Finding Footing

When it gets too much
I need to feel your touch
--Bryan Adams

With COVID hysteria raging among the politicos, markets have found their footing. Major indexes have retraced much of the meltdown path.

Nasdaq has been the strongest index.

Despite tech strength, the best performing sector on the way up has been...energy. $12 oil and all...

Moving Toward Freedom

"Exit visas are imminent."
--Gordon Gekko (Wall Street)

A nice feature of our federalist design is that it invites policy competition among the states. States that impose high taxes on its citizens, for instance, risk losing a big chunk of its tax base if people choose to flee to lower tax regimes.

Currently, varied state responses w.r.t. re-opening their economies post COVID is creating a new basis for policy competition. States such as California, New York, and Michigan, which have signaled that their lockdown orders will extend into the foreseeable future, could see a wave of exits as people seek freedom.

Of course, it is also possible that some people ditch free states if they believe that rescinding lock-down orders puts their health in jeopardy.

While competition related to unlocking economies creates a two-way street, my sense is that traffic will be heavy in one direction only as people move toward freedom.

Time Until Reopen and Politics

I see you on the street and you walk on by
You make me want to hang my head down and cry
--Madonna

Although political bias seemed apparent as we went into lockdown, it now seems obvious as various states look to re-open their economies. Using party affiliation (D = Democratic, R = Republican) of the state governor as a proxy, let's list some states moving to re-open large portions of their economies:

Georgia - R
Iowa - R
Ohio - R
Tennessee - R
Texas - R
West Virginia - R

Now for states signaling reluctance to end lockdowns soon:

California - D
Michigan - D
New Jersey - D
New York - D
Oregon - D
Washington - D

A small and perhaps selective sample. But to my knowledge as of this date, there is no R state digging in its heels proclaiming that it will remain closed for the foreseeable future, nor is there a D state hustling to re-open.

Pressure does seem likely to build on laggards as leaders unlock the shackles. It will be difficult to keep people locked down in places like California when those prisoners see freemen going about their business once again in other states.

Meanwhile, building on the Days to Shutdown metric discussed previously, let's define a metric called Time Until Reopen. Suppose we measure it in terms of the number of days from the peak COVID death count in a state until that state rescinds a majority percentage (e.g., 80%) of its original lockdown orders.

The proposition is this: On average, D states will have a significantly higher Time Until Reopen than will R states.

Although many possible reasons might explain why political bias exists in the COVID situation, distilling those possibilities down into a lucid explanation of the factors at work in this case remains a task for the future.

Do Lockdowns Work?

"Shut it down. Shut it down now!"
--Telco operator (Die Hard)

Interesting study of lockdown effectiveness. The authors considered US states that have ordered mandatory lockdowns (I count 45 state data points on the graph). The independent variable was 'Days to Shutdown,' or the number of days after state COVID death rate hit 1 per million that businesses were ordered to close. The lower the number, the faster the time till shutdown. Some Days to Shutdown are negative because some states issued mandatory lockdowns before death counts had ticked above the 1/million threshold.

The dependent variable was Deaths per Million at 21 Days, or COVID death rate per million 21 days after the initial 1 per million threshold was met.

If lockdowns have been a major factor in preventing COVID deaths, then we should expect to see a positive relationship between X and Y. In other words, the longer it took states to lockdown, the greater the death rate should be.

That's not what we see, however. The slope of the regression line is shown to be slightly negative, with a reported R-squared of about 5%. The authors do not report the statistical significance of their regression results.

The authors suggest that lack of relationship here indicates other variables at work. They report that a regression analysis of per capita death rates vs state population density, for instance, produced a correlation coefficient of 0.44.

European countries were added for context (blue dots). Once again, no relationship between time to lockdown and COVID death rate is apparent.

Although the authors do not reflect on limitations of their study, I can think of a couple off-hand. The data are not distinguished by degree of lockdown, although measures have varied by jurisdiction. For example, Sweden (which the authors do discuss) has implemented relatively light lockdown measures compared to other places. It is interesting that states instituting some of the more draconian measures (e.g., NY, NJ, MI, MA) fare worse on the chart.

Another issue involves why the choice of 21 days after the touching one fatality per million to measure COVID deaths? The authors do not explain how they arrived at the three week reference point. Review of daily fatalities in many jurisdictions does seem to suggest peaks after 3-4 weeks, thus lending some intuitive appeal to the 21 day period. However, supporting rationale here would strengthen the analysis.

Even with those limitations, this study presents some interesting findings. These findings suggest that forced lockdowns are not primary factors in preventing COVID-related fatalities.

Evidence Man

"Let's play another game."
--Frank Dulaney (Body of Evidence)

Nice follow-up piece with Stanford MD and prof John Ioannidis. These pages discussed Ioannidis' mid-March warning of the 'evidence fiasco' surrounding COVID policymaking.

Not surprisingly, he was chastised by the public health establishment for breaking ranks from the party line. Fortunately, Dr Ioannidis did not bow to institutional pressures for compliance and remained on course. Since then, he has authored multiple academic articles on early COVID data analysis and need for better evidence-based policymaking. He has also collaborated with several Stanford colleagues to perform one of the early antibody studies on COVID infection prevalence.

One of the things I find most interesting is that most of Ioannidis' early conclusions--many drawn from analysis of the unique Diamond Princess cruise ship population sample--still hold today.

In the WSJ follow-up piece, Ioannidis notes that, although he enjoys models, "they're very, very low in terms of how much weight we can place on them and how much we can trust them." While models might offer some intuition about situation's early shape, "depending on models for evidence, I think that's a very bad recipe."

He laments that "there's a sort of mob mentality here operating that they just insist that this has to be the end of the world, and it has to be that the sky is falling." Rather than focusing on data and evidence, the mob favors "speculation and science fiction."

Well said, Dr Ioannidis. However, these pages have argued that games of COVID dissonance should be expected. We might also expect that such dissonance will dissipate as the body of evidence continues to grow.

Antibody Studies

Shiver and say the words
Of every lie you've heard
--Echo & the Bunnymen

'Antibody studies' are finally starting to roll in. The studies seek to estimate the percentage of people who have already been infected by COVID-19 by checking for the presence of serum antibodies in large samples (n = 100s or 1000s of individuals).

Results are streaming in. NYC, Boston, Santa Clara, LA, Miami--among others locations (hoping someone aggregates these studies soon on a website).

All suggest similar. The prevalence of COVID-19 among the population is much higher than official reported infection counts--orders of magnitude higher. Estimated prevalence from the antibody studies ranges from 4% to over 20% in some jurisdictions. Projecting these results suggest that tens of millions of Americans have been infected with COVID-19.

It should be noted that COVID antibodies may take 2-3 weeks to develop in the bloodstream after infection, meaning that the infection rate measured in a particular antibody study likely under-reports true prevalence at a single point in time. This is why antibody tests for prevalence need to be repeated to better understand incidence (rate of change) as well.

With total infection counts much higher than expected, fatality rates are much lower than reported--and certainly far lower than initially forecast. Alex Berenson believes COVID-19 death rates are likely to settle in the 0.25% - 0.40% range (deaths/# infected basis).

5/ Add all this up, and the COVID death rate will likely settle into the 0.25%-0.4% range (1 in 250 people infected to 1 in 400). Far from 20 times higher than flu. Meanwhile, the median age of death is 78-80. And unlike the flu, #SARSCoV2 is basically not dangerous to children.

— Alex Berenson (@AlexBerenson) April 24, 2020

It should be acknowledged that the Stanford folks were on top of this from the beginning. It began with Dr Ioannidis' call for prevalence and incidence testing (along with his analysis of the Diamond Princess population sample with conclusions and projections largely in-line with what we're seeing). Other Stanford professors weighed in as well, arguing that COVID infection rates were likely to be far higher than initially reported thus pushing fatality rates far lower--and that, consequently, draconian lock-down measures were likely to do far more harm than good. They echoed the call for prevalence studies.

Now, with the antibody data streaming in, another Stanford doc suggests that policymakers must focus on the data and fundamental biology, rather than clinging to woefully inaccurate hypothetical projections, to thoughtfully remove restrictions and restore order.

Although many people will not welcome the findings, antibody studies help to awaken reasoning minds.

COVID Dissonance

Take the children and yourself
And hide out in the cellar
--Mike and the Mechanics

Cognitive dissonance is mental stress realized when holding contradictory beliefs or thoughts, or by the appearance of new information that consists with existing beliefs. Because cognitive dissonance is difficult to live with, our minds seek to relieve it.

One way to resolve cognitive dissonance is to modify your beliefs or thoughts in the direction of truth. If, for example, you initially believed that COVID-19 pandemic would kill millions of people worldwide, and subsequent data suggest that the virus was much milder than originally thought, then you would concede that your forecast was mistaken. By doing so, of course, you would have to endure some psychic pain associated with admitting that you were wrong.

However, people tend to be loss averse, meaning that, in the case of cognitive dissonance, they are reluctant to cope with the anguish of being wrong. As such, individuals are more likely to pivot away from truth. To avoid psychic pain, they are likely to 'double down,' and escalate their commitment to losing intellectual positions. In the COVID situation, you will be prone to cling to your belief that the virus is a large-scale killer. Those who do not share your views on the COVID-19 pandemic become the enemy.

As the COVID threat dissipates, we should therefore expect multitudes who bought into the original COVID story to collectively dig in their heels and insist that the worst is yet to come.

They will do this until their minds can find a less painful, more convenient way to get off the ride.

Science Deniers

Juror #3: Well, what do you want? I say he's guilty.
Juror #8: We want to hear your arguments.
Juror #3: I GAVE you my arguments!
Juror #8: We're not convinced. We want to hear them again. We have as much time as it takes.
--12 Angry Men

One of the more tiresome replies to people who question statements coming from so-called public health officials' is that the questioners are obviously 'science deniers.'

I have never seen a convincing explanation of why this claim should be true. Absent such scientific (!) justification, we are left with the claimants' ad hominem rhetoric and what it seems to imply. The 'logic' seems to be as follows:

Public health officials are experts in their field, many of them with advanced degrees.

This means that these people are steeped in science.

Therefore, their statements constitute 'science' and therefore are undeniable.

Paradoxically, such a thought process lands some distance away from chains of logic central to the scientific method.

Moreover, a scientific mind is skeptical. It is constantly asking 'what else can it be?' In the case of public health officials, a plausible rival hypothesis in a format similar to the one above is this:

Public health officials are bureaucrats.

This means that these people are steeped in politics.

Therefore, their statements are grounded in self-interested active agency and in hiding policy errors and therefore are highly questionable.

Why isn't the second hypothesis the more valid one? If the original claimants above cannot convincingly answer this question, then who are the true science deniers?

Prosperity and Production

"We're gonna give the people what they need, at prices they can afford to pay. And as fresh needs come up, we'll satisfy them to--with something new and even more exciting. And when we achieve that, we'll really start to grow. We're not gonna die, we're gonna live! And it's gonna take every bit of business judgment and creative energy in this company--from the mills and the factories right to the top of the tower! And we're going to do it together, every one of us, right here at Treadway."
--McDonald Walling (Executive Suite)

Rand Paul's observation is not just 'opinion.' The only way to alleviate axiomatic scarcity is via production--i.e., combining labor with tools to create consumable output. When production is forcibly curtailed, no amount of money printing compensates for the prosperity that is lost. Less output is being produced.

The one thing that will get our economy going again: reopening! We can’t continue printing bailout money. It’s not a lack of money that plagues us. It’s lack of commerce. Until we reopen our economy, job losses will continue.

— Senator Rand Paul (@RandPaul) April 21, 2020

The only way to improve prosperity is to produce more. More production comes from more people working. The more that people produce, the greater the prosperity.

Excess Deaths

Carla: You have a lifetime left. Why waste it missing what's already gone?
Louden Swain: It does seem morbid, doesn't it?
--Vision Quest

These pages have discussed conditions of active agency surrounding public health officials and associated policymakers, including their incentive to 'fudge' data to cover-up errors. It is not surprising, then, that officials are taking increasingly liberal approaches to recording COVID-19 mortality, including backdating deaths and counting anyone even presumed to have the virus upon death as a COVID fatality.

Given that the 'official' COVID numbers are being infected (!) with error at growing rates, it is possible that the most accurate picture of COVID-19 fatalities will come from examining total death counts from all causes (which are much harder to fudge vs cause of death), and taking the difference between actual deaths and the number of fatalities expected from historical patterns to arrive at 'excess deaths' attributable to the coronavirus.

If COVID-19 death counting was 100% accurate, then we would expect to see total deaths surge by the amount of this new, unique morbidity. However, if COVID death counts surge but total fatalities don't surge similarly, then the lack of 'excess' provides more perspective of the true effect of the new disease.

As Ryan McMaken reports, weekly US death counts as of April 4 have yet to show a nationwide surge. He notes that some states, such as New York, did see a significant increase in weekly deaths in early April. However, other states thought to be areas of concern, such as Colorado and Florida, have seen no increase in deaths. In some states, total death counts are down.

Of course, it is possible that deaths from other causes have declined as people are locked down and not socially interacting. On the other hand, suicides and health problems that generally increase when people are out of work and experiencing difficult economic times could serve to push fatalities higher.

What is evident is that, thus far, COVID-19 related deaths have not been sufficient to push nationwide mortality above that significantly exceeds historical levels.

Less Than Zero

Maybe someday, saved by zero
I'll be more together
--The Fixx

Front month crude currently printing at -$6.84 per barrel. Yes, negative prices for crude. Producers pay buyers to take it away.

Just when you thought you'd seen it all...

$0 Oil

"We're going to get bloody on this one, Rog."
--Sergeant Martin Riggs (Lethal Weapon)

Crude oil is down another 40% (!) this am to under $11/barrel. Prices haven't been this low since 1999 (note that the chart below does not update price till day's end).

Collapsing in the wake of world economic lockdown, oil demand is way out of balance with supply--particularly in the US where cheap credit has funded many marginal domestic producers. These highly leveraged players had little chance of surviving prolonged crude prices below $30 much less down here close to $10.

The situation gets more desperate for marginal players by the day. Their options are these: 1) Keep on pumping oil and sell it for whatever you can while hanging on in hopes that prices recover soon, or 2) shut down and default on your loans and probably never open your doors again.

The situation has gotten so crazy that spot prices for physical barrels of crude are approaching $0 in some local markets. Why? Upstream oil supply chains are running out of storage capacity. With nowhere to put it all, buyers are less willing to take oil off the hands of producers at any price.

$0 oil. Strap yourself in for an ugly shake out coming in the oil patch.

Trading Away God's Gifts

For freedom Christ set us free. So stand firm and do not submit again to the yoke of slavery.
--Galations 5:1

Here is what I believe. Because God created each of us in his image, his most important gifts to us are life and freedom (God is perfectly free). Freedom in this sense is the right to pursue one's interests peacefully--i.e., without forcibly interfering with the rights of others to do the same.

His gifts of life and freedom are not mutually exclusive. Choosing to live life according to God's will necessarily requires the freedom to do so. Just as Jesus was free to walk the path to the cross, so too are each of us free to choose our paths.

Indeed, Easter is the consummate celebration of life and freedom. Christ's resurrection reminds us of the sanctity of life--eternal life--that can only be obtained through free will.

Because life and freedom come from God, no one on this earth can rightfully take them from us. It follows, then, that we are obligated to steward these sacred gifts to the best of our ability. We should not squander them in worthless trades, and we must defend them if need be when they are forcibly threatened.

Yet, we often fail to protect our freedoms (and the life that is necessarily connected to them) when they are endangered. We live stark examples of this failure whenever we obediently bow to earthly proposals or edicts that would have us trade or surrender essential freedoms for modicums of safety.

It is hard to imagine a deal the devil would like more, for Satan knows that it is a free life rather than a secure life that leads us to God.

Yet I fear this is precisely the trade many have been making over the past several weeks. Draconian 'lockdown' orders from policymakers that infringe on liberty in the name of safety are being met largely with acquiescence rather than pushback. People by the millions are conceding, often gladly, personal freedom in exchange for what amounts to participation in government-backed programs proposed to provide some measure of protection against a perceived health threat.

Judge Nap articulates the unconstitutional nature of these policies as only he (with God's grace, of course) can do. But the problem lies not just with policymakers. Their programs could not be implemented without a general willingness among the people to make the trade. The Judge warns liberty, once surrendered to government, is difficult to claw back.

The irony, then, is this. Trading freedom for security proposed to preserve life today may do anything but in the long run.

Make sure you understand the consequences of this trade before you make it.

Pathological Persistence

Oh, the movie never ends
It goes on, and on, and on, and on
--Journey

Alex Berenson observes that many bureaucrats (and their media minions) have locked themselves into a destructive policy path (and narrative) that they can't seem to stop. In many ways, it seems they are turning up the volume despite evidence that suggests they should be dialing it back.

1/ The Santa Clara findings, the Boston homeless shelter and French carrier data, the @hendrikstreeck German serology study, even the @unherd interview all align - #COVID will likely have fatalities 1.5x to 3x that of the flu - though not in the young, who are at very low risk...

— Alex Berenson (@AlexBerenson) April 18, 2020

3/ So what are we doing now? Especially with the economic hit turning out to be greater than the worst-case forecasts and hospitals outside New York emptying out and laying off employees? How come we can't change course?

— Alex Berenson (@AlexBerenson) April 18, 2020

5/ We seem to have locked ourselves into a position where we need to justify the damage we've already caused, instead of recognizing the harm and stopping it. Unless, of course, some people out there really prefer the streets empty and workplaces and stores shut.

— Alex Berenson (@AlexBerenson) April 18, 2020

In the mid 1970s, researchers became interested in the phenomenon of pathological organizational persistence. Why is it that some organizational actions, once initiated, seem difficult to stop--especially in the face of evidence telling them that the initiatives weren't producing favorable outcomes?

A particularly interesting thread of this research studied 'escalation of commitment.' Spanning nearly two decades, these studies examined tendencies of individuals and organizations to become locked into losing situations and to 'throw good money after bad.' Results suggested that economic determinants of a project along with various psychological, social, and organizational forces likely play roles in the escalation phenomenon.

Moreover, there appears to be a temporal effect, meaning that certain factors matter more at certain phases of the project. For instance, a project's economic determinants might shape early commitment, but psychological and social factors serve to reinforce and escalate commitment as time goes by.

Concluding a paper that extended their already impressive body of work, Ross and Staw (1993) proposed several situations likely to escalate, or to make it difficult to exit/reverse, a failing course of action:

• Early introduction of organizational determinants such as internal political support, 'side bets' such as hiring of staff, or how closely the project is seen as tied to core values and objectives.
• Alignment of external political forces with the project.
• Ambiguous and changing economics of the project.
• When potential losses become so large that withdrawal might lead to bankruptcy (organization-wide failure).
• When managers venture far from their areas of expertise.
• When technological changes cause major changes in organizational context such that previously learned procedures and decision checks no longer apply.
• When it is perceived that there is no replacement for the products or services of the organization, external parties (including government and interest groups) will seek to prevent withdrawal from a failing course of action, resulting in what amounts to preserving a permanently failing organization.

On the other hand, the following situations may facilitate withdrawal from a losing course of action:

• Changes in top management that reduce psychological and social sources of commitment.
• Efforts to deinstitutionalize the project to separate the project from the central goals and purposes of the enterprise (i.e., reducing organizational determinants of escalation).
• Appeals to external constituents for resources that would make withdrawal less costly.

We are surely witnessing the escalation dynamic at work right now. Past research can help us understand it and offer paths for how to get off the ride.

Reference

Ross, J. & Staw, B.M. (1993). Organizational escalation and exit: Lessons from the Shoreham nuclear power plant. Academy of Management Journal, 36: 701-732.

Intellectual Specialization and the Learned Ignoramus

"The Defense Department regrets to inform you that your sons are dead because they were stupid."
--Goose (Top Gun)

This article is a timely follow-up to our recent missive about over-reliance on expert thinkers in a specialized world. The author suggests that unbalanced 'intellectual specialization' has contributed to the current crisis.

He draws from a 1930 work by Spanish philosopher Jose Ortega y Gasset called The Revolt of the Masses. Gasset observed that increased specialization among thinkers was creating a new class of narrow-minded intellectuals. These 'learned ignoramuses' were unable to think outside of their core intellectual silos to understand how their disciplined interacted with the broader world. See the chapter entitled 'The Barbarism of 'Specialisation'" beginning on p. 69 for Ortega y Gasset's account of the dynamic.

The author suggests that the current cadre of public health officials fills this bill well. While knowing something about infectious diseases and their spread, these people know little about how their policy proposals impact other aspect of human life. Thus we have prescriptions to lock down the world to prevent the spread of a novel virus in the near term, but little serious consideration of the long term economic and social costs of doing so.

As such, we may be faced with a cure that is far worse than the disease.

Madison's Sorrow

Always searching for the real thing
Living like it's far away
Just leave all the madness in yesterday
You're holding the key when you believe it
--Michael McDonald

When the governor of Ohio announced what amounted to a state lockdown of all 'non-essential' businesses a month ago, I happened to be patronizing a small business in the area.

Lamenting about the forced closure that would go into effect at 9 pm that evening, my proprietor friend speculated that lawsuits would arise challenging the constitutionality of the order. I agreed, although I wondered whether states might have more discretionary police power than the federal government to manage acute situations in their local jurisdictions.

Judge Nap believes that they don't.

Mirroring the US constitution, each state constitution mandates separation of powers between the legislative, executive, and judicial branches. Devised by James Madison and other founding ancestors, separation of powers requires each branch to stay within their assigned borders of authority. The legislative branch writes laws, the executive branch enforces those laws, and the judicial branch interprets them. This mandated division of labor prevents one branch from assimilating power.

It is important to note that Madison et al. stipulated no exceptions to this rule. There are no riders that state, for example, that the requirement for separation of power is negated during crisis situations.

Unfortunately, the genius of this design is turning into Madison's sorrow.

To counter the COVID-19 pandemic, state governors and other officials have been crafting various 'orders' mandating or restricting various individual behaviors. Stay at home, close your business, don't go to the park, keep 6 feet of distance between you and others. The Judge argues that these orders are NOT laws. They cannot justly carry a criminal penalty for violation. Governors can no more legally craft law or assign punishment for noncompliance than courts can command the military or police.

Moreover, even if governors were enforcing orders to close churches, businesses, etc. passed by state legislatures, such laws would be profoundly unconstitutional. The First Amendment firmly establishes freedom of religion and freedom of assembly as fundamental liberties. The Fifth Amendment, per its Due Process clause, firmly establishes the right to be left alone and to engage in voluntary exchange with others.

No constitution gives governors the authority to decide what human activities are 'essential.'

The Judge notes that states may have cause to impair fundamental liberties, but measures must meet what is called a strict scrutiny standard. Strict scrutiny requires that a 'compelling state interest' must exist, and that the interest must be pursued by the 'least restrictive means' possible.

While there is little question that fighting a pandemic is a compelling state interest, there are far less restrictive means to combat a pandemic than broad lockdowns that shutter businesses, churches, and prevent voluntary trade.

At the 'least restrictive' end of the countermeasures spectrum, a state might advise citizens of the dangers at hand and recommend ways to reduce illness or contagion--particularly among those who may be most at risk. By letting the people decide, liberty is preserved as individuals make free, personalized choices for navigating the situation.

Instead, governors are violating their oaths to uphold the Constitution. They are overstepping their legal boundaries when they create orders that are the purview of state legislatures. Moreover, those orders violate constitutional rights. Even when combating pandemics, states must pursue their interests using means that are least restrictive to essential liberties. Plenty of countermeasures to the COVID situation exist that are less restrictive to liberty than those currently imposed.

This is why lawsuits that my small business owner/friend envisions--those that challenge draconian lockdown orders--should win the day in just courts.

Arresting Justice

"It is to Madame Justice that I dedicate this concerto, in honor of the holiday that she seems to have taken from these parts, and in recognition of the imposter that stands in her stead."
--V (V for Vendetta)

Protest groups are popping up in many states to push back against draconian COVID lockdown measures. A protester was arrested in North Carolina yesterday after he failed to follow a police order to disperse.

I wanted to believe this was a joke or a hoax - @raleighpolice calling a protest a “non-essential activity” and arresting someone for speaking out against the state’s lockdown. But it is as real as Stalin. pic.twitter.com/d8Z0UqquIS

— Alex Berenson (@AlexBerenson) April 14, 2020

Police claimed that the arrest was justified because protesting is a 'non-essential activity.'

Another example of authoritarian assault on constitutional rights. As a reminder, there is no 11th amendment, no asterisk, no disclaimer in the Bill of Rights stating that people's constitutional rights are voided in the event of crisis or to preserve national security.

Indeed, constitutional rights were enumerated primarily for times of crisis, for it is during crises that rights to life, liberty, and property are most threatened.

Reliance on Experts

Claire Standish: What's bizarre about you?
Allison Reynolds: He can't think for himself
Andrew Clark: She's right.
--The Breakfast Club

Miserable forecasts and costly overreaction to the COVID-19 situation once again demonstrate the mistake of depending on 'experts' to tell the public how to think. Although it has been recently freshened with discussions of agency problems and data manipulation by public health officials in the present context, the thread running thru these pages that discusses the adverse consequences of relying on expert opinions is long and deep.

I've pulled several posts from the thread for reflection and for future reference.

8/31/09 Argument against of outsourcing one's brain using the Obamacare context to demonstrate. Reflecting those conclusions ten+ years later demonstrates the power of thinking for oneself.

2/10/10 Review of The Treason of the Intellectuals, a 1920s work by French essayist Julien Benda that comments on early movements of the intellectual class away from disinterested pursuit of truth and toward being socially (and politically) connected power brokers of their day. Nothing has changed since, except maybe for the intensity of intellectual migration away from truth.

11/13/10 Uses the destruction wrought by intellectual Ellsworth Toohey in Ayn Rand's The Fountainhead as context for reviews of work by both Hayek (1944, 1949) and Schumpeter (1942) that speculates why intellectuals tend to embrace socialistic ideologies. Reasons offered include blaming capitalism for self-held beliefs about being under-employed, lack of first-hand deep smarts about markets and private industry, and general attraction to utopian ideals of income equality and social justice.

4/29/12 Review of Thomas Sowell's Intellectuals and Society, a well researched 2009 book that discusses a supply chain of sorts operated by those who generate and/or push ideas--many of them faulty--as an occupation.

10/2/12 Discussion of parallels between the Pharisees in Christ's time and modern intellectuals. Reflecting on the readings this past Lenten season, I was once again struck by just how much today's intellectual set resembles Modern Day Pharisees. The Lord is speaking to us.

7/29/18 Prof Williams offers examples of just how often the predictions of so-called experts have been "wrong beyond imagination." Soon, it seems, he'll have more whoppers for his list.

9/21/19 Circles back to the downside of not thinking for oneself. If you think that 'the science has been settled' w.r.t. to matters such as global warming or, now, contagious disease and how to address it, then you are vulnerable to being played by others.

We'll end with some concluding thoughts from the 2/10/10 post cited above:

"Perhaps relying on a subset of individuals to do the reasoning or thinking for the rest of society is not a particularly good division of labor.

"Rather than outsourcing their capacity for reason to those who are considered smart, perhaps individuals should diversify their skill sets to include thought processes that pursue the truth."

Peddling Fear

I read the news today, oh boy
Four thousand holes in Blackburn, Lancashire
And though the holes were rather small
They had to count them all
And now they know how many holes it takes
To fill the Albert Hall
--The Beatles

Saw several headlines this morning stating that the US has moved to the top of the world list in total COVID-19 deaths. These headlines are misleading, of course, because they do not take into account population size.

When the 22,000 coronavirus deaths are compared to the US population of about 330 million, then US death rates are among the lowest in the developed world. Moreover, COVID mortality rates in the US remain below those of the typical flu season.

None of this matters to mainstream media. They remain focused on their specialty: peddling fear.

Morning Glory

Very early when the sun had risen, on the first day of the week, they came to the tomb.
--Mark 16:2

The Holy Women at the Tomb (William Bouguereau, 1890)

Authoritarian Assault

Norfolk: And will you forfeit all you have, which includes the respect of your country, for a belief?
Sir Thomas More: Because what matters is that I believe it. Or, rather no, not that I believe it, but that *I* believe it. I trust I make myself obscure.
Norfolk: Perfectly. Why do you insult me with this lawyer's chatter?
Sir Thomas More: Because I am afraid.
Norfolk: Man, you're ill. This isn't Spain, you know. This is England!
--A Man For All Seasons

Yesterday Kentucky's governor announced that police in the state will be recording license plates of cars in church parking lots this Easter weekend and, subsequently, health officials will order all members of the households associated with those license plates to be quarantined for 14 days.

What now? Go to church this weekend in Kentucky and the state will find you via license plate reader and order you into quarantine for 14 days. Kentucky - population 4.6 million - currently has 271 people hospitalized with #COVID. https://t.co/YyHFBSvo1R

— Alex Berenson (@AlexBerenson) April 11, 2020

Let's see,

Freedom of religion
Freedom of assembly
Right to privacy
No deprivation of life, liberty, property without due process

That's at least three amendments in the Bill of Rights assaulted by a single authoritarian order.

Degree of pushback against orders like this will speak loudly about how much preference for liberty remains among us.

Hiding Type 1 and Type 2 Error

The deception with tact
Just what are you trying to say
You've got a blank face, which irritates
Communicate, pull out your party piece
--INXS

When deciding to act under conditions of uncertainty, two types of errors can be made. A type 1 error is involves acting when you shouldn't (overreaction). A type 2 error involves not acting when you should (underreaction).

For example, in a health care context, a type 1 error would be a 'false positive' that leads you to believe that you have a medical condition that requires treatment when, in reality, you are fine. A type 2 error would be a 'false negative,' meaning that the test did not pick up the medical condition and leads you to believe that you are fine when you really needed to undergo treatment.

These pages recently considered the game theoretic position of public health officials and policymakers who must decide whether or not to act now to best address a potential but uncertain public health crisis in the future. Our analysis concluded that the dominant strategy is to act--because there is a high likelihood that public officials will realize favorable outcomes regardless of whether a future health crisis manifests or not.

Admittedly, however, this analysis depends to some extent on whether public health officials can control public perceptions of type 1 or type 2 policy errors. For example, if they feel that they can manipulate case and death counts numbers associated with a disease outbreak, then public health officials may be more emboldened to select a strategy reflective of 'active agency'--i.e., a response that fits their personal interest more than it fits public interest.

Over the past week we've seen examples of how public health officials are attempting to manipulate COVID-19 case and death counts to control public perception of type 1 and type 2 policy errors.

Accusations are surfacing that Chinese officials deliberately under-reported the severity of the coronavirus outbreak in China. They may have suppressed case and death counts to make the situation look far worse than it was. If the allegations are true, then Chinese public health officials have been engaging in behavior to suppress public perception of a type 2 error.

Reports are also surfacing that officials in some states, such as New York and Ohio, are beginning to count cases and deaths that have not been formally confirmed as COVID-19-based among their official statistics. Why make the numbers look worse than they truly are? To hide type 1 error. By inflating the official counts, public health officials seek to deflect claims that they overreacted--that they made a mountain out of a molehill.

Not sure fudging the numbers will work in this case. Regardless, we are witnessing textbook examples of officials displaying active agent behavior in attempt to hide type 1 and type 2 error.

Institutionalized Compliance

"These walls are funny. First you hate 'em. Then you get used to 'em. Enough time passes, you get so you depend on them. That's institutionalized."
--Ellis Boyd 'Red' Redding (The Shawshank Redemption)

Although many of the draconian measures imposed to counter COVID-19 appear unconstitutional, the vast majority of US citizens are complying. One would think that, at the very least, gross infringements on personal liberty such as 'stay at home' orders and forced shutdowns of 'non-essential' businesses would spark public protests and perhaps outright rebellion.

By and large, however, Americans are not only complying with COVID countermeasures, but they have become zealots in promoting them. In fact, some locales have established tattletale systems for reporting non-compliance to authorities.

Why are Americans so willing to accept infringements on their liberty that they famously fought so hard for in the past?

One explanation is fear. As these pages have noted, conditions of threat drive reactive, fast thinking processes less capable of reason. When we are afraid of what a novel virus strain might do to us, we find it difficult to 'think straight,' making us more likely to bow to central authorities that promise safety.

Another, perhaps more comprehensive explanation can be found in institutional theory. Institutions are cognitive, normative, and regulative structures and activities that provide stability and meaning to social behavior (Scott, 1995). Although we often refer to them as people, places, or dates (e.g., President of the United States, courts, prisons, markets, holidays, 'institutes of higher learning'), institutions are better thought of as the laws, customs, and other norms produced, practiced, or symbolized by those agencies.

When viewed in this manner, institutions constitute an approach for managing environmental uncertainty. Because uncertainty threatens to upset resource flows necessary for survival, people create 'negotiated environments' laden with governance mechanisms to regulate transactions in the name of stability (Oliver, 1991; Pfeffer & Salancik, 1978).

Institutions support the stability motive by specifying 'rules of the game' in social settings; their primary role in society is to reduce uncertainty by establishing stable structure for human interaction (North, 1990).

Individuals and organizations can seen as operating in 'fields' that exert institutional pressures for sameness (a.k.a. 'isomorphism') through various mechanisms (DiMaggio & Powell, 1983). These mechanisms can be coercive ("Do this or you'll go to jail"), normative ("This is the proper thing to do"), or mimetic ("Let's copy what they're doing"). Individuals and organizations that adopt the rules are rewarded with resources and legitimacy that enable survival and prosperity. Those who do not adopt are sanctioned.

The general proposition is this: The greater the environmental uncertainty, the greater the institutional pressure exerted by the field to stabilize the situation.

The COVID-19 pandemic has caused perceptions of environmental uncertainty to shoot through the roof. Witness, for example, the spike higher in the measure of economic policy uncertainty pictured above.

We should expect, therefore, greater imposition of institutional rules aimed at quelling the threat to resource stability posed by the COVID-19 situation. Indeed, we've seen the complete range of institutional mechanisms at work: coercive (mandatory business shutdowns), normative (social distancing standards), mimetic (NBA shutdown quickly cascades to all active professional and amateur sports).

Sanctions for noncompliance are currently so strong that few are tempted to break the rules.

However, if people begin to perceive less acute uncertainty (e.g., "the virus threat has passed" or "the virus threat is less than we originally thought") or if they perceive that newly imposed institutional rules create uncertainty in other areas (e.g., "COVID countermeasures might tank the economy"), then isomorphic pressures exerted by the field must be revised. Ineffective rules must be rescinded or replaced. Otherwise, extant institutions will be seen as creating more instability than they suppress, and rebellion to topple those rules will intensify.

We may be entering such a situation now.

References

DiMaggio, P.S. & Powell, W.W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48: 147-160.

North, D.C. (1990). Institutions, institutional change and economic performance. Cambridge, UK: Cambridge University Press.

Oliver, C. (1991). Strategic responses to institutional processes. Academy of Management Review, 16: 145-179.

Pfeffer, J. & Salancik, G.R. (1978). The external control of organizations: A resource dependence perspective. New York: Harper & Row.

Scott, W.R. (1995). Institutions and organizations. Thousand Oaks, CA: Sage Publications.

Forecasting Misery, or Miserable Forecasting?

Time keeps on slippin,' slippin,' slippin'
Into the future
--Steve Miller Band

Back to the drawing board indeed. After just a couple of days, the 'benchmark' UW-IHME forecasters have revised their COVID-19 death estimates (along with hospital loads) down again. The new projection predicts about 60,000 deaths inside of a range of 31,000 to 126,000. That's a 25% decline off of the past weekend's forecast, and orders of magnitude lower than its initial doomsday projections.

Not surprisingly, the forecasters do not provide ready access to their past predictions, or how indicate just how erroneous they have been.

Mainstream media, on the other hand, has begun publishing puff pieces about how difficult forecasting can be rather than on how miserably wrong these projections have been--not to mention the mammoth costs associated with implementing draconian countermeasures in response to predictions that have been way off.

It is safe to say that forecasters sporting this type of track record in the private sector would not be forecasters for long.

Meanwhile, with actual COVID-attributed US deaths below 13,000 and case counts and hospitalizations slowing, it seems likely that the IHME forecasters will be taking their projections down further yet in order to maintain some semblance of relevance.

What's Going Down?

Paranoia strikes deep
Into your life it will creep
It starts when you're always afraid
Step out of line
The man comes and takes you away
--Buffalo Springfield

Each year the Center for Disease Control (CDC) estimates the number of deaths due to seasonal flu. Here are the results for the flu season ending spring of:

2011: 36,656
2012: 12,447
2013: 42,570
2014: 37,970
2015: 51,376
2016: 22,705
2017: 38,230
2018: 61,099
2019: 34,157

avg: 37,463

These numbers are estimates, however, and CDC acknowledges the possibility of large error. Its own confidence intervals assigned to these values range broadly. For example, for the highest flu year in the series, 2018, CDC estimates that the true value of flu deaths could have been as high as 95,000. That's more than 50% higher the 61,099 point estimate.

These numbers are going to get more attention as COVID-19 mortality forecasts continue to ratchet lower. The University of Washington's Institute for Health Metrics and Evaluation (UW-IHME) projection, which has gained (for reasons currently beyond my comprehension) social status as a model of legitimacy, has been steadily revising its death forecasts (along with its forecasts of hospital resource capacity utilization) lower. As of this writing, it now projects nearly 82,000 domestic COVID-19 deaths within a confidence interval of approximately 49,000 to 136,000.

What this means is that revised COVID-19 death forecasts are now overlapping ranges associated with common flu mortality. With current US fatalities attributed to COVID-19 standing at about 11,000 and daily new case and death counts breaking lower, more downward revisions seem imminent. Only a couple of days old, the most UW-IHME forecast of about 14,600 deaths by today (~30% higher than actual) suggests these folks will be heading back to the drawing board real soon.

As COVID-19 projections continue their descent into the seasonal flu zone, more people will question what's going on down here.

Breaking Good

And when the night is cold and dark
You can see, you can see light
--Corey Hart

You wouldn't know it by mainstream media headlines this morning, but the COVID-19 evidence is breaking decidedly toward the good side this morning. Infection, hospitalization, and mortality metrics, are beginning to roll over--particularly with respect to rate-of-change. For instance, new daily cases are declining in virus epicenters such as Italy.

Italy has reported an average of 4,428 new COVID-19 cases over the last 5 days, the lowest 5-day average since March 15-19. pic.twitter.com/EU5bgerR7B

— Charlie Bilello (@charliebilello) April 3, 2020

Many public health forecasting models of COVID-related mortality and hospital capacity utilization suddenly appear far too high. The institutional prediction community is now scurrying to revise its forecasts lower in order to remain marginally relevant.

Perhaps the best news is that minds continue to wake up to the notion that the cure brought about government intervention is likely to be worse than the disease.

Which is the bigger threat ?

— Thomas Massie (@RepThomasMassie) April 6, 2020

Discounting capacity may be returning to markets as well. The Dow is +1,000 this am as investors sniff out possibilities favorable outcomes from a situation that is breaking good.

Let the People Decide

Sybilla: What becomes of us?
Balian of Ibelin: The world will decide. The world always decides.
--Kingdom of Heaven

Editorial by Mises editors says it more eloquently than I can. Not only does government lack the legal authority to shut down American life, but the far reaching harms brought on by this authoritarian action will surely do more harm than the virus itself.

As they reengage their brains and begin to think clearly, many people are coming to realize that 'the cure will be worse than the disease.'

The correct solution is never a top down central plan implemented by force. Rather, the solution is always bottom up and de-centralized based on voluntary cooperation. Ingenuity and trade with respect to ideas, resources, production, and trade that overcome adversity and enable adpatation.

As the editors state: "The American people--individuals, families, businesses--must decide for themselves how and when to reopen society and return to their daily lives."

Let the people decide.

Prepare for Breadlines

"It feels like it's all...slipping away."
--Max Kellerman (Dirty Dancing)

Animation demonstrates the spike higher in weekly jobless claims. One for the history books.

Goodness. pic.twitter.com/yu6kz8jEaD

— Clay Travis (@ClayTravis) April 4, 2020

If the lockdown madness is permitted to continue, then prepare for breadlines.

And make no mistake. This destruction will have been man-made--not the direct consequence of a virus.

Mandatory Quarantines

Finch: The problem is, he knows us better than we know ourselves. That's why I went to Larkhill last night.
Dominic: But that's outside quarantine!
--V for Vendetta

Can government apply a mandatory quarantine policy, where individuals or groups are required to remain in their households in the name of 'public health'? Judge Nap considers the question from a constitutional perspective.

The Declaration and the Bill of Rights are clear: freedom is the default position. Our rights to think, speak, publish, worship, defend ourselves, travel, own property, and to be left alone are natural to our humanity. Government does not grant these rights. Rather, it is government's job to protect these rights.

Unfortunately, 200+ years of political and judicial interest have stretched government authority far beyond the boundaries established by our founding ancestors. As government power has expanded, liberty, by definition, has declined.

That said, if government (state or federal) wants to impair the life, liberty, or property of any person, then, per the Fifth Amendment, it must follow due process. Although the federal government has since granted itself powers beyond those delegated to it by the plain meaning of the Constitution, the courts have still recognized constitutional safeguards to protect natural rights.

Thus, if extant state or federal government want to confine individuals against their will to protect public health, they need to comply with the constitutional requirement of both substantive and procedural due process.

A government-ordered quarantine of people in a geographic area would be an egregious violation of both substantive and procedural due process. Substantively, no government in American has the lawful power to curtail natural rights by decree.

Procedurally, the states and feds can only quarantine those who are actively contagious and will infect others imminently. Government must present evidence of both in court--at separate trials for each person that it wishes to quarantine. The evidence must be compelling, as the government bears the burden of proof in those trials.

A legal argument sometimes submitted to justify mass quarantines by edict is that the situation is similar to one where an attack seems eminent and offensive force is necessary to quell the threat. But the standard necessary to justify preemption is high--as it should be. If you see someone who you believe dislikes you walking toward you on the street, and you think he might be carrying a concealed weapon, then do you have the right to attack him in the name of self-defense? Not hardly.

Infringing upon a person's freedom--even the freedom of a madman or of a contagious person--is always constitutionally guarded. That means a trial before every quarantine, no matter the public danger. The trial must be fair--not one animated by mass hysteria or government-inspired fear.

The longer government-mandated lockdowns persist, the more likely legal challenges grounded in constitutional arguments will arise.

Epic Incoherence

"Two words: In. Sane."
--Albert Gibson (True Lies)

Trying to wrap my head around the costs of what we're doing. Assume the following rough estimates:

lost production due to lockdown = $2 trillion (10% of $20T annual GDP)
policy interventions (monetary + fiscal) = $5 trillion
acute COVID health care = $0.5 trillion
future social and economic problems from current lockdown = $1 trillion
total = $8.5 trillion

Frankly, I think these estimates are conservative.

The US population is about 330 million. As such, current intervention is costing each citizen almost $26,000--more than $100,000 for a family of four.

Where is that $100K per household going to come from?

On the disease outcome side, currently about 5,100 people have died from nearly 217,000 positive reported COVID-19 cases. About 10% of those positive cases require hospitalization and let's say half of those are critical enough where in-patient care prevents death. That's about 11,000 prevented deaths. Not all of those can be credited to government lockdown policies, however, because interventionary policies are largely aimed at 'flattening the curve'--i.e., to delay (not prevent) the onset of infection in order to keep critical care capacity utilizations below 100%.

Stated differently, a sizeable fraction of critical care COVID-19 patients would have been saved had there been no interventionary lockdown. Let's credit the lockdown with saving half of those patients--5,500 of them. At $8.5 trillion in total, that's a cost of about $1.5 billion per prevented COVID-19 death.

Of course, COVID-19 infections are projected to get much worse from here. If the public health situation escalates 15x worse from here and results in, say, 80,000 prevented COVID-19 deaths, then the cost per prevented death from government intervention would still amount to more than $100 million.

But even if 1,000,000 COVID-19 deaths are ultimately prevented, the cost per prevented death would be $8.5 million each. If 50 million deaths were prevented, the cost would still be $170,000 per saved life.

Even if my cost estimates up top are double what they turn out to be (I think they're actually low), then it is still difficult to get the math to work.

Of course, this analysis fails to balance the cost of deaths that will surely result in the future as a consequence of lockdown policies aimed at reducing deaths in the present. If you care committed to saving lives now from COVID-19, why are you willing to kill people in the future in order to accomplish your goal?

Another question. Why were you not committed to saving lives from seasonal flu by employing similar measures in past years? Even if COVID-19 is more lethal to at-risk demographics, surely people could have been saved by lockdowns in past years? Why is it ok to act now but not then?

For reasoning minds, the incoherence is epic.

On the Rebound

That's how you fell for me
That's how you changed my life
You cut me like a knife
--Russ Ballard

SPX has bounced off its lows to about the tune of the 38% Fibo retracement line. After a rally that included the largest 3 day move since 1931, it feels like the lift is running out of steam.

Will the rally run out of gas here, or will it regain some mo-mo and power higher?