An important lesson from both economic analysis and economic history is that when people are relatively unregulated and free to adjust, they can adjust quickly to various economic shocks, even large ones. But when governments heavily regulate people’s economic activities, these governments slow and often prevent adjustments. The good news is that in 2020, the federal government and many state and local governments have temporarily relaxed regulations to make adjustment easier. The bad news is that many of these same governments have added regulations that make adjustments difficult or impossible. And the further bad news is that many pre-existing regulations have not been loosened and, therefore, act to slow adjustment. One of the most extreme regulations is the Food and Drug Administration’s heavy requirements that limit testing for the Covid-19 disease.
This is from “Managing (and Mismanaging) the “Covid Shock,” my latest article on Defining Ideas, October 22, 2020.
Another excerpt:
However, there’s a responsible solution for restaurants and bars that want to serve drinks: insist that they serve people outside and insist that they require people to stay seated and socially distanced. But governments seem to have problems with letting people have fun. The California Department of Alcoholic Beverage Control insists that bars may open only if they offer “bona fide meals.” Those meals cannot be pre-packaged sandwiches and salads, side dishes like fries and chicken wings, bagged pretzels or popcorn, or, the horror, dessert.
And then one of the worst:
In the midst of a pandemic, one of the things we would like most to know is whether we have the virus. Testing can tell us that. But existing tests are expensive. After recently traveling, I decided, at my wife’s urging, to get tested. I paid $180 for results within twenty-four hours and got them in six hours. I can afford that. But that’s a lot of money for many people, and six hours is still a lot of time. Wouldn’t it be nice if we could have even cheaper tests that we can conduct on ourselves and get fast results? That way, each of us would know whether to isolate or go to work, bars, football games, or restaurants.
Actually, we can, but we may not, because the FDA stops us. These tests cost under $10 and give results within fifteen minutes. But the FDA won’t allow them because they’re not as accurate as tests it does allow.
Read the whole thing.
READER COMMENTS
Alan Goldhammer
Oct 23 2020 at 4:23pm
the whole testing fiasco is a failure of imagination and I’ve written on this considerably in my newsletter. Paul Romer was right in his initial view of massive testing but President Trump doesn’t like testing because the number of infected individuals goes up (I’ll leave aside the stupidity of such a statement in that the virus doesn’t care anything about testing). I also seem to remember discussion from the Administration about tests being available for everyone and at no cost. That’s what it should be but was not.
I differ from you on the opening of bars and restaurants. there is ample information from college towns about how such places can be superspreading events. There was a story on La Crosse WI the other day where there were hardly any COVID-19 case until the three colleges and universities opened up. The virus spread throughout the town and even nursing homes which you thought might be protected given what we know were infected with associated mortality. I just don’t see how bars can open safely given what we know but others may have a different opinion.
I’ve been looking at how some of the universities have been doing and have particularly tracked Purdue because Mitch Daniels was adamant in a WaPo op-ed back in June that they would open in the fall. Other than some early suspensions for violation of the code they asked students to sign, they have done a good job with infection rates level at 2.8% though it’s a bit misleading as they are not doing enough testing IMO. It goes to show that things can get back to semi-normal.
There is a good paper I read today showing that compliance with mask wearing does make a big impact. Here is the money quote, ” Mask mandates across 1083 counties in the U.S. in 49 states decreased hospitalization rates from COVID-19 even when controlling for other factors that could impact disease severity, including age, testing access, number of cases, and mobility (as a proxy for other non-Pharmaceutical interventions such as sheltering-in-place).”
It might have been useful to talk about such public health measures in your article as they can and have made a difference in the regions that have adopted them.
john hare
Oct 23 2020 at 8:57pm
Followed both links and some of the comments on the FDA not allowing. Amazing the percentage of comments there that don’t grasp the basic concepts. I’ve never been tested, and won’t seek it unless strongly motivated. I would though buy a few of the cheap tests to use in the privacy of my own home when I had any reason to. I would have spent perhaps $100.00 over the last several months on the infrequent days that I felt bad. I think it should be up to me how much I am willing to trust a somewhat less accurate test as long as I have a reasonable idea of the possible false readings and how to address them. Should take up about as much print space on the package as the surgeon generals warning that it causes cancer in left handed albino cockroaches when used to excess.
Jon Murphy
Oct 23 2020 at 10:48pm
I love the quote from John Cochrane in your article. One should note that, by preventing the testing, the FDA is actually reducing the quality of data on the pandemic.* If you’re one of these folks who believes in rule by experts, then the FDA’s actions should outrage you.
To a point Roger Koppl and I have been harping on for months now, we have massive expert failure characterizing this pandemic. The FDA’s actions are only one such instance of this failure.
*The fact that the tests are less accurate are irrelevant. If the false-positive rate is known, we can adjust.
Thomas Hutcheson
Oct 24 2020 at 8:21am
We need regulation done by cost-benefit analysis with public choice economists telling ut how to get that done politically.
Jon Murphy
Oct 24 2020 at 9:38am
No. I think such a suggestion ignores the advances of economic theory since the 1920s.
Thomas Hutcheson
Oct 24 2020 at 9:47am
But isn’t that what public choice is supposed to fix?
Jon Murphy
Oct 24 2020 at 10:26am
No. Public Choice is not a theory about how to do regulation better any more than economics is a theory about how to save better. Public Choice is a lens through which to view the world, not a blueprint of how to save it.
BC
Oct 25 2020 at 2:41am
If governments are so good at determining costs and benefits, why limit cost-benefit analysis to just regulating Covid-19 tests? Government could just calculate the total social cost and benefit of *every product and service* to determine exactly how much of each to produce.
David Seltzer
Oct 26 2020 at 4:20pm
Jon said, “The fact that the tests are less accurate are irrelevant. If the false-positive rate is known, we can adjust.” Absolutely. I taught an intro stats course at Loyola. I spent considerable time explaining Bayesian analysis and the problem of false positives, Type I and false negatives, Type II errors.
aaron
Oct 24 2020 at 4:17pm
https://mobile.twitter.com/aaronshem/status/1316907624311459840
If he hasn’t already,
@realDonaldTrump
should be developing a “reparations” package as shovel-ready Keynesian stimulus program for when we recover from CoViD. It is the ideal stimulus for this recovery
Comments are closed.