Reopen, Now

We are in the midst of a soft reopening of America.  Of course, the riots and protests make it a bit tougher along with the capricious policies of some politicians.  What’s interesting to me is how many politicians were “following the science” or “following the data” and reject that same data now.

Economists grind out data all the time.  Sometimes it means nothing.  Correlation doesn’t mean causation.  I have said from the beginning of this whole thing in February that it not only was political but that the people in charge had no understanding or at least appreciation for the opportunity costs.

Turns out, I was right.

We know for sure the original model used to predict the amount of death from COVID 19 was wrong.  Not just a little wrong.  Wildly wrong.  Experts used that model initially and assigned a value for a human death at $4.5MM dollars which is sort of a standard value used when calculating statistical models of death and danger.  That gave us a $7.9 trillion number.  Big number.

We now know it was very wrong.

Looking at actual data, and using a more accurate model, the numbers change.  We know that it is mostly older people that have the risk of dying.  In statistical terms, their lives are not worth as much as a younger person.  That has a bullwhip effect on costs and opportunity costs.

From the above linked WSJ article:

Finally, after using demographic data to adjust the VSL—which is lower for older people, who have fewer years to live—the study found that the gross benefit of social distancing has been a mere $250 billion.

$250 billion is still a big number but it’s a lot less than $7.9 trillion.  Especially when you think about the money Congress spent making public policy off the $7.9 trillion number.  We weren’t just wrong.  We were so terribly wrong we will impact the financial future of America and have no idea of what the economic effects will be.

I am reminded of Abraham Wald, a statistician in World War Two, analyzing bombers that came back from their bombing runs.  They needed to figure out where to put armor on the bombers to protect them against flak.  In the case of COVID 19, since we know that older people are vulnerable, we need to concentrate our resources on protecting them.  Younger people aren’t vulnerable.  Open schools.  Have summer camps.  Have summer schools.  Open colleges and universities.  Most importantly, open restaurants and businesses.

Idling people is killing them but just in different ways.

At the same time, we can’t “ne’er do well” and just put our heads in the sand.   You take some precautions.  You wash your hands, a lot.  You might wear a mask inside when you are in common areas.  No real need to wear one outside.  If you are sick, stay home.  Be careful around older people and around people that have an illness or condition that might threaten them.  The people that have those illnesses and conditions need to take it upon themselves to protect themselves.  This is common sense.

However, as we know and I have cited again and again, there has been a “crush Trump at all costs” political element to this from the very beginning.  We haven’t had days of rage in the US since November 2016.  We have had a continuous cycle of rage.  The rage is propagated by the hard left and the Establishment/Never Trump wing of the Republican Party looks the other way.   The left-wing American media has lost its mind.  It is fair to point out that many of them have an ultimate agenda of overthrowing the way the US capitalist system works.  Statues of Confederates and historical US figures are being toppled but no statues of Karl Marx or Lenin are being toppled as far as I know.  I don’t think we can predict the crescendo, but eventually, it will run out of gas.  I just hope the aftermath is okay.

As far as COVID is concerned it’s not complex.  It is not rocket science.  It’s just data.