Musk Games High Powered Incentives

The Daily Mail reports that Elon Musk has seemingly joined the chorus demanding the end to COVID-19 related lockdowns. But it also reports that he was about to get a large payout from Tesla linked to its stock price. Shares, which had been depressed, rose 10% just ahead of its quarterly report.

Maybe he really believes this, but he sure has an incentive to feign belief.

Lockdowns vesus contact tracing

Mulligan, Murphy, and Topel* have a thoughtful policy piece on "Some basic economics of COVID-19 policy." It combines a number of economic concepts (e.g., fixed costs versus marginal costs, option value, externalities, capital depreciation (physical and human)). Essentially, it compares the relative strengths of the policy alternatives of Large-Scale Social Distancing (LSSD) versus Screen, Test, Trace and Quarantine (STTQ). From their summary:

Our analysis indicates that the features of a cost-effective strategy will depend on both current circumstances and how we expect the pandemic to play out. Some elements are common, such as the desire to use STTQ rather than LSSD when infection rates are low, and shifting the incidence of disease away from the most vulnerable. These apply whether the objective is to buy time, manage the progression of the disease, or limit the long-run impact of a pandemic that will run its course. The key difference in terms of the optimal strategy is whether our focus is on keeping the disease contained. If the objective is to buy time, then our analysis favors early and aggressive intervention. This minimizes the overall impact and allows for strong but scalable measures via STTQ. In contrast, limiting the cumulative cost of a pandemic that will ultimately run its course argues for aggressive policies later, when they will have the biggest impact on the peak load problem for the health-care system and when they will have the greatest impact on the ultimate number infected. Given the desire to protect the most vulnerable, this objective can even argue for allowing faster transmission to those that are less vulnerable, which further limits the burden on the vulnerable and also reduces the burden on the health-care system. Finally, the objective of long-run containment calls for an effective STTQ strategy applied early to keep the overall infection level low. Starting early lowers overall costs and lowers cumulative infections under the long-term containment strategy.

*I was Bob Topel's RA over a quarter century ago.

Pandemic ==> inequality

New Paper: Mobile phone (GPS) data shows

1.  Richer and younger New York City residents are able to shelter in second homes and with friends and family away from the epicenter of the outbreak. 
2.  Low-income, black, and Hispanic are likely to be frontline workers, while other populations are more easily able to work remotely. 
3.  Similarly, they are likely to have higher frequency of visits to retail establishments instead of ordering food and groceries delivery services

Bottom line:  these factors likely explain why the disease spreads more easily among poorer, older, and minority populations. 

HT:  Marginal Revolution

Will the suburbs rise and the cities decline?

From WSJ: 

Indeed, the experience has the family rethinking its commitment to the city. Until the pandemic, the suburbs didn’t seem practical. But now that her husband, a lawyer, has proven his ability to work from home, they’re hoping his employer will be open to the idea. Last week, Ms. Euretig made her first call to a Hudson Valley real-estate agent.

...What’s the point of paying crazy rent on a cramped apartment if you can’t enjoy the city? 

Related from MarginalRevolution:

 New York City’s multi-tentacled subway system was a major disseminator – if not the principal transmission vehicle – of coronavirus infection

Sweden's strategy, for the long haul

Lockdowns will slow the virus (temporarily?), but will damage the economy (temporarily?).  Sweden is trying a different strategy.

“It is important to have a policy that can be sustained over a longer period, meaning staying home if you are sick, which is our message,” said Tegnell, who has received both threats and fan mail over the country’s handling of the crisis.

“Locking people up at home won’t work in the longer term,” he said. “Sooner or later people are going to go out anyway.”

Let's try to learn from this experiment.