EconTalk |
Megan McArdle on Catastrophes and the Pandemic
Mar 22 2021

looking-backward-300x212.jpg Whether it's a pandemic or a Texas-sized ice storm that leaves millions of people without power, we'd like to avoid a repetition. Megan McArdle of the Washington Post talks with EconTalk host Russ Roberts about the challenge of learning the right lessons from the current crisis in order to prevent the next one. McArdle argues that we frequently learn the wrong lessons from the past in trying to prevent the harm from the catastrophes that might be waiting in our future.

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Explore audio transcript, further reading that will help you delve deeper into this week’s episode, and vigorous conversations in the form of our comments section below.

READER COMMENTS

DH
Mar 22 2021 at 10:02am

For the record, according to an article in Forbes, on 2/27, CDC Director Robert Redfield testified on Capitol Hill. When asked if people should wear masks, said no.

On 2/29, U.S. Surgeon General Jerome Adams orders Americans to “STOP BUYING MASKS!” in an all-caps message on Twitter, claiming they are “NOT effective in preventing [the] general public from catching coronavirus” and will deplete mask supplies for healthcare providers (again from Forbes article).

On March 8, in a 60 minutes interview, Fauci said people said there is no reason to be walking around wearing masks (his remarks were interpreted by some as protecting the mask supply for those that really needed them).

I believe also that (please correct me if I’m wrong) that Econtalk guest Jay Bhattacharya, MD, PhD, one of the creators of the Barrington project said there is/was no randomized controlled study that proved the effectiveness of wearing masks.

Alan Goldhammer
Mar 22 2021 at 11:40am

I just finished listening while on my morning walk.  While generally good, there were some errors that need to be cited.  The Australian lockdowns were far more sever than the simple ‘5 days’ that Russ mentioned.  The prime example here is Melbourne.  the first one lasted 111 days though recently they did have a 5 day lock down focused on a hotel outbreak that they thought they could contain.

mRNA technology is not as new as was implied and Moderna had a prototype Zika vaccine based on this technology prior to the SARS-CoV-2 outbreak.  The other vaccine platforms that have been deployed for COVID-19 are also not new and have been used for some time.  Russ is in error about the lack of vaccine development because of pricing.  Merck, Pfizer and GSK both have vigorous vaccine R&D programs and have introduced new vaccines that make a very good return on investment.

There are observational studies showing that masks do work.  The classic paper, published in the Proceedings of the National Academy of Sciences, looks at the experience of a mask mandate in Jena Germany versus a near by comparably sized city that did not implement the mandate until 3-4 weeks later.  Jena had no COVID-19 cases the neighboring town did.

Dominic J
Mar 23 2021 at 2:47pm

Adding to the errors, Russ is simply wrong that people have been going to Pubs and restaurants throughout the pandemic within the UK. Firstly it depends on the area, the city of Leicester didn’t end its lockdown in June like the rest of country and pubs have been closed for about half the time since. Second and more generally pubs have been closed everywhere since December so no one has been going since then. I only mention this as Russ is usually quite careful about the points he makes and he wasn’t here

Adam S
Mar 22 2021 at 5:28pm

Good chat with a “soft” libertarian like myself.

Russ, I still struggle to see the libertarian case for not maintaining semiconductor capacity. Chips aren’t like masks that you can indeed make a “good enough” version with a dish towel – there’s a very real chance China takes over Taiwanese semiconductor capability that doesn’t exist elsewhere in the world. It’s one thing to have the know-how (which we have) and the machinery (which we don’t).

There’s a reason that to this day, China still uses Russian jets in all its fighter aircraft: turbo jets are very hard to make, even with a very strong profit and national security motive! The US military could find substitutes if they were in a crisis situation, but how long will that take? It could be devastating.

Now, who gets to decide what’s a strategic industry and what isn’t? Clearly a very difficult decision and not one we can give to any single government agency. We were lucky that producers of raw vaccine materials (like India) are friendly, but that might not always be the case.

With public health and national defense, it seems like a no-brainer that we should have a baseline of capacity, even if it’s economically inefficient. It’s very hard to incentivize individual companies to care about US national security without paying them to care, but the worst case scenario is so bad that the insurance cost seems well worth it.

Would love to hear an EconTalk that covers the libertarian approach to national defense.

krishnan chittur
Mar 22 2021 at 5:40pm

The success in developing the vaccine quickly (viral sequence -> mRNA) in a few days is perhaps related to the fact that the US spends SO MUCH on healthcare/pharmaceuticals – perhaps MORE than any other country – i.e. excess spending led to surplus talent leading to rapid development (something like that?) – Assuming this to be true, what other examples can we cite to show how excess spending does lead to surplus talent and so perhaps increased innovation when needed to find solutions required? Could this be true elsewhere and not just pharma?  Is there a way to “predict” possible future benefits from any current “excess” spending in any field?

The discussion about supply chain robustness and creating spare capacity was interesting – seems like a better idea than spending money and storing what we may or may not need for something that may or may not happen!

I fear however that we have been overtaken by fear in 2020 – and life may never ever go back to normal – with or without vaccines – far too much power has been lost to government which will never give it up.  One particularly egregious example of this is the current trend to demand that everyone get vaccinated – even people who have been infected – It is almost as if people are trying to rewrite immunology in attempts to maintain public control.  There is substantial data indicating that while there are new variants (like with ANY virus) the newer ones are less lethal even as they spread more – but that infected people are immune (with B cells/antibodies and T cells).  Demanding that everyone have some vaccine passport is just a power play and goes against what we understand about this corona virus and other viruses.

Nate Hyde
Mar 22 2021 at 5:41pm

About 10 minutes in these two presumably data and statistics savvy folks say that the idea that extreme weather variability resulting from climate change “gives the impression of an utterly non-falsifiable thesis – if the weather gets warmer its because of climate change, if it gets colder its because of climate change, if it stays the same its because of climate change.”

The claim is that climate change results in increased variability and greater extremes in weather. That is falsifiable. If, say, we have a decades long, consistent, high frequency temperature record in Texas and that data shows no increase in variance over the last decade or so compared to earlier decades then that is evidence against greater variability.

I initially only heard the “if it gets warmer… if it gets colder” part. When I went back to make sure I got their point correctly I heard the “if it stays the same” part. Given that the supposedly non-falsifiable claim is “climate change results in increased variability” that part gives the impression Megan didn’t think it through.

That said it is not reasonable to point to any particular extreme weather event and say “see, climate change!” That is probably what Megan is reacting against. But as time passes and we collect more data if we see variance increasing with time then it will be reasonable to point to that and say “see, climate change!”

Corey McKee
Mar 22 2021 at 5:54pm

Much of the Texas ice storm was due to the simple problem of not having the correct oil in the transformer stations. This is an easy fix…

Mulqueeney Dennis
Mar 22 2021 at 11:14pm

While I appreciate the discussion, as the topics of catastrophes and preventing/preparing for them is both interesting and important, I would say that there are people who’s career focus IS this topic, so more could be done here about sussing out how to prepare for extreme events by talking to others who have thought deeply about this topic.

lloydfour
Mar 23 2021 at 6:16am

Whole bunch of unknowns in the pandemic but decision still have to be made.  This episode has a lot of Monday morning wisdom. Sure someone has the right answer at the start of the pandemic but how to find that person among all the loud voices?

I am still stuck on Mike Munger’s remark that market prices in shortages are great if you can afford them.  I suppose if you cannot afford the high prices, you grab a pitch fork and start a French revolution on the One Percenters.

 

Charles Mann
Mar 23 2021 at 6:35am

Since Texas has had ice storms that caused major blackouts twice in the past 10 years, that certainly seems common enough to me that they should at least think about contingency plans for when it happens again. Perhaps they won’t have another ice storm for awhile but to completely blow off the possibility seems unwise, IMO.

 

Aidan
Mar 23 2021 at 7:17am

I think that Megan McArdle, who I generally admire, really was too vague in this episode, her thoughts were not really that focussed. Typical was the section on whether lockdowns “work” – we could define what “working” means for a start.

I live in the UK and just want to add that Russ is incorrect about observance on the lockdown here – it has been pretty well observed (pubs are closed for one thing), but I agree that it is pretty much pointless trying to judge whether government intervention is worth it. Compare the UK and Spain this year:

https://ourworldindata.org/explorers/coronavirus-data-explorer?zoomToSelection=true&time=295..latest&pickerSort=asc&pickerMetric=location&Metric=Confirmed+cases&Interval=7-day+rolling+average&Relative+to+Population=true&Align+outbreaks=false&country=GBR~ESP

The graph of cases is almost identical, but the lockdowns were very different. Restaurants and schools were closed in the UK but not in Spain – in Madrid there are limits but you can still dine indoors. How does one say which lockdown “worked” better? My hunch is to agree that the effects of government action were limited and the costs were enormous.

Kevin Ryan
Mar 23 2021 at 2:50pm

Would second your point on observance in the UK (as I also live there).

Also I was a bit surprised (ie not hugely surprised) that they did not mention the Astra Zeneca vaccine.

Of course, it is not yet available in the US (and quite possibly never will be).  But, as far as I am aware, it does not share the features of US govt funding and an exceptional degree of innovation that were central to the discussion.

 

 

Andrew Wagner
Mar 23 2021 at 11:15am

“Just in time” was largely copied from Toyota, but if you’ve actually studied how Toyota works, they buffer with capacity instead of inventory–exactly what McArdle describes.

Industrial Engineering 101: Little’s Law says that you can buffer with time, inventory, or capacity. Obviously, time doesn’t work in response to pandemic. Inventory carries risks to. (Dried out straps on masks, damaged good in storage, etc). The solution is buffering with capacity. Which is why 3M in South Dakota had an entire production line for N95 masks idle, waiting for the next medical emergency, and they were at 150% production in *January 2020*!

David Zarecky
Mar 23 2021 at 3:07pm

Russ doesn’t like the use of climate change for ‘things that happen I don’t like.’ Well, there’s literally a truckload of scientific evidence showing exactly how weather events like the Texas ice storm are caused by the jet stream being out of whack due to climate change. There’s no amount of offhand sophistry that will bring Russ, or his guests, around that evidence. Will we ever see a climatologist on the show, rather than casual climate change deniers like Bjorn Lomborg, singing their feel-good ‘relax, nothing much’s happening, we’ll adapt alright’ ditty along with Russ? Perhaps Russ has too little skin in the game. He has 20 max 30 years to go. Arguably not enough to see his comfy lifestyle wracked by climate change. I do hope his kids care more about the issue than he does.

Russ Roberts
Mar 23 2021 at 5:59pm

David,

Thanks for your perspective. The goal here at EconTalk is education. Rather than insult me for my presumed callousness, it would be more helpful to provide a resource or link to help me see the viewpoint you think I’ve ignored. Here, for example,  is a discussion of the Texas/climate change issue. It argues that scientists are divided about the impact of the jet stream, but perhaps you have something more definitive. And for your interest, here is a list of some of our episodes on climate change and other environmental issues that includes more diversity than perhaps you’re aware of–our “Environment” category needs repair…

krishnan chittur
Mar 24 2021 at 10:53pm

Bjorn Lomborg is one of many who provide rational analysis of “climate change” – he mentions that he believes that the earth is warming but that the solutions proposed will only serve to strangulate economies without doing almost anything – and along the way make life for the poor even worse.  Lomborg’s point is that there is much we can do with a fraction of the resources that are demanded by some on “climate change” – Indeed using “casual climate change deniers” gives the objective away – it is not about rational discussion – of the cost/benefit – but do as the activists demand without questions – and Lomborg questions – enraging the activists – as is clear from the tone.

It may be helpful to listen to Steven Levitt talk about the issue of “climate change” – he reminds us that activists are only interested in CO2 levels and did not want to hear solutions to the problem – that is, “climate change” has become a religion – and the adherents are opaque to reason or scientific arguments and modeling.

Ben
Mar 23 2021 at 11:35pm

Why the insistence on using straw man arguments against anti-masking? Obviously masks have some effect preventing the spread of an airborne virus. The argument that compels anit-maskers against masking is the fact that they know they face a low risk for extreme symptoms or death. Thus, for many people with moderate to high risk tolerance, the on-going effort is not worth the limited benefit. This reasoning is not based on a disbelief in the science, but rather an acceptance of the science as only one factor in a rational individual decision-making process. I think the conversations touching on Covid-19 would be more productive if Russ and guests would address the actual rationale behind anti-masking rather than merely reiterating the fact that masking is scientifically proven to reduce the spread.

Maureen Wood
Mar 24 2021 at 4:38am

Hi Russ,

Thanks for this program. I love Megan McArdle normally but as an expert in disaster risk management, trained in town planning, her analysis that putting de-icing equipment on energy sources in Texas is completely unfounded. The risk is nothing close to the probability that she would be attacked by a polar bear. Risk is not just probability. Risk is probability X consequences. Let’s now look at the probability side. In every decade since 1940 (that’s as far as I could go back) there have been several days of below 32 degree temperatures, in the order of anywhere from 10 to 25. That means that the probability of having a freezing temperatures in Austin over a 10 year period, if you assume that winter is about 90 days a year, at least 1/100. If you also look at the consequence side, the consequences of power failing for even a few days in the city of Austin, not to mention the region around it, are huge. If you are a land use planner worth your salt, and not influenced by the prevailing political sentiments, you would have recommended de-icing equipment. In graduate school in the eary 1990s, I helped a run a study of hurricane planning on the east coast of North Carolina, where in the last 30 years they had had more than one devastating hurricanes and floods. It was pretty random as to whether a town decided to plan for the next one or not, but the ones that remembered (e.g., Wilmington) said, we know we’re in a hurricane zone and no, never never again. But other towns were willing to take the risk. This demonstrates that it’s not necessarily about hindsight, but rather politics, economics and culture. Two towns in the same zone take a completely different decision. Another example is New Orleans. My former landuse planning professor took a professorship in New Orleans in the late 1990s. I went to visit him and he showed me around the dykes and he told me that this was a disaster waiting to happen and nobody would do anything about it. 9 years later his prediction came true. Don’t compare hindsight in natural disasters to financial disasters. They are not the same. I also have a background in finance and I can tell you that whether or not a natural disaster occurs is not complicated, it’s a 1-0 game, at least form our human perspective, because we cannot control nature. With finance, it’s a complicated story where the outcome is very unpredictable, but most of the pieces story are in our control to some degree, but we still can’t predict it. It has been well-established that an informed society is unlikely to accept a 1/100 risk for a disaster of the proportions of Texas or New Orleans disasters, but they believe their politicians know what they are doing and they don’t question. So it’s very nice of Megan to let Texas off the hook, but they don’t deserve it. They actually should have known. Many other places would have done differently in the same position with the same data BEFORE (not after) it happened. I’ve seen them.

Maureen Wood
Mar 24 2021 at 4:42am

Hi Russ,

Thanks for this program. I love Megan McArdle normally but as an expert in disaster risk management, trained in town planning, her analysis that putting de-icing equipment on energy sources in Texas is completely unfounded. The risk is nothing close to the probability that she would be attacked by a polar bear. Risk is not just probability. Risk is probability X consequences. Let’s now look at the probability side. In every decade since 1940 in Austin, Texas, (that’s as far as I could go back) there have been several days of below 32 degree temperatures, in the order of anywhere from 10 to 25. That means that the probability of having a freezing temperatures in Austin over a 10 year period, if you assume that winter is about 90 days a year, at least 1/100. If you also look at the consequence side, the consequences of power failing for even a few days in the city of Austin, not to mention the region around it, are huge. If you are a land use planner worth your salt, and not influenced by the prevailing political sentiments, you would have recommended de-icing equipment. In graduate school in the eary 1990s, I helped a run a study of hurricane planning on the east coast of North Carolina, where in the last 30 years they had had more than one devastating hurricanes and floods. It was pretty random as to whether a town decided to plan for the next one or not, but the ones that remembered (e.g., Wilmington) said, we know we’re in a hurricane zone and no, never never again. But other towns were willing to take the risk. This demonstrates that it’s not necessarily about hindsight, but rather politics, economics and culture. Two towns in the same zone take a completely different decision. Another example is New Orleans. My former landuse planning professor took a professorship in New Orleans in the late 1990s. I went to visit him and he showed me around the dykes and he told me that this was a disaster waiting to happen and nobody would do anything about it. 9 years later his prediction came true. Don’t compare hindsight in natural disasters to financial disasters. They are not the same. I also have a background in finance and I can tell you that whether or not a natural disaster occurs is not complicated, it’s a 1-0 game, at least from our human perspective, because we cannot control nature. With finance, it’s a complicated story where the outcome is very unpredictable, but most of the pieces story are in our control to some degree, but we still can’t predict it. It has been well-established that an informed society is unlikely to accept a 1/100 risk for a disaster of the proportions of Texas or New Orleans disasters, but they believe their politicians know what they are doing and they don’t question. So it’s very nice of Megan to let Texas off the hook, but they don’t deserve it. They actually should have known. Many other places would have done differently in the same position with the same data BEFORE (not after) it happened. I’ve seen them.

Andrew Benton
Apr 20 2021 at 5:24pm

Agreed with Maureen Wood.

Referring readers to the Chemical Safety Board’s “Safety Digest: Preparing Equipment and Instrumentation for Cold Weather Operations” 2018 article which describes 2 incidents in Texas where companies did not adequately winterize equipment which then resulted in multiple fatalities.

Let us not forget the responsibility of job inspectorates to audit the risk-based approaches that these operations pursue.

The nuclear industry is about to moon in order for us to become carbon neutral. I now refer readers to the French independent media outlet “Mediapart“‘s article “Nucléaire: la sécurité percée d’EDF” (December 2020) which describes the inability of existing plants to deal with basic security and disposal risks.

I understand that the Texas Nuclear reactor shut down as feedwater pipes froze. This is a non-concern in comparison to what could happen in France. We can smell the crap at our doorstep but not from across the pond.

Daniel
Mar 24 2021 at 8:35am

I don’t understand Megan’s argument near the end the Europe did better on the “controlling people side.” What’s the evidence to support this claim? For example, you can look at deaths in European countries versus the U.S. here:  https://ourworldindata.org/covid-deaths  The US is currently better than France but worse than Germany and the UK, but the US at times has been lower than France, Germany, and the UK.  But how much of this is “controlling people” and how much is the US’s higher incidence of obesity or some other factor? (We know that obesity plays a huge role in bad COVID outcomes.)

I also have a hard time believing that mask *policies* work. *Masks* may work. It seems like they should. But mask policies don’t seem to have an appreciable impact. States that are near each other have had similar outcomes despite disparate policies. Here’s an example:  https://twitter.com/ianmSC/status/1374568014595559432/photo/2

Lastly, do we have any evidence of compliance rates with lockdowns and mask mandates?

 

 

Todd Kreider
Mar 24 2021 at 11:27am

McArdle said: “…because N-95 masks are extremely effective at preventing you from getting it as well as preventing you from transmitting it.”

This isn’t correct and the Danish randomized study of 3,000 N-95 mask wearers and 3,000 non-mask wearers showed that there was no evidence of protection. N-95 respirators have shown protection but one cannot use them for long periods.

DH wrote: “Econtalk guest Jay Bhattacharya, MD, PhD, one of the creators of the Barrington project said there is/was no randomized controlled study that proved the effectiveness of wearing masks.”

This meta analysis of ten mask wearing studies concluded last May: “In pooled analysis, we found no significant reduction in influenza transmission with the use of face masks.” The large Danish study was the 11th randomly controlled study that did not find mask wearing protective against a respiratory virus, in this case, against the current coronavirus.

https://wwwnc.cdc.gov/eid/article/26/5/19-0994_article

Also, a 2015 Australia/Vietnam study of mask use in hospitals showed that cloth masks allowed 97% transmission of influenza whereas surgical masks had a flow though rate of 45%.

Jeffrey Fleischer
Mar 24 2021 at 7:59pm

Hi Russ,

Long time since Wash U 1993-4!  Great to listen to this episode. With the counterfeit N95’s from China during COVID19 – – regulation and enforcement of NIOSH quality standards is a key driver.  Makes no sense to gamble with health of frontline healthcare professionals, workers in other industries.

We’re presently onshoring the production of medical grade meltblown (key input of N95/N99 respirators – this layer stops the viral spread); and have very specific thoughts around rendering this cost efficient for the United States.  The USA currently has the capacity for self-sufficiency of medical grade masks (all inputs and finished materials sourced and made in America) by the end of this calendar year.

 

Joel Grover
Mar 25 2021 at 1:39pm

The discussion in this podcast increases my concern that an extremely important lesson that will not be learned from the pandemic is how tragically wrong was NIH’s policy of recommending against early ambulatory treatment of COVID 19 until complications occurred that required hospitalization.  In doing so NIH essentially guaranteed that patients in their 80’s who had to be hospitalized would die, as can be seen in the CDC’s data.  That recommendation made it impossible for any physician practicing as an employee of a major health service to even try to prevent complications because they would be going against HS policy and could be fired.  In many communities in the US today virtually every doctor is part of such a conglomerate and their patients simply had no option to get preventative treatment.

The NIH policy also discouraged research and public discussion of early ambulatory treatment.  Fortunately, some research did go on and it showed that dramatic improvement in outcomes was possible.  One study at Baylor Medical published late last year showed order of magnitude reductions in hospitalization and death rates among 300+ patients with confirmed cases of COVID who were over 50 or had co-morbities and who were treated with a sequential multi-drug therapy that include anti-virals, anti-inflammatory agents and anti-thrombosis agents (https://rcm.imrpress.com/EN/10.31083/j.rcm.2020.04.260).  Russ Roberts would be doing a major public service by doing a podcast on that study.

Hunter McDaniel
Mar 25 2021 at 4:17pm

Overall, a good episode. I’m awed by the self-restraint Russ showed declining to name the director of the NIAID.

The main reason we now have a vaccine “in less than a year” is because clinical trials could be conducted at a time when the disease was highly prevalent. Without the concurrent surge last fall it would have taken much longer to accumulate statistically significant metrics on vaccine efficacy. It’s nice that Australia and New Zealand have so far escaped the pandemic, but their ultimate success depends on a vaccine coming from elsewhere.

Although we do now, thankfully, have multiple working vaccines for COVID we should not let the FDA off the hook for their performance – especially concerning the AZN vaccine. First, they refused to consider data from trials conducted outside the US. Second, they halted the US trial for seven weeks because of one potential adverse event. Third, they even now are going to take their sweet time reviewing data from a small clinical trial in the US when there is observational data available from the UK where MILLIONS of people have received the vaccine. I wonder what it would take for them to feel some urgency.

In previous pandemics we tried to identify and quarantine those people we thought were infectious. I don’t know of any precedent for using lockdowns as a disease control measure. Restricting the liberty of Typhoid Mary, cited as precedent by Megan, was an example of the former and not the later.

Megan deplores the role of the former president in the “mask wars”, but I can’t separate his responsibility from that of his media co-dependents. Together they created a climate where we could not have an honest discussion of the uncertainties, risks, and tradeoffs in our response to the pandemic.

Coupon Clipper
Mar 28 2021 at 11:39am

One comment about the transcript:

You quote Russ as saying, “Nope. That was just a bonus. That was gravy. It was a loan, yeah.”  He didn’t say “it was a loan”; he said, “It was a lagnaiappe.”

What an awesome word to use there!  I just think it deserves to be in the official transcript. 🙂

[I’ve changed the transcript. However, I’m still not sure what the actual word was. Loan? Lagniappe? Lagniappe–gift–works for me. I would never have thought of that. Thanks! –Econlib Ed.]

Coupon Clipper
Mar 29 2021 at 8:16am

Sorry, I misspelled the correction in my comment!  The word is “lagniappe”:

“something given as a bonus or extra gift”

So your correction to the transcript is accurate and spelled correctly.  I only caught this because I had just learned the word a few days prior!  You can imagine my surprise when Russ said it.  I had gone the first few decades of my life without ever hearing it, as far as I know.

John Alcorn
Mar 29 2021 at 3:49pm

Industrial policy, re:  pandemics, makes sense for (a) vaccine development capacity and (b) surveillance testing capacity and readiness.

What about potential catastrophes other than pandemics?

Russ Roberts points out that there are too many things to worry about. Ian Martin and Robert Pindyck analyze the issue as a wicked problem in their groundbreaking study, “Averting catastrophes: The strange economics of Scylla and Charybdis,” AER (2015):

“Faced with numerous potential catastrophes-nuclear and bioterrorism, mega-viruses, climate change, and others—which should society attempt to avert? A policy to avert one catastrophe considered in isolation might be evaluated in cost-benefit terms. But because society faces multiple catastrophes, simple cost-benefit analysis fails: even if the benefit of averting each one exceeds the cost, we should not necessarily avert them all. […] the costs and benefits of averting a catastrophe are not marginal, in that they have significant impacts on total consumption. This creates an interdependence among the projects that must be taken into account when formulating policy. […] although naïve reasoning would suggest using a sequential decision rule (e.g., avert the catastrophe with the largest benefit/cost ratio, then decide on the one with the next-largest ratio, etc.), such a rule is not optimal. In general, in fact, there is no simple decision rule.”

Moreover, there is a prior problem: Forecasting catastrophes to avert. Prediction markets might help. For example, Shi-Ling Hsu proposes a prediction market for climate outcomes, linking emissions permits, carbon taxes, and climate indices.

Smart freedoms are the most efficient way to enable swift adaptation to pandemics: freedom to conduct challenge trials in vaccine development (see Bryan Caplan here); and freedom to conduct rigorous experiments about transmission (see Arnold Kling here and Robin Hanson here). Hanson also outlines decision markets for pandemic policy.

Shripad
Apr 3 2021 at 1:23pm

Megan has made an interesting point about adaptability vs preparedness. The approach can be paraphrased MTBF(Mean Time Between Failures) vs MTTR ( Mean Time To Repair).

Most modern software companies prefer MTTR as they know it is very difficult to control the next error, but they can control is recovery from it.

Tim Mason
Apr 4 2021 at 5:52pm

I don’t think masking is at all cheap.   the mask itself maybe inexpensive, and a single usage on a trip to the grocery store is no big deal.   But that’s different than every one masking on every visit every day for a full year.   Grocery store workers wear masks all day long.   That looks miserable.    They’re uncomfortable and one more thing I have to remember.   If I forget to grab mine on the way out, I might have to return home to get it.   I don’t see as many smiles.   Non-verbal communication is heavily degraded.   They incur the cost of societal division inevitable any time pressure of compliance is brought to bare on the population either by mandate or peer pressure.

The cost of masking is enormous.    It’s fair to ask for better evidence that they’re effective before bearing that cost.   Even if they’re shown to be effective, it’s still fair to ask if they’re worth it.

John Alcorn
Apr 5 2021 at 10:27pm

Tim Mason,

Thank you for telling it like it is. Let me add that verbal communication, too, is heavily degraded in some contexts. In Fall and Spring, I have taught my courses — seminars, approx. 16 students in each course — in person, masked, in classrooms with social distancing (sex feet). Masks do limit sustained vocal projection about complex subjects, and diminish comprehension and spontaneous discussion. Students make less use of Faculty office hours (review, follow-up questions, etc.) because of mask fatigue. Masks are mandatory on campus (also outdoors) except when alone in one’s dorm room or office. Although remote courses are worse, masks do indeed have substantial costs in a variety of contexts.

What seems most effective (and cost-effective), by a wide margin, is ample fresh-air circulation, when 15-20 people interact in a classroom for two hours. The historic buildings on campus have classrooms with high ceilings and large, louvered windows. Keep the windows wide open, no matter the weather or temperature.

Matt Dawson
Apr 6 2021 at 7:12pm

Great discussion. Aside from disagreements on some of the facts cited by Russ and the guest, the general point is that we should build adaptability and resilience in systems.  I was surprised Russ not the guest discussed the importance of general health in mitigating effects of future pandemics.  We could align  resources and incentivize an increase in health and reduction in obesity.

Masks are not low cost   They are low cost for discreet activities, such as shopping in a store or waiting in line.   Costs raise exponentially with time, level of physical activity, and length of interaction , as described by Tim and John in the comments above.

 

Tim Fowler
Apr 8 2021 at 4:36pm

The current reactions are somewhat novel. In the past they would quarantine people who were sick or who were suspected of being sick.  Lockdowns were less rare, and lockdowns of large sections of the economy for a year didn’t happen in the US.

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AUDIO TRANSCRIPT
TimePodcast Episode Highlights
0:37

Intro. [Recording date: March 5th, 2021.]

Russ Roberts: Today is March 5th, 2021, and my guest is journalist and author Megan McArdle. This is Megan's fifth appearance on EconTalk. She was here last in October of 2017 to talk about internet shaming--unfortunately, a very prescient conversation. Our topic for today is the pandemic and the issue of preparedness for the next big thing. We're going to draw loosely on a recent piece Megan wrote in the Washington Post, which we will link to. Megan, welcome back to EconTalk.

Megan McArdle: Thanks so much for having me. Always an honor.

Russ Roberts: A few housekeeping matters. I want to remind listeners, we are now posting video versions of EconTalk on YouTube so you can watch this conversation if you prefer. We also have a Goodreads group for discussing books that get talked about on EconTalk. And I'm going to be--we're going to be trying some new styles of interviews in an upcoming episode, at least we hope. Megan and I are going to talk about a book by Roger Scruton called Where We Are. Roger Scruton passed away last year, but his book struck me as an important contribution to the question of who we are--not just in the United Kingdom, but elsewhere as well. I thought it would be a great conversation. So, she and I are going to talk about that in a few months or weeks. We'll see; but if you want to read that book in advance feel free to do so.

1:53

Russ Roberts: Okay. Let's get started. Now, Megan, we are somewhere near the one-year anniversary of the pandemic. Of course, it's kind of hard to define the first start of it. Around mid March last year is when I noticed that life was grinding to some kind of halt and we were in a lot more trouble than I had thought we were.

And, you recently, reflecting back on what's happened in the last year, you wrote this--the column was published on February 24, 2021; you wrote the following:

After every crisis, there comes a moment of dazzling hindsight. We look back at the Before Time and list the things that should have been done differently. There's always something and usually more than one something, many of them even plausible.

One wonders if, say, the worst of the global financial crisis might have been averted if U.S. and European regulators had required financial institutions to hold more assets in reserve... or about all sorts of points where the pandemic might've gone very differently... or how Texas might have fared the past two weeks if power companies had invested in the kind of de-icing equipment used in Minnesota. Or if the state had just been plugged into an interstate grid.

But wondering is easy. So is spinning counterfactuals when you already know which unlikely disaster befell you.

My first question is: What's wrong with that? Isn't that how we learn? We look back, we see what mistakes we made, and we intend at least going forward not to make those same mistakes in the future.

Megan McArdle: Yes, to a point. Right? And so, what was actually top of mind when I wrote that was not even the pandemic. It was the Texas disaster, because, of course, you had all of these power plants had failed. Water had failed. And, all of these people were--well, it started with Conservatives complaining that it was all about wind turbines and 'The environmentalists got us into this.' And, in fact, wind turbines were a disproportionate part of the problem.

But, if you drive through the Northern Midwest, there's loads of wind turbines. They have de-icing equipment that keep this from being a problem.

So, Texas didn't have that equipment. And, naturally of course, the Left fired back and said, 'Well, if you didn't have this deregulation, and if Texas people had invested rather than just, like, deregulating and always racing to the bottom with cost provisions, then this wouldn't have happened.'

And, in some sense, that's true. But: Texas is going to invest in a lot of de-icing equipment? I mean, this was a freak storm. And, well, freak long period of low temperatures, right? This was not--maybe this is going to be the new normal. Maybe climate change has brought us to this point. But it hadn't happened before. Even in 2009, when there had been bad storms, it hadn't gotten that cold for that long.

And so, you know, Minnesota doesn't design its power plants--as Texas does--to shed heat, because Minnesota doesn't worry about the 120-degree days that you might get in a very hot and arid place. Places design for the most common problems. And, that's actually normally a good thing. We should think most about the things that are most likely to happen to us. I worry more about all sorts of urban hazards like crime or getting run over by a car than I do about polar bears, because it is not impossible that a polar bear could escape from the zoo and come to my house. But, it seems like there are a lot of other more likely threats that I would prepare for first.

That said, so that runs us into a problem: is that, when the freak accident happens, we can look back and say, 'Well, there was this thing we could have done.' Right? And, we think that we would have done it. That's called hindsight bias, right?

And so, if you ask 100 people in a room about something--about an event, -how likely something is--and ask them to write down a prediction; and then you let them see how it plays out. And, then you go back, more people will remember having correctly predicted that this thing was going to happen than actually is true.

And, that just tells us: we like to think that we're in control. We like to think that we know what's going to happen, that we can prepare against all of these distant eventualities. And so, we kind of fool ourselves into thinking actually our judgment is super-good.

And, I think one of the great things for me about having been a writer for so long, although it's not a comfortable thing for me, is that I have written down my predictions about the world.

And so, I can go back and say, yeah, I can't smooth away into memory and conveniently misremember how I felt about the Iraq war, how I felt about what we should do about the Financial Crisis, and on and on and on and on and on. And, in fact, I wrote a very embarrassing column about the Financial Crisis when the Bear Stearns collapse happened: that we just we're involved in a garden-variety recession; don't freak out. This is not that big a deal, we shouldn't bail them out. Well. So, I think that that is healthy, but most people obviously don't do that. And so, you end up in a place where most people think that they know better than they actually do, what's going to happen in the world.

7:18

Russ Roberts: But, I think the crucial question is that what do we learn from? So, there is hindsight bias for sure, but that's not really the focus I think of the thrust of your piece.

Megan McArdle: No, that is not.

Russ Roberts: It's a good thing to observe. But you start off--I'm going to start out with what you said a minute ago: You don't spend a lot of time worrying about polar bears. There is a remote chance that a bear of some kind would wander into your environment. And, my understanding is, it's good if you're attacked by a bear to make yourself as large as possible and scream.

The alternative--it's clearly not to run. Don't run. They run very fast. They don't look fast, they run very fast. Climbing a tree is not a bad idea, but they're very tall. They can get very far up the tree while you're climbing just by stretching. So, my understanding is if you see a bear, don't run, don't freeze. If you are attacked, make yourself as large as you can and yell back. I want to tell listeners: Do not rely on that advice. That's just my--just giving you what I got.

Megan McArdle: My understanding is that it actually varies by the kind of bear--

Russ Roberts: I'm sure it does. No doubt.

Megan McArdle: Like with grizzlies, you just want to actually apparently play dead and hope that they'll kind of rip an arm off, get bored. And then like with some of them you can punch them in the nose and they don't like it. But I don't remember which bears are which/ And also this could be wrong. So, don't rely on that, either.

Russ Roberts: Don't rely on any of this, listeners.

But my point in bringing it up is not to pass on my deep wisdom about the ursine creatures of our world, but rather to point out that it's probably not a good investment of your time, Megan, or mine, to figure out exactly. We wouldn't want to go to a twice-a-week seminar on bear attacks because it's very remote. And, we decided that even though it's remote, even though it would be really bad, the downside is very high, we don't invest in that.

If we were to be attacked by a bear and survive, we might say, 'Well, now I'm going to take the seminar.' That would also probably be a bad thought because it's pretty far--again, unlikely again. Unless you thought that the probability of a bear attack had gotten more common.

So, bringing us back to the Texas grid problem and the pandemic, and I have to mention that I do not like, Megan--I have to give you a little hard time here--I don't like the use of climate change for 'things that happen I don't like.' I understand there's this argument that climate change means more variable climate, and therefore it is responsible for the eight-degree weather in Texas. But, I don't know that--just kind of, I'm just like, I got to get that out there.

Megan McArdle: Yeah. Actually, I would like to leap on that just as leave on that aside and agree with it because I think that--it's not even that it's necessarily wrong. It's that it creates the impression of an utterly non-falsifiable thesis: If the weather gets warmer, it's because of climate change; if it gets colder, it's because of climate change; if it stays the same, it's because of climate change. Right? It's like everything that happens is because of climate change. And, I think even just as a messaging tactic, it's not good.

Russ Roberts: Yeah. I agree. Fair enough. Good point.

10:29

Russ Roberts: But, let's move to this question of de-icing equipment, say, for Texas, which would be an insurance policy for a rare event. And, I would argue--and we'll get into this as much as we want--I would argue that that is a bit of a fool's game. And I think that was part of your column, to some extent. Your main point, I would argue, is that you said we don't seem to have any taste for that. Why don't we start there actually, then I'll talk about why I think it's the wrong way to think about it.

You said basically: all the things that we learn typically about these crises after they passed using hindsight involve using a large amount of money that is only going to have value if this remote thing happens again. And, we have zero political taste--we may have some personal taste for it--we have zero political taste for these kinds of expenditures, either because of the nature of incentives facing politicians, the way we think about global societal problems. So, why don't you expand on that issue of our unwillingness.

Megan McArdle: I think it's actually worse than that--which is that we have a large political appetite for spending a lot of money on whatever just happened. On whatever really unlikely thing just happened. Texas may well, now, just install the icing equipment on all of its power plants. And, I guess there's some chance that that will end up being a good investment: sometimes these things are.

And, similarly in the Financial Crisis we did a ton of regulation--some of which I support. I think requiring banks to carry more reserves is basically a good idea. But we also did a lot of other random stuff that just sounded financial, like requiring banks to lower interchange fees, which had nothing to do with anything except then I couldn't get a debit card that gave me air miles.

And, yet that's not necessarily--if you think about you're going to have a certain number of rare events in any given period in 10 years, 50 years, a century, whatever--five years--the next unlikely thing to happen to you is probably not going to be the unlikely thing that just happened to you.

And so, now I don't want to get into statistical magic where I suggest, which is not true, that the bad thing that just happened is now the least likely thing to happen to you. The bad thing that just happened is exactly is likely to happen to you as it was before.

Russ Roberts: Once you get hit by lightning, it's okay to go out golfing in a lightning storm and hold your metal golf clubs up high, because it's so unlikely to get hit twice.

Megan McArdle: Exactly. That is not a good plan.

But, with the caveat that sometimes when a really unlikely thing happens, it actually signals that something has changed and that the unlikely thing has become more likely. And, maybe that's true of Texas weather patterns. I am not a meteorologist. I have no idea. But, in general, the last unlikely thing that happened to us--and, I remember when I was writing about finance in the early 2000s. And, I would ask people about the housing bubble, and I was like, 'Boy, this sure seems, like, bubbly.' I'm watching all of these house-flipping shows on HGTV [Home and Garden Television] where it didn't matter what you did. You could paint the entire thing fuchsia and install, like, orange fixtures, and you would double your money. Right?

And, that seemed unsustainable to me. And, I mentioned as much to Wall Street analysts and they all said exactly the same thing, like, in the same words. The nation hasn't had a sustained nationwide decrease in home prices since the Great Depression. And, when they said 'since the Great Depression,' since the Great Depression was synonymous for, like, never: it was impossible--

Russ Roberts: Never. Civil War time, roughly. Meaning: long ago.

Megan McArdle: But, this was something--yes, exactly. Meaning, back when people wore funny hats and it doesn't really have anything to do with us.

And, that is how we think: When an unlikely thing hasn't happened for a while, we think it's never going to happen again. And, when an unlikely thing just happened, we think we needed to take a lot of preparation against it. In fact, what we should be doing is kind of looking at, 'You know what? Maybe financial crises are now impossible, but financial crises do seem to be a fairly regular happening in modern economies since at least the 18th century.'

'Maybe we're now so good at disease that we can't have a pandemic like the 1918 flu. But, maybe they just only happen every 50 to 100 years and we're due.' 'Maybe the Yellowstone supervolcano is never going to explode again in the ways that it did that caused 10-year winters. And, then: maybe it is, and we don't know.'

These are things that--you should think, try to assess what the probability is based on what the probabilities are, not on recency bias about the thing that is most clear to your mind, and that seems like it just happened to people like you.

And that's just not how we think. So, we simultaneously under- and over-prepare. We over-prepare for one crisis because it just happens to have happened. And, then we under-prepare for all of the other crises that could well be the next thing up. Right?

Russ Roberts: Different things come to mind, as you talk about that: one is we're always fighting the last war. It's a big theme in historical writing that people look at what happened in the last war. The famous example is the French were worried about an attack from Germany, so they built Maginot Line--which was great for stopping large masses of human beings and trench warfare; really not good with tanks. And, that was useless. They spent a huge amount of money, huge amount of time, and were not any safer than they had been before they did that.

And, that's--I want to talk about the specifics of the pandemic from that possible mistake. And, while we also understand that sometimes you do learn something from the last war that is useful for the next one. As you point out.

The other thing I want to, of course, allude to some extent, this whole conversation is about a Black Swan--an unlikely thing.

Although, many people have argued the pandemic is not a Black Swan. We all know there's a risk of a pandemic, as you say, every few decades, and maybe more often in a more global world, this is not a Black Swan. This is what you exactly should be ready for. A lot of people said it was coming, and they had good reason--that it wasn't just like Cassandra kind of stuff.

And, the third thing I want to mentioned is a piece I remember from Kathryn Schulz, the journalist and author, on the dangers of a massive earthquake in the Pacific Northwest. And, the theme of that article was: This is kind of inevitable. It's not going to happen tomorrow, probably--almost certainly not going to happen tomorrow. It's almost certainly not going to happen this year. But it is a little bit scarily likely that it'll happen in the next few decades, say. And so, what do you do about that? Do you not live in Seattle? Do you move? Do you make it off limits?

So, these are literally existential questions.

17:54

Russ Roberts: I want to put those to the side. I want to focus a little more narrowly on the pandemic issue. And--you mention this in your piece; I'm going to expand your observation--we're going to be ready for the next COVID-like thing. We're going to stockpile a bunch of masks. We had stockpiled them, by the way, a bunch of things. They were neglected, because--by Republicans and Democrats, they were just kind of left just unpleasant to spend money on those kinds of things. When you're a politician or when maybe as a voter, you don't like it. So, presumably we're going to get better at--we're going to stockpile some masks. We have a lot of ventilators now, whether they're useful or not. We got a bunch of those. We solved that problem, at least at the current expected level of a really bad pandemic.

The more difficult questions for me are things like supply chain redundancy, things that are massively--stockpiling a billion masks, it's money rather not spent if you don't have another pandemic. But, it's not like a supply chain redundancy. Or, say, stopping global travel, which would be another way to prevent the next pandemic, not just prevent its costs from being realized.

We could create a national laboratory that would work on vaccines at a level of effort that is generally not incentivized by the current system. The current system punishes vaccine makers. Part of the challenge we've had with the vaccine and production is that the government took money out of the vaccine business a long time ago. Nobody generally invests in it, tends to be a low profit experience. So, pharmaceutical companies don't do anything in that area, much. But, Operation Warp Speed--President Trump changed that from the top down, which is not bad given that we'd ruined it from before top down.

And so, you could argue that these are the kinds of things that we need to expand and expand greatly. Obviously we need a lot more bird feeder production, and flour production and all the things--and toilet paper, of course. I'm going to talk about toilet paper in a minute. But, anyway, so those are the kinds of things that--it's one thing to stockpile masks to create the kind of infrastructure that we might need to reduce the challenges of the next pandemic is incredibly expensive, it seems to me. So, what's your reaction to that?

Megan McArdle: I think that's absolutely right. And, I think that, I would say a few things. One thing is that I'm not even sure travel bans work. They slow it, but I think what you see historically is that the pandemic didn't move that much faster than, say, the 1918 flu--which is interesting, if you think about how much faster air travel is than boat travel. And, that's just because diseases are very good at spreading. If you were on an island and you can shut down early--

Russ Roberts: Australia--

Megan McArdle: Australia. And, I think that it is possible that travel bans can stop it long enough for the new vaccine technologies to get on the case. Which is different from, say, a hundred years ago. I think biomedically we've never done better and just, I'm still--I wake up every morning just astonished that we managed to produce a workable vaccine in well under a year, not just one, five.

So, I think in that case, preparation is good and cheap. If there is another pandemic that looks it's like this, we should probably err on the side of temporary travel bans. Right? 'Temporarily--two weeks--we're shutting down global travel even if this pans out to be nothing; sorry that you missed your vacation; etc. But, we're going to be err on the side of caution, if we get something that looks like it's a serious outbreak in a country that could be spreading it. And, then we're going to assess.'

And we know how to do things like surveillance and so forth. I hope we're going to fix the CDC [Centers for Disease Control] lab problems.

Russ Roberts: What do you mean by that? What would you say is the CDC lab problem?

Megan McArdle: So, this isn't the first time that the CDC screwed up the test. They contaminated the test they were making because they were processed: They were testing samples in the same lab that they were using to make the test. They were processing samples in the same lab that they were using to put the test kits together. They tried to make it too complicated. The WHO [World Health Organization] had developed a simple, you know, easy test that a lot of countries--it's not true that they offered us the test and we didn't take it. It wasn't that they were going to send us tests. It was that we could have copied their test pretty easily and we decided to grow our own. And, then the CDC lab screwed up.

And, this isn't the first time that the CDC lab has screwed up making a test like this. They screwed up on Zika, too. They screwed up on a bunch of things; and it looks like there's just problems in the CDC that I like most Americans had no idea existed.

The CDC, just as an aside, it's an amazing story. Right? This is what they're there for: this was the big game. This was their going to the Super Bowl, and they just--it was like they sat down on the sidelines and just decided to, like, not play the first quarter.

So, on that side, I think we're going to do better next time. Right? At least if it happens in the next 20 years.

And, there's this really interesting research on Wall Street, for example, that suggests that if you've lived through a financial crisis, you don't have another one because the people who lived through it recognize the signs. And, it's when the old-timers start retiring that you get new bubbles.

But, on the supply chain redundancies: I'm experiencing some feelings that I as a libertarian never had before. Because, part of it's redundancy and this was--you like I, I'm sure--have spent the last 40 years hearing about--well, not 40, I'm only 48, so at the age of eight, I wasn't spending a lot of time paying attention to supply chain management.

However, you know, I spent a lot of time as an economics student and a business journalist listening to the mantra of just-in-time and how just-in-time came and reduced--it was like this beautiful fairytale: there are these huge mountains of inventory that companies were sitting on and they were just doing nothing and they were costly. And, then sometimes they would get obsolete before they used all of it, and how, 'Duh, our ancestors were really stupid.'

And, then it turns out that in a pandemic, what you would really like is a large supply of inventory that you can then process.

And, in fact, like, before travel got so fast, that was what the inventories were for: was that you would have shipping interruptions. If you're getting ore from across the Great Lakes and there's a series of bad storms, you don't get any ore and your coal mine shuts down--your steel mill shuts down--so, instead you stockpile. Right?

And so, that, I'm a little bit shifting on. And I think companies are shifting on, too, by the way. They're thinking about maybe 'I want a little more flex in my supply chain than I had. I don't want to run it as lean as possible.'

That probably won't last that long, but I think for the next three to five years, companies at least are going to be thinking that way.

But, the big issue for me is thinking about stockpiling goods versus kind of stockpiling capacity. And, Garrett Jones, the economist, for example, and I have had a back and forth on this privately. I don't think I'm outing him. But he says, 'Look, we can stockpile masks, we can stockpile all of this stuff.' And, my thought is, like, 'Yeah, we could have maybe for this pandemic,' although the number of masks we went through, I think it's implausible that we would have stockpiled that many.

But, I think about what if this had gone on for three years. Right? And, what if it's all in China, which is a strategic rival to the United States and which bought up our masks and then wouldn't export any to us. Right? And, really, I don't blame them, that's probably what we would've done, too.

But, I think about: Go back to World War II. Think about World War II and think about how fast America ramps up as the arsenal democracy. Right? We're doing it even before we get into World War II with Lend-Lease and so forth. But, we had all of these people who knew how to do that. Right? We had not just--forget the physical plant, you can build a physical plant. What we had was, we had a lot of machinists. We had clusters of manufacturing. We had people who knew what they were doing. And, then when we mobilized for war, we could bring in a ton of new people and the old people who knew what they were doing could train them. If you don't have the people who know what they're doing, if you just don't have that capacity at all, it's really hard to build. Right? How do you build an entire manufacturing industry from scratch in two years?

And, you can think of that as a kind of stockpiling, and you can think of it as a kind of making yourself capable of meeting various crises.

Now, there are downsides to what we would have to do to maintain those capacities, is the problem. Right? We might end up with kind of protected industries, which often are very inefficient: They aren't actually good at what they do, and so forth.

So, I don't know necessarily how we should meet this challenge. But I think it is a real challenge that I would definitely not have--I mean, I don't know, like 10 years ago, maybe longer, maybe 15 years ago, I wrote a really mean review in the New York Sun of Barry Lynn. I actually remember the review and I felt so bad. I ended up at a think tank with him where we were both Fellows for a little while; and he remembered my terrible review. And I felt so awful. I was an obnoxious kid. I thought of him as a big famous person had written a book, and I was just some dumb jerk who got to paid $150 bucks to write book reviews for the New York Sun. And, I was a little jealous and far meaner than I should have been; and I don't write reviews like that anymore. But, I would just like to take this opportunity to just say: Mr. Lynn, that when I apologized, I said, I wouldn't have written it that way, but I still don't think that your argument about supply chains being vulnerable. And, I'm still pretty skeptical. I would just like to take this opportunity to say, like, 'Mr. Lynn, I think you were onto something and I was not just inappropriate in tone, but I should have taken you more seriously.'

So: that, I'm really revisiting; and that's really hard for me because what I'm urging goes against everything that I believe as is economically efficient as a matter of political economy. But, I think especially given that the current manufacturing capital of the world is a strategic rival to the United States, I'm really rethinking how we might think about bringing some of those capacities back here, because I am worried not so much about--I don't think we need as much capacity as we would have to have to meet a pandemic in the case of PPE [Personal Protective Equipment] or so forth, or as much defense manufacturing capabilities as we would need to meet a war. What I think is that we need a strategic reserve of people who know how to do these things.

And so, one idea, for example, that I think is interesting is that we should just--there's arguments for doing this in, like, a stick[?] sort of way--as, like, arguing that we should try to get semiconductor manufacturing back here by saying to the Taiwanese firms that do most of the fabs [microchip manufacturing plants--Econlib Ed.]: 'If you want to sell us chips, you have to transfer technologies.' This is what China does, by the way, to American firms that go there.

But, I prefer to say, like, 'Look, Taiwan, you're in a pretty dangerous area. And, it looks to me like China is really, really thinking about invading and taking your islands over. So, you know what, visas for everyone, bring your chip fabs here, bring all of your skilled workers. We want you. We will subsidize the transfer of those manufacturing. We will give visas to everyone a pathway to citizenship. It's good for us, it's good for you. Do what Britain did for Hong Kong.' I think that would be a wonderful way to kind of promote some of this coming back is instead of doing it on the stick[?] side, say, 'Look, there are strategic things where we are willing to give people tax breaks and visas in order to come here, show us, and build an industry here,' so that we will have it. We will have the knowledge and the personal capacity when we need it.

30:41

Russ Roberts: Well, there's a lot there. I think I need to bring you back into the free-market fold a little bit. I'm going to try. And, like you I've had--I've talked about this on the program--there were things that happened here in the last year I didn't expect, as a market-oriented economist. I thought things would go more swimmingly.

The question is--well, I'm going to make a couple of observations. I don't know if I can directly respond to what you said, but the first thing I want to say, I want to talk about toilet paper. We talked about toilet paper with John Cochrane recently, and a listener with some industry expertise wrote me and made the following observation, which I'd heard before, but he brought it to me in a different way, which is: The toilet paper world has two markets--home and away, home and work.

The home market has a different quality to it, a different demand for quality. And, what happened with the pandemic is there was a massive increase in the demand for home-quality toilet paper, because people aren't going to work. So, they're using more toilet paper at home because during the times when they would normally be using it at work, they're using it at home.

The claim is--and I think this is correct--he made two claims: One, to increase the home supply, you can't just transfer the roles from work to home because the quality is different and the distribution is different. Right? It's not easy for the people who sell toilet paper to offices to sell it to grocery stores.

Now, I'm a little bit surprised about that. I wouldn't think that'd be so hard to fix. But, let's take that as possibly true.

The second problem, of course, is that you want to make more home quality toilet paper, but it's a big investment. And, if the pandemic problems last for three months or even a year, just not worth it.

So, what is the--I think we've kind of weathered storm, though. I think we don't need a national toilet paper production process. We don't need to nationalize the toilet paper industry. And, I'd like prices to be more flexible. And, it could be that there's both legal reasons and maybe cultural and social reasons for why prices didn't respond the way I would have hoped they did during the early days, especially of the pandemic, but we kind of did okay, actually. There was not really--it was unpleasant, there was some anxiety there, but not a big deal.

Second thing I want to say is that we did build a massive amount of overcapacity, unintentionally, through government policy.

I've alluded to this--I want to make it clearer and get your reaction to it--which is that because we've subsidized the pharmaceutical industry for the last 25 years, we've created a massive army of chemists, biochemists, and thoughtful and skilled people working in private labs, who--I thought we have too many of them, and my apologies to friends and family in that industry. I think we have too many. I think we've made it too profitable. So, there's too much innovation of the kind that isn't worth the money that we're spending on it. We have a lot of episodes discussing this for listeners who want to dig deeper. But there was a huge upside to that over-expenditure and that waste, what I think is wasted money: There was an enormous army of people--really smart, talented people--to work on a vaccine in two days.

And, you can say, 'Well, they weren't all in the United States.' They weren't, but you know what? The reason those pharmaceutical companies overseas have so many employees is because about half of the pharmaceutical market is here in the United States because of the way we've over-subsidized it. And, as a result, there were people all over the world ready to create a vaccine to sell to the United States. And they did.

And, it's been--you can argue whether it's fair or who should get it first, and whether the United States should have a big supply to start with. But, that phenomenon, the fact that we got a vaccine produced, intellectually-produced, in two days and then produced eventually--literally produced--in under a year, which everyone said was impossible--'It's going to take at least 18 months'--that was due to that enormous excess capacity in that industry that was sitting there, and the willingness of the Trump Administration to subsidize it out of pocket.

And, I would argue, and I'd like to get your reactions, I think that is the--we can argue for a while, and maybe we will, maybe not all in this episode, about the missteps and lost opportunities that the Trump Administration had in the pandemic. But this was a good one. This was a really good thing that there was a--and by the way, it's not just the so-called Operation Warp Speed, it was also--because Pfizer didn't participate. No; they just got a guaranteed $X billion dollar contract of purchases in advance to incentivize them. That was a really good idea.

And, I would argue that that is the single biggest lesson of the pandemic: that, it's not, 'What do we do to prevent the next one?' And, I think this is true for all of the examples that you give--the power grid, the Yellowstone volcano--it's not, 'What do we do to prevent the next one?' It's, 'What do we do to adapt to the next one?'

And, the insurance for adaptability I would argue is cheaper than the insurance for prevention. And, one of the reasons is that the insurance for prevention is a really bad idea if that thing never comes back again. But the insurance for adaptability has lots of applications. And the vaccine is a perfect example. We're going to get all kinds of pleasant things, I think, out of the science that went into that. There are all kinds of ways when adaptation is possible for dealing with more than just this crisis. And so, what I would argue is: the single thing, if I were in charge--unlikely don't you think?--if I were in charge--

Megan McArdle: I would vote for you for World Czar.

Russ Roberts: Ditto. And back to you. But, the problem of course is that once we were in office, we would act a lot like the other people.

But, my point is that I think the single most important lesson from this crisis is that in two days in January of 2020, more than one, I think, pharmaceutical company figured out how to fix this problem. We should have spent every effort we had to speed that up. And, we didn't. The states didn't do a good job--reasonably so; you know, hard to do, first time, haven't done a lot of this. That's one of the reasons Israel, I think, did so well: different kinds of health system, not totally centralized, but not totally decentralized; not state/government driven in many ways, even though it's highly subsidized. The States--

Megan McArdle: Also Israel is just incredibly good at high speed lifeboat ethics. That is their specialty. So--

Russ Roberts: Yeah. And, it's a small place. There's a lot of reasons. There are a lot of things going on there.

But, my point is that I think--the only thing that, the single most important thing we do the next time is speed up two things: testing, which you mentioned, and getting the vaccine out quicker. Getting it produced quicker, getting it tested quicker, taking some chances as John Cochrane and others have suggested. Keeping the incentives there for them to produce it and make a lot of money I hope in doing it.

And, everything else I think is, for me, is really uncertain how important it is. I think stockpiling masks is a horrible idea. You can make a mask out of a pair of socks. Yes, it's not as good as an N-95. Yes, it's good to have N-95 capacity in the United States. Yes, it's good to have smart people who are capable of building a factory in case all the N-95s are produced by someone you have a global conflict with. That's all true. But, I think we could do all those things. I think we can maybe figure out how to produce N-95 masks here in the United States. I really think that's--I don't think we need that stockpile, that capacity in our people. That's my thought. Anyway, I've said too much. Your turn.

Megan McArdle: No. In the case of masks, we have a U.S. manufacturer, and here is actually one of the places where the Trump Administration fell down. And the reason they fell down was that Donald Trump didn't like masks. He thought they looked unmanly. He wanted everyone to just pretend the pandemic wasn't happening and then it wouldn't be happening and the economy would go back up and he would get reelected. Right?

Russ Roberts: It didn't work out. There's a lesson there.

Megan McArdle: Right. He liked vaccines, he didn't like masks and so they subsidized vaccines. I think we could have done more, honestly. I think we should have built, for example--

Russ Roberts: So cheap--

Megan McArdle: Yeah, so cheap. We should have paid all--like, taken the top five candidates and said, 'We will buy enough vaccine to vaccinate every single person in the United States. And, we're going to give away whatever we don't use.' Right? 'First one, we will use the first good one that we get. And, then the rest of it, we just give away.' It would have been a huge benefit of soft power. It would have been cheap at eight times the price that we're paying for these things--

Russ Roberts: Yeah. When we say cheap, it's billions of dollars, but it's dwarfed by the social damage, children not going to school, it's such a--

Megan McArdle: Right. We should have paid them to build more factories. We should have just spent money like it was going out of style.

But we should have done the same thing with N-95 masks, because N-95 masks are extremely effective at preventing you from getting it as well as preventing you from transmitting it. They're just a much more effective technology. We had a domestic manufacturer here, Prestige America Tech, who could have ramped--

Russ Roberts: In Texas--

Megan McArdle: Yeah, in Texas. That company could have ramped up their production more according to early reports, and they didn't. And, the reason they didn't was that you had to buy these very expensive machines and they didn't want to invest in all that capacity and then get stuck with it and get stuck with the cost of it after the pandemic. And so, they produced what they had the machines to make now.

Well, we should've just gone in there and said, 'You know what? We'll buy you the machines.' How many can you get? Put them all in, just roll out these masks. We should have been sending--we should be getting them free with a box of cornflakes. We did not do that, and that was a big loss because it could have gotten us back sooner. We could have had people going into movie theaters and doing all of these things, had we actually done the stuff that kept people--you could have gone in with--it is now okay to buy N-95 masks and I have a couple of them and it makes a big difference in terms of I can go into a store and feel safe and I wouldn't go into those stores if I didn't have those masks.

And so, that is the stuff where I think we could have done so much more than we did on that front.

But, I agree with you that we--first of all, we should stockpile some masks just because in the first flush of the few days, you want supplies that you can send quickly to the places that are having hotspots. You want to be able to just dump as many masks as New York needs on New York, rather than having them wear garbage bags and reuse their respirators. However, I completely agree with you. We don't want all of the masks we could conceivably use during a pandemic. I think what we want is the capacity to adapt. But, I think we have to think about what is that with pharmaceuticals. With masks, I agree with you. We have that capacity, but with something like semiconductors, we don't make them here. Right?

That is just not capacity that we have right now. And, if we had a different crisis, that might be an issue. And, I think we should think about--first of all, I think I disagree with you. I actually liked the hog-wild pharmaceutical spending in the United States. I just think--you know, look: we're such a rich country. You go into the supermarket, there's like a whole wall of stuff that just makes your laundry softer. What else are we going to spend our money on other than getting healthier? This is great. My mother's vaccinated now, my father is vaccinated. I feel wonderful. It's just like it's such--I am so happy we spent every penny of that money. And, I think most Americans actually feel the same way, is that they are happy that we have that capacity. We have all of those people.

I think we have to think about what it means to have the capacity to adapt. And, I don't think we're good at that.

Russ Roberts: No, agreed.

Megan McArdle: Like we're, because we didn't do that deliberately--

Russ Roberts: Nope. That was just a bonus. That was gravy. It was a lagniappe, yeah.

Megan McArdle: And, I love luck, I'm happy we had it. And, I think the United States has more luck than most because we're bigger and richer and you get a lot of luck when you're big and rich.

But, we could have more if we were a little more thoughtful about policy in a bunch of directions. Right? And, to go back to the masks and to go back to what we didn't do in the pandemic, we just didn't think big enough. We should have. Why were we so stingy about it? It's just, you look at how much money we were losing. And, it's just incredible to me that we didn't pour even more money into the adaptation because the adaptations were the fastest, easiest way to actually get this back to normal. We can't prevent a pandemic from emerging.

We can't go into the place in part because humans are pushing into more and more kind of marginal areas and farming and so forth. And, they encounter wild animals, and those wild animals have new diseases that can pass to humans. There's intensive agriculture: the more people that we have on the planet, the more intensively we're going to be farming; and the richer people get, the more there's going to be animal agriculture. There's going to be farming, livestock, and diseases passing back and forth. So, I think we're probably more likely to have a pandemic now.

Russ Roberts: Nyah--I don't think so. I think we're moving to a lot more lab-based meat and lab-based or agricultural produce that I think will reduce that risk.

Megan McArdle: Maybe. You know what in that case, yes, the risk goes down. But the point is, okay, if we want to do prevention, let's invest in really good lab-based steak. But, think around corners like that, right? Don't think about, 'Well, I want to make the United States the leading manufacturer of surgical gowns.' I agree that is not something that we desperately need to have, but we do need to think about what capacities do we need to have in order to be able to adapt.

45:11

Russ Roberts: But, I think--what I learned from your piece that I'm not sure is the main theme, and maybe you didn't intend it, is there's too many things to worry about. And it's not a cognitive problem. It's that preparing for the array of existential risks would require a fundamental readjustment of life that most people literally don't want. And, they're much happier adapting, doing the best they can.

I think the real question, and I'm going to try to bring you back again into the market oriented fold, is: who plans, who takes the risk, who builds the insurance, the capacity for adaptation? And, I think government is particularly bad at it. There's an argument that government has to do it because there's no incentive for the private sector to do it. Because why would they build for the future?

The problem is, politicians have the same problem. It's not solved by turning it over to the public sector. And, in fact, you're more likely to get cronyism, I worry, that would not spend that money of precaution and prevention wisely.

And, I think we ought to be looking for ways to give private actors the chance to bear the costs of insurance, which means--just take a trivial example. I bet a lot of people in Texas have changed what they keep in their basements. I don't know if there are many basements in Texas, but I'm sure--

Megan McArdle: I don't know either.

Russ Roberts: I don't know if they do, but I'm not sure I'm pro- or anti-basement. I have a lot of issues with basements: water. Storage on the plus side, water on the negative side. Anyway--but I'm sure they've changed their stockpiling habits. As you say, that'll probably die out once people who've lived through this die out and they'll be vulnerable again. But, that's just a trivial way that people worry about an anticipated possible low-probability event. They take private action. They don't say, 'Oh, the government has to stockpile water in case there's a four-degree day and we don't have de-icing equipment.' Let individuals--some can stockpile, some can choose not to, some can take risks, some can not. What we want the government to do is to do the things that it does particularly well.

Now, you and I might disagree about what those are and certainly you and I together would disagree with a bunch of other people. But, one of the things it doesn't do well--and no one does well--is to try to figure out where the next thing is coming from.

And so, what I think we ought to do is to, again, keep the profit, keep the incentives, the carrot--not the stick that you mentioned earlier--keep the carrot available for people who are foresighted and farsighted and take and absorb risk so that when that thing comes along, let them make a lot of money.

So, if somebody wants to stockpile N-95s and sell them at a big profit, people can do that--should be able to do that--but now they won't, because they know--they've learned--that if you stockpile N-95s to prepare for a pandemic, the government is not going to let you profit from that. They're not going to let you recoup your costs of storage. They're going to call you a price gouger and put you in jail. That's a mistake. I understand the political incentives. It's a mistake. Telling people they can't make money from vaccines is a mistake.

We can get around it. We can reestablish those incentives, as we've done. But I think it's the wrong way to organize the process of how do we prepare for an uncertain future?

And, I think it's tempting to look at the current mess and say, 'Well, look how badly, say, the private sector did with, say ,toilet paper or with whatever it is.' I don't think the government generally does better.

And, I'm going to go off topic, I'm going to totally--because I have to say this because it's important. I know there are listeners out there who think masks are stupid. You write me on Twitter and say, 'Oh, people in Florida did fine. And, they ignored masks.' And, that's the same thing folks are saying that people in Japan did great, and they're obsessed with masks.

You don't know. There's too much else going on. It's really not smart to argue that, 'Well, Florida doesn't wear masks.' Florida is not a person. Florida doesn't have a face. There were some people in Florida who wore masks; some people who didn't; some of them were more vulnerable. It's really complicated.

So, I am not--I don't have a lot of--there's not a lot of evidence--it's not that I don't--there's not a lot of evidence about whether masks work or don't work. It just seems kind of smart to me than an airborne thing, you want to keep your respiratory system away from other people's as much as you can. And it's cheap. So, for me, it's kind of like a no-brainer that wearing a mask is a good decision for yourself and for others. You could argue, 'Well, we may find out it actually doesn't work as well as we thought.' I got a headline today: 'A supercomputer has proved two masks don't help.' I was, like, 'I don't think so.' It's really a fad[?].

Megan McArdle: I think it was--I often have these conversations with people about the minimum wage. Right? Where they, 'You know, the minimum wage doesn't do anything; you can raise it to $15 an hour, the disemployment,' like, there's--and 'we know, science has proven.' Right? And, look: I think that the magnitude of these changes is probably lower, certainly in the cities where it's been tested in the booming economies where it has been tested, than I would have thought it was 15 years ago. But, that said, like, at the end of the day, what's the mechanism by which you raise the price of something and nothing happens, like, over and over and over again? Right?

And, similarly about the mask: If you think this doesn't work, put on a mask and try spitting.

Right? Like: It's actually, like, 'No, actually the laws of physics--at some level end up arguing with the laws of physics.'

And, similarly, when people say lockdowns don't work, you end up arguing against the germ theory of disease. And, unless you have a really good reputation of the germ theory of disease--if people stay at home, it has to be at some point mathematically true that they cannot pass a contagious disease on to other people.

I think where there is a real argument is that there's a concept in medical research called Intention to Treat, where you study the effects, not of actually treating people, but of offering them the treatment. Because that's what real-world policies look like. Right? Is that, you give someone a hypertension diagnosis and you give them blood pressure medication. Right? But, most people literally, by nine months most people are not taking their hypertension meds as directed.

So, you have to study, what does it look like in the real world? Not: What would it look like if I could stick this person in a lab and make them do exactly what the design is?

And, similarly with mask mandates, with lockdowns. They would be really, really extremely effective if everyone used them as directed, if they didn't then say 'Yes, but of course, when it was my best friend's birthday, I had the girls over and we didn't wear our masks while we were sitting around in the living room gabbing for 10 hours.' Right? That's--you have to--don't argue that doesn't work, argue that the actual legal policies don't do as much as you would expect. And, I think that's right. I think these are marginal interventions. But in the case of a mask it is such a cheap intervention.

52:48

Russ Roberts: So, I'm going to push back on the lockdown, because I think it's way too early to--first of all, I have no idea if they worked. I think, as you say: The laws of physics, staying at home more often than not, staying at home probably helps. I'm okay with that. But you can't really lock down, is the problem. They are always going to be people who are working together if we're going to feed ourselves, unless we're going to stockpile a year's worth of food in our house, and toilet paper, and jigsaw puzzles, and flour. All the things that--bird feeders are in very short supply, I hear, because people are staying home. They want to look at the birds.

Megan McArdle: I did not know that. I knew about the flour. I actually talked to King Arthur flour. It's fascinating what they--they saw a fourfold increase in demand for flour, just, like, bread flour. There was the bread flour, everyone's making bread. And, then at the same time, of course, they have their assembly lines are working at very low productivity because they have to distance people. And so, trying to deal with those two things at once--fascinating.

Russ Roberts: And, they responded very aggressively, not as aggressively as if there had been a national flour commission or a czar.

But anyway, the lockdown problem, the thing that I have a problem with lockdown is that I worry it was relatively ineffective and incredibly expensive. And, I think we haven't--we still have to see what the costs are. And, I think the--

Megan McArdle: Right. I'm not necessarily saying it's--we can argue about whether it was worth the cost; and we can argue about whether it has a big effect compared to what people are doing individually. Because there's some evidence that people just kind of hold their activity at roughly a level that produces a transmission rate of one, which is one sick person gets one other person sick, and that the government intervention might not have had that much impact in addition to that. Although, I think the experience of, say, the United Kingdom indicates that if you really actually get very serious about it and use enforcement, they really just--their numbers plummeted in a way that other countries that are vaccinated have not seen happening, which tends to make me think that at least if you are really hardcore about it, it does have an effect.

Russ Roberts: I'm going to push back on that because my friends in the United Kingdom say, 'Nobody paid any attention to any of those things. They don't wear masks there. They wander around freely. They have parties, they go to the pubs.' They didn't do anything.

Megan McArdle: But, is that sense of the new variant showed up? Because my assumption is--

Russ Roberts: This is all the way through. That's my impression. It's very anecdotal. But, I would go back to Israel for a minute--a lot of people applauded Israel for its--Israel had very aggressive lockdown. They follow you on your phone--if you leave your apartment.

I think in Australia, which is an island--in Australia, I think if you left your hotel during quarantine, when you arrived, I think it's a $20,000 fine.

And, that deters a lot of people from going out. But, you know, Israel had very serious lockdowns. And then they lifted them; and then of course it came back.

I had people on Twitter applauding [as they go? Ezra Koh?], 'Good job, they know how to respond.' Well, but if it comes back, all you did was bear a lot of costs to delay it.

Megan McArdle: Well, I think: Look, if you think that vaccination is going to--if you've got to--the last lockdown they did, they were doing knowing that they had enough vaccine to vaccinate the entire population. Right?--

Russ Roberts: True. Yup. Fair enough--

Megan McArdle: And, if all you're doing is delaying it, in the context of a vaccine, that's going to radically shift your death load.

And, again, I think there's more argument for short-term lockdowns the way Australia does them, where most of the time everything's open, and then if they get cases in a city, it's just everything gets shut down for a couple of--you know, for four weeks or so--

Russ Roberts: Maybe five days. No, they do five days.

Megan McArdle: Five days, or whatever it is, I haven't been following it that closely. But they shut everything down, so that transmission stops. And then they reopen everything as soon as they're clear that the chain is broken. And, that's--I think I would have certainly taken that over the year I spent going very few places--just personally, even if it was allowed.

Russ Roberts: I think that's partly because they're an island and could control the flow of people in and out in a way that a large country can't.

So, I don't know. So, I'm agnostic on 'lockdown.' I don't think--and I think lockdown, as I've suggested before is sort of a misleading word in the United States, because we did not lock down in any way. We forced some things to close; some of those might've closed anyway because people didn't want to go out. They--self-, I would call it, self-quarantining can mimic the effect of a lockdown.

But, as you point out, many people failed. They claim they're self-quarantining and then they hang out with their family or friends in ways that were probably not always so good.

But, I think some of them are common sense, obvious things we've learned about staying a little further apart apart from people when a pandemic is raging, wearing a mask--these are cheap. These are really inexpensive. That's different than--

Megan McArdle: Don't shake hands--

Russ Roberts: Don't shake hands. Don't hug your friends. It's hard. I don't like it. I really hate it.

But, not sending your kids to school I think we will find was a horrific error, I hope that turns out to be learned. If in fact it is a horrific error, we'll see. And very bad socially, I think, for the fabric of democracy. I think a lot of wealthy people were able to bear virtually no cost to that. And, I think poor people are going to have a larger cost of going forward for a long time, I'm worried. We'll see.

58:29

Russ Roberts: Let's close with other--it's very hard to calibrate one, say, free-market flavor. If I'm a 8.7 on a scale of one to 10, and let's say you were an 8.4 before, but now you're a 7.6--so that's kind of, that's silly.

Megan McArdle: Yeah. It's also, this is really limited. I want to make it clear. I'm not suggesting that we need, like, strategic toilet paper reserves; nor am I suggesting that we need to massively--I am just thinking more broadly about how are we maintaining our capacities to adapt more broadly. I think that also has to do with investing in scientific research. And, I think it has to do with not--I mean, really in the pharmaceutical industry in a lot of ways what we're talking about is not intervening to force prices down. Right? And, it turned out it was a good idea to not intervene to force prices down because then we had all of these biochemists who were able to leap into action that we wouldn't have had if we'd had half as much pharmaceutical research going on. Right?

So, I think, and it's very possible that if--you know, here's the interesting thing is that the mRNA [messenger RNA, messenger Ribonucleic Acid] vaccines were not developed for vac--my understanding is the technology was actually developed for other things. And, it doesn't work for long-term treatments because your body--the MRNA is safe, take your vaccines, it's fine. But, your body sees it as kind of funky; and so it gives this kind of immune response to it. And, that meant that as a treatment, it didn't work, because your body would start noticing it. And, that's why, for example, these vaccines are notorious for creating a very sore arm because your immune system is like, 'Whoa, that mRNA does not look quite right to me.'

But, that said, would this--if we had had European-style drug pricing, right, where we had cut a lot fat, the speculative stuff, we had reduced the payoff to doing highly speculative pharmaceutical research, would that technology have been around? Or, would that have been one of the things that people looked at that and said, 'Nyeh, you know--that's pretty speculative and I'm just not seeing how there's any chance we're going to get our money back, given what a government's likely to pay for it? Let's focus on whatever I can get government grants to do research for or whatever is taxpayer favored.'

And so, we might have almost as many cancer treatments because government is, like, paying for those. And, we might have a lot fewer things like the mRNA vaccines.

So, I'm glad that our government didn't intervene in the way that European governments do. And, I'm glad that we maintain that capacity.

And, I think it's worth asking--I've pitched this is like, 'Why don't we give the Taiwanese semiconductor fabs tax breaks and visas to come here?'--

Russ Roberts: Fabs being fabricators, just--

Megan McArdle: Yeah, fabricators. And, of course, I also just like high-skilled visa immigration anyway. So, yes: Just to give people reasons to come here anyway. I don't like China and I feel bad for Taiwan. So, take that caveat.

But, also look for: Where are the ways that our government is suppressing our adaptive capacity by going into markets and intervening to get an outcome that is politically convenient but is not actually giving us.

And, I don't know what those places are. And I don't know if there are any. But I think that is probably for the low-hanging fruit that all libertarians can agree on, which is: in the places where the government is going in and kind of artificially making sure that supply is low and price is low: let's pull back from those.

This should add an argument to our arsenal. Where those industries are likely to be strategically important in the case of asteroid defense or, you know, a war with China, or with another pandemic, or with all of these low-probability but high-badness potential disasters. Asteroid defense--I do think, I will say, I think that the government should be investing more in this. And, also I think that's actually something that government is probably going to have to do. But, I will say that private companies like SpaceX are also showing us that there is a big role for private initiative here; and the number of tech billionaires who just apparently want to use their money to, like, get us, humanity, into space, it just makes me love big tech more.

Russ Roberts: I've learnt a lot about Megan's biases and I think--

Megan McArdle: Yeah. It is true. I'm trying not to make this about my personal preferences. I would like to go to space very much. But, if anyone has a spare spot on their rocket, I will go.

But, you know, that said, I think that there really are ways in which we're suppressing our own adaptive capacity right now.

1:03:36

Russ Roberts: So, let's close with a little bit more about lessons learned. I want to clarify what I said. I said one of the lessons learned is that vaccines make a big difference: let's get them out quicker. I think if we had not suppressed the profit of those, we wouldn't have had to worry about it as much. But, given that we have suppressed the profit, I'm okay with subsidizing them upfront like that. I think that was a good move. I would have preferred a different move, but under those circumstances it was okay. I would like to see the government spend less time restricting the availability of private tests. The role of the FDA [Food and Drug Administration] I think has not been so good. The CDC [Centers for Disease Control] I think destroyed a lot of its credibility going forward. And, I think human beings in the modern age are going to spend a lot of time trying to figure out for themselves what's risky and what isn't.

They basically--although people still tell me, 'Oh, this is okay because so-and-so'--I won't quote who it is--'says it's okay.' I'm thinking, but so-and-so said other things were okay that weren't okay. Why do you trust him now? Because it's a political place, the CDC. And so, is the World Health Organization [WHO], tragically: they just, I think prematurely, ended their mission in China to figure out where this thing started--'Oh, it'll take some time, we need to think about some more.' It's like, oh, nice. I think that was probably not a science-driven decision.

Megan McArdle: You don't say, Russ.

Russ Roberts: Yeah, I know.

So, I want to hear--I want to let you close with: Is there anything else you want to add to what you've learned that surprised you or mistakes--you've confessed to about--you've retracted your bitter review, Barry Lynn's book. Is there anything else you want to--and by the way, I think you should just have an EconTalk where we invite reviewers to come onto the program and apologize for a snarky review that not only was too snarky, but actually it was wrong. So, I think it's a fantastic potential. It could just be a website: you could start it. Anyway--

Megan McArdle: It's been gnawing at me, so I'm glad I got that off my chest.

Russ Roberts: Good. Anything else you want to say in closing about things that surprised you, things you wrote early on in this and you realized, you look back on them and say, 'Well, I think I jumped the gun there,' or 'I really missed an opportunity. And, I think now what we need to do is X.' Anything else?

Megan McArdle: Yeah. The things that surprise me are our institutions failed at levels I did not anticipate. At every level. It's easy to blame Donald Trump and, oh boy, I do. However, Donald Trump didn't sneak into the CDC offices at night and mess with the reagents and the lab tests. That was on the CDC. Now, maybe a better president wouldn't intervene--

Russ Roberts: And he didn't lie and say, 'Don't buy masks, they don't work,' today. And, then later, 'Oh, they're really good.'

Megan McArdle: The level--look, I knew that public health had been highly politicized. Public health has this problem, which is that we don't have as much infectious disease as we did. In many ways, not technologically, but institutionally, we would have been way better prepared to deal with this in 1930. Because if you ever look at movies about hospitals in 1930, they're fascinating. Everyone's in white, including the doctors, no scrubs, and they're all in these really kind of arcane, their outfits buttoned from the back and so forth. And, that's because they really cared about protecting infection control.

Now we care, too, but we don't care as much because we have antibiotics. If a patient who went in for surgery got infections, which was a huge risk, that patient was going to die--

Russ Roberts: In 1930--

Megan McArdle: And, there was--you couldn't give him a shot. So, they spent more time worrying about infection control. And, they were better at it. They were more serious about quarantine. When people say--I have this conversation with a lot of people on the Right who say 'This isn't America. America would never do any, this is the unprecedented.' And, I say, 'You know what? In the 1900s, the City of New York locked Mary Mellon--told a woman named Mary Mellon--that she had an option. She could have her gallbladder removed, or she could go to jail for the rest of her life.' And, those were her two options. And, the reason they told her this was that she was a typhoid carrier; and they had told her she was a typhoid carrier; and she was also a cook. And then told her, but she didn't believe in the germ theory of disease. And, she was, I don't know, a budding anarchist, and she would say, okay. And, then she would go off and get a job as a cook, and a bunch of people would die.

Now, it wasn't that our 19th century ancestors loved liberty less than we did. They read the Declaration of Independence, the 4th of July every year--

Russ Roberts: They knew what was in it.

Megan McArdle: They knew what was in it. But also they were much more in many ways. Right? There were many fewer restrictions on daily life in 1900 than there are now. Even in red states.

And yet the people of the time ultimately thought, 'Well, of course I don't like randomly jailing people who haven't actually'--she hadn't kill anyone, she hadn't done anything that she knew was wrong. She just thought the experts were wrong. And stupid. Which sounds familiar. But, the people we're like, 'Well, yeah, but I just don't want to get typhoid.'

And, it turns out that Americans don't love liberty more than they love not getting typhoid.

And, we were much more serious about quarantine 100 years ago than we are now. And so, the idea that this is some novel infringement by overweening blue-state Americans is just not true.

But, we had institutional failures up and down the chain-at the state level, at the local level, Andrew Cuomo, forcing nursing homes to take COVID-positive patients back, to state governors who flagrantly refuse to do even really basic things like masks. You have this now. I don't understand why red states, why Mississippi and Texas--look, I think there's a real argument on reopening. I don't agree with--I would be more conservative on this than they are, but I think there's a legitimate argument to be had about how much price we should be willing to pay, especially now that we can vaccinate vulnerable people. But, why the masks? It's just this like symbolic politics. Obviously Donald Trump made all of these--it was fascinating because I watched it.

Early on conservatives loved masks: they were really mad at the CDC for saying masks don't work. They were making fun of it. They were making basically the same arguments I am about the laws of physics. And, then Donald Trump wouldn't wear one. And, then, they felt compelled to defend Donald Trump. And, there wasn't really a defense of 'Donald Trump won't wear one' except masks don't work. So, they started arguing the masks don't work and then they got really invested in it, and it became symbolic politics. And, I think that--

Russ Roberts: Tribalism gets in the way of--

Megan McArdle: Yeah. And, it's on the other side, too. Right? So, I live in Washington, DC. I don't think I need to wear a mask outside. I'm perfectly happy to walk around not wearing a mask because I think the odds that I'm going to get COVID from a passer-by in my not-very-dense neighborhood, it's just extremely low. And, not worth the fact that it's actually very hard to exercise these things. It doesn't matter: I wear a mask because in my neighborhood you are like a sociopath if you don't wear at least one and preferably two masks when you're out walking around on the street. And, that is also political.

And, it was really telling, because Texas and Mississippi lifted all their restrictions and there was all this news coverage and all this Twitter fulmination about how they were killing people and so forth. And, then Connecticut announced that they were also lifting most of their restrictions. They are leaving the mask mandate--and, this goes back to what I said about symbolic politics--and, no one was, like, 'Why is the governor of Connecticut just determined to kill its citizens?' Right?

It's very political. And, I didn't predict that. I would have predicted that we would pull together more like World War II and less that it would have driven us even farther apart.

And, I also think that in the early days, the biggest mistake I made was in the early days, I envisioned the kind of Australia-style lockdown, where we all really do this, but we do it for a short period of time; and we crack it. We get this thing totally suppressed to the point where we stand up massive contact tracing and testing capability. And, then we just go about our lives.

So, I was predicting a much more severe lockdown, but I was pitching it for like maybe three months. Right? It was like: Everyone really get into their house. Everyone really pull together an act like this matters. And, for three months we're going to just knock this thing in the head. And, then we're going to stand up contact tracing; we're going to get an aggressive testing regime; and then we can go back to basically normal. And, I would have thought that would have been feasible. And I now think, in retrospect, that was obviously just never on the table for a bunch of political and institutional reasons. And, given that, I probably would not advocate for nearly as much closure as I did.

1:13:04

Russ Roberts: Well, I'm not an anarchist. A lot of people assume that if I don't like, say, price controls, I want no government. I never understood that leap that people make about me. I think there is a role for government.

But, what's fascinating about that comment you made, and then I'll let you have the last word, is that institutions struggle to work well when tribalism and partisanship run amok, as they have. And, the leadership was missing there, to try to pull people together. It's not Donald Trump's skill set. It's just the way it turned out to be. I agree with you: I thought there'd be a little more unity. Wasn't in the cards. And, I think we paid a terrible price that certain things that should have been open-and-shut became virtue signaling. Or vice versa: not doing them became virtue signaling. It's bizarre. Such a strange time.

Megan McArdle: I think I would close by saying something that--look, I've thought during this pandemic a lot about a quote from James Herriot, who people of my age and older will remember wrote these wonderful books about being a vet in the Yorkshire Dales. They're sort of lightly fictionalized accounts of his life as an actual vet in the Yorkshire Dales. And, some of the stories are made up, but a lot of them are true. And, he told a great story once about: very early on in his career, he goes to watch this eminent horse specialist doing an operation and the horse randomly dies in the middle of the operation. Horses are quite--my understanding is they don't take anesthesia particularly well. And so the horse dies. And, I guess the way at the time that you would try to perform CPR [cardio-pulmonary resuscitation] on a horse was that you would jump on its ribs.

And so, he said, as he watched this eminent specialist of whom he had been in awe dancing around on the horse's ribs, he suddenly realized that his profession was going to afford many opportunities to look like an idiot. And, indeed it did.

And, I think that that has been true of my own profession as well. And, more broadly, the kind of commentator/pundit/wonk profession. Which is that: at any given time in the pandemic, it's looked like you understood what the result was [inaudible 01:15:30]. So, early on blue-staters are looking enviously at Europe where everything's open and we're still basically closed because we never got the pandemic under control the way they did. I mean, they dropped their cases very close to zero during the summer, and we had not, because red states just refused. And, possibly for other reasons--maybe the lockdowns in blue states even weren't as complete as they were in Europe.

But, on the other hand--and so there was a lot of triumphant[?] commentary. And then came fall, and Europe just zooms up and suddenly their case loads are worse than ours. And, all of a sudden red-staters are turning around and going, 'Ha, ha, ha. What do you think now?' Right?

And, this has gone back and forth several times, because then Europe got it back under control and we still haven't.

But, I would say this: is that I think now that we're coming to the end of it, right?--

Russ Roberts: Maybe. Maybe. Maybe--

Megan McArdle: where we're going to have a lot of our population vaccinated, we hope, it looks like we're now at this moment--again, I'm taking one of these opportunities to look like an idiot. But, no, I think that one thing we can say is that Europe did better on the kind of control-side, the controlling-people side. They really did manage to get their case loads much lower than United States did. And, I think that that was policy. I don't think it was--policy or culture, whichever. It was something about us; it wasn't just random luck of the virus. There was something that we were doing either as governments or as individuals that was keeping transmission going at a pretty brisk clip during the summer.

I think part of that honestly does have to do with like, it was spreading in a lot of states where there's a lot of air conditioning and where it's really hot and so people were inside.

But, the flip side of that is that we did better in vaccines than Europe and that Brexit is looking like genius at the moment. Right?

And so, what does that tell you about these two cultures? I think it does tell you something. And I think it is that America is actually better at the adaptation. We still are. We've got a lot of problems. We have so many problems. We are so divided. But we still have this capacity that made us one of the leading forces in World War II, that has made us often indispensable nation economically to the world. We still have it, guys. We could do more of it. We could get it back. We just have to stop screaming at each other.

Russ Roberts: Our guest today has been Megan McArdle. Megan, thanks again for being part of EconTalk.

Megan McArdle: Thanks for having me.


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