Sunday, May 31, 2020

Come Holy Spirit

The Spirit of the Lord has
filled the world,
and that which holds all things
understands what is said.
--Wisdom 1:7

When the time for Pentecost was fulfilled, they were all in one place together. And suddenly there cam from the sky a noise like a strong driving wind, and it filled the entire house in which they were. Then there appeared to them tongues as of fire, which parted and came to rest on each one of them.

And they were filled with the Holy Spirit and began to speak in different tongues, as the Spirit enabled them to proclaim.

Acts 2:1-4

Saturday, May 30, 2020

Transaction Costs and Regulation

David Larrabee: It's all beginning to make sense. Mr Tyson owns the sugar cane. You own the formula for the plastics. And I'm offered as a sacrifice on the altar of industrial progress.
Linus Larrabee: You make it sound as if the son of the hotdog dynasty had to marry the daughter of the mustard king.

Oliver Williamson passed away last week. Professor Williamson was a giant in the field of transaction cost economics. Building on the pioneering work of the late Ronald Coase, Williamson sought to explain why we see different organizational forms in the marketplace.

On one extreme we find granular trade between small independent contractors producing narrow ranges of output and trading with each other with little or no organizational overhead. Lots of 'outsourcing.' On the other extreme we find huge corporate hierarchies that do much of production and exchange internally rather than on the market. Lots of 'insourcing.'

What factors drive markets versus hierarchy?

Williamson theorized that a primary factor was contracting cost--i.e., the costs associated with governing transactions between parties. When contracting costs are low, then trade tends to happen between granular entities on the market as portrayed in many introductory economics textbooks. As contracting costs increase, more organizational hierarchy becomes necessary to govern trade. At some point, the bureaucratic costs of governing exchange become so high that firms will look to take those transactions off the market and manage them internally.

One source of transaction costs is regulation. For instance, if traders are required to pay a tariff, or meet mandated product or process requirements before a market transaction can be consummated, then entities will consider alternatives such as engaging in production themselves if regulatory costs can be reduced. Of course, these efficiency gains must be weighed against efficiency losses from less specialized/more diversified production.

Currently, regulatory burdens imposed by COVID-19 'regulators' are certain to drive transactions off the market. For example, if goods and the transportation modes that move them must be sanitized before they change hands, then that increased cost of trade will reduce volume associated with contracting out.

Consumers will behave similarly. For instance, if masks are required to go to a gym, restaurant, or sporting event, then that increased cost of trade will motivate some consumers to stay at home and become more self-sufficient.

If regulatory burdens do not lift, then Oliver Williamson would likely agree that motivation for outsourcing will continue to decline, and motivation for insourcing will continue to rise.

Friday, May 29, 2020

White Knuckler

Just hold on loosely
And don't let go
If you cling too tightly
You're gonna lose control
--38 Special

Stock market volatility has been spectacular over the past 2-3 months, with many shares experiencing eye-popping moves in both directions. The chart of Pan American Silver (PAAS) demonstrates well.

After touching a 52 week high at about $26 back in mid Feb, which represented more than a doubling from lows marked early/mid 2019, PAAS stock price proceeded to collapse by nearly 60% over the next month, touching an intraday low of about $10.50/share in mid-March.

From there the stock took off. After tracing out a nice looking cup-and-handle pattern, PAAS shares broke thru their previous high and are trading this morning above $28/share. That's nearly a 170% move off the mid-March lows.

Thrill-seeking investors have been treated to quite the white knuckler.

position in PAAS

Thursday, May 28, 2020

Difficult to Comprehend

Took a ride
I went downtown
The streets were empty
There was no one around

Infectious disease epidemiologists employ hypothetical models to forecast outcomes from the spread of infections. These models narrowly focus on direct outcomes of the disease (e.g., number of infections, number of deaths) depending on whether countermeasures or no countermeasures are employed.

Not only can these models produce spectacularly wrong predictions of the direct effects of infectious disease spread, but they ignore the costs associated with implementing various countermeasures--particularly, ironically enough,  health costs associated with draconian policies certain to upset the lives of millions for protracted time periods.

This side of the forecast would likely be more accurate, as it is well known that one of the most predictive factors associated with public health is economic prosperity. When economies grow, collective health does too.

More people are waking up to the fact that models that have 'informed' policymakers during the current crisis have disregarded the consequences of countermeasures on public health. In this article, an MD and three b-school profs use past research and current evidence to estimate that millions of human life years will be lost in the US alone due to the countermeasures already implemented to 'slow the spread' of COVID-19.

Almost certainly, the cure will be far worse than the disease.

The authors rightly conclude that future policy-making must be informed by a more inclusive analysis than that being conducted by a single class of epidemiological 'experts.'

Adding a forecast cost of countermeasures to a forecasting model should be a straightforward endeavor given the voluminous supporting research. Indeed, why current models lack more comprehensiveness is difficult to...comprehend.

Wednesday, May 27, 2020

Virtue Signaling

Turn out the light
Bolt the door
I ain't going out there
--Bruce Springsteen

The World Health Organization reiterates that the masses should not wear masks unless they are sick or caring for a sick loved one. "There is no specific evidence that the wearing of masks by the mass population has any potential benefit. In fact, there's some evidence to suggest the opposite in the misuse of wearing a mask properly or fitting it properly."
Nice that the WHO is being data driven for a change.

Sadly, this recommendation is unlikely to change the behavior of millions of mask wearers or the agencies, such as the CDC, that are promoting the wearing of facial coverings of any kind.

Why would people be reluctant to remove their masks in absence of evidence to support their use? One reason is that it is generally difficult to reverse an ineffective or failing course of action--particularly when the course of action takes on a political element.

Another reason is that many mask-wearers, perhaps most of them, aren't concerned about the evidence at all. Their objective is not so much a medical one as it is a media one. They are making a statement--primarily one about themselves. By wearing a mask, they signal to others that they concerned about their fellow man and that they dutifully support authoritarian actions to 'stop the spread.'

Masks have become the consummate virtue signaling device associated with this pandemic.

Tuesday, May 26, 2020

Reopen Optimism

If you gave me half a chance you'd see
My desire burning inside of me
But you choose to look the other way

Market rallying on more 'reopen' optimism. Dow and SPX have the lead today.

COMP lagging but shouldn't be too surprising after the run that it's had.

Four letter freaks are now a stone's throw from their late Feb highs. Who would have thunk it?

Sunday, May 24, 2020

Time is Ticking

Tanneran: Louden, this poem mean anything to you at all?
Louden Swain: Yeah. Kind of. I figure the girl in the poem's about my age. She's feeling sad about the leaves falling from the trees. And what the poet tells her is what she's really sad about is that she's beginning to realize she'll die someday too. The thing is, she's already dying.
Tanneran: Is that a good thing to realize, or do you think we'd be better off not thinking about it?
Louden Swain: I don't know. Nobody likes think about it. I don't like to think about it. But if you don't, you might go through life thinking you've got plenty of time. You put off the really important stuff until later. And before you know it, there's no more time left, and you've blown it.
Tanneran: That's not bad, Louden. That's not bad at all.
--Vision Quest

Many people have spent the last 8 weeks or longer holed up at home. The key word is 'spent.' They have spent a portion of their lives that they will never get back.

What have they spent it on? Idle time. Feelings of safety, security.

I can't imagine a worse trade.

God gave us life and the freedom to live it. But our time here is limited. Using that scarce resource to the utmost requires risk taking, not risk aversion.

Time is ticking.

Saturday, May 23, 2020

Nine on Our Side

Ninety nine
I've been waiting so long
Oh, ninety nine
Where did we go wrong?

Thomas Massie suggests that those believing that the Constitution authorizes government to forcibly do things in the name of public health (e.g., mandatory vaccinations, face masks, tracking protocols) misunderstand the Ninth Amendment.

The Amendment states:

"The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people."

James Madison was fearful that government officials would assume that rights not specified in the Bill of Rights belonged to them and not to the people. He authored the Ninth Amendment to clarify that the opposite was true.

There are no provisions in the Constitution for surrendering individuals rights for some 'common good'--such as protection against a pandemic.

The Ninth Amendment tells us that people retain their rights--even in cases of emergency.

Friday, May 22, 2020

Vanishing Capacity

There is freedom within
There is freedom without
Try to catch the deluge in a paper cup
--Crowded House

Capacity in service sector operations is often difficult to accurately pinpoint. It depends less on facility area and more on operating constraints imposed by managers. For instance, the number of customers that a thousand square feet of restaurant space can serve depends on the number of tables positioned in the layout--something that prior to the current pandemic was primarily at the discretion of the establishment's managers.

Regulations for post-lockdown reopening of businesses are dramatically reducing operating capacities in many facilities. In particular, social distancing rules that force more space between employees, customers, et al. are effectively decreasing potential for productive output from many service sector operations.

Sticking with the restaurant example above, some facilities are being forced to remove every other table from service in order to comply with social distance requirements, effectively cutting the number of customers that can possibly be served in half. In addition to restaurants, many retailers, schools, healthcare, and other service sector operations that previously thought they had plenty of production space are now discovering that they don't have enough.

Capacity is vanishing.

It should go without saying that these regulations upset the economics of many service sector enterprises. Yes, many businesses are now being permitted to open. But if the rules restrict operating capacities below the minimum efficient scale necessary to recoup costs, then one of two things is likely to happen.

Either prices of many service sector outputs are going up, or many service sector operations are going under.

Thursday, May 21, 2020

Crude Comeback

Back in black
I hit the sack
I've been too long
I'm glad to be back

After last month's historic plunge that saw prices below zero at one point, crude oil has made an impressive comeback. It has clawed back to the low $30s and is now eyeing the early March 'COVID gap.'

A reverse head-and-shoulders pattern is also evident, making this a bullish looking set-up.

We've come a long way in a month, considering that not long ago most crude storage facilities were full and producers were paying others to take crude off their hands.

Now, as lockdowns ease and people shun mass transit in favor of car travel, demand for oil is perking up.

Wednesday, May 20, 2020

Governors and Degrowth

I must have dreamed a thousand dreams
Been haunted by a million screams
But I can hear the marching feet
They're moving into the street

Referencing the previous post, belief in degrowth, certainly more prevalent on the political left, may help explain differences in lockdown policies between states, as well as how long those lockdowns have been ordered to stay in place.

If you're a progressive governor who subscribes to the global warming narrative, then you might be inclined to order a more draconian lockdown to 'degrow' the economy than would a governor more literate in economic fundamentals.

You also might be inclined to keep your jackboot on the necks of producers and consumers for a longer period of time.


Christy Wills: Just tell me one more time what your solution is to this crisis.
Brantley Foster: We don't cut, we expand.
Sheila the waitress: I agree. Expansion is a positive reaction to the universe. While retraction, or cutting back, or pulling off...those are all negative forces.
--The Secret of My Success

Degrowth? I had never heard the term until a couple days ago. Degrowth is grounded in belief that economic growth and prosperity are central causes of environmental and social decline. Fixing the situation requires 'degrowth,' or curtailing industrial activity and consumer behavior--particularly w.r.t. to industries that employ fossil fuels.

Reasoning minds might have to read that a few times just to make sure they've accurately grasped the central propositions. As absurd as it is, the degrowth idea is organized enough to have its own website, and enough of a following to be discussed among the cosmopolitan intellectual set.

While the label may be new, degrowth is really just a brand of watermelon socialism. In order to save the planet from capitalism, central planning must be substituted for voluntary production and trade.

What is new is that COVID-19 lockdowns have provided a glimpse of what degrowth policy might look like in practice. Such a 'test-run' offers degrowth proponents an opportunity to observe just how far they might be able to push their policies on the public.

Of course, the poverty and all of its associated problems brought on by 'degrowth' will also vividly demonstrate to millions just wrong headed the idea is.

Tuesday, May 19, 2020

Derailing the Train

Benjamin Franklin Gates: Of all the words written here about freedom, there's a line here that's at the heart of all the others. 'But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and provide new Guards for their future security'...People don't talk that way anymore.
Riley Poole: Beautiful...I have no idea what you just said.
Benjamin Franklin Gates: It means if there's something wrong, those who have the ability to take action have the responsibility to take action.
--National Treasure

Although we have all been endowed with the inalienable right to liberty, the law of diversity suggests that each of us does not value liberty equally. Perhaps liberty preference is normally distributed among individuals.

On one end of the bell-shaped curve are people who value freedom so highly that they're willing to rebel when their liberty is infringed only slightly. Because they reside out in the 'tail' of the distribution, these folks are few in number.

On the other end are those content to trade their liberty away for a something else, such as a government-provided security--however temporary that provision may be. There are relatively few of these tail dwellers as well.

If preference for liberty is approximated by the normal distribution, then most people reside in the middle. They are willing to tolerate some compromise to their freedom--perhaps because they figure that the cost of pushback exceeds the perceived gain.

It takes, in the classic words of Locke and Jefferson, 'a long train of abuses' of liberty by government to motivate pushback from the middle group. As that train lengthens, however, preference for liberty is activated in more people in the meat of the bell-shaped curve. At some point, critical mass is reached where rebels collectively engage in throwing off tyrannical government.

How large must that critical mass be? Researchers estimate that the fraction of colonists willing to engage in active rebellion against the British was no more than 1/3 of the colonial population prior to the beginning of the American Revolution. Studies of other libertarian movements conclude similarly. The fraction of the bell-shaped curve whose liberty preference must be engaged to spark rebellion tends to be far less than half.

As governors continue, and in some cases escalate, conditions of draconian lockdown in some states, the train of abuses is getting longer. The lengthening train is engaging the liberty preference in more individuals. These individuals are pushing back in larger numbers. If this process continues, this pushback will get organized with the collective objective of derailing the train.

Monday, May 18, 2020

Digital Printing Press

Now that ain't working
That's the way you do it
Lemme tell you
Those guys ain't dumb
--Dire Straits

In an interview on 60 Minutes last night, Fed chair Jerome Powell uncomfortably discussed the central bank's 'secret' for dealing with financial crises: printing money. When Powell admitted that the Fed "flooded the system with money" in response to the recent market meltdowns a month, the interviewer asked (I am laughing as I type this), "Where does it come from? Do you print it?"

"We print it digitally," Powell replied. "So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds or other government guaranteed security [with the digital money that we created out of thin air, he should have added]."

This is called monetization of debt (or 'quantitative easing') and has been going on for much longer than the past two months.

What's changed is the sheer volume of monetization, and the realization that the Fed's 'digital printing press' policy will not be reversed.

Sunday, May 17, 2020

Avoidance Behavior

Every time I think of you
I always catch my breath
And I'm standing here
And you're miles away
And I'm wondering why you left
--John Waite

In an early April paper (full paper here), Jeffrey Harris, an MD and PhD Economist at MIT, presented evidence that the COVID-19 epidemic curve was already flattening in NYC. After disposing of several alternative explanations of why the flattening curves was a mirage (e.g., lack of testing, not accounting for asymptomatic cases, inhabitants fleeing the city, etc), he proceeds with a discussion of what was making the curve flatten.

He notes studies of social distancing measures, including a comparison of containment policies enacted by various cities during the 1918 Spanish Flu epidemic (Markel et al., 2007), suggest merits of spacing between people, particularly for prolonged periods of time.

Policymakers, of course, will be quick to credit their coercive lockdown measures with putting the necessary distance between people to reduce the threat of infection.

But Harris notes, "there is, however, another strand in the economics literature suggesting that people voluntary engage in avoidance behaviors once they fully perceive the risks of contagion." (p. 13) He notes various studies of past epidemics, including the 2009 H1N1 Swine Flu epidemic when there were no quarantines or lockdowns, where "economists could see no other explanation for their finding that the incidence of new cases fell well below the exponential path predicted from epidemiologists' classical models."

Harris suggests that, "in all of these cases, the critical ingredient in the public policy mix may have been the successful communication of consistent, clear, accurate and timely information to millions of individuals, who responded by taking action without government coercion. Put bluntly, what flattened the curve was no more than the naked truth."

This time around, policymakers who want to take credit for flattening the curve by draconian lockdown need to answer this question first: How do you know that what occurred was not primarily due to voluntary avoidance behavior? Once they understood the risks, why didn't people social distance themselves as they saw prudent?

Imagine where we'd be today if policymakers had merely shared information all along the way and then let the people decide what to do.

btw, Harris recently completed another interesting paper analyzing the subway's role in seeding the virus epidemic in NYC. Perhaps we'll discuss in an upcoming post.


Harris, J.E. (2020). The coronavirus epidemic curve is already flattening in New York City. National Bureau of Economic Research Working Paper No. 26917. April 3, 2020.

Markel, H., Lipman, H.B., Navarro, J.A., Sloan, A., Michalsen, J.R., Stern, A.M., & Cetron, M.S. (2007). Nonpharmaceutical interventions implemented by US cities during the 1918-1919 influenza pandemic. JAMA, 298: 644-654.

Saturday, May 16, 2020

Opacity and Imprecision: Friends of Bureaucrats

"You're asking the wrong question, Jacob."
--Lou Zabel (Wall Street: Money Never Sleeps)

These pages have discussed inflating COVID-19 death counts as a means of masking Type I error in public health policy. Evidence continues to grow that this is being done on a broad scale.

Dr Deborah Birx, response coordinator of the White House task force on the coronavirus pandemic, reportedly voiced frustration at a recent task force meeting with the CDC's antiquated virus data tracking system--a system that she suspects may be inflating statistics such as mortality and case counts by up to 25%.

Why in the world would the country's primary public health agency operate opaque, imprecise systems for collecting information during a pandemic?

This is the wrong question. The real question is, "Why should we expect otherwise?"

Opacity and imprecision are the friends of bureaucrats operating under conditions of active agency. The last thing they want is a system that makes them accountable for their actions.

Friday, May 15, 2020


It's hard times befallen
The Soul Survivors
She thinks I'm crazy
But I'm just growing old
--Steely Dan

For those unaware, the nineteen in COVID-19 stands for the year when the first case of this particular strain of coronavirus was detected. The first reported case in Wuhan, China was mid-November of last year, which suggests the virus was circulating freely for at least a week or more in the locality--given its incubation period and asymptomatic nature.

Back in March, bio-medicine folks at Stanford suggested that the virus entered the US far before the first reported domestic case in mid-January. After all, they observed, "tens of thousands of people travelled from Wuhan to the US in December." Assuming that the virus was highly transmissible and that the number of infections doubled roughly every three days, the researchers estimated that "an epidemic seed on Jan. 1 implies that by March 9 about six million people in the U.S. would have been infected."

The bio docs proceeded to argue that those high infection levels, if accurate, would have translated into a much lower COVID-19 mortality rate than what was being reported.

Not surprisingly, officials dismissed their logic, and stuck to the narrative that there was no chance that infection rates were that high that early in the US.

However, evidence continues to grow that the Stanford folks were on the mark. Sero-antibody studies have revealed that COVID infection levels are orders of magnitude higher than official counts. In fact, some people who have tested positive in serology studies, like these people from the Seattle area, are claiming that they displayed clinical symptoms of the virus in December. My sense is that we'll hear more of these stories.

It seems quite likely that the virus was circulating in the US for months before things were shut down. And that the virus has come and gone in tens of millions.

Thursday, May 14, 2020

Theoretical Contribution

Thomas Callahan: My girlfriend wrote a very interesting essay on who might have ordered the assassinations.
Gavin Vareek: Your girlfriend has a theory?
Thomas Callahan: Here, take a look at it. You'll get a kick out of how her mind works.
--The Pelican Brief

I first read Whetten's (1989) paper about what constitutes a theoretical contribution while I was in grad school. I'm reflecting on it here because I'd like to tighten up some conceptual research in process. Also, current genuflections made in deference to 'science' seem to lack understanding that legitimate science in any discipline is built on strong underlying theory.

When he wrote this, Whetten was editor of what remains arguably the most prestigious 'theory' journal in all of organization science. His primary audience was aspiring authors seeking to publish in the journal. His objective was to convey what he saw as the necessary ingredients of strong conceptual research so that author better understood what they needed to include in their papers to increase chances of publication.

Whetten suggested that a complete theory must contain four essential elements:

What. What factors (a.k.a. variables, constructs, concepts) should logically be considered in the explanation of the phenomenon of interest? The 'right' set of factors is both comprehensive (all of the relevant factors are included) and parsimonious (factors cannot be deleted without reducing value in the model). When formulating theory, it is usually better to err on side of too many factors initially as it is relatively easy to remove unnecessary or invalid factors as the theory is refined over time.

How. After identifying the set of essential factors, the researcher must explain how the factors are related. Figures that contain boxes (the factors) and arrows (the proposed relationships between the factors) help clarify the author's thinking and improve reader comprehension.

Together, the What and How constitute the domain or subject of the theory. When combined, Whats and Hows typically produce testable propositions. The difference between propositions and hypotheses is that propositions involve concepts while hypotheses require measures. Although they are not required for good theoretical contributions, propositions that are testable are generally very useful. They force the researcher to think about concrete applications of new or revised thinking, and they increase the likelihood that future researchers will use the theory to core arguments stemming from the model. When used, propositions should be limited to specifying logically induced research implications of the theoretical arguments. They should not re-plow old ground already confirmed by previous studies.

Why. What are the underlying economic, psychological, or social dynamics that justify the factors and the underlying relationships? The rationale constitutes the theoretical glue that welds the model together (to Whetten, model = theory). In theory development researchers, logic replaces data as the basis for evaluation. If they hope to have an impact, theorists must convince others that their proposed conceptualization makes sense. Moreover, if the research model is be interesting and useful, then all of the relationships in the model have not been previously tested, lest it is already 'classroom ready.'

Although propositions involving Whats and Hows can technically be tested without understanding the Whys in the model, this generally leads to empirically grounded discussions that lack conceptual foundations. Therefore, propositions should be well grounded in the Whys.

Together, What, How, and Why provide the essential ingredients of a simple theory: description and explanation.

Who, Where, When. Under what conditions does the theory hold, or not? Temporal and contextual factors set limits on generalizability and define the range of the theory. Although theorists cannot be expected to anticipate all possible boundary constraints, there is clearly value in conducting simple mental tests for generalizability of core propositions. How might proposed effects change over time? What if the phenomenon under consideration took place in a different land? While Who, Where, When is often fleshed out through subsequent empirical tests, theorists can add validity to their arguments by initiating the process of defining the theory's boundaries.

Most researchers do not generate new theory from scratch. Instead, they generally work on improving theory that already exists. What approaches can researchers take to extend theory in a meaningful direction?

What and How. When seeking to publish work in top tier journals, authors can rarely succeed by simply changing the Whats in an existing model. Adding or deleting variables rarely satisfies reviewers because the changes are rarely of sufficient magnitude to alter the core logic of the existing model.

That said, it may be possible to add a new factor that changes the accepted relationships (the Hows) among the Whats. Introduction of a new variable, for instance, might change the strength or direction of relationship between two existing Whats or might even obsolete a previously accepted relationship entirely. Theorists might keep an eye on empirical research that generates contrary or inconsistent results to motivate revision of models that are not completely satisfactory when subjected to test.

Why. Going after the Why is often the most fruitful, but also the most difficult, path to theoretical contribution. It commonly involves borrowing perspective from other fields that alters metaphors and gestalts that challenge underlying rationales of accepted theories. Whetten cites work that overlaps ecology and economics as an example here.

Who, Where, When. It is usually insufficient to point out new, previously undocumented conditions where an existing model either a) does not work well or b) performs as expected. In some cases, however, investigating qualitative changes at the boundaries could be theoretically interesting if something about the new condition suggests the theory should perform differently. The rule is that theorists need to learn something new about the theory itself when working with it under different conditions. New applications should improve the tool, not merely reaffirm its utility.

Three themes underlie these ideas for developing useful theoretical contribution (or theoretical critique). First, sufficient theoretical contributions rarely propose a single change to existing models. Interesting critiques focus on multiple elements, adding completeness to theoretical work.

Second, effective theoretical critiques should marshal compelling evidence. This evidence could be logical (e.g., the theory is not internally consistent), empirical (its predictions are inconsistent with data accumulated from past studies), or epistemological (its assumptions are invalid, given information from another field).

Third, good theoretical critiques should propose alternative or remedies. Critics are responsible for developing improved conceptualizations. Otherwise, it is difficult to know whether the extant model is inferior, or merely the best we can currently do in a complex world.

Advice that I hope to put to good use in upcoming projects. Would think any proponent of 'science' should aspire to do the same.


Whetten, D.A. (1989). What constitutes a theoretical contribution? Academy of Management Review, 14: 490-495.

Wednesday, May 13, 2020

Unmasking Truth

Evey Hammond: Who are you?
V: Who? Who is but the form following the function of what, and what I am is a man in a mask.
Evey Hammond: Well, I can see that.
V: Of course you can. I'm not questioning your powers of observation. I'm merely remarking upon the paradox of asking a masked man who he is.
Evey Hammond: Oh, right.
--V for Vendetta

In a timely follow-up to our question of whether masks work as a COVID-19 deterrent, an MD presents a case for not wearing them based on past medical research. He observes that no scientific study has been done that conclusively demonstrates a significant deterrent effect of cloth or N95 masks on the transmission of the COVID-19 virus. Thus, any recommendations for mask wearing that claim to be 'scientifically based' must draw from research that investigates the effect of masks on transmission of reasonably similar viruses, such as the influenza virus. Fortunately, previous studies of mask:influenza transmission effects have been done and are available for scrutiny.

He focuses on a 2012 meta-study (i.e., aggregate analysis of multiple previously reported studies) published in Respiratory Viruses that found no conclusive relationship between mask use and protection from influenza. Findings from meta-analyses tend to carry extra weight because they are drawn from various studies in the past, usually over varied conditions, thus serving to increase generalizability.

As an aside, and by way of Alex Berenson, a more recent paper from Emerging Infectious Diseases, a peer reviewed journal published by, quite ironically, CDC, reports similar findings. The article, posted on the CDC site just before the COVID pandemic hit in February, presents findings from another meta-analysis of previous research on mask:influenza transmission research. The researchers "did not find evidence that surgical-type face masks are effective in reducing laboratory-confirmed influenza, either when worn by infected persons (source control) or by persons in the general community to reduce their susceptibility."

Key results are displayed in Figure 2 (below) showing statistical confidence intervals that bracket ranges of measured outcomes relative to a 'no effect' centerline for 10 previous studies of mask:influenza transmission. Those 10 studies are grouped three different ways (A,B.C) to account for some investigations that evaluated masks along side other measures (e.g., wearing masks and gloves). Because the confidence intervals do not break to the left (positive mask effect) or to the right (negative mask effect) of the 'no effect' centerline in nearly all cases, we are left to conclude that masks appear to have no significant bearing on virus transmission across a range of conditions in previous research studies.

Picking back up with the MD's stream of thought, he notes that, until recently, CDC did not recommend wearing a face mask unless a person was infected. Such a recommendation would have been wholly consistent with the research. Instead, CDC has reversed course and now recommends masks--despite no scientific evidence that demonstrates the efficacy of wearing face masks for prevention purposes.

After establishing that masks do not appear to help, the MD goes further. He argues that wearing masks might pose significant health threats. The filtering mechanism of a mask creates problems on the inbound (inhaling) and outbound (exhaling) side of breathing through the mask.

On the inbound side, the mask filter makes it harder to breathe in normal volumes of air, thus impairing respiration. This can lead to various problems, from headaches and increased airway resistance, to reduction in blood oxygenation (hypoxia) and increased blood CO2 (hypercapnia), and all the way to serious life-threatening complications. He cites several studies, some measuring the more pedestrian effects of health care workers who wear masks frequently on the job, to support his arguments.

The MD discusses several serious medical complications that might result from wearing masks for prolonged periods of time, including:
  • Impairment of immunity due to low blood oxygen levels, setting the stage for contracting any infection, including COVID-19, and making the consequences of infection worse.
  • Severe worsening of lung function among elderly who are frail or who have lung diseases such as COPD--as well as among lung cancer patients and those who have had lung surgery.
  • Increasing spread of cancer from prolonged hypoxia--because cancer spreads best in low oxygen microenvironments.
  • Increased risk of heart attacks and strokes--because hypoxia has also been proposed as a factor in the onset of atherosclerosis.
On the outbound side of breathing, masks are problematic because pathogens that the body is trying to reject through exhalation get caught up in the mesh filter. By wearing a mask, people infected with a respiratory virus are likely to exhale virus into the mask, where some of it remains and is available to be reintroduced into the respiratory system on subsequent inhalations. When they rebreathe the virus stuck in the mask filter, people wearing masks might raise concentrations of the virus in their lungs and nasal passages with potentially deadly effects.

The thrust of the MD's message is easily grasped. Currently, there is more 'science' to support not wearing masks during the present pandemic than there is to support wearing them. If you plan to heed the advice of so-called experts to wear masks, then make sure you have considered the possible risks so that you have made a more informed decision.

Tuesday, May 12, 2020

Mass Transit Exodus

Sam Campagna: Frank, the president sent his limo for you.
Lilly Raines: That's the least he could do.
Frank Horrigan: Good. I love public transportation.
--In the Line of Fire

Implication is that less desire going forward to ride mass transit is bullish for oil.

More cars, more gas.

Monday, May 11, 2020

Peak Mask

"Look at all those people down there. They follow the rules. For what? They're letting fear lead them."
--Han (The Fast and the Furious: Tokyo Drift)

Herd behavior tends to stampede past the reasonable to the unreasonable. The mask phenomenon demonstrates this in spades.

At my neighborhood grocery store, the rare mask wearer has been replaced with at least eight in 10 looking like either a doctor going into surgery or Jesse James entering a bank.

Outside, where risk of transmitting any infection is very low, 25%+ may be masked up--even when walking alone.

Do masks 'work?' Advice from the so-called public health 'experts' has been equivocal. Many who said early on that masks didn't matter now say they do. Some states have ordered mask wearing in public. But there has been no conclusive evidence. 

The experts, it seems, have merely joined the herd.

That mask wearing has intensified even as data suggest that the threat is passing demonstrates a classic characteristic of herd psychology. Herd behavior usually peaks somewhere on the other side of the objective.

If the objective is to profit from rising stock prices, the herd is still in stocks after prices start to fall. If the objective is to avoid infection from a communicable disease, then it is likely that people will be putting on masks even as threat of infection dissipates.

When will we hit peak mask?

Sunday, May 10, 2020

Nursing Homes

Ben Luckett: So you think it's like Bernie said? We're cheating nature?
Mary Luckett: Yes.
Ben Luckett: Well, I'll tell ya. The way nature's been cheating us, I don't mind cheating her a little.

Ioannidis et al discussed the large fraction of COVID-19 deaths coming from nursing homes. Consistent with their findings, focused analysis of US data suggest that nursing homes currently account for about 40% of domestic fatalities.

Nursing home deaths account for more than 60% of deaths in several states. In Minnesota, almost 85% of all COVID-19 deaths come from nursing home communities.

Even with the susceptibility of the elderly to the coronavirus--a characteristic that has been understood since the early days of the pandemic, this number is astonishingly high. The intuitive policy response from the beginning was to implement measures to protect this vulnerable group.

Stunningly, it seems that policymakers in many states have been doing just the opposite. Officials in some states, including California, Illinois, Michigan, Pennsylvania, New Jersey, and New York, have been actively pushing COVID-19 elderly out of hospitals and into nursing homes. In many cases this action has subsequently ignited deadly infection spreads among residents.

Meanwhile, these same state officials remain committed to enforcing draconian lockdowns of their broad populations who, as the data continue to show, face minimal risk from the virus.

It is difficult to imagine a more upside down policy response.

What is not so difficult to imagine is the specter of lawsuits, and perhaps even criminal charges, brought against state officials whose policies have resulted in the deaths of perhaps tens of thousands of elderly nursing home residents. There can be little doubt that their actions have created the deadliest of all cul-de-sac effects.

Saturday, May 9, 2020

Cul-De-Sac Effect

Our house
It has a crowd
There's always something happening
And it's usually quite loud

Soon after states began to issue lockdown orders, an academic from Yale penned a NYT editorial using a war analogy. Waging an open war against the virus using across-the-board lockdown strategies risked broad collateral damage. He suggested that a 'surgical strike' might be more in order--one that protects the elderly and other at-risk groups while letting those not at significant risk resume their lives to prevent economic collapse.

Two months later his words remain wise.

He also expressed concern that, by sending families home to huddle amongst themselves for extended periods of time, risk of transmitting the virus might grow within those groups.

I've labeled this the cul-de-sac effect. When we leave our homes each morning, we enter into a cross hatched open network where we interact with many people for relatively short periods of time. At the end of the day we retreat to a cul-de-sac--a closed network of fewer, more intimate contacts.

There is growing evidence that the cul-de-sac is in fact a major source of COVID infection. For example, data from New York indicate that most of the current COVID-19 hospitalizations in the state are coming from people who were staying at home.

Then, of course, there are nursing home and long term care cul-de-sacs that, when not properly secured, have become death traps for the elderly.

While potentially increasing exposure to infection, cul-de-sacs can also decrease resistance to them. If people are forced to remain in the cul-de-sacs by stay at home orders, then they will get less sunshine Vitamin D exposure and be more sedentary. Weakened immune systems are less capable of fighting infections of any type.

Indeed, the cul-de-sac effect may help explain why there is little evidence that lockdowns have been effective at curtailing COVID mortality.

Friday, May 8, 2020

Poverty and Health

Mae Braddock: Howard's fever was getting worse and then Rosy started to sneeze.
Jim Braddock: Where are they, Mae?
Mae Braddock: Jim, we can't even keep them warm.
Jim Braddock: Where are the kids?
Mae Braddock: The boys will sleep on the sofa at my father's in Brooklyn. And Rosy will stay at my sister's. Jimmy, we can't keep them.
Jim Braddock: You don't make decisions about our children without me.
Mae Braddock: What if they really get sick? We already owe Dr McDonald...
--Cinderella Man

It does not take an 'expert' to understand that the most important factor in explaining collective health of a population is standard of living. Standard of living improves from voluntary production and trade (capitalism). As production and trade increase, more resources are generated that enable greater prosperity and healthier lifestyles.

Collective measures of health, such as average life expectancy, are strongly correlated to per capita income over time.

And, although I am not a researcher in the public health space, I'm certain that there voluminous studies that focus on the bottom end of the relationship--that people with lower incomes are generally less healthy. The higher the poverty level of a society, the lower the collective health.

One of the many ironies arising from the COVID situation is that leftists digging in their heels in favor of extended lockdowns--regulations that reduce prosperity because they restrict voluntary production and trade--are the same people who, at other times, claim that income redistribution policies are necessary to improve the health of the poor.

By extending lockdown periods, leftists are creating poverty that they claim to despise.

Today, the headline unemployment rate hit nearly 15%, while the U6 number (which includes discouraged workers) ticked 23%. These levels, which likely under-report true degree of unemployment, were last touched in the Great Depression.

The adverse effects associated with forcing (literally) people into conditions of economic weakness will surely dwarf the near term ill effects of the coronavirus itself.

Thursday, May 7, 2020

Hoodwinked by Charlatans

I was born in the wagon of a traveling show
My momma used to dance for the money they'd throw
Papa would do whatever he could
Preach a little gospel
Sell a couple bottles of Dr Good

In times of crisis, charlatans come out of the woodwork. In the 1930s, economic charlatans led by John Maynard Keynes bent the ears of policymakers worldwide pushing easy money policies to politicians desperate to win votes in difficult times.

This time around, charlatans of 'public health' are taking center stage. Fauci, Birx, Ferguson and other so-called health 'experts' have captured control of policymaking pulpits worldwide to sell their brand of snake oil to the gullible.

Being played is always costly. But never in history has getting hoodwinked by charlatans fetched such a large bill so quickly.

Wednesday, May 6, 2020

COVID Mortality Risk

With a little perseverance
You can get things done
Without the blind adherence
That has conquered some
--Cory Hart

Another important paper by John Ioannidis and his Stanford colleagues (full paper here). The researchers analyze COVID -19 mortality data from 11 European countries, Canada, and 12 'hot spot' US states as of April 24th. The primary objective was to estimate risk of COVID-19 death using 65 as the over/under age.

Results indicate that people < 65 yrs old have very small risk of dying from COVID-19. Moreover, death for people under 65 with no underlying conditions is "remarkably uncommon." For people in many countries, risk of dying from COVID-19 roughly equates to the risk of dying from driving to and from work each day. The researchers conclude that strategies that protect the high risk elderly are prudent moving forward.

A few nuggets from their Discussion section:

The researchers suspect that the peak of the 'epidemic wave' may have already been reached in many countries by May 1. While they acknowledge the possibility of a second epidemic wave next fall or spring, they note that influenza presents similar uncertainties.

They highlight issues with death count accuracy. "Even though mortality is an unambiguous endpoint, attribution of death to a specific cause is often challenging and definitions of 'COVID-19 death' vary across countries and sometimes even change within countries over time." They note that their age-stratified data sample from Canada and the UK do not appear to include deaths that occurred outside of hospitals. They were added to the UK sample past the deadline for the paper's submission.

Moreover, "different countries and US locations differ on the threshold of including deaths at care homes." For instance Belgium reports more than half of its deaths as coming from nursing homes although > 90% have not had laboratory confirmation. "New York City and some other US locations have also started counting in more recent counts 'probable deaths' without any COVID-19 laboratory confirmation, a debatable practice at best [emphasis mine]."

The researchers also comment on outlier cases--i.e., mortality of people less than 65 with no reported underlying conditions. While such cases were observed these deaths were "remarkably uncommon." They note the possibility that these people may have had underlying comorbidities that had not been diagnosed. Nonetheless, these small number of cases do not invalidate the study's conclusion that "for healthy, non-elderly people, the risk of dying from COVID-19 this season has been infinitesimally small." Unfortunately, they note "this is in stark contrast from many news stories that focus on the demise of young people and the panic and horror that these widely reverberated stories are causing."

Personally, I find these stories despicable and indicative of journalistic malpractice.

Finally, the researchers discuss the large fraction of COVID-19 deaths coming from nursing homes. Data show 42-57% of European deaths coming from care homes. Similar evidence is surfacing in the US. The researchers note that "nursing homes and hospitalized patients (nosocomial infection) appear to account for a lion's share of COVID-19 mortality."

I increasingly suspect that this will instigate a flurry of CYA actions by policymakers in weeks ahead. As analysis of the data reveals that most COVID deaths come, not just from the elderly, but from elderly confined to care facilities, then the major policy error of widespread lockdown may become clear to a whole lot of people.

Tuesday, May 5, 2020

Borrow and Print

"I'm tapped out, Marv. American Express has got a hit man looking for me."
--Bud Fox (Wall Street)

How does a federal government pay for a sudden multi-trillion dollar stimulus package when it has no savings? Simple.

Just borrow...

...and print.

Problem solved.

position in AXP

Monday, May 4, 2020

Unlocking Logic

"I know why you did it. I know you were afraid. Who wouldn't be? War, terror, disease. There were a myriad of problems which conspired to corrupt your reason and rob you of your common sense. Fear got the best of you, and in your panic you turned to the now high chancellor, Adam Sutler. He promised you order, he promised you peace, and all he demanded in return was your silent, obedient consent."
--V (V for Vendetta)

A former UK Supreme Court judge criticizes his government's lockdown, arguing that it is "without doubt the greatest interference with personal liberty in our history." He could just as easily be aiming his criticism at government in the United States, of course.

His observations and logic resonate, and I wanted to capture them here.

Even during wartime, he notes, government never tried to confine the entire population to their homes day and night. And, although governments have tried to confine sick people known to be carrying infectious diseases, "we live in a new world in which, if we are ill, the State will try to cure us. From this, it is said to follow that the State can take control of our lives against our will even if we are healthy, lest we fall ill and need its services too much."

Quite ironically, then, it becomes people's duty to save the health system from overburden, rather than the opposite.

Because it is now pointless to object to the imposition of a lockdown that has already occurred, he suggests that the essential question now involves how do we get out of it.

Unfortunately this is not a question that the government thoughtfully asked itself when it reacted in "blind panic" to initial statistical projections of COVID mortality by legislating a hurried lockdown order. Although ministers have now formulated five tests to be satisfied before the lockdown is lifted, these are narrowly focused measures, developed with counsel of so-called health 'experts' primarily to shield public officials from criticism.

However, while it is natural for politicians to evade political responsibility, the judge suggests that "there is no reason why the rest of us should help them do it."

Ending the lockdown, therefore, "is a political decision, not a scientific one." The single question to be answered is this. Is a lockdown worth it? The answer depends only partly on health science. "There are also moral judgments, constitutional values, and economic consequences involved."

The judge offers five categorical (although completely independent) issues to be considered to smartly decide on lifting compulsory lockdowns.

1) Medical issues. The initial Ferguson projection of millions dead that drove so much government action worldwide was grounded in questionable 'science.' It also ignored important health considerations, "such as adverse health consequences of the lockdown itself or the number of people who would have died anyway from underlying clinical conditions even without Covid-19, maybe a few months later." All that said, the judge concedes that the lockdown probably has saved lives, although far fewer than the Ferguson model has projected (I would not be so kind here).

2) Tradeoffs. "To say that life is priceless and nothing else counts is just empty rhetoric." People's behavior demonstrates that they believe otherwise. The judge observes that Britain "went to war in 1939 because lives were worth losing for liberty." We drive cars and fly airplanes that can kill because we value convenience. Axiomatic scarcity demands that we make tradeoffs. It is essential to consider the things we gain as well as the things we lose thru lockdown.

3) What is life? What sort of life are we protecting thru lockdown?. "Life is more than the avoidance of death." Social interaction is fundamental to human existence. Viruses and other infections never completely go away. Compulsory quarantines to protect the old and vulnerable to wait on collective immunity "makes a mockery of basic human values."

4) Economic and social cost. Although people decry attempts to measure mortality of Covid-19 vs the economic cost of doing so, this again is empty rhetoric. All of us depend on money that comes from production--production that has been forcibly shut down. It is a productive economy that is "the source of our security and the foundation of our children's future." He correctly observes that "poverty kills too. And when it does not kill, it maims mentally, physically and socially."

5) Limits of State power. To say that there are no limits to what states can legitimately do to people against the will is "the stuff of tyrants. Every despot who ever lived thought that he was coercing his subjects for their own good or that of society at large." The judge asks, "Do we really want to be the kind of society where basic freedoms are conditional on the decisions of politicians in thrall to scientists and statisticians?"

Our founding ancestors, of course, said no. So does this judge. "Guidance is fine. Voluntary self-isolation is fine, and strongly advisable for the more vulnerable. Most of them will do it by choice. But coercion is not fine. There is no moral or principled justification for it."

He concludes that these are the issues that require discussion by politicians (and their electorate) "without the kind of emotive evasions, propagandist slogans and generalized hype that have characterized their contribution thus far."

Sunday, May 3, 2020

Virus of Propaganda

"I'm sure you've all heard the old wive's tale that no hypnotized subject may be forced to do that which is repellant to his moral nature, whatever that may be. Nonsense, of course."
--Dr Yen Lo (The Manchurian Candidate)

In times of war the US government has engaged in propaganda campaigns to influence public opinion and to create 'enthusiasm' about the war effort. FDR's administration did similar to shape sentiment surrounding his New Deal programs. Many of those propaganda campaigns were supported by corporate interests as well.

Now we're witnessing propaganda supporting draconian lockdown measures spreading faster than the coronavirus itself. Thru every media channel imaginable, people are being told that we're #AloneTogether and that together we can Stop the Spread.

Corporations have jumped in with both feet, overtly telling us how their altruistic actions are helping the effort along.

Does the American mind possess the wherewithal to stop the spread of this virus of propaganda?

Saturday, May 2, 2020


Hey did I tell you that my name
Was called disturbance
--The Rolling Stones

State governors largely seem to believe that their lockdown authority is supreme indefinite. It isn't. People are waking up. They are beginning to rebel against discretionary suppression of freedom.

There is a belief that statists see the COVID situation as an opportunity to reduce liberty and enlarge government power in permanent ways. We know that this is true in any crisis.

But I wonder whether this might backfire. The more statists try to push it in an overt grab for power, the more people push back in rebellion to defend their unalienable rights.

Friday, May 1, 2020

Ingroup Hypocrisy

"When you're a Jet, you're a Jet all the way. From your first cigarette, to your last dying days."
--Riff (West Side Story)

Observers are pointing out the blatant differences between how Democrats and the mainstream media are treating accusations of sexual assault against Democratic presidential hopeful Joe Biden and Supreme Court justice Brett Kavanaugh (nominated by a Republican president).

Such hypocrisy should not be surprising, however. Social identity theory predicts it. Questionable behavior of out-group members is likely to be criticized, while similar behavior by in-group members is likely to be given a free pass.

Why might leftists be more prone to such hypocrisy? Leftists by nature are more collectivistic, meaning they are more prone to drawn to, and identify with, groups. Because they identify more with their group, leftists are more likely to display affiliation bias.