Intro. [Recording date: May 12, 2020.]
Russ Roberts: Today is May 12, 2020. My guest is economist and Nobel Laureate, Paul Romer, University Professor of Economics at New York University [NYU]. He previously served as the Chief Economist at the World Bank and is the founding director of NYU's Marron Institute of Urban Management. This is Paul's fifth appearance on EconTalk, having last been here in April of 2019 talking about growth, cities and the state of economics.
Our topic for today is the COVID-19 pandemic and where we stand in mid-May 2020. And, as I've done recently, I want to remind listeners that because of the pandemic we're doing some different stuff with audio. We're also trying to record this as a YouTube video for those who want to watch it.
Paul, welcome back to EconTalk.
Paul Romer: Yeah. It's good to be back. So, am I in the, like, the top in return visits?
Russ Roberts: No. You're like Henry Aaron's brother, Tommie. You know--the two of them I think hold the record for most homeruns by two brothers in the major leagues. He might have under 50. He might have under 10. I can't remember. But, you get the joke.
Russ Roberts: Anyway, as we record this, it's mid-May as I mentioned, and we're about 80,000 dead in America, as far as we know. There's a lot of uncertainty about that number, but that's the current sort of best guess due to the COVID-19. And, unemployment is just under 15%, but people expect it to go dramatically higher. What do you think it's important to recognize this stage of the pandemic? What have we learned?
Paul Romer: Yeah. I think that it's important to recognize that we've suffered a very serious shock. When this virus jumped over the barrier and started spreading amongst humans, we just lost a permanent large fraction of our opportunities. I think it's hard to appreciate that something like this could happen for reasons that are completely out of our control. And, it's even worse when we think, 'Oh, if we had done something, we might have prevented this from becoming so bad.' But, bygones are bygones and we've suffered a big loss, a big shock.
And I think we need to get past denial on this and come to terms with what are the best of some bad outcomes or bad alternatives. But, frankly, the alternatives facing us right now are very grim.
Russ Roberts: Why do you say that? I mean in particular, there's a lot of worry about a "second wave." There's a lot of worry about--that a vaccine may not be forthcoming. Period. Or it might be months away. You've suggested that we are still at a risk of massively larger numbers of death. I'm a little bit skeptical about that, but lay out your pessimistic case.
Paul Romer: Well, I think that--the way this played out was that there was some consensus about an emergency response, which was lockdown. That made sense amongst people who believe in, basically, what they call mitigation, which is: you accept that you cannot stop this virus from spreading through the population. You try and keep it from spreading too quickly so you don't overwhelm your hospitals, but you just accept that it's going to spread through the population and some people will die from it.
The other strategy is suppression: that you take active measures that will keep the number of people infected to a small enough number and keep pushing that number down so that you don't spread through the whole population.
The disadvantage of suppression is you have to stay with it. There's never a time when you can stop because when you stop, you go right back to exponential growth like we had in the beginning and it zooms through the whole population. And what we're learning right now is that the strategies were using for suppression are very, very costly.
We're losing something like--I'm estimating $500 billion a month in forgone output.
So, you think, okay, well that's the only alternative. Maybe we should go with mitigation, but spread throughout the whole population. The thing I think people aren't recognizing about that path is that one's very slow. It takes more than a year to have this virus spread all the way through the population, if you're mitigating, so we don't overwhelm our hospitals.
So, roughly speaking if this virus spreads through the whole population, probably about a million people will die and that's using a half a percent as the infection death rate which is at the lower end of what we believed before.
Two, if you're going to limit deaths to 2,000 people a day, then it takes like 400 days or 500 days to get to a million deaths. So, it could be 500 days until we get past the point where people are dying, where we get to herd immunity, and we're past this crisis.
So, both the mitigation strategy where we let it spread or the suppression strategy right now look like they impose enormous costs on society. And arguing between the two of them seems to me to be almost kind of irrelevant because they're both so awful. What we need to do is figure out something which is sustainable but a lot less costly.
Russ Roberts: Let me push back against the million deaths, because I really think that's--I don't agree with that. That was what I thought in the early days. I would call that the consensus. And I interviewed Tyler Cowen on this program--I don't even remember when it was. I think it was some time in the Middle Ages, but it was probably a month ago at the very beginning. And, in the very beginning of this, Tyler, I could sense-it's an interesting--I sensed in our conversation, he was very careful not to be optimistic in any dimension. And I think part of that he felt was like a social service: that we had to make sure that people were worried.
And I came very close to asking him to whether he thought a million people would die or not. What was the over/under? Would he take the over or the under, meaning did he think there'd be more than a million deaths or fewer? And, I could sense he didn't want to talk about that so I didn't ask it, but that was the number that was on my mind that it might be a million people dead.
And that number was based on 50% of the population getting it and a death rate of 1%. And you've done the same thing: you've said, 'Well, actually 100% is going to get it and the death rates going to be a half percent.'
Paul Romer: No, no, no, no. To be fair, I was assuming 60% infected and a half a percent is the infection death rate.
Russ Roberts: Okay. So, the reason I think that's a gross overestimate--and I bring this up out of intellectual curiosity more than policy purposes, and I think for educational reasons I think it's important to talk about it. So, just to be clear, I'm not saying that, 'Well, if it's only 250,000, it's great.' It's obviously a horrible tragedy, regardless.
The overwhelming numbers of deaths right now in the United States, are--there's two things that jump out to me. About half are in the New York metropolitan area. They're in New York, Connecticut, New Jersey.
Sixty to 70% or people over the age of 70, and an enormous amount of the exponential growth appears to have occurred from a handful, relatively small, at least--not a handful, but a relatively small number of people who infected large numbers of people in social gatherings like parties, celebrations, conferences and choirs, and religious services.
So, it seems to me that if we did nothing dramatic--and in a minute you and I have some dramatic things we could do or could have done--but if we did nothing dramatic, and we told people, 'Wear masks. If you are over the age of 70, stay in self-isolation--the equivalent of quarantine. And, don't do anything with more than 25 people: Don't hold religious services, do not hold concerts, etc., etc.--I don't understand how we're going to get anything close to a death rate of a half a percent. In fact, in New York City right now, my understanding is the best guess is 20% to 25% of the people in their city have had the virus, and the death rate isn't--is it half a percent in New York among--
Paul Romer: Well, that's where I got the half a percent from, yes, is from New York.
But, let me say, I think you and I don't disagree on the facts here. It's really just a matter of how we break these down into cases.
So, what I was saying is that, if we want to get to this point where we have herd immunity--so the virus just dies out because it has trouble finding people to infect. To get to herd immunity, you have to get to at least 60% infected; and then if the death rate is a half a percent, that leads to a million deaths. But, that's if we want to get to herd immunity.
Now I think what you're articulating is a suppression strategy. There's a way we can keep this from spreading to everybody and it's a suppression strategy which is less costly than, say, locking everybody down, the way we're doing right now. And, that's where I think we have to go.
Russ Roberts: And, the reason I'm saying that, the reason I'm saying that, Paul, is I don't think the--the half percent number is an average. It's actually a tenth of a percent or less for people under the age of 25 or 40, even maybe; and it's 5% to 20%, horrifically, for people over the age of 70 and maybe 60.
And so, we could bring that number down with that Infection Fatality Rate, the so-called IFR--we could bring that number down well below half of a percent if the elderly people were careful. Which they will be. Trust me. I'm 65. I'm going to be more careful. And, if we treated nursing homes very differently than we did tragically in the first few weeks of the crisis, which were--
Paul Romer: Yeah. So, again, I think we're not disagreeing. But let me be clear what I'm trying to say. There is a vision which is a time in the future where we don't have to do anything differently--that we go back to life as of 2019--that you could get to because of herd immunity. And, that is logically possible.
I'm just saying it means a lot of infections, a lot of deaths, and crucially it takes a long time. So, when people are saying we want to get back quickly to 2019, going for herd immunity doesn't get us back quickly.
Now, where you're going is where I think we should go, is say, 'We can't just like lock everybody down.' Just say, 'Everybody's got to stay home.' And we can't do that indefinitely because it's way too costly, but there may indeed be a series of measures which we have to stick with forever or at least until there's a vaccine that's widely deployed. But, there's a series of measure that could be a lot less costly than just locking everybody down, but that suppress the virus.
So, I think we're on the same page. And then the conversation is about what are those measures that will actually, at moderate cost, suppress--
Russ Roberts: Make a difference--
Paul Romer: Suppress the virus. And, keep in mind that we have to be willing to stick with those forever.
Russ Roberts: I just want to add one more caveat to the discussion about the costs of the current so-called shutdown, lockdown, or however you want to call it. Actually, I think it's important not to call it a lockdown. It's not a lockdown. It's a government-imposed shutdown, much of which happened before the government imposed it--voluntarily, and, as you have correctly pointed out, I've tried to push it as a point at which has nothing to do with the government. People are just afraid. They don't want to eat out. They don't want to get on an airplane if they could avoid it. They don't want to go to a hotel. So, there's an enormous part of the economy that's not going to fixed with the government just saying, 'Okay, go back.' There's a lot of dimensions to this.
But, I want to talk about your back-of-the-envelope calculation of which you made earlier of $500 billion a month. There are costs that are government spending costs that are burdens on the fisc, so to speak. They are fiscal costs of government paying out money that are being funded by debt, eventually have to be paid back to some dimension via taxes. That is risky, because there's uncertainty about at some point whether that is sustainable.
But there are other costs--which are I think what you're mainly referring to--which is the reduction of economic activity, the lost GDP [Gross Domestic Product] from the fact that people are sheltering at home. Many of whom cannot work. Many of whom have no demand for their services.
There's a third cost, which is not measured, which is unmeasurable, which I know you're also worried about. I think it's important to make sure it's heard and put on the table, which is the loss to dignity, the fear of the future, the inability to plan, the mental burden on people of anxiety and depression, potentially suicide and worse, potentially tragically as you have pointed out also, the political consequences of this when people are voting for them in the next election--not this election, which is already--you can debate how pleasant or unpleasant it is--but the 2024 election is the one I'm really thinking about, which is the potential for demagogue candidates, demagogic candidates to mobilize people who correctly--correctly--believe they were betrayed in this response to the pandemic.
And, as you said earlier, I don't blame--there are people to blame. It's really complicated. I think there's easy people to blame, some of which is merited. But a lot of it, it's more complicated; and yet the political process, nuance isn't its strong suit.
So, I think it's really important to get that point out on the table that the costs of this are potentially much more than $500 billion, and that the current situation which is this sort of open-ended mix of government mandate and individual fear--or, return and then worse fear because it grows again--is really to be avoided as much as possible. If there's any way possible.
Paul Romer: Yeah. Yeah. Yep. You're exactly right. My $500 billion tried to capture just the things we're not producing right now--the restaurant meals that aren't produced, the dental services not provided.
And, then a little allowance for the fact that a lot of that supply chains, the connections, the jobs, the positions are going to go away. So, the longer we stay at this depressed state, the lower our future ability to produce output will be as well.
I didn't try and put a number on the political risk, but that's the one that dominates this decision for me. Because, if somebody said to me, 'We have to just stay where we are,' in the economic kind of [?]--
Russ Roberts: Freeze--
Paul Romer: If we have to stay with this as long as it takes to get a vaccine and that might take five or 10 years, my response to them is, 'Well, if this means a threat that could really undermine our whole democratic system and our whole rule of law, I don't think it's worth running that risk.' We've got to find something else that doesn't threaten to destroy everything about the foundations of our society.
Russ Roberts: Yeah. I made that observation to someone recently and they've looked at me like I was a lunatic, like I was some cuckoo. Yet--this actually is someone who I think does know something about the Weimar Republic, for example, or other situations where, really a fundamental breakdown in civilization occurs, opening the door to many, many, many unpleasant things.
The other point I want to make, which drives me crazy, is that--I don't know about you, but I suspect it's the same--my hardship in this ordeal is that I have to share my bandwidth with two kids home from college and my wife teaching on Zoom during the day to her high school calculus students. My income is secure; I have plenty of everything. There are lot of things I miss. But I'm not enduring any "hardship." It's just frustrating, annoying. It's a little bit of an emotional challenge, at times. A lot of wonderful things. I'm playing a lot of chess with my kids and they're playing Puerto Rico and really getting good at it.
But, there's an enormous part of the population--and by the way, I work from home already with EconTalk and writing and other things. So, there's tens of millions of people who can't pay their mortgage and they're getting a $1,200 check?
I mean, that's--if they're lucky. Now, there are some people on unemployment that are doing well. There are small businesses that are getting loans. It's slowly starting to work a little bit. But, I think a lot of the chattering class--the pundit class--underestimates the human side of this that's devastating for people not like them.
Paul Romer: Yeah. I haven't gone back and reread this carefully, but my recollection is there were developments like the Wobblies, the Workers of the World [IWW--Industrial Workers of the World] who were kind of more on the Left; and then Huey Long.
And, you know, even in the United States, you could see incipient signs of this rebellion against the current system. This sense that we had to just tear everything down because it's so broken. And, that's just incredibly dangerous, when a society gets to that point.
Russ Roberts: Oh, yeah. I totally agree.
Russ Roberts: So, let's talk about what you've been writing a lot about, which I'm extremely interested in. And, I'm agnostic on it. I don't understand the strong case for it, but I'm eager to hear it from you: which is the potential for testing.
So, just to throw into the mix, there was a tweet this morning from somebody who is living--an American, I think an American, living in Wuhan. He said Wuhan wasn't a shutdown : It was a lockdown. It was martial law, barbed wire, guards in front of every apartment complex. You can only go out with a pass. If you were positive, you were sent into--and, this is also true in South Korea--you were sent into a quarantine dormitory. You had to wear an ankle bracelet, I think in South Korea, and be followed and tracked.
These options aren't really available in America. So, when you talk about--in an authoritarian state, which China is more or less, or a different culture, maybe a more homogeneous country like South Korea or Israel which also had very strong, close-to lockdown situations that people accepted--the testing and tracing idea, I don't fully understand.
So, tell me what you see is the role that testing would play in getting us out of this or moving us forward.
Paul Romer: Sure. Well, the first thing I have been saying recently to people is that if the Paul Romer of May 2020 talked to the Paul Romer of 2019 and said to the Paul Romer of 2019, 'We've got to spend a hundred billion a year on tests, get everybody tested every 14 days'--
Russ Roberts: In cases of pandemic.
Paul Romer: Well, I mean, the Paul Romer of 2019 would not have bought this argument. Things are not that bad; it's not that serious. Why do you got to go all this trouble, all this problem?
And the difference is that now, in the face of this particular crisis, I've just realized that the alternatives of letting the virus spread through the whole population, or trying to suppress it indefinitely through other means, are both so unattractive that now $100 billion a year which seemed like way too much before, now it seems kind of like a walk in the park. That's the first thing.
Now, the second thing is: reasonable people can differ about what's the right low-cost way to suppress this virus indefinitely. And, by the way, how are we going to suppress the next few viruses that come down the pike? Things like wearing masks? If we have a social consensus and can sustain that indefinitely, that could go a long way towards protecting us and suppressing this virus.
The idea with testing, though, is that if there's some information we don't have, what we'd like to know is whose infectious right now. If we knew that information, what we could do is say we're going to isolate those people for a short period of time, a few weeks, and we can then suppress the virus without interfering with anybody else's daily lives.
Now, how you work the deal where, when you find somebody who is infectious you get them to go into quarantine, we don't have to use a [inaudible 00:22:25] solution for that. Steve Levitt and I wrote a paper[?]: We can pay people to go into quarantine when they test positive.
So, we've got other tools that can be consistent with freedom on this. But, right now what we're missing is the information.
Now, one way that people have proposed to get that information, and the only thing that was available in the past, was this idea of contact tracing. When you find somebody who is infected, you trace back their contacts and you try and essentially test them to see which of the contacts are also infectious. That was the cheapest way to figure out who was infectious in the past because we didn't have tests.
What's happened is the cost of tests have been coming down radically and are still going down. So, my claim is it's actually going to be cheaper and more effective and more efficient for us to just scale up the testing and do it for everybody.
And it's partly colored by our experience, which was: the contact tracing system was the system we were using in January when this virus exploded, and it just completely failed. The people who say, 'Okay, well contact tracing is going to work, give us a do-over,' I don't see the evidence that it's going to be different if we do it again.
So, I think we need--given the low cost of testing now, relatively, I think we need to just invest in that capacity for testing. And then with this information, who is infectious right now, we've got a lot more options for managing this at low cost.
Russ Roberts: So, let's just--give us an overview of what you see as the state of testing right now. Right now here in Maryland where I live, I think it takes--it's still a swab up your nose, which everyone says is really unpleasant, not something people are eager to do; and it's I think a three-day wait.
There are two problems with that obviously. One is it's just a long time. Second is, in between those three days, you could go get infected again. You could come back negative and then get infected the three days you're waiting and dangerously affect people. So, where are we on the testing?
Paul Romer: Well, there's two types of tests. I don't find the terminology very helpful here so I won't use it, like antibody versus antigen.
One test just asks: Are there signs of your body's response to an infection, which tells us you were infected at some point in the past. So, has your body responded to an infection? That's one class of test.
The other class of tests are: Is there virus present in your body right now? And, so the swabs, the PCR [polymerase chain reaction], but there's some other versions of that kind of antigen testing. Test for the virus, not your body's reaction to that. The antigen testing is the thing that can identify you early in the process of being infectious.
Russ Roberts: When[?] you're asymptomatic.
Paul Romer: Yep. It has the best shot at catching you when you don't have symptoms but you're infectious and infecting other people. So, right now that's mainly PCR although there's one other antigen test that's just been entertained.
Russ Roberts: Explain what PCR is.
Paul Romer: Well, PCR is a way to take a sample and then to amplify, to try and amplify a particular string of RNA [ribonucleic acid] from the virus. So, if there's a little bit of that RNA in the sample, this amplifies that up to the point where it's easy to measure and it says, 'Oh, yeah. There was RNA from the virus in this sample.' So, PCR is a way to do that.
Antigen tests are another way to see, 'Oh, yeah. There was a string of that RNA from the virus and in the sample.'
One of the big holdups as you described is that the approved tests require these swabs that go way up the nose towards the back of your throat and they were in short supply.
Now, here we get to the heart of why we haven't expanded testing more rapidly. There are university researchers who said, 'We don't need swabs. We can actually just test saliva.' So, there's a group at Rutgers that showed you can just test--you just have people spit in the tube and you test the saliva. Another group at Yale that said, 'Actually, the saliva samples are actually even better than using the nasal pharyngeal swabs.'
Russ Roberts: Fewer false-positives and false-negatives, presumably.
Paul Romer: Yeah. Now, slightly better, not hugely better. But way more convenient and there is no shortage of swabs.
So, why hasn't everybody started switching to the saliva tests? Well, even under the expedited process of giving Emergency-Use Authorizations, EUA, at the FDA [Food and Drug Administration], the FDA said to the group at Rutgers, 'Okay. You can test saliva samples, but only with this particular it for collecting--this particular type of tube that people spit in. And only your lab. We're not approving anybody else to do what you just discovered how to do.'
And then, even worse, they said, 'And, only if the person spits into a tube under the supervision of a healthcare professional.' Then it's like, 'Okay, well, I mean, can we do telemedicine? Can they spit in the tube but you watch them?' 'No, it has to be in the physical presence of a healthcare professional to spit in the tube.'
Now, why they mandated that, I have no idea. After four weeks they finally said, 'Okay. They let you do the swabs at home without supervision. So, we'll let you spit in a tube now without supervision.' But, it's still the case that the only lab that can process those samples is at Rutgers, and 'If anybody else wants to be a good citizen at some university campus and start doing this, you just have to come ask us and we'll take several weeks and we'll decide whether we're going to let you.'
And, we will never get to the level of testing we need if we operate under that kind of regime, under the FDA. So, that has got to change.
Russ Roberts: Because I hate to defend the FDA in this situation--
Paul Romer: Well, I hate to attack them, but--
Russ Roberts: Well, you and I are a little bit different--but I think the--just 180 degrees. But, I think the issue ultimately might be, if proving that you're negative is valuable that people could obviously fake and use other people's spit and all that. So, the presence of a healthcare professional, I kind of get.
Paul Romer: Yeah. I was told that was like chain-of-custody.
Russ Roberts: There you go. Okay, I can understand that a little bit.
Paul Romer: That's not the FDA's problem here. I mean, somebody else should be worried about that problem.
Russ Roberts: Agreed. I agree with you there.
Russ Roberts: But, let me ask you this. With the saliva tests that you know of, and you know of two, and maybe there are others. One, what is--
Paul Romer: I think it's just one, but you can now do it at home. That's just what changed.
Russ Roberts: I thought you said at Rutgers and at Yale.
Paul Romer: Oh, no. Yale used the Rutgers'--Yale did the test of the Rutgers system.
Russ Roberts: But, there is a saliva test. So, the question is: One, how much does it cost? And by cost, of course, we mean administer and evaluate, not just administer. And, then secondly how long does it take?
Paul Romer: Yep. My understanding, there's a logistics challenge of like, how do you get the sample to the lab. I think the lab can do it in about four hours. But other people I've talked to in the labs say that this is something that could be dramatically scaled up. Both the throughput--how many samples can we test, start down the line--and then how long does it take to go down the line. There's a little bit of a trade-off between throughput and the waiting time. But, the people in the labs say they think that this both of these could be speeded up quite substantially.
Russ Roberts: So, we could call it--sorry about this, Paul. I'm going to call it Jiffy Tube. So, with Jiffy Tube, you show up to a free-standing kiosk or a storefront. You spit in the cup; and then you wait in the room with the magazines and the TV playing a really bad cable reality show which is what my Jiffy Lube looks like. And, do you stay isolated for those four hours? It's not fun, but you work; there's broadband, and you--
Paul Romer: Again, I think, we can sort out all of those issues if we move as fast as we can to speed up the testing, both more throughput and shorter waiting times. For example, if there's a wait time, people can always get their results over the internet.
Russ Roberts: But, I like this idea of that while you're waiting for the test, you can't go get reinfected by someone else, at least for now.
Paul Romer: But, the way this works is that if you're testing frequently, you just accept--even the test is going to miss some people who are truly positive and you might get reinfected before you might be infected. As soon as you get a negative result, you still might get reinfected.
So, that's why you have to retest frequently. The key is that, this is not going to wipe out the virus, but it means that the number of people who infected will be steadily decreasing over time. If R0 number is less than one, so you get a steady decrease. And, that's really all we can hope for.
Russ Roberts: R0 being the the number of people that one person infects. So, the super-spreader could have an R0 of 50. You show up at a party with it and you kiss and hug a lot of people and 50 people end up contagious, but that person would be removed from the party effectively. So it wouldn't show up at the party to start with and the R0 would fall.
So, you're suggesting that testing could become the equivalent of stopping off to gas up your car. It's just something you do every once in a while to make sure you're not endangering other people, that you're not at risk yourself.
Russ Roberts: So, why is that going to make such a big difference? Why is that a game-changer for how we move forward economically? And, when I say economically--again, I don't like that word--our ability to interact with one another in every way that we used to do in January of 2020.
Paul Romer: Well, whether you're trying to use just population testing or whether you're trying to use testing plus tracing, the goal here is to figure out who's infectious, because the only way to stop or suppress this virus is to find a large enough fraction of the people who are infectious, get them isolated, so they don't infect more people, and then you're on this path where the number of people infected is falling over time.
So, you just have to find enough of the people who are currently infectious and get them isolated.
If you do that, you don't have to interfere with the activities of anybody who is not infectious. So, a lot of the value of the test as you were just alluding to is that when you get a negative test result--like, if I got a negative test result and my dentist had a negative test result in the last couple days, I could go to the dentist and have him check my teeth and he'd be safe and I'd be safe.
Russ Roberts: Yeah, I guess I could see it being a very powerful reducer of R0 and death if we made all--I shouldn't have said "we made all"--if nursing homes chose or sports teams chose to use these tests frequently, they were cheap enough, quick enough; and that would allow--again, you could--there, you could be tested before the game. You could show up at the game as a fan. There could be a tailgate party for people waiting for the results. The ones who were positive would be told they have to go home. They wouldn't be allowed in.
There would be a lot of different ways that a test that was cheap, quick, and relatively painless could make life better. But, I'm wondering about the--I'll call it the Civil Liberties issue: Would you require people with a positive test to go home? Would you pay them to go home, as you alluded to a little bit ago? Would you force them to wear an ankle bracelet or install an app on their phone that would allow people to monitor whether they're keeping quarantined?
Paul Romer: So, the basic answer that I want to give to this is that, until we have the capacity to test and get this valuable information, it's premature to worry too much about what we do with that information.
Russ Roberts: Fair enough.
Paul Romer: But, I do agree that we want to use that information in ways that protect liberty and protect our freedom and don't encumber us too much. I think there are ways to do that. This is part of why I'm very suspicious of the digital contact tracing. I just don't see how you do that without further eroding notions about privacy and without further entrenching the power of a few, just a couple of very powerful firms right now. They have been in discussions where people are saying, 'Well, you know, just the new world is we're going to have to force everybody to carry a cellphone when they're out on the street.'
Russ Roberts: With that app on installed that'll beep if they failed the test so everyone will know.
Paul Romer: I don't want to live in a world where we're forcing--a couple of firms were forcing everybody to carry and use the product of a couple of firms.
Russ Roberts: We're on the same page.
Paul Romer: So, I'm not happy about that outcome.
Now, on the other kind of test results, I have some co-authors on a paper who are from Scandinavia. Their attitude was that there could be a version of this testing that you do at home. Really the progress is so fast that very soon you'll be able to do a version of the molecular PCR-like tests at home.
Russ Roberts: Like a pregnancy test, a strip or--
Paul Romer: Well, like a pregnancy test. Or, the molecular tests involved, putting things in a little vat, a little pot, and keeping it warm for a little while. But, we could manage that. It's like, simpler than a bread maker. But, their attitude was: give people the ability to find out whether they're infectious and then just trust them to do the right thing.
Russ Roberts: Knowing that some of them won't. That's okay. It's better than--something.
Paul Romer: Yeah. It was like these Scandinavians were instructing me, the guy from the United States, the home of freedom, about, 'You know, actually if you just let people know information, they generally will do things and it turns out okay.'
Russ Roberts: Yeah. We understand that not everybody will, but that's not--there is no solution short of full martial law, which I think most of us don't want, that is going to eradicate, fully suppress this. And, by the way, of course, as we're recording this today, in Wuhan it was announced they have a few new cases. So, it's not clear how well some people have done and with other techniques, and etc.
Paul Romer: The modest version of this would just make it possible for everybody to know if they're infectious; and most people aren't going to want to infect their colleagues, they aren't going to want to infect their friends.
Russ Roberts: Their grandmother.
Paul Romer: They'll take heightened precautions. So, I think that's the simplest way to do it.
The next step up would be to say, 'Well, there's certain things where, like, counterparties might not agree to do things with you unless you can show you've got a test result.' Like, my dentist may not want to see me because it isn't going to work for me to wear a mask when I'm in the dental chair. So, my dentists may not want to see me unless I get a test; and that's his choice. I don't think you need the government to force that.
You could even say as part of our security screening and stuff at the airport, you've got to have either a recent test or take a test at the airport to fly in an airplane. So, that could involve a little bit more coercion.
But, there's lots of incremental steps we can take to use this information that could save a lot of lives. And also bring back the economy. Like, one of the things I would do if we could just get a little bit more testing online from one of these university labs, just get them free of the FDA, get them so they can produce like 20,000, 50,000 tests a day: just have them test everybody involved in baseball and restart the baseball season. You know, maybe don't bring fans into the stands yet, but you could televise games in a stadium. You could test all the players, all of the coaches, the umpires. Any of the service workers who support them. So, you could easily start televised baseball games without any risk that we're going to cause a big spreading event that kills other people and makes the virus spread faster.
Russ Roberts: We were talking a minute ago about people doing the right thing. Of course, when your livelihood is at stake, I think it's tempting to take a chance on hurting other people when it's otherwise costly to you. So, as you said before, it might be worthwhile to pay people not to work in certain settings once they got a positive test, and if they can't work from home, etc., etc.
It's really important to remind people that a lot of people are going to get a positive test who have zero symptoms, who have nothing wrong with them. We do not know yet the full long-term consequences, but most young people get this, nothing happens to them. They don't even know they have it. Now again, we don't know the long-term effects, etc. But I think that that has to stay front and center.
Paul Romer: But, I think it's good to emphasize, too, that this is one of these areas where there's big kind of like community or social effects, not just individual effects.
The Major League Baseball might actually say to play, 'You have to get tested; and if you test positive, we're not going to let you play because this is part of how we protect the reputation of the entire league. Otherwise, people come shut us down,' or something. So, at various scales, we may have to require people and say, 'Look, if you're not okay with these rules, it's fine. Just take the season off. Come back next year and maybe we won't have to require the testing next year.'
Russ Roberts: Yeah. So, what do you see as--I see there being a number of groups here that are desperately working to do something. So, let me list them. There are people like you--and a little bit like me, but more you than me--who are freelancing, trying to spread the word, trying to get ideas out there. There's government, which is very slow, very laborious, very role-oriented, struggling to respond with any urgency--as is, tragically the healthcare system, the medical supply chains. We've exposed a lot of, I think tragic bureaucratic problems with the medical supply chain and we're going to--
Paul Romer: Although can I just break character and say something nice about government?
Russ Roberts: Yeah.
Paul Romer: The Congress did allocate $25 billion for testing. It's a small part of a much bigger, more complicated response. But, there's been a little bit of positive motion. So--
Russ Roberts: Yeah, that's good. But, so, government does some things, and it takes a while for it to--I don't know if any of that money has been spent yet. I doubt it. But, it well eventually. So, we got government, we got individuals like you and me trying to spread the word about what we think is the right thing to do or trying to spread information which is very valuable.
Then we have foundations, like Gates and others. Large--still bureaucratic but in a different way, but with large sums of money available, and who I think are working very hard to try to do something.
And then finally we have people, and I'll call them Silicon Valley--they're not obviously all in Silicon Valley--but talented, creative people who are racing, working around the clock, right now, trying to find a vaccine, trying to find--all kinds of things are happening that I think will lead to some wonderful things down the road even when some of them will fail. But, we're going to learn a lot. This is really what I would call a full-court press among skilled people here.
And so, the question is--there's a bit of a coordination problem here which is--and it's also the fact that we've taken all the money out of the medical system, except in certain places. In certain places, you can make a lot of money, still. That's not the places we want that to be all the time. And here we want to be in testing, let's say hypothetically, and we'd like somebody to be able to make either a lot of money testing or some way to get the feedback loops correct.
So, you could overcome that a little bit. Do you have an idea of how we might mobilize either to get the FDA's hand a little less clenched around this to take advantage of the economies of scale that you and I both believe would be enormous once this got started. Who are the players who might--and, Paul, you got a lot of contacts. People do listen to you. So, what are you trying to do? What could we do?
Paul Romer: I think--the Administration has already signaled that the FDA is willing to defer to the States if the State Health Department will take the lead on some of these questions.
So, I think the next step is to persuade the Governors that they have the freedom to create a different kind of regime for certifying tests and letting tests unfold. To get the Governors to think of themselves as the purchaser of these testing services, many of which they'll probably buy from their university laboratories--within state, maybe out of state. And use the commitment of the funds, together with the regulatory freedom, to say to some of these laboratories with all of this expertise and all of this specialized equipment: 'If you can provide the tests, we'll pay you and you'll be able to cover the costs you incurred to scale this activity up.'
I think, this involves a commitment by the States to pay for a stream of testing services out into the future. In the middle of this depression, the State budgets have been hammered, so ideally we have the Federal Government that borrows, they give money to the States, the States use that money to go purchase testing services.
Russ Roberts: So, let me suggest an alternative model, because I don't find that encouraging.
Russ Roberts: Although, a handful of Governors would make a big difference. Right? You don't need every Governor right away to jump into action. A trial-and-error here is always good. Let some people try it, see what happens. A few could--if their states do better, people can say, 'Hey, I want to try that.'
But, the thing I notice here: Rutgers, I'm sure there's some fine people there. Maybe they can produce 5,000 tests. We need 25 million, maybe 50 million. Actually, we need probably more than that because are going to be tested early and often.
So, we need two things, it seems to me: a producer of the tests and a reader of the tests. And, those people need to have some credibility, ideally, as a way to stamp you as clean-for-now.
To do that, I think you need a really large sum of money and a set of industrial-level production folk, either in the pharmaceutical industry, testing industry. We've got to get those folks mobilized. You know, I hate to say it, there's people we're picking on today: but you need an Elon Musk to grab this by the throat and say, 'We're going to make this work and get it done.'
Paul Romer: Well, let me give you my second kind of piece of this strategy. So, one piece is, like, these purchase commitments: 'There will be revenue that, if you scale up to be able to produce tests, there'll be revenue for you if you do it.'
Another piece, though, is I've said we should create a billion dollar prize that the Federal Government will give to the first laboratory that shows that it can process 10 million tests a day.
If they were competing for a billion dollars--I've talked to people in these labs--that the molecular genomic stuff is actually pretty easy. They realize the problem they're going to face is the logistics: How do you get that many tubes in the door, open the tubes, get them--so, they're going to need to get services from an Amazon or a Musk or something. But they could hire that in. If they were competing for a billion dollar prize, they would do it. I think there's no question in my mind that somebody would collect on that prize certainly within--certainly within six months, maybe sooner.
Russ Roberts: Well, I like the Chico Marx line from Night at the Opera when they ask--I think Groucho asked him if he can sail tomorrow and Chico says, 'If you pay me enough I can sail yesterday.'
Russ Roberts: The greatest cinematic expression of incentives matter. If it's a $10 billion prize, they might be able to do it in less than six months.
It seems--so, here's my advice to you, Paul and then we're going to move on to a different topic unless you have something else to say. I hear, I think we need, I want Fred Smith of FedEx or Ryan Petersen of, I think it's Flexport, where, these are people who are really good at flying tubes around--so, you need a transport thing, and then you need a lab to do the turnaround. And they need a place that's producing the tubes and whatever it is, the cups, the boilers or whatever it is to do it quickly.
So, I'd like to see you put together an ad hoc committee of extremely talented people who are a mix of logistics, production, science--and mobilize this. You've got to convince them that this is not just like one other thing we need to be doing, but might be the single best thing we could be doing. I'm open to that, myself--which is good--but I don't belong on the committee. So, anyway, I think it's going to--
Paul Romer: Let me just say that I'm writing an op-ed, I've written an op-ed. I'm trying to shop around with Representative Don Beyer and Representative Gonzales, a Democrat and a Republican from the House, pushing this idea of big prizes. The prize for the big centralized lab is one. The prize for the device at home is another. I think we should use prizes as a way to motivate some big mobilized efforts to solve these problems.
Russ Roberts: Well, the prize, they'll get the talent to coalesce without a committee. Okay.
Russ Roberts: Let's move to a different topic, if we might. Something I think you've thought about. I know everybody is thinking about it--I'm thinking about it--which is what we might call globalization or free trade. So, a lot of very smart people right now are saying that--and, some not so smart people, I have to say--but, a large group of people are saying, 'You know, this whole trade thing, this is the kind of thing you get.'
And, they're right. A global world is more susceptible to a pandemic than a world of the Middle Ages. A global world is richer than the Middle Ages. I like to say we've tried Buy Local: it's called the Middle Ages. It's not a world most of us want to live in.
But I do think that the aftermath of this, however it ends, going forward, whatever the next chapter is, is going to involve a conversation about our relationship with China as a trading partner--and maybe in other ways I'm afraid to say: I think it will also diplomatically, militarily, we're in for some dark times. But, just economically just on the trade issue, how do you see the--you're, I think, with me, pretty much a free trader--
Russ Roberts: What's your response to this situation, as a free trader?
Paul Romer: Yeah. So, one of the first things is that a lot of the problem we face with the spread of viruses right now is just the fact that people want to move around. And, unless we're willing to be kind of draconian and limiting people's freedom to move around, we have to just face the fact that viruses are going to spread all over the world more quickly than they ever have before.
I think there are benefits from letting people move around; and I think it's in principle, you know, problematic to say we're not going to let people do something they want to do. So, I think we just have to accept this. But this is part of why I'm so keen on trying to--so, let me just start--
Russ Roberts: Yeah, I hear you out there. Go ahead to see if you can--quiet those folks down.
Paul Romer: It's problematic to try and say that somehow somebody's going to decide that other people can't do things they want to do--like go see relatives, go see friends, go visit things. So, this is part of why I think it's so important for us to invest in this testing infrastructure: So that when somebody says in the future, 'Oh no, they've got SARS-CoV number three, or number four,' which has emerged in some other country; we'll say, 'Well, we're ready for it. Somebody is going to bring that into the United States, but we're already testing everybody every two weeks. As soon as somebody shows up, we'll find out where it is. We'll isolate them. We're good to go.'
So, I think of this investment in the testing infrastructure as a kind of like a health defense that will protect us on a permanent basis from the spread of viruses in the future.
And, they're going to spread. I don't think there's any way to just pretend that isn't going to happen or to wish it away.
Russ Roberts: Well, I guess there is this issue of, you know, we talk about what people might have to do to for me to trade with you, to take you as a patient in my dentistry office or to serve you in my restaurant or to have you work in my nursing home. We might want to say we don't really want to trade with countries so much who have wet markets and really creepy animals. You know, I don't understand why China has not responded to this by saying--forget whether they're culpable in any way for any of this in sinister ways which I don't think we have any evidence for--but I think it probably came from--at least we know some other viruses have come from wet markets--animals in China. So, why don't we, wouldn't we want them to, wouldn't we encourage them to say, 'Maybe not do that?' I don't know. Or, 'If you do want to do it,' because it's your culture, whatever, which I totally respect, 'Don't be surprised if people don't want to buy your stuff.'
Paul Romer: Well, first, I think the Chinese have a pretty big incentive to get this under control. Obviously, they may have some incentives to try and sweep under the rug mistakes or problems from the past. But I think they've got a big incentive to solve this.
But, even if we do decide that they're not doing a good job at that: What are we going to do? I think buying the goods is really quite separate from the question of the mobility of the people.
Russ Roberts: Fair enough.
Paul Romer: Restricting the mobility of the people is going to infringe on the freedoms of people, even U.S. citizens who want to go visit places. So, I don't think we can solve the by just saying, 'We're not going to have people interact with people from China.'
Russ Roberts: Well, I don't know enough of the medical side. Maybe you don't either. But, if we're at SARS-CoV-17--right now we're in what, SARS-CoV-2 [Severe Acute Respiratory Syndrome Coronavirus 2 of the genus Betacoronavirus]?
Russ Roberts: Well, let's take 3, then. SARS-CoV-3, the next coronavirus that is scary and creepy and hurts people. We're not going to immediately be able to test, right? We're going to have to start from scratch again, develop a new test.
Paul Romer: No, but actually--this is where it really is pretty cool.
They've made amazing progress in this world of reading RNA strings. So, they'll have all of this--it's just like all the hardware ready to go. And then somebody needs to just tell them, 'Here's the RNA string for this new virus.' Everybody just plugs it into their equipment, and boom, they're ready to go. So, we could be ready to test at almost the drop of the hat as soon as we identify the new viral agent.
Russ Roberts: And, do you think there's--have you looked at all into the vaccine situation or is it just so fraught with uncertainty?
Paul Romer: Yeah. Um, I haven't looked in detail, but I will tell you that, um, even though I think the FDA should just back off, get out of the way on this testing process and let the states run with this, I think the FDA actually has to be very careful about approving a vaccine. Because we have this very tenuous consensus right now that it's okay for the government to require parents to vaccinate their children. And these vaccinations for childhood diseases, these save just hundreds of millions of lives every year--
Russ Roberts: Incredibly safe.
Paul Romer: We don't want to lose that consensus.
Russ Roberts: It's true.
Paul Romer: We have another episode of a vaccine with side effects that are unexpected that kill some people. We could, in this country at least, just lose the consensus for mandatory vaccination.
Russ Roberts: That's a great point. Great point.
Paul Romer: So, I think they've got to go carefully on this. And, that means it takes time to check all that out. And so I think we just have to allow for the fact that, in many cases it took five or 10 years to come up with a vaccine for some new disease. So, we might get lucky, but we might not and we shouldn't cut any corners.
Russ Roberts: I'm guardedly optimistic about that just because again I think there's an immense amount of human creativity being focused on that one thing. But, it may not be solvable quickly.
Paul Romer: And we don't have an effective vaccine to control influenza.
Russ Roberts: Right.
Paul Romer: There's a lot of disease, but we've been working on that one. We don't have one for the cold. We've got a few successes but a few failures.
Russ Roberts: Yeah.
Russ Roberts: Let's close to talk about the labor market, which I think about a lot lately. There was a really beautiful piece in the New York Times Sunday Magazine a few weeks ago by Gabrielle Hamilton. She's the chef and founder of a restaurant in New York called Prune. And she talked about--the reason I--I liked it for a lot of reasons. Beautifully written. I recommend it to folks. We'll put a link up to it.
But I think--the other reason I liked it is it captured the human dimension of this, the dashing of dreams when a business--which happens all the time in capitalism, it's not just during pandemics--but, a business that somebody put their life into, put all their hopes, all their capital, all their emotional capital and then it's over. Just happens. Competition comes along. In this case, it's a pandemic.
But, you think about the cascade of effects--so, the busboys, the waiters, the waitresses, the suppliers, the truck driver--all the people who through the beautiful tapestry of interactions that emerge out of buying and selling, that are now cut. And so, those people have to go reassemble into some other collection of employment.
And, of course, there's a lot of places that are booming--right?--if you can handle it. There are many, many jobs that are booming. But, they are very specific. They don't usually involve the talents of--I'm talking about fulfilling orders, delivering packages. Some wonderful expansions going on obviously that our economic response is that you'd expect in a market system.
But, part of the challenges is that it's really hard to reallocate people, partly because we cushion the blow--which is a humanitarian thing through unemployment insurance or through other forms of aid.
Do you have thoughts on what we can do to make that reassignment better as--'reassignment' is the wrong word because nobody is doing the assigning--
Paul Romer: Reallocation. Yeah.
Russ Roberts: Reallocation. And I say that with the important side point which I think is totally--I just don't know how this is going to play out, but it's possible people won't want to eat in restaurants for five years. I don't think that's true. I think we'll go back to normal quicker than most people think. But, all the people who drive Uber, all the people do these things that are really creative and wonderful are suddenly going to find themselves with nothing.
And, the question is, is that reassignment is--let me frame it one more way. We put the economy in a freezer. And when we unthaw it, it's not like, 'Everybody go back to work now.' No, they're not, because a lot of those places aren't going to work whether you allow them to go back or not.
Paul Romer: Yeah. So, I think one of the strengths of the U.S. economy was that we had a system where people's jobs could just go away; but it was also a system where it was relatively easy to go get a new job. So, those high rates of turnover of job destruction, job creation, that was a good system to be in. The problem with the period right now is we've gotten a huge surge in job destruction and no offsetting huge surge in job creation.
And this is what we run into it in most recessions. We just have it in much bigger quantities than we've ever faced before.
So, I think it's hard to know how to respond to this. I think one side of it is just to recognize that there's some ambivalence on the part of most voters about just cash transfers as a way to help other people. I think there's a lot more support for the idea that you can offer somebody something in exchange for work that they do.
So, I think we should be looking at things like, possibly, even the Civilian Conservation Corps that Roosevelt set up during the 1930s, which is, you know, not a particularly attractive job option, but at least it's something so that you can make sure that people aren't just destitute if they just run out of other options.
So, I think we may end up thinking about these kind of like job-creation, kind of government job-creation opportunities, where the goal is not to make them permanent jobs, not necessarily to make them even particularly attractive jobs, but at least jobs that give people a bare minimum of security and dignity, and independence.
Beyond that, I think that the most important thing to do is just to stop the fear which is killing the restaurant business and killing my chance to go see my dentist.
And there, again, I think all we need is the information: Who is infectious right now? If we just knew who is infectious right now or who is infectious with the next pathogen in the future, we just had that information, we could make some small adjustments and get back to the economy that we had.
So, you know, maybe some jobs-like programs. Maybe some continuing financial help to just get people from going into bankruptcy. But, as much as possible, just remove the fear and then let people go back to doing what we do, which is figure out ways to work together and create value.
Russ Roberts: My guest today has been Paul Romer. Paul, thanks for being part of EconTalk.
Paul Romer: Good. It's a pleasure.