What the Heck Is Going On Out There?

I don't normally have an opening post for the semester, but I will for Spring 2021.

I always post to this blog year round, and have students cover what I've done since the end of the semester the last time the class was taught. 

These past 9 months, I've been blogging almost exclusively about COVID-19. Introducing students to time series analysis is a third of what I do in this course, and the COVID-19 data we mostly hear about is all time series. I'm going to try and do less of that going forward.

Also, COVID-19 is a phenomenon with ridiculously huge macroeconomic consequences. Honestly, I was primed to cover it in this class. This is an excerpt from the Quodlibet for Spring 2003:

How will the fear of exposure to the Severe Acute Respiratory Syndrome (SARS) affect trade with other countries and the U.S. economy?

Gosh ... I wish I had an answer for this one too. Let's think about this in terms of polar cases. The worst case scenario is that this is a contagious disease, for which we have no immunity, which has a 4% death rate. So, we're talking 250 million deaths worldwide. In the best case, a vaccine can be developed quickly with few side effects, and the whole scary situation fizzles out.

I think that its pretty obvious that people are worried about that worst case scenario. Expectations of that scenario could have enormous effects on the world economy without it ever even taking place. Already we are seeing drops in travel to East Asia, recommendations that people avoid travel to Toronto, Beijing, and Hong Kong, empty hotels, closed universities, hospitals and schools, and so on. How much damage is that doing - I don't know, I've heard no estimates. Here's a ballpark figure: big natural disasters in developed countries do $20-100B in damage. The U.S. can shake that off, but Hong Kong, and other small but wealthy countries would be devastated. This probably bears a lot more attention than the Iraq war. On the other hand, don't blow it out of proportion. Only a few thousand people have had SARS so far.

The earliest estimates of damage to China only from COVID-19, posted here on January 30th were for $150B. That was back when we thought COVID-19 would be more like SARS (less contagious, but a higher death rate). We're now almost a year into this, and there are no really solid estimates of global GDP losses due to COVID-19, but they are clearly in the trillions.

Speaking of being primed for this, I was not on top of COVID-19 when it first started out — but I was probably ahead of everyone else you know. I do recall seeing the January 8th article in The Wall Street Journal that broke the news broadly. I mentally filed that away as a possible topic for ECON 3020, but it didn't seem that important to work on right away. On Thursday, January 24th, China took the unprecedented step of locking down otherwise healthy people in a city of 11 million people. Over the weekend of January 25-26 I was actively collecting items to share with the class that originally appeared in this post on January 28th. 

The bottom line is we'll still do some COVID-19 this semester, but this blog won't look like the last 11 months of posts.

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So what else is going on that might interest a class like this? I'll be posting more on these topics in the next few days:

Brexit is finally an agreement and not just a referendum.

We have new Democratic control of the levers of power in D.C. There's a lot of policies we need to start talking about: raising the minimum wage, raising taxes, undoing tax reform (including shifting back towards favoring coastal blue states), handing out checks, and so on.

Also, social perceptions go in waves, and a problematic one that still does not seem to have crested is that billionaires (in wealth) need to be singled out for punitive taxation (in income).

Nationalized health care will be back on the table. Lots of people rationalize this possibility away, but elimination of private health insurance is written into Democratic documents that have circulated for the last two years.

A lot of people don't seem to get that the Green New Deal is a fairy tale that should not be subject to serious discussion. Most debates about this are about the color of one's unicorn, and not about what is possible or likely.

And then, of course, there's lockdowns and the pandemic/lockdown recession.

This should keep us busy for a while!