WEBVTT - A Nobel Prize Winner’s Suggestion for Fixing the Economy 0:00:15.356 --> 0:00:22.916 Pushkin from Pushkin Industries. This is Deep Background, the show 0:00:22.916 --> 0:00:26.236 where we explore the stories behind the stories in the news. 0:00:26.836 --> 0:00:31.076 I'm Noah Feldman, and we are still talking about coronavirus 0:00:31.676 --> 0:00:34.796 in particular. We're going to talk today about the interaction 0:00:35.036 --> 0:00:39.476 between the virus and the economy. How soon can we 0:00:39.516 --> 0:00:42.676 go back to work? How safe will that be? How 0:00:42.756 --> 0:00:44.956 unsafe will we be if we don't look out for 0:00:44.996 --> 0:00:49.476 the economy. To discuss these very difficult issues, I spoke 0:00:49.516 --> 0:00:53.516 to Paul Romer, a Nobel winning economist at New York University. 0:00:53.876 --> 0:00:56.316 He used to be the chief economist of the World Bank, 0:00:56.516 --> 0:01:01.836 and he's been thinking hard about this subject. Paul, thank 0:01:01.876 --> 0:01:04.396 you very much for joining me. I want to start 0:01:04.476 --> 0:01:08.556 with a very influential essay that you and Alan Garber, 0:01:08.676 --> 0:01:11.396 the provost at Harvard, published in the New York Times, 0:01:11.916 --> 0:01:14.676 where you were the first I would say serious people 0:01:14.716 --> 0:01:19.156 to put in a major public venue the economic concerns 0:01:19.196 --> 0:01:22.436 about what we do about coronavirus on a par with 0:01:22.476 --> 0:01:24.556 the public health concerns, or in relation to the public 0:01:24.596 --> 0:01:27.876 health concerns. Describe to me, if you will, your current 0:01:27.916 --> 0:01:32.596 thinking on that very challenging question. Yeah. I mean to 0:01:32.636 --> 0:01:34.196 be honest, I think there were a lot of people 0:01:34.236 --> 0:01:38.196 who were recognizing the size of the economic cost that 0:01:38.236 --> 0:01:41.556 we were going to bear. I think what was distinctive 0:01:41.596 --> 0:01:46.556 about our op ED was a very specific proposal about 0:01:46.596 --> 0:01:50.876 how to craft a middle ground where we get out 0:01:50.916 --> 0:01:52.996 of this trap where we either have to kill the 0:01:53.036 --> 0:01:57.236 economy or killed lives. So if I can, let me 0:01:57.316 --> 0:02:00.556 just try and explain the basics of the challenge, please do. 0:02:00.916 --> 0:02:04.916 There's this notion of the replication rate. If one person 0:02:05.076 --> 0:02:08.516 is infected, how many new people does that person infect? 0:02:09.116 --> 0:02:10.956 What people call the R not or the R zero 0:02:11.076 --> 0:02:15.196 yep ur zero are not a replication rate. That number 0:02:15.276 --> 0:02:18.636 has to be less than one to keep the pandemic 0:02:18.636 --> 0:02:21.476 in check. If it goes above one, then it just 0:02:21.716 --> 0:02:24.796 grows like wildfire. Social distance is one way to get 0:02:24.796 --> 0:02:27.876 it below one, but of course it's really hurting the economy. 0:02:28.596 --> 0:02:32.156 The way to keep it below one that is guaranteed 0:02:32.156 --> 0:02:35.436 to work is find the people who are infected and 0:02:35.676 --> 0:02:39.236 isolate them. Now, right now, what we're doing is we're 0:02:39.276 --> 0:02:43.996 isolating everybody because we don't know who's infected. So all 0:02:44.036 --> 0:02:46.916 we need to do is switch to a strategy where 0:02:47.036 --> 0:02:50.876 we're testing everybody with regularity. As soon as we find 0:02:50.916 --> 0:02:54.356 somebody who's positive, we have them go into isolation for 0:02:54.516 --> 0:02:59.076 say two weeks, and that's all it takes to get 0:02:59.076 --> 0:03:02.716 on a path where this pandemic is dying out, and 0:03:02.756 --> 0:03:06.236 we can stick with that policy as long as it 0:03:06.276 --> 0:03:09.316 takes to get a vaccine, which is the other way 0:03:09.356 --> 0:03:13.756 to protect ourselves. So all it takes is to figure 0:03:13.796 --> 0:03:17.956 out who it is who's infectious and to isolate them 0:03:18.636 --> 0:03:22.716 without isolating lots of people who could otherwise just go 0:03:22.756 --> 0:03:26.356 back to daily life and work. I am not an epidemiologist, 0:03:26.396 --> 0:03:28.836 and I want to be clear about the caveat to 0:03:28.916 --> 0:03:30.836 that to that effect, but I want to ask a 0:03:30.956 --> 0:03:34.276 question that's informed by my conversations with epidemiologists and what 0:03:34.356 --> 0:03:37.676 I'm reading, and it's this, under circumstances where we already 0:03:37.676 --> 0:03:44.996 have community spread, unless everyone we're tested nearly every day, 0:03:45.236 --> 0:03:49.356 isn't there a substantial risk that even testing every week 0:03:49.476 --> 0:03:52.756 or every ten days, which requires a tremendous number of tasks, 0:03:52.836 --> 0:03:54.956 much greater than I think it seems realistic, at least 0:03:54.996 --> 0:03:56.796 according to what I've read, for us to be able 0:03:56.836 --> 0:03:59.996 to produce in the next few months, would leave open 0:04:00.036 --> 0:04:02.756 the possibility of continued spread. I mean, your key line 0:04:02.836 --> 0:04:05.356 is all we have to do is but the question is, 0:04:05.996 --> 0:04:08.076 you know, is that in fact doable? We don't want 0:04:08.076 --> 0:04:10.356 to be the people in the punchline of an economist 0:04:10.436 --> 0:04:13.076 joke who assumed they can opener. No, I hear you, 0:04:13.316 --> 0:04:15.916 And this is a good way to phrase the question. 0:04:16.876 --> 0:04:21.036 Here's the way I would respond to the epidemiologists. It's 0:04:21.156 --> 0:04:24.036 that you guys are supposed to be the ones who 0:04:24.076 --> 0:04:28.556 take the numbers seriously, so do the numbers here. What 0:04:28.596 --> 0:04:31.876 they're saying is something like, oh, we can't get enough testing, 0:04:32.236 --> 0:04:35.916 so my gosh, you'd have to test people every every day. 0:04:35.956 --> 0:04:38.796 That's just not true. All you have to do is 0:04:38.876 --> 0:04:42.556 do the numbers here. If you tested people on average 0:04:42.596 --> 0:04:46.276 about once every two weeks, and even if your test 0:04:46.636 --> 0:04:49.596 has what they call a false negative rate, you fail 0:04:49.676 --> 0:04:53.676 to catch some people who are actually infectious. Even under 0:04:53.676 --> 0:04:58.556 those circumstances, you can get rzro below one. And I'm 0:04:58.556 --> 0:05:03.116 really disappointed and want to challenge them. Why do they 0:05:03.156 --> 0:05:06.916 switch into this kind of know nothing mode of that 0:05:07.036 --> 0:05:10.036 just won't work? And then they the ones who claim 0:05:10.436 --> 0:05:12.876 they're the ones who do the math, they just stop 0:05:12.996 --> 0:05:15.356 doing the math. Now, let me be clear about what 0:05:15.396 --> 0:05:18.076 it would mean to test people on average about once 0:05:18.116 --> 0:05:21.676 every two weeks. This means running about twenty million tests 0:05:21.676 --> 0:05:25.516 a day. That is a huge expansion in the testing 0:05:25.556 --> 0:05:29.636 capacity that we have, and it's never been the case 0:05:30.076 --> 0:05:33.276 that public health authorities had the kind of resources to 0:05:33.316 --> 0:05:35.756 do that kind of testing. So I understand why they're 0:05:35.796 --> 0:05:39.196 saying it's not possible, but just think about other cases 0:05:39.196 --> 0:05:41.956 where we've done something like this. The TSA screens about 0:05:41.996 --> 0:05:46.116 five million Americans a day, and you know, you could 0:05:46.116 --> 0:05:48.796 have imagined a time before nine to eleven where people 0:05:48.796 --> 0:05:51.316 were saying, oh my god, you could never screen all 0:05:51.476 --> 0:05:54.196 people who get on airplanes. That's just impossible. And you know, 0:05:54.556 --> 0:05:56.956 so we have to stop flying because we might have 0:05:56.996 --> 0:06:00.076 a terrorist attack or something. You know, if we're serious 0:06:00.196 --> 0:06:04.036 about scaling out to millions a day, we've got this 0:06:04.196 --> 0:06:08.036 economy that could produce twenty trillion dollars worth of value. 0:06:08.276 --> 0:06:13.036 We've got sixty million workers. We could organize ourselves to 0:06:13.116 --> 0:06:16.116 administer twenty million tests a day. It's really not that 0:06:16.196 --> 0:06:19.956 big a challenge. It isn't something that was ever available 0:06:20.036 --> 0:06:23.836 to public health authorities before, but we could easily decide 0:06:23.836 --> 0:06:26.556 to do it now. And I really want to just 0:06:26.716 --> 0:06:29.836 insist and I'm going to get aggressive about this. The 0:06:29.916 --> 0:06:34.796 epidemiologists can't just go into know nothing mode and dismiss 0:06:34.876 --> 0:06:39.796 this without actually doing the math and engaging seriously. So 0:06:39.836 --> 0:06:42.756 I think that many epidemiologists that I know at least 0:06:42.796 --> 0:06:45.516 would say, it's not that we're not doing the math 0:06:46.436 --> 0:06:48.716 at all. That they say, you know, we live on 0:06:48.796 --> 0:06:50.676 math and we're not ignoring the math. I think that's 0:06:50.676 --> 0:06:52.276 the first thing they would say. The second thing I 0:06:52.276 --> 0:06:57.036 think they would say is that they have to recognize 0:06:57.836 --> 0:07:01.556 not the normative claim that we ought to or we 0:07:01.676 --> 0:07:04.516 might be able to generate twenty million tests a day, 0:07:05.036 --> 0:07:08.796 but rather the predictive claim, because they engage in minute 0:07:08.796 --> 0:07:13.276 a minute prediction too of whether this particular president, with 0:07:13.356 --> 0:07:19.836 this particular configuration of economic forces facing him, is even 0:07:19.916 --> 0:07:24.356 plausibly capable of doing what you think we normatively ought 0:07:24.356 --> 0:07:26.516 to do. And I think someone would say, we concede 0:07:26.556 --> 0:07:28.596 that it would, we should have twenty million testing. I've 0:07:28.596 --> 0:07:30.676 not heard any of bidemiologists saying, oh, it doesn't matter 0:07:30.676 --> 0:07:32.636 about the test. They all say we need the testing 0:07:32.716 --> 0:07:34.556 we need in a very serious way. But if they 0:07:34.556 --> 0:07:38.236 have a different assessment of the empirical probabilities. Well, yeah, 0:07:38.276 --> 0:07:41.076 let me let me just say, you know, I understand that, 0:07:41.476 --> 0:07:44.116 but I think people have to you know, stick to 0:07:44.196 --> 0:07:49.476 their area of expertise. They understand the math of these models. 0:07:49.956 --> 0:07:57.076 They're not experts in politics, public expenditure, mobilization. I don't 0:07:57.156 --> 0:08:00.396 think they're the ones who should make for everybody the 0:08:00.476 --> 0:08:04.716 judgment about what's politically feasible, and then, worst of all, 0:08:04.996 --> 0:08:09.916 having made that judgment, hide it behind some phony assertion 0:08:09.996 --> 0:08:12.756 like you'd have to test people ever every day. What 0:08:12.796 --> 0:08:15.076 they should say, I think is the same thing I'm saying, 0:08:15.116 --> 0:08:17.196 which is like, look, if you want to be sure 0:08:17.236 --> 0:08:20.956 you're below with R zero below one, at any level 0:08:20.996 --> 0:08:23.276 of prevalenced the United States, you're going to need to 0:08:23.276 --> 0:08:26.876 test something like twenty million people a day. And then 0:08:27.076 --> 0:08:30.036 let's leave it to others to figure out if setting 0:08:30.036 --> 0:08:32.876 ourselves up to do that kind of testing would actually 0:08:33.116 --> 0:08:36.676 be less costly than continuing to do what we're doing 0:08:36.676 --> 0:08:39.876 to the economy. I think some epidemiologists, at least privately 0:08:39.956 --> 0:08:43.156 worry that if they say more or less what you're saying, 0:08:43.676 --> 0:08:47.676 that that's an invitation to the Trump administration to say, 0:08:47.796 --> 0:08:50.876 even without the twenty million tests a day, we can 0:08:51.396 --> 0:08:55.836 return to greater degree of normalcy, and that if that happens, 0:08:55.916 --> 0:08:58.876 it could genuinely lead to a public health disaster. Yeah, 0:08:58.876 --> 0:09:00.796 but let me just jump in, just head on in this, 0:09:00.796 --> 0:09:03.036 because this is exactly the thing I've been saying to economists. 0:09:03.076 --> 0:09:05.956 I would say exactly these things to anybody in science. 0:09:06.836 --> 0:09:11.236 You cannot tell people things that are just factually untrue 0:09:12.116 --> 0:09:15.796 because you think that the political spin is such that 0:09:15.956 --> 0:09:18.916 will get better outcomes that way. And I'll give you 0:09:18.956 --> 0:09:21.316 a very clear example of how this is coming back 0:09:21.356 --> 0:09:26.996 to bite us. The WHO and some supporting authorities said, oh, 0:09:27.156 --> 0:09:31.196 masks don't help, so don't use masks. Now, it's just 0:09:31.316 --> 0:09:34.276 not true. If you've got everybody who goes out in 0:09:34.356 --> 0:09:36.996 New York City, for example, to wear a mask, that 0:09:37.036 --> 0:09:41.516 could reduce our zero The reason they said something that 0:09:41.676 --> 0:09:46.236 wasn't true is because they were worried, quite reasonably, that 0:09:46.356 --> 0:09:49.236 we don't have enough masks. That were worried if people 0:09:49.316 --> 0:09:52.396 ran out to buy masks, we wouldn't have masks for 0:09:52.436 --> 0:09:54.596 the people in the hospitals who need them the most. 0:09:55.436 --> 0:09:58.716 But it was a huge mistake to say something that 0:09:58.836 --> 0:10:03.516 was misleading, bordering on being false. To try and achieve 0:10:03.556 --> 0:10:07.796 a good outcome. What scientists need to do is stick 0:10:07.876 --> 0:10:13.916 to what's true, protect our credibility, and then tell others well, 0:10:14.276 --> 0:10:18.276 given that it's true that masks will protect people, you 0:10:18.316 --> 0:10:21.356 may face a sudden surge in the demand for masks. 0:10:21.476 --> 0:10:23.636 You better move right away to make sure that your 0:10:23.636 --> 0:10:26.556 hospital workers have the masks. They get the first in 0:10:26.596 --> 0:10:29.716 line to get those masks. But we just should have 0:10:29.756 --> 0:10:32.556 stuck to the truth there. And my answer to the 0:10:32.676 --> 0:10:36.756 epidemiologist right now is the same. I don't see any 0:10:36.876 --> 0:10:41.796 danger in saying consistently, if we test on the scale 0:10:41.796 --> 0:10:45.116 of twenty million people a day and we isolate everybody 0:10:45.156 --> 0:10:49.356 who's positive, everybody else can return to work and we 0:10:49.476 --> 0:10:53.396 can contain this pandemic. And if you need to go 0:10:53.476 --> 0:10:56.156 on and say, if we just start sending people to 0:10:56.196 --> 0:11:00.876 work without testing, without any strategy for identifying who's positive 0:11:01.116 --> 0:11:05.156 and isolating them, we will kill hundreds of thousands of people. 0:11:05.676 --> 0:11:07.996 I just don't see why those are hard statements to 0:11:08.116 --> 0:11:11.996 make clearly and directly to the public. We'll be back 0:11:12.036 --> 0:11:22.996 in just a moment. I want to ask you about 0:11:23.036 --> 0:11:26.916 this potential disciplinary gap that you're describing, and maybe I 0:11:26.956 --> 0:11:29.796 should be more aggressive and say maybe there's even a 0:11:29.836 --> 0:11:34.356 disciplinary war that's emerging. And roughly speaking, there are the epidemiologists, 0:11:34.636 --> 0:11:37.636 most of whom also have mds as well as new 0:11:37.676 --> 0:11:40.636 degrees in public health or statistics on the one hand, 0:11:41.076 --> 0:11:44.396 and on the other hand are economists, and each is 0:11:44.436 --> 0:11:47.716 sort of in his or her element, because the public 0:11:47.716 --> 0:11:51.356 health epidemiologists are spending their whole lives studying what happens 0:11:51.356 --> 0:11:54.436 when disease spreads, and disease is greatly dangerous and is spreading, 0:11:54.716 --> 0:11:58.276 and the economists spend their whole careers studying what happens 0:11:58.316 --> 0:12:01.356 in especially to people do macro studying the rise and 0:12:01.436 --> 0:12:03.996 fall of economies, and our economy is now in a 0:12:04.116 --> 0:12:08.716 kind of a free fall. Each says, my disaster is very, 0:12:08.836 --> 0:12:10.916 very bad. It needs to be taken seriously, and there's 0:12:10.916 --> 0:12:13.836 a kind of struggle going on. It sounds like perhaps 0:12:13.876 --> 0:12:17.996 this is hypothesis over which struggle is the greatest, which 0:12:18.036 --> 0:12:20.836 challenges the greatest, where the priorities should lie. And there 0:12:20.836 --> 0:12:26.276 also maybe some epistemological differences, because the epidemiologists are accustomed 0:12:26.316 --> 0:12:29.076 to thinking about avoiding harm, and they don't spend a 0:12:29.116 --> 0:12:32.676 lot of time thinking about costs and benefits, and in contrast, 0:12:32.716 --> 0:12:36.356 the economist's whole undertaking is to think about costs and benefits. 0:12:36.876 --> 0:12:39.356 Does that resonate at all with what you're observing. I 0:12:39.396 --> 0:12:41.676 think there's a lot of truth in what you said there, 0:12:41.756 --> 0:12:45.596 so I don't disagree with that at all. I also 0:12:45.636 --> 0:12:48.756 think that's important to remember that I think everybody, the 0:12:49.036 --> 0:12:52.556 vast majority of people operating in these different camps, are 0:12:52.676 --> 0:12:56.036 doing so with good intentions and in good faith. So 0:12:56.156 --> 0:12:58.836 this isn't a case of bad actors. I think it 0:12:58.916 --> 0:13:04.076 is hard to appreciate the perspectives and the arguments of others, 0:13:04.876 --> 0:13:07.276 But let me just say that, you know, Alan Garber 0:13:07.396 --> 0:13:10.716 is actually an MD and the p HD economist. He's 0:13:10.756 --> 0:13:14.316 not an epidemiologist modeler, but you know he certainly knows 0:13:14.356 --> 0:13:16.956 those guys. So Alan and I were really, in a sense, 0:13:16.996 --> 0:13:20.756 trying to bring these two communities together. And the ironic 0:13:20.836 --> 0:13:23.636 part if you extend that you think about the public 0:13:23.636 --> 0:13:26.236 health people, if you think about what Alan and I 0:13:26.316 --> 0:13:30.716 are saying, we're saying, in effect, those economists who are 0:13:30.716 --> 0:13:33.756 telling you all about stimulus and so forth, we're spending 0:13:33.916 --> 0:13:37.956 way too much on their proposal, and we're not spending 0:13:38.076 --> 0:13:41.276 nearly enough on the kind of thing that you and 0:13:41.436 --> 0:13:44.956 public health have been arguing for for so many years. 0:13:45.356 --> 0:13:47.836 So oddly, you know, on the public health side, we're 0:13:47.836 --> 0:13:49.956 coming in from the outside, but we're saying, actually, you know, 0:13:49.996 --> 0:13:52.436 you guys were right, and we should have been spending 0:13:52.796 --> 0:13:55.596 billions more on you, and so let's just do it 0:13:55.636 --> 0:13:59.316 in a hurry. Now. There's a special dimension that makes 0:13:59.316 --> 0:14:02.676 it a little bit tough in the epidemiological community right now, 0:14:03.036 --> 0:14:07.196 which is that they have been attacked, basically by trolls 0:14:07.716 --> 0:14:10.916 who are trying to say, like this Imperial College study 0:14:11.076 --> 0:14:14.236 with many deaths and some of these other studies were 0:14:14.276 --> 0:14:19.516 politically motivated. So they've been blindsided by suddenly being pulled 0:14:19.556 --> 0:14:23.836 into the world of the trolls and vitriol and lies, 0:14:24.276 --> 0:14:27.476 and they don't quite know how to respond. Some of them, 0:14:27.676 --> 0:14:32.276 understandably are feeling defensive, and you know, at first glance 0:14:32.796 --> 0:14:35.076 they may worry a little bit about, well, how do 0:14:35.116 --> 0:14:38.036 we know that Romer and Garber aren't just you know, 0:14:38.196 --> 0:14:41.396 kind of one more subtle attempt at troll lists and 0:14:41.516 --> 0:14:44.676 undermine our credibility. But here I think what we need 0:14:44.716 --> 0:14:47.796 to do is just engage and engage on the specifics. 0:14:48.156 --> 0:14:51.956 Take each other's arguments seriously, and I think we should 0:14:51.996 --> 0:14:55.316 be able to all come to consensus around some of 0:14:55.356 --> 0:14:59.716 these basics, like even if we don't know things like prevalence, 0:15:00.316 --> 0:15:03.996 if we test at a sufficient scale and then isolate 0:15:04.036 --> 0:15:08.116 the people who test positive, we can get below our zero. 0:15:08.276 --> 0:15:09.956 And then from the on a side, I think we 0:15:09.996 --> 0:15:12.036 can say, and this is a policy we can stick 0:15:12.036 --> 0:15:15.836 with indefinitely. Everybody who tells you, well, I've got this 0:15:15.916 --> 0:15:19.436 policy and I know it's so damaging that we can't 0:15:19.476 --> 0:15:21.316 do it for very long, but let's just do it 0:15:21.356 --> 0:15:25.396 for a little while and then and then they never say, well, 0:15:25.436 --> 0:15:28.636 and then we'll do something else. We should be extremely 0:15:28.636 --> 0:15:30.756 skeptical right now of anybody who says, well, just do 0:15:30.796 --> 0:15:33.716 this really damaging thing and then we'll make it up 0:15:33.756 --> 0:15:36.556 as we go. Do you have a view on whether 0:15:36.836 --> 0:15:40.436 President Trump should be invoking the Defense Production Act in 0:15:40.516 --> 0:15:44.196 order to compel the kinds of investments that you're talking about. 0:15:44.236 --> 0:15:46.276 I mean, the analogy to World War Two and to 0:15:46.356 --> 0:15:49.156 other wars is pretty striking here. What the World War 0:15:49.196 --> 0:15:51.916 Two historians are always telling us is that the build 0:15:51.956 --> 0:15:55.076 up post Pearl Harbor actually really took a while. You 0:15:55.116 --> 0:15:56.596 know that it took a couple of years for the 0:15:56.676 --> 0:15:59.036 United States to generate the kind of They also think 0:15:59.036 --> 0:16:00.676 that the United States won the war because if it's 0:16:00.716 --> 0:16:03.156 capacity to mobilize production. So, don't get me wrong, they're 0:16:03.156 --> 0:16:05.476 in broad agreement with you. But there's a question of temporality. 0:16:07.076 --> 0:16:09.676 There's two ways to respond to a question like that. 0:16:10.156 --> 0:16:15.476 One is yes, indeed, President Trump should or President Trump 0:16:15.556 --> 0:16:19.436 should not. I think we, just as economists, have to 0:16:19.436 --> 0:16:22.476 get out of the mode of thinking that we're philosopher 0:16:22.596 --> 0:16:26.436 kings who can tell somebody else here's what you should do. 0:16:27.036 --> 0:16:29.796 You know, and it takes self control and discipline. Those 0:16:29.796 --> 0:16:32.796 are not the right kind of answers to provide. But 0:16:32.996 --> 0:16:35.436 here's the kind of answer that I think would be helpful. 0:16:35.996 --> 0:16:39.276 Here's why something like the Defense Production Act might help 0:16:39.356 --> 0:16:44.236 us ramp up production very quickly. Think about just masks 0:16:44.476 --> 0:16:48.276 or body suits. We say to a manufacturer, we'd like 0:16:48.356 --> 0:16:51.196 you to increase the output of your equipment by a 0:16:51.196 --> 0:16:53.996 factor of ten so we can get a surge of 0:16:54.036 --> 0:16:56.676 production in the next few weeks and months to then 0:16:56.916 --> 0:17:00.636 meet the sudden demand we're facing. And we want you 0:17:00.676 --> 0:17:03.316 to do it at the same price. Sell your goods 0:17:03.316 --> 0:17:06.316 at the same price you were selling your goods before. Well, 0:17:06.356 --> 0:17:09.276 the manufacturer then says, listen, you're asking me to buy 0:17:09.276 --> 0:17:12.236 all this equipment which will last for like ten years, 0:17:12.836 --> 0:17:16.676 and you're asking me to run this equipment for maybe 0:17:16.956 --> 0:17:20.076 two or three months, six months. The demand might go away, 0:17:20.676 --> 0:17:23.676 and then I've paid for equipment that could have been 0:17:23.716 --> 0:17:26.196 producing for ten years, but I only get to use 0:17:26.196 --> 0:17:29.116 it for six months, and then I'm going to suffer 0:17:29.196 --> 0:17:33.916 huge losses if I operate that way. So if the 0:17:33.956 --> 0:17:37.756 market operated the way we describe it in the textbooks, 0:17:38.196 --> 0:17:40.236 we just say, okay, well, the market price for a 0:17:40.356 --> 0:17:43.556 surge in production of masks is like ten times what 0:17:43.596 --> 0:17:46.876 the market price was before, and that will help you 0:17:47.036 --> 0:17:50.956 give you an incentive, mister manufacturer, miss manufacturer, to take 0:17:50.996 --> 0:17:52.716 a risk that you're going to end up with obsolete 0:17:52.796 --> 0:17:55.996 capital equipment in a few months. But now we have 0:17:56.036 --> 0:17:59.116 this constraint, which is just a fact, which is that 0:17:59.716 --> 0:18:04.236 many people, the vast majority of people, respond moralistically to 0:18:04.276 --> 0:18:08.876 what they see as price gouging or kind of opportunism. 0:18:09.356 --> 0:18:12.716 So the realities, we can't let the market do its 0:18:12.796 --> 0:18:17.396 job with high prices to motivate surge production. So what 0:18:17.596 --> 0:18:19.636 might work in a case like this is for the 0:18:19.676 --> 0:18:23.716 government to say, Okay, we'll buy the equipment for the 0:18:23.916 --> 0:18:26.876 production line. We'll rent it to you on a month 0:18:26.956 --> 0:18:31.156 by month basis. You provide the workers, you do the design, 0:18:31.196 --> 0:18:34.556 the manufacturing, sell the masks is something like the prices 0:18:34.596 --> 0:18:37.716 you sold before, and then if it turns out the 0:18:37.756 --> 0:18:41.196 demand falls off in a few months, you can stop 0:18:41.276 --> 0:18:44.196 paying rent on the machines. We the government eat the 0:18:44.276 --> 0:18:47.676 loss of machines that are now obsolete. I think this 0:18:47.716 --> 0:18:53.396 would be a socially acceptable way to radically scale up production. 0:18:54.236 --> 0:18:58.516 And the trick here is to avoid the moralistic kind 0:18:58.556 --> 0:19:04.156 of analysis and just look pragmatically and say, gee, if 0:19:04.156 --> 0:19:08.036 we're talking about a surge, somebody might bear some costs 0:19:08.076 --> 0:19:11.916 because equipment be obsolete in a few months, and we 0:19:11.996 --> 0:19:15.476 as taxpayers would like our government to bear that cost 0:19:15.636 --> 0:19:18.356 because we really want to get this equipment very quickly. 0:19:18.996 --> 0:19:20.676 And that I think could be done either with or 0:19:20.676 --> 0:19:22.876 without the DPA. The DPA might be an effective way 0:19:22.876 --> 0:19:24.956 of doing it, but I think their statutory room for 0:19:24.956 --> 0:19:27.756 the president to do what you described in a voluntary 0:19:27.796 --> 0:19:31.636 deal with the companies without having to invoke centralized industrial control. Yeah, 0:19:31.876 --> 0:19:34.036 I think, And there's just been some lack of clarity 0:19:34.156 --> 0:19:37.236 like this is also unfamiliar, and we're moving so fast. 0:19:37.756 --> 0:19:41.276 I think some firms are worried that how the DPA 0:19:41.356 --> 0:19:45.596 will be used is that some official will say you 0:19:45.676 --> 0:19:48.916 have to expand your production of masks, you have to 0:19:48.996 --> 0:19:52.156 charge the prices from before. In effect, you have to 0:19:52.196 --> 0:19:55.396 bear the cost of the equipment which may turn out 0:19:55.396 --> 0:19:57.796 to be obsolete very soon. So as long as we 0:19:57.836 --> 0:20:00.196 make it clear that the DPA is really a mechanism 0:20:00.516 --> 0:20:03.676 for just brokering a deal that is the deal that 0:20:03.716 --> 0:20:08.556 we as taxpayers and citizens want, but which for variety 0:20:08.556 --> 0:20:11.876 of reasons, we can't allow through a mechanism where we 0:20:11.916 --> 0:20:14.476 just pay a very high price for production. Right now, 0:20:14.836 --> 0:20:16.796 this is just a mechanism that would let us use 0:20:16.796 --> 0:20:20.156 our government to broker the deal we want, which is fundamentally, 0:20:20.196 --> 0:20:23.476 we just need the masks as fast as possible. Paul, 0:20:23.556 --> 0:20:26.036 let me ask you one more question before you go, 0:20:26.116 --> 0:20:28.116 and this has to do with the relationship between your 0:20:28.156 --> 0:20:31.636 own academic expertise and trajectory and the work that one 0:20:31.676 --> 0:20:35.316 of the Nobel Prize and your views in this particular crisis. 0:20:35.756 --> 0:20:39.196 So at a very gross level of generality, your works 0:20:39.316 --> 0:20:42.796 innovation had a lot to do with taking into account 0:20:42.876 --> 0:20:47.156 in models of macroeconomic growth the way that new ideas, innovations, 0:20:47.396 --> 0:20:52.356 and technological change actually affect trajectories. Do you find that 0:20:52.556 --> 0:20:54.476 when you're thinking about this set of problems and you're 0:20:54.516 --> 0:20:57.196 staking out your own position, that your view maybe in 0:20:57.236 --> 0:20:59.916 some direct way influenced by your sense that, yes, we're 0:20:59.956 --> 0:21:02.716 in this crisis. Yes there's a trajectory that the epidemiologists 0:21:02.756 --> 0:21:05.996 and others are predicting, but they're not taking into account 0:21:06.076 --> 0:21:09.956 the kinds of innovative interventions they could be undertaken of, 0:21:10.076 --> 0:21:13.996 precisely the kind you are talking about. Yeah, I'm one 0:21:14.036 --> 0:21:16.356 thing about using Twitter, as it does force you to 0:21:16.436 --> 0:21:19.356 boil things down. I sent out a tweet where I 0:21:19.396 --> 0:21:21.876 said that I've spent my whole career trying to make 0:21:21.916 --> 0:21:27.156 a single point, which is just because something is unfamiliar, 0:21:27.836 --> 0:21:31.596 it doesn't mean it's impossible. Now, I mean, who can 0:21:31.716 --> 0:21:35.436 argue with that. But it's something which we don't keep 0:21:35.676 --> 0:21:38.596 track of, we don't think about. So when somebody says, 0:21:39.156 --> 0:21:42.676 testing twenty million people, basically I've never seen that. I 0:21:42.756 --> 0:21:45.396 have no experience with that. That's so unfamiliar. Oh that 0:21:45.476 --> 0:21:50.596 must be impossible. No, actually, it's not impossible. And every 0:21:50.636 --> 0:21:52.796 time we go down a path where we try and 0:21:52.876 --> 0:21:55.756 do something new, when we try to estimate, well, how 0:21:55.756 --> 0:21:59.196 hard is this going to be, it's inevitably much less hard, 0:21:59.356 --> 0:22:03.876 much less costly than we think, because we discover ways 0:22:04.116 --> 0:22:05.876 to do it once we start trying to do it. 0:22:05.916 --> 0:22:08.556 We discover ways to do it that we never even 0:22:08.596 --> 0:22:12.116 knew we're possible. So I'm not only confident that we 0:22:12.156 --> 0:22:15.156 could afford to scale out exactly what we're doing right now, 0:22:15.476 --> 0:22:19.156 but absolutely certain that if we start doing that, we're 0:22:19.156 --> 0:22:21.516 going to find ways to do it at much lower 0:22:21.556 --> 0:22:26.636 cost and much more quickly, much less disruption than anybody 0:22:26.956 --> 0:22:29.516 imagines right now. And you know, and you can actually 0:22:29.556 --> 0:22:33.116 go back and look at various episodes like how hard 0:22:33.196 --> 0:22:36.316 is it going to be to reduce sulfur dioxide emissions 0:22:36.436 --> 0:22:39.996 that caused acid rain? Or like how hard is it 0:22:40.036 --> 0:22:43.676 going to be to stop using the chlorofluorocarbons which we're 0:22:43.756 --> 0:22:46.436 destroying the ozone layer. You go back and read that, 0:22:46.716 --> 0:22:49.196 you know, the literature in the debate before it was 0:22:49.276 --> 0:22:50.996 like this is going to be the end of life 0:22:50.996 --> 0:22:53.876 as we know it if we don't have chlorofluorocarbons, but 0:22:53.996 --> 0:22:56.556 you know, we banned them. We found an alternative, we 0:22:56.676 --> 0:22:59.596 stopped using them, and you know as bradiodorant and just 0:22:59.756 --> 0:23:04.396 roll on deodorant. You know, there's an almost unlimited infinite 0:23:04.436 --> 0:23:08.956 number of alternative ways to do things, but because they're unfamiliar, 0:23:09.356 --> 0:23:12.316 we tend to think they're not possible, and we need 0:23:12.356 --> 0:23:16.076 to just lose that kind of fear and commit to 0:23:16.836 --> 0:23:19.876 let's go down this path. We don't know exactly how 0:23:19.916 --> 0:23:21.276 we're going to do it, but we're going to find 0:23:21.276 --> 0:23:23.676 a way to do it, and once we commit, it'll 0:23:23.676 --> 0:23:28.036 turn out fine. Paul, thank you very much for your insights. 0:23:28.076 --> 0:23:30.516 I think your core insight, which you described as spending 0:23:30.556 --> 0:23:34.076 your career on that unfamiliarity is not the same thing 0:23:34.076 --> 0:23:38.156