Archive for April 9th, 2020

How and why have some societies come to control infectious diseases while others have let them fester?

April 9, 2020 sent this message to its subscribers:

The current crisis has brought into focus the tradeoffs between quarantines and economic freedom.  For an excellent book about the history of these tradeoffs in the United States, read Werner Troesken’s The Pox of Liberty:  How the Constitution Left Americans Rich, Free, and Prone to Infection.   Werner traces the history of how governments at all levels of the American federal system dealt with three deadly and recurring diseases:  smallpox, yellow fever, and typhoid.    All of the issues the world is facing today to avoid horrid deaths are discussed in Werner’s book:  inadequate testing, the absence of vaccines, attempts to develop vaccines, tradeoffs between economic losses and quarantines, the uncertainties that the disease might return in the future, and inadequate medical facilities. 

The situations developed in the 19th century societies when there were much higher death rates, lower incomes, and at best rudimentary medical care.  Werner shows how the clauses of the U.S. Constitution that expanded freedoms served to make it more difficult to prevent disease in the short run.  Yet, in the long run these same clauses provided expansive opportunities for a wide range of governments, people, and organizations to increase incomes and find ways to solve the disease problems.  It is a complex story that weaves together law, economics, politics, sociology, demography, and epidemiology into a superb tapestry by one of the leading economic historians of public health.  Sadly, Werner died in 2018, so we cannot talk to him directly, but his writing offers a valuable history lesson for how to think about the issues the world faces today. 


Here is the book. The first chapter of the book is available. has a book review:

Throughout the remainder of the book, Troesken answers this question by appealing to the American system itself. In a single word, the reason the America historically had such a high disease rate: liberty.

The fact the American political system values individual liberty and allows the public to elect officials that share their beliefs, combined with a strong history of individual and states’ rights allowed local preferences and, in some cases, the voices of a few to prevent compulsory vaccination and deter certain public health investments. While this book’s focus is on the eradication of smallpox and typhoid from the late eighteenth to the early twentieth century, its framework is useful in understanding contemporary public health debates and policy.  Recently, scientific evidence has debunked the potential link between autism and vaccination, yet there is still a strong anti-vaccine movement among parents of newborns. Likewise, the HPV vaccine is highly effective in reducing cervical cancer later in life, yet vaccination rates remain relatively low due to a resistance to discussing reproductive health with young daughters. Understanding that the American system empowers these voices should shed light on the persistence of disease in the United States.


After finishing the book, one is left with the following impression: The institutions, which provide individuals the incentives to trade and produce have also hindered higher levels of government from internalizing public health externalities. Thus, the United States has been able to amass significant wealth and income due to individual effort, yet has continued to battle certain diseases longer than other nations with a stronger central government. At the same time, the government’s desire to pay its debts has also facilitated large, long term investments to improve water infrastructure. This nuanced study has helped fill a gap in the existing literature by highlighting that the institutions and disease environment are part of an endogenous relationship between the two.

Does this explain current Covid19 crisis in US which has largest number of cases?



Czech National Bank to get more powers to “trade on the financial market without restrictions”

April 9, 2020

All kinds of things happening.

The Czech Parliament approved a small change in the Act of the Central Bank. The amendment allows the central bank to intervene in the markets:


Covid-19: Future of cash and digital payments

April 9, 2020

Raphael Auer, Giulio Cornelli and Jon Frost of BIS in this note:

  • The Covid-19 pandemic has fanned public concerns that the coronavirus could be transmitted by cash.
  • Scientific evidence suggests that the probability of transmission via banknotes is low when compared with other frequently-touched objects, such as credit card terminals or PIN pads.
  • To bolster trust in cash, central banks are actively communicating, urging continued acceptance of cash and, in some instances, sterilising or quarantining banknotes. Some encourage contactless payments.
  • Looking ahead, developments could speed up the shift toward digital payments. This could open a divide in access to payments instruments, which could negatively impact unbanked and older consumers. The pandemic may amplify calls to defend the role of cash – but also calls for central bank digital currencies.


The macroeconomic spillover effects of the pandemic on the global economy: V vs W shocks

April 9, 2020

Emanuel Kohlscheen, Benoît Mojon and Daniel Rees of BIS in this research note:


Shrinkonomics: Lessons from Japan

April 9, 2020

Gee Hee Hong and Todd Schneider of IMF in this article:

Demographic change is having a fundamental impact on the global economy—but not in the way we once thought it would.

A mere five decades ago, some observers were predicting that the human population was too big and would soon strip the world of resources, leading to mass starvation, collapse of the global economy, and a host of other ills. But the doomsday scenario of mass overpopulation did not materialize. Rather, for the first time in modern history, the world’s population is expected to virtually stop growing by the end of this century, owing in large part to falling global fertility rates.

Japan’s unique population, fertility, and immigration history make it a leading exemplar of this trend. The impact of an aging and shrinking population is already visible in everything from economic and financial performance to the shape of cities and public policy priorities (such as the long-term solvency of public pension, health care, and long-term care systems).

With demographics having such a clear and accelerating impact, Japan is the test kitchen for “shrinkonomics”—a laboratory from which other countries are beginning to draw lessons.

The IMF’s work on the Japanese economy has focused heavily on demographics in recent years—mirroring the intense debate within Japan on how best to respond to the pressures from a rapidly aging and shrinking population. While each country’s experience will be different—and prompt different solutions—some of the key macroeconomic and financial effects can be identified from Japan’s recent experience.

What makes Japan different?

On the one hand, Japan is in good company with respect to broad demographic trends. Looking across Organisation for Economic Co-operation and Development data, there are many countries with declining populations, and likely more to come. Japan is also not alone—in the region or compared with other advanced economies—with respect to having a low fertility rate, which is common across most of the Group of Seven (G7). Japan also shares with other countries an improvement in health and average lifespan. This is a common trend across most advanced economies, though Japan is certainly doing better than average.

But this is not the whole story. Japan’s unique characteristics put demographic trends (and their macroeconomic and financial impact) in sharper relief than in other countries:

Japan’s postwar baby boom was short —only about three years, compared to other G7 members, where such periods stretched anywhere from nine to twenty years. This means that Japan’s demographic structure will shift dramatically in just a few years—particularly as the boomers hit retirement age and become eligible for public pension and health care benefits.

Japan leads the world in terms of life expectancy —surpassing all Group of Twenty economies as early as 1978. Extended life expectancy, combined with low fertility, accentuates demographic change in Japan and is manifested in a steady increase in the old-age dependency ratio (the number of retired people relative to the working-age population).

Immigration flows are too small to make an impact —on aging and shrinking demographics. In comparison with other G7 economies, Japan is an outlier in terms of its very limited use of imported labor. Foreign workers accounted for only about 2.2 percent of Japan’s total labor force in 2018, compared with an estimated 17.4 percent in the United States and 17 percent in the United Kingdom.

Covid19 is making things even worse for Japan…

%d bloggers like this: