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This fine post by Maria Chikina (Pitt) and Wesley Pegden (CMU) reaches important if unpalatable conclusions, including:

“There is a simple truth behind the problems with these modeling conclusions. The duration of containment efforts does not matter, if transmission rates return to normal when they end, and mortality rates have not improved. This is simply because as long as a large majority of the population remains uninfected, lifting containment measures will lead to an epidemic almost as large as would happen without having mitigations in place at all.”

To which Id add: draconian containment may be doing more social harm than good if a majority has already been infected.

And, I don’t think the technology or infrastructure exists for reliable mass or randomized screening to figure that out. Cutting edge molecular  assays for old fashioned influenzas (according to the CDC) can miss up to a third of infections; some cannot distinguish between Type A and Type B influenza viruses. (The CDC of course frames these facts in a more positive way.)

And advocates of randomized testing: Which test? And who will administer them: send out the people who do household employment surveys? Imagine a can opener as the saying goes..

A simpler, harm minimizing alternative: strict norms/rules to treat people with ambiguous symptoms as presumptive Covid cases and keep them at home.. Also possibly people already in poor health and of advanced age.

My oped on covid 19 that the FT has just kindly published, emphasizes we are operating in a fog — of irreducible, radical uncertainty. As Mervyn King wisely put it. ” “No one can really know the nature of this virus.”
Six years of studying medical advances — Im going to be teaching a new course on this at HBS next year — convince me there is no techno magic that will clarify.  Reliable, large scale screening is a Theranos like fantasy: its not just the “upstream” scientific breakthroughs that are a bottleneck — there is a long “downstream” chain — of producing tests, distributing them,  training operators to administer them and physicians to interpret them that are at least as great a constraint.
(There is a reason the CDC recommends against routine laboratory testing for flu diagnosis — even though the tests and protocols are well established.)
And without tests, uncertainty about infection and death rates — and efficacy of containment choices is unavoidable.
Our best guess/guide at this point I think is the 2009 swine flu pandemic. Covid could be better. it could be worse. But i dont see any reason for doing more than was done in 2009. This certainly wasn’t nothing — but it didnt involve fnearly global lock-downs and immediate large-scale, harm to people’s livelihoods. And with no exit plans or criteria even.
Some can afford extended sheltering in place.  A great many cannot.

My email and facebook feed is filled with pictures and videos of exponential growth functions.
The flood originates, I believe, in epidemiological hubris, namely that:
1. The form of equation governing infection growth is known and unchanging; and,
2. That the parameters of the equation — the now infamous R0 — also don’t change, and therefore can be reliably estimated from the data.
Yes, you can “fit” the initial *recorded* covid infections to an exponential curve — as you could “eyeballs” in the early phases of the 1999 internet bubble. But as Herbert Stein famously observed “if something cannot go on forever it will stop”; very likely, I might add tailing off before it stops for many phenomena. The reasons will of course vary from case to case.
The conflation of the convenience of a mathematical model with is correctness is common in economics (eg Cobb-douglas production functions) and financial risk models (normally distributed price changes). Sometimes, as in 2008, with disastrous consequences.

A pro-screening friend posed this question — in response to my strong objections to mass screening.

To which I replied:

“It depends on the purpose, costs and the consequences.

Testing witches by tying weights to suspects’ feet and tossing them into ponds was a terrible idea. Yet at the time, many authorities decided it was a conclusive test — real witches didnt drown — and crucial to containing the scourge of witchcraft.

If I could offer some serious personal examples: When I was twelve, a servant in the house (yes that was common in India) was diagnosed with leprosy. Everyone in the family was immediately tested (with relatively crude, indirect tests) in a public hospital. I tested positive and was prescribed — and immediately started taking — a drug that would cure the disease but would eventually seriously damage my liver.

My mother, a cancer researcher not a medical doctor, wasn’t persuaded by the diagnosis. About a year later, after reading whatever she could find on the top, she took me to a specialized leprosy hospital. They redid the crude test and this time I tested negative. But since there was a prior diagnosis — and there was some abnormal scaling of skin — they performed a much more invasive, accurate test. They took out a large chunk of skin (about 5 mm deep) which they tested in a culture. After several weeks the culture showed there were no leprae bacteria. The drugs were immediately discontinued and later, when it was discovered I had developed an allergy to nylon socks, the scaling went away.

Accuracy here was crucial.

But what if the better test wasn’t available? Would I urge using the crude test to screen the population for leprosy. Absolutely not. But for people who had symptoms or circumstances that indicated the possibility of leprosy, yes. Even if misdiagnoses needlessly harmed their livers.

Another example: I am a sucker for all kinds of testing even when I know the accuracy of the test has not been tested (and is probably low). I have several gadgets to test blood oxygen saturation levels in my sleep (as an indication for apnea).  Im sure they are extremely dodgy. But they are harmless. Likewise, I know the 23andme genetic tests have no medical value to me. Yet I did them for sport — and got the “risk factors” for a thousand of my genes which I know are utterly unreliable.

The CDC has sensible criteria for testing for the flu (generally it recommends against). In my judgement those are pretty good ones for the corona virus as well.

And if you are really interested in the general issue of testing methods and tradeoffs look up the readings on that topic in my practical knowledge syllabus

Comparisons of coronavirus infections to the mundane seasonal ‘flu have invited widespread mockery. In fact, the comparison is oddly and usefully apt. Estimates of infection and death rates –for both – require heroic, unverifiable assumptions. And how we deal with flu outbreaks provide useful lessons for coping with what the World Health Organization has declared a global pandemic.

Like many, I never see a doctor when I believe I’ve gotten the flu. Most patients who do see physicians are “clinically” diagnosed, in a rough and ready way. The US Center for Disease Control (CDC) recommends laboratory tests only for hospitalized or high risk patients. And, according to the CDC, “proper interpretation” of tests requires consideration of numerous factors such as whether the specimen is taken from the upper or lower respiratory tract, accuracy of the test used as compared to a “gold standard” test, and the prevalence of the flu in the patient population.

These interpretations (like my personal guesses and physicians’ clinical diagnoses) are fallible: laboratory testing isn’t like dipping litmus paper into a beaker.

Attributing deaths to the ‘flu is also a fallible judgment call, not the unambiguous result of a foolproof test.

How many are diagnosed, whether by themselves, clinically by physicians or nurses, or through lab tests, is also a guesstimate. I keep my self-diagnosis to myself and professional results aren’t entered into a national registry or data base.


Brilliant observation from Knight’s Risk Uncertainty and Profit: “We live in a world full of contradiction and paradox, a fact of which perhaps the most fundamental illustration is this: that the existence of a problem of knowledge depends on the future being different from the past, while the possibility of the solution of the problem depends on the future being like the past.”

I see this as an extension of Hume’s more famous induction paradox: “Why should we believe that the sun will rise again in the East tomorrow?” To say that because “its always risen in the East before” is not a reason — its simply a restatement of the belief. Hume’s answer is that there can in fact be no “reason” — its a matter of animal instinct.

This kind of animal instinct makes many kinds of “routine” knowledge problems trivial. The interesting ones become “when or how might the future be different from the past (or how could we make it different)”? And whatever mental process we use (eg the application of science) relies on some ‘likeness’ with past situations. Note “likeness” is crucial. If “identical” we could fall back on the simple animal instinct of extrapolation.

The compositor has sent  the “final” version of Making Economics More Useful: How Technological Eclecticism Could Help (though the official publication in Applied Economics wont be till July or August.)

I nearly emptied my research budget to make it completely open source so feel free to download, pass around, republish, excerpt or whatever.

Its a huge relief after a dozen or so summary “desk rejects”. One editor suggested I was “insulting economists.” (I don’t: but it might be an expiation for my careless years at the Indian Institute of Technology).

Ultimately I found a brave editor at Applied Economics and an exceptional referee who asked for a significant rewrite — and pushed me to make bolder, broader claims, instead of the customary niggling and narrowing.

Whew! And Happy New Year!

I got a “revise and resubmit” for my paper on making economics more useful on the very day the Nobel prize in economics was announced.

I have long been skeptical of the practical utility of Randomized Control Trials (RCTs) in general and field experiments in developmental economics in particular. I had not gone into this in my first round submission but I think I’m going to risk this in the re-submission.

The argument I plan to make is as follows:

A foundational question for disciplinary economics is whether it should limit itself to being a science which privileges general propositions; or, should it also include knowledge (as in engineering or medicine) that pertains to the design and use of physical or virtual artifacts (airplanes, drugs, surgical procedures)?

The Deaton and Cartwright critique of RCTs correctly observes that RCTs are ‘optimized” to validate general principles rather than evaluate or improve actual designs. Thus the RCT finding that textbooks alone don’t improve learning supports the general principle that complements matter; other field experiments support the general idea that incentives (including monetary incentives) matter. (The latter has been a staple of older econometric research as well: Zvi Griliches’s hybrid corn research comes to mind.)


Srikant Datar, Fabio Villa, and I are happy (and relieved) to complete this case history on the evolution of coronary bypass operations. This is by FAR the hardest writing I’ve ever attempted: the story is incredibly complex, and I knew nothing the topic when I started. Fabio bailed us out with his expertise — and patience with my profound ignorance. (He’s a heart surgeon, turned psychiatrist.)

Katherine Stebbins’s and Caitlin Bowler’s research and writing was crucial in the other cases (links below).

The narratives have been filtered through a thesis about practical knowledge, although the cases do not explicitly advance an “argument.” A planned book compilation of the cases will clarify.

If you can’t wait, this manifesto-like syllabus outlines my general thesis of practical knowledge and an earlier Critical Review essay how this applies medicine.


While preparing for for my practical knowledge seminar last week I saw something in Chandler that had been hiding in plain sight, which I think aligns Chandler with Frank Knight — and away from the transaction cost view of organizations advanced by two Nobel Laureates Ron Coase and Oliver Williamson. (Chandler felt strongly that Williamson had misapplied his histories).


I am a staunch free-trader with strong but pragmatic libertarian leanings. I am also an immigrant (of “color” in the prevailing euphemism). All this makes me seriously conflicted about immigration, which I cannot reduce to a matter of high libertarian principle.

The questions are difficult:how many immigrants can our public infrastructure tolerably accommodate? How do we prevent criminal contamination of refugee inflows? How freely do we admit immigrants whose backgrounds cannot be reliably checked or from countries which celebrate honor killings and punish homosexuals and blasphemers? How do we treat those caught trying to beat the rules? How about their children?

Unfortunately, immigration demands more pragmatic tough mindedness than trade as my oped argues. Timidity or tender-heartedness will simply allow authoritarians and demagogues to more harshly exclude or expel immigrants.

Why Is Immigration Different from Trade?

Jan 11, 2019 Amar Bhidé

There is no doubt that immigration brings a host of benefits, both to immigrants themselves and to the native-born population. But if broadly beneficial immigration is to be sustained, destination countries must acknowledge and address the real risks that it raises.


Talking heads on “financial” TV channels have always provided “infotainment” — information so blended with entertainment that you couldn’t tell where one stopped and the other started.  One rated the Fed Chair’s “performance” at his press conference on the Fed decision to hike rates an “F”.
But why should the Fed and its chairs have to “perform” for the market or soothe its tantrums, my just published oped argues.

WSJ OPINION   |   December 26, 2018  p. A21

Stock-Market Volatility Can Be Good for the Economy

Cheap, abundant capital doesn’t create good ideas. Scarce, expensive capital helps weed out bad ones.

Amar Bhidé


Paul Volcker’s critique of 2% inflation targets in his recent memoir spurred me to write this oped just published in the Wall Street Journal. Volcker focuses on the economic hazards of the targets; I question the legitimacy of “independent” appointees in making inherently political choices about ends and not just means. The Constitution envisions a republic messily governed “by the people” not just “for the people” by philosopher-kings in an efficient Kallipolis.












My argument (which Volcker may well dispute) echoes the problem raised in Dick Nelson’s 1977 classic, The Moon and the Ghetto, of carelessly throwing policy goals “over the legislative wall” to experts. I plan to expand on this in a book based on my practical knowledge seminar (This become a consuming obsession for me, so Id love to get any thoughts on the seminar’s manifesto-like syllabus).

But here I’d like to add my two bits to the flood of eloquent, well-deserved tributes occasioned by the Volcker memoir.


The WSJ op-ed reflects my ingrained First Amendment-absolutism: fake news will always be with us and any remedy is likely to make things worse.

(Yes, I did recently suggest corralling infopolists’ assaults on privacy. But, our Constitution protects the exercise of free speech not of market power — even if the power was “fairly” secured. Moreover, as Emerson said, a foolish consistency is the hobgoblin of little minds.)

Skepticism Beats Snopes as an Antidote to Fake News

These days what’s called ‘fact checking’ is no more than a comprehensive gotcha effort

Sophisticated netizens swear by the myth-busting of Snopes, a website that has debunked many an urban legend. But Snopes—or any other enterprise established only to check facts—can’t stop the epidemic of fake news allegedly pervading social and traditional media.

When customer reviews of sellers first appeared on eBay , scholars quickly lauded—and backed with rigorous, fact-based research—the benefits of independent evaluation. But it didn’t take long for scammers to produce fake reviews. Sellers learned to pay not-so-independent reviewers to post glowing evaluations of their products and viciously bad-mouth the competition.


I am viscerally skeptical about expanding state power but recognize that technological advances do often require new rules: Automobiles required brake inspections and traffic police for instance.

Similarly, I argue in this just published Project Syndicate oped,  the digital economy poses new risks and requires new rules. The info-monopolists are not your great grandfather’s oil trusts. Market power can deprive us of more than the loss of the “little triangles” of consumer surplus as I think Zvi Griliches used to put it.


Opening of the new Google data center in Eemshaven

The question of how to encourage innovation while limiting the abuse of market power long precedes the advent of the digital age. And today, the need to strike the right balance is nowhere more apparent than in the case of dominant information-technology companies like Facebook and Google.
In a modern capitalist economy, we celebrate innovations that produce market power, but fear the risks of unchecked dominance. Nowhere are those risks more apparent than with today’s information-technology monopolies. (more…)

This article in many ways, is the “debt” counterpart to my 1993 Journal of Financial Economics piece and offers an even broader critique of the reflexive belief that more complete financial markets are always better.

I conclude thus:

Lemon problems do not stop the sale of well over a million used cars in the U.S. each year, but they do prevent the operation of a market in which buyers place sight-unseen bids for used cars offered by unknown sellers. In fact, anonymous markets for physical goods are restricted mainly to metals or agricultural commodities. Most goods—including new or secondhand cars, shoes and homes—are purchased from identifiable sellers.
Buyers also prefer to examine specific items—test-driving cars or trying on shoes, for instance—before they make a purchase.

Outside finance, revolutionary technological advances have not turned many goods or services into anonymously traded commodities. Rather, the advances have reduced the cost of communicating and using detailed information, mitigating information asymmetries, and helping buyers select items that match their preferences. And technology has reduced anonymity: in contrast to the street-hailing of taxis, users of ride-hailing apps can screen drivers based on their ratings. Similarly, consumers can review the ratings of plumbers on the web instead of randomly picking one from the telephone directory.



(Manifesto-like) Syllabus

This seminar examines the development of knowledge embodied in artifacts (including physical objects, protocols, and organizations) intended to transform “existing conditions into preferred ones.”We are particularly interested in knowledge “inclusively” produced by the many and for the many. Thus, we care more about how ready-to-wear footwear is designed, produced, and sold, than in customizing handcrafted boots for buyers who don’t think about the price. Likewise, general tools and techniques commonly used to produce a variety of artifacts are of greater interest than specialized tools. Thus, we are interested in how consumer goods, not just shoes, are designed, produced, and marketed.

By traditional intellectual standards, studying practical knowledge may seem undignified and uninspiring. The ancient Greeks venerated contemplation, music and the other arts, abstract truths, and mathematical reasoning. Merchants and craftsmen (including, presumably, builders of large hollow horses) occupied the bottom rung of Plato’s idealized society; their knowledge and toil was but a means towards the realization of the good life by a small enlightened class. Modern society has raised science into the pantheon of the wisdom we venerate. Engineers, physicians, lawyers, entrepreneurs, managers, and accountants earn high incomes; but, many dismiss their knowledge as a mere application of deeper scientific ideas or simply unfounded superstition. Similarly, in higher education: the first European universities started by offering practical medical and legal training and the University of Pennsylvania emerged from Benjamin Franklin’s 1749 proposal for an Academy to teach “those Things that are likely to be most useful.” But now, some in the upper reaches of the Academy deride professional education as verging on the teaching of trades that must be kept in its subordinate place.



Fair-lending laws turned consumers into anonymous credit scores—and a target for identity thieves.

In a longer working paper I further argue that reducing individuals to scores has also undergirded the vast growth of anonymous markets in securitized consumer and mortgage loans.

Photo: David Goldman/Associated Press

My working paper just posted on SSRN synthesizes ideas Ive been working on for my practical knowledge seminar, a case writing project on medical innovation and a forthcoming paper in the Journal of Applied Corporate Finance.

I argue that economics lacks an “engineering” counterpart to its “physics” side. That’s fine as long as you don’t rely just on the “science” of economics to make practical choices. But wouldn’t we be better off with an engineering side? (I grant social engineering is a scary phrase!)

Keynes thought it would be “splendid” if economists became more like dentists. They have instead become more like physical scientists who focus on propositions about invariant tendencies amenable to decisive verification. This predisposition, I argue, limits the utility of economics in evaluating concrete policy choices. I further suggest that emulating the more pluralistic and less decisive techniques used to develop and test new engineering and medical technologies would mitigate these limitations. Additionally, I offer an example of how a simulation model can help evaluate policies that affect the extension of credit.

My article, just accepted by Ekonomisk Debatt, will be published after translation by the Swedish Economics Association in May.

The argument is half-Hayekian in the sense it argues for an important role for the decentralized, private sector creation of the medium of exchange, which Hayek presumably would have approved of, but anchored in a government monopoly for creating base money that Hayek did not favor, but which dates back to antiquity.


The decentralized enterprise that sustains the dynamism of economies makes top-down monetary interventions, such as quantitative easing, that target aggregates such as overall inflation, futile. Moreover, economic stability and dynamism also require prudent, decentralized lending to decentralized borrowers. But, sustained monetary interventions aimed at aggregate inflation (or employment) targets induce imprudent credit extension, jeopardizing stability and dynamism.

Amar Bhidé

Financial Times  August 16, 2016

Easy money is a dangerous cure for a debt hangover

Amar Bhidé and Anders Barsk

Quartz June 21, 2016

Brexiters are making a dangerous mistake in their argument for leaving the EU

From Quartz  January 7, 2015

When it comes to ISIL Europe is repeating the sins of its fathers

political posters

Widespread private and public cheating in Greece is old hat. Michael Lewis documented it splendidly in Vanity Fair in 2010.

What’s “novel” in this just published piece (tho Ive made it a few times before) is that the Euro doesn’t need or can’t have “convergence” of standards of living or in the quality of governance.  Rather the common currency needs rules and structures that *minimize* the supporting standardization and regimentation.

 “Standardize and centralize only when necessary” is a staple of modern management.  And figuring out what and how to centralize (establishing “loose tight controls as Peters and Waterman put it) are an important part of a CEOs job. (more…)

A civil libertarian and free-speech absolutist’s concern about the Charlie Hedbo demonstrations

By Amar Bhidé

Mass demonstrations of solidarity in favor of free speech and against the Charlie Hebdo killings are understandable, but they could inadvertently give cover to actions that subvert the very liberties the protesters cherish. Legitimate public outrage should not be channeled into declaring or escalating wars on Islamic (or any other kind of) terror. Democracies should coolly rely on existing tools and procedures against criminal conspiracies.


Talk at Cato conference on the future of US growth

A Swedish  friend, employed in New York by a famously prudent Swedish bank, kindly invited me to lunch last month. We discussed the recent convulsions in ‘repos’, as one does over quinoa salad in Manhattan.

That conversation prompted me to propose a radical simplification of repo markets, just published in the WSJ.

My proposal may trouble moral hazard purists, while many outside finance just won’t care.

But there’s a reason for concern: The repo market is a trillion-dollar pawnshop and the last time it went haywire was before and during the 2008 crisis.

Experts have of course suggested complicated tweaks: glitches in complex systems invariably invite quick fixes that increase complexity — and the power of insiders who pretend to know what’s what.

But it’s spiraling complexity that crashed 737s, destroyed Detroit’s manufacturing preeminence, and wrecked finance.

I’m not predicting imminent disaster. But why take a chance – why not make Toyota’s “lean” principle the default before a real geopolitical or financial accident happens?