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Hi all,

I’ve had a few text messages in the last week using some formulation of the phrase: “is it time to panic yet?”  For avoidance of doubt, the answer to this question is always no: panic is inherently unhelpful, this is just baked into the definition of the word. I was working at home yesterday and went to the shops at lunchtime to get a snack and some things for dinner and the local Sainsbury’s was like a scene from an old Spencer Tracy movie: people carrying enough toiletries to last a year, bushels of lentils, peas, beans and dried pasta (the side effects of such a diet don’t bear thinking about). I feel relatively certain I’m preaching to the choir with this email, but please do not panic buy – any shortages we experience at this point are much, much, much more likely to be the self-fulfilling result of panic buying itself than the underlying supply chains. One supply chain that has definitely broken, causing enormous welfare loss (primarily concentrated in the population of cricket-obsessed basketball fanatics) is the simultaneous supply of near-Playoff basketball (just as LeBron was beginning to snap his fingers) and the forthcoming England tour of Sri Lanka which, free of any fear of looking like a fool, I will now suggest was heading for a whitewash by the glorious might of Karunaratne and co.

  1. I will leave speculation about the best course of action in response to the Coronavirus itself to the many people better equipped to deal with such questions than me; others have both more information and more expertise than I do. I have been keeping an eye on some of the best writing on mitigating or navigating the economic shocks of the pandemic, however. Richard Baldwin, on VoxEU, has a good piece setting out the many points in the economy that a disruption may be expected, and the effects in different places. Kaushik Basu, unsurprisingly, has noted implications that have escaped the attention of many others, and in particular highlights the impact of a novel and unexpected event like this on contracts, and the special implications a spate of broken contracts can have. If you’re interested in the effects on LICs (and if you’re reading this, you probably are), Dave Evans and Mead Over have you covered. Unfortunately, even a virus can be politicised, and in the US, opinion over the virus is split firmly on party lines (though a wise friend has pointed out that these polls come from before Trump’s recent speech).
  2. In the US, many people who will need treatment will be paying for this out of pocket, either in the form of insurance co-payments or because they are uninsured. This Planet Money podcast with Anne Case (transcript) should be a reminder to pick up Deaths of Despair, her book with Angus Deaton about the human impact of this kind of system; but you should also listen to it to understand the deep indirect costs the US system involves. And there is a truly mad statistic buried in here: pharma companies spend more on advertising than they do on R&D.
  3. This has been a pretty depressing start to the links, so something that makes me (and probably most economists) smile: a randomised trial provides evidence for something most of us take as an article of faith, but is surprisingly hard to prove: competition works beautifully, reducing prices and increasing quality for consumers. Obviously, not always, not everywhere, and not from every starting point but… this matters.  
  4. A very nice post by Florence Kondylis and John Loesser on the questions that you are likely to encounter in almost any academic seminar. For the policymaker, this doubles as a really good list of questions you should ask of a paper as part of your process for assessing the quality of evidence it provides. Related: Marc Bellemare, my new econometrics crush, on the merits of Peter Kennedy and Judea Pearl for thinking about evidence  based on data. Read to the end.
  5. So with some time on his hands as his university works out its response to Covid, Dietz Vollrath writes up the latest in thinking about economy-wide productivity and profit mark-ups. Reading him is still one of the best things you can do to keep your macro sharp.
  6. While we’re talking macro, I can’t quite remember why but earlier this week I dug out the famous 1981 Sargent and Wallace paper ‘Some Unpleasant Monetary Arithmetic’, and I cannot recommend reading it enough. It’s old enough (almost exactly my age) that many economists these days will have never read it, but the power of the logic and the clarity of thinking in the paper is a superb model for any aspiring economist. Not only that, but it feels like the paper still has a lot to contribute to current macroeconomic problems.
  7. Let’s close on things that (should) make us happy. Michael Schur is writing a book, which in my head is titled “Don’t be a shirtbag, for fork’s sake”; Tove Jansson’s love letters to her partner are being published and they are very moving (and Moomin); even if there isn’t any new basketball, there is nothing to stop us watching videos of Shawn Kemp and Gary Payton reminding us that Lonzo Ball and Zion Williamson have a long way to go; and Sir Isaac Vivian Alexander Richards.

Wash your hands, everyone!

R

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Links round-up