentation of multiple scenarios also requires the adoption of a multitude of underlying assumptions about how these factors will play out given each policy choice made. Unfortunately, none of the epidemiology models they considered took sufficient steps to account for these complications.
The NBER study thus concludes:

“In sum, the language of these papers suggests a degree of certainty that is simply not justified. Even if the parameter values are representative of a wide range of cases within the context of the given model, none of these authors attempts to quantify uncertainty about the validity of their broader modeling choices.”

Epidemiological expertise may convey specialized knowledge about the nature of disease transmission that is specifically suited to forecasting a pandemic’s spread. But it does not exempt the modelers from social scientific best practices for testing the robustness of their claims. Nor does it obviate basic rules of statistical analysis.

It would be a mistake to pit epidemiology as a field against its “outside” critics though, as the ongoing COVID-19 debates actually reveal a much more complex scientific discussion – including among medical experts and other specialists in pandemics. Around the same time the ICL model was released in March, distinguished medical statistician John Ioannidis issued a strong warning for disease modelers to recognize the severe deficiencies in reliable data about COVID-19, including assumptions about its transmission and its essentially unknown fatality rates.

More recently, a team of epidemiologists based at the University of Sydney examined the performance of the influential Institute for Health Metrics and Evaluation (IHME) model out of the University of Washington at predicting next-day fatalities in each of the 50 states. Looking at daily results from March and early April, they concluded that as much as 70% of the actual daily fatality totals fell outside of the model’s 95% confidence interval, by either being too high or too low. This finding is not necessarily discrediting of the IHME researcher’s approach, but it does speak to the need for further refinements in their techniques while also cautioning against using its predictions as a basis for policy-making while uncertainty about its accuracy remains high.

As these examples reveal, epidemiology, health economics, and related fields that specialize in medical statistics are not a single “consensus” to be deferred to as a monolithic voice of expertise. Rather, they host necessary and sometimes sharply divided debates – including over COVID-19.
To illustrate the importance of statistical scrutiny, it helps to look to past epidemics and observe what similar debates tell us about the accuracy of competing epidemiological forecasts. In the late 1990s and early 2000s one such example played out in Great Britain concerning Creutzfeldt-Jakob Syndrome, better known by its common moniker of “Mad Cow Disease.”

In 2001 the New York Times ran a story on different epidemiological projections about the spread of Mad Cow Disease, highlighting two competing models.

The first model came from a team of Jerome Huillard d’Aignaux, Simon Cousens, and Peter Smith at the London School of Hygiene and Tropical Medicine (LSHTM). Using a variety of assumptions about the disease’s existing prevalence (some of them hotly contested) as well as observational data about the disease’s incidence prior to its highly publicized 1996 outbreak, the LSHTM model offered a variety of scenarios depicting an overall mild transmission pattern for the disease.

As Cousens told the Times in 2001, “No model came up with a number exceeding 10,000 deaths and most were far lower, in the range of a few thousand deaths” spread over the next decade. While the Mad Cow Disease literature continues to debate some of the underlying assumptions of their model, the LSHTM team’s mortality projections ended up fairly close to reality – at least compared to other models.

An estimated 177 people died from Mad Cow Disease in the UK in the wake of the 1996 outbreak. Disease mitigation measures persist in an ongoing effort to prevent a future outbreak from cattle-to-human transmissions including import/export restrictions on beef and the slaughter of cattle to contain the infection in livestock, but for the past two decades annual Mad Cow fatalities in humans have remained extremely rare.

When the 2001 Times story ran however, a different model dominated the headlines about the Mad Cow outbreak – one that projected a wide-scale pandemic leading to over 136,000 deaths in the UK. The British government relied on this competing model for its policy response, slaughtering an estimated 4 million cows in the process. The competing model did not stop at cattle either. In an additional study, they examined the disease’s potential to run rampant among sheep. In the event of a lamb-to-human transmission, the modelers then offered a “worst case” scenario of 150,000 human deaths, which they hyped to a frenzied press at the time.

In the 2001 Times article, the lead author of this more alarmist projection responded to the comparatively tiny death toll projections from the LSHTM team. Such numbers, he insisted, were “unjustifiably optimistic.” He laid out a litany of problems with the LSHTM model, describing its assumptions about earlier Mad Cow Disease exposure as “extremely naïve” and suggesting that it missed widespread “underreporting of disease by farmers and veterinarians who did not understand what was happening to their animals.” He conceded at the time that he had “since revised [the 136,000 projection] only very slightly downward,” but expressed confidence it would prove much closer to the actual count.

The lead author of the extreme Mad Cow and Mad Lamb Disease fatality projections in the early 2000s is a familiar name for epidemiological modeling.

It was Neil Ferguson of the ICL team.

As with the present crisis, a high degree of uncertainty has loomed over epidemiological forecasts in the past. Such uncertainty is likely unavoidable, but it also produces a wide range of competing projections. When governments design policy based on epidemiological forecasts, their choice of the model to use could be the difference between a mild mitigation strategy and a large proactive intervention, such as the mass slaughter of livestock in the case of Mad Cow Disease or aggressive and wide-scale societal lockdowns in the case of COVID-19.

That choice, often made amid severe data limitations, is often presented to the public as an unfortunate but necessary action to forestall an apocalyptic scenario from playing out. But we must also consider the unseen harms incurred when politicians base decisions on a modeled scenario that is not only unlikely but also wildly alarmist and likely exaggerated by the dual temptations of media attention and gaining the ear of politicians.

Given the high uncertainties revealed by statistical scrutiny of epidemiological models including among other medical experts, the presumption should go the other way instead. What is warranted is not bold political action in response to speculative models generated with little transparency and dubious suppositions, but rather extreme caution when relying on the very same models to determine policy."