The People v. The Flu

In Plagues and Peoples, published in 1976, William McNeill argued that human history can be thought of as the co-evolution of our societies and the “microparasites” to which we are prone.  The emergence of settled agriculture, major historial movements of people, and industrialization all brought with them new or more intense diseases.  Eventually, most societies figured out how to survive – but of course some didn’t (see Jared Diamond‘s work for details) and many people died young along the way.

You don’t need to buy McNeill’s full view in order to take away the following point.  We have to invest and innovate to stay ahead of disease – there is no sense in which these are likely to be completely “conquered” – because they change as we do.  Investments are needed not just in the relevant science, but also in how it is used to combat potential epidemics – as well as more general endemic disease.

As I argue this morning on the NYT’s Economix, regarding the current swine H1N1 flu outbreak, global public health officials are doing much better than our friends who watch over financial systems.  In terms of reaction speed, communications, and the legitimacy of response agencies, economics has much to learn from the people who fight against epidemics.

But more broadly, in terms of reducing vulnerability in the system, both public health and economics need to do better.  We let endemic conditions fester and global risks build up.  We haven’t found ways to think clearly enough about what causes major crises – particularly, how do apparently stable systems suddenly face the prospect of collapse? (OK, the biologists are ahead on that one also.)

And, of course, if we continue to run up massive amounts of public debt – through various forms of financial sector misadventure – it becomes harder to fund sensible investments in and around the medical sector (note to Larry Summers: how are we going to afford the big push on public investment you are advocating?)  On top of everything else, unrestrained Big Finance is bad for your health.

By Simon Johnson

29 responses to “The People v. The Flu

  1. Re the relationship between social animals and microparasites there is as you suggest adaptability on both sides. And ecological niche boundaries may be permeable, even fluid. I even hold out hope that some human officials (you named one in the post) may be able to move from microparasite enablers of deregulated behemoth monsters to a better place

  2. I would purport that this is a failure of economics as a discipline rather than of one constituency within the field (bankers, regulators, or academics, etc.). A humorous explanation of my point can be found here: (http://www.realclearmarkets.com/articles/2008/12/macroeconomics_is_complete_bun.html).

    Whats the joke: Economists have predicted 10 out of the last 6 recessions? Economists have historically had horrendous predictive power, yet we continue to rely on them to tell us how the world will unfold in the next few years. And we use those predictions to make extremely dangerous and delicate decisions, such as the setting of interest rates, the raising and lowering of taxes, and the extension of defined retirement benefits 50+ years into the future. And what’s the basis for these predictions? About 100 years worth of price series data, that span a world whose characteristics are constantly changing. (You can’t get anything statistically significant from comparing the 1930s to today, as the world is too different). Nassim Taleb’s “Fooled by Randomness” criticizes this as psuedoscience. We think we’re doing rigorous tests on our data…but even 10,000 or 100,000 observations of white swans failed to predict the existence of a black one in australia. And even if economists can name all of the littany of “assumptions” they impose to make their model work (rational human beings, independent decision makers, efficient markets), we are still dumb enough to use those models to predit the real world.

    Biologists (such as my mother) love to claim how difficult their job is because life is a system that is so much more difficult to model than what engineers have to deal with, such as say a car, or a building, or a bridge. The beauty of it is that biologists are AWARE of the limitations of their predictive ability. Economists on the other hand, cry “Eureka!” every time they find a data set that proves a theory of theres, without realizing that in the period just before or just after there was data that disproved it. And even if some economists are humble enough to realize all of their failings and limitations (I’m passing no judgements on the esteemed authors of this blog), the ones that are most capable of causing damage (the ones plucked out of obscurity and tossed into the limelight of public service on the back of their economic “creditentials”), generally are filled with the hubris to think they can control the world.

    As final anecdotal evidence: as any profitable flow trader (investment banking, hedge fund, or otherwise), how often he listens to his firms “economics department,” when making trading decisions. Those models that are filled with rational human beings are useless in the real market filled with greed, panic, and a population that acts as a giant macroeconomic herd.

    But of course, ask any economist who has a vested interest in maintaining his importance to society (Bernanke, pundit, professor, everything in between), and he’ll vehemently defend his job to you.

  3. Surely you would not wish to imply to those of us with weak and suspicious minds that the one govt official you mention in this post is a microparasitical enabler of Behemoth deregulated?

  4. economics is not related to flow trading. flow trading makes money on the mechanics of trading (ie try not to be exposed to ‘macroeconomic’ factors; make money on the difference between bid and ask). economics is only relevant if you hold risky positions for a long time.

  5. Plebeianswillrevolt

    The answer is who has the vested interest. In the case of economics and transparancy, the clientele are the bankers, hedge-investors, broker-dealers. In the case of influenza, the consumer clients are the people.

    Financial reporting and forcasting is structured to mislead and obscure. Look at Wall Street today. Fabulous “bull run.” Biggest streak of gains in history. Straight UP for 8 consecutive weeks, over 2,500 points on the DOW. Contrast this with all this sordid crying crap about the terrible state of US GDP, the global economic collapse, zombie banks, Chrysler bankruptcy, 10% domestic unemployment, credit and forclosures. The disconnect is mind numbing.

    What makes sense anymore? Is this just bizzaro world. We need a good global pandemic purging – only it wouldn’t get the right people. “They” have already stockpiled all the Tamiflu vaccine.

  6. The parallel between microparasites vs public health institutions and financiers vs regulators is very interesting. Both are ever-evolving perpetual struggles.

    Here’s why financiers will always have the edge. The best brains in finance will always go to them. Why work for the government when you can make 10 times as much in the private sector?

    Of course there are a few exceptions such as Simon Johnson. I wonder if he ever considered working for some investment bank or hedge fund. What are the motivations of people like him?

  7. Well, I would hope that Johnson’s motivations are rooted in a moral imperative; a desire to know himself as an authentic person.

  8. …that is to say, more than a mere financial success.

  9. Notably,

    Public health was not _always_ ahead of the game, and the reasons were very similar to the reasons underlying the current financial crisis: Economics and Incentives.

    Namely, an over-reliance on private market-based incentives in situations where market incentives were _massively_ distorted by externalities, information asymmetry, moral hazard, adverse selection…

    Public Health has learned some painful lessons, most recently after declaring that the war against bacterial infections had been “won”. This led to a decade+ of under-investment in antibiotic research, which contributed to a period of dangerous weakness wherein various superbugs emerged that were resistant (sometimes severely resistant) to standard (and even third line) antibiotics. MRSA (staph), MDR TB, XDR TB, various resistant strains of pneumococcal disease, etc.

    Here are some examples of how government inability to correct market-failures has cost millions of lives and hundreds of billions of dollars in damage:

    The “Profit Problem” in antibiotic R&D – http://www.ncbi.nlm.nih.gov/pubmed/16247440

    The essential argument is that antibiotic research, if done well, limits consumption of the antibiotic drug. This is one reason why drug companies love to invest in lifestyle drugs, or drugs that treat chronic illnesses (heart disease, obesity, mental illness, diabetes & renal disease, etc.). These drugs are vastly more popular than even a “blockbuster” antibiotic drug. In the mid-1990s, the lack of any novel mechanisms of action in new drugs was terrifying. We are only just beginning to rebuild our antibiotic arsenal with drugs that have new mechanisms of action.

    Combine this with hospital investments of millions in state of the art arterial catheritization suites (to bill patients and insurance companies for costly procedures that are unproven), vs. pathetically small investment in patient isolation and anti-contagion. Our hospitals – their very design – are ancient, but the motive to rebuild those systems does not exist. Rather, hospitals invest in systems that payout, rather than systems that prevent (though that may be improving in many non-profit HMOs).

    Another example: the #1 disease killer in the world right now is a disease that almost does not exist in the US, Tuberculosis. A disease that _could_ have been exterminated, much like smallpox. The primary reason we failed (other than AIDs coinfection) was lack of aggressive resource commitment in a timely manner. Now TB is back, and a growing threat.

    Malaria is another example of a resurgent disease.

    In addition to all of this, it’s worth noting the impact of global travel/trade on disease propagation. Not just obvious pandemics (like now), but inobvious cases in which travelers return from foreign countries with rare diseases and spread them. This constitutes a massive incentive problem – if we wanted to align incentives, we might place a “health tax” on travel and mandatory isolation periods on travel to certain places, and dedicate the funds to research and eradication efforts against those diseases (domestically and abroad).

    So why don’t we fix these gross market failures?

    The reasons, sadly, have been political, not economic.

    So, Public Health – while better than our financial system by orders of magnitude – has its own problems, many relating to twisted market incentives and a blind faith that the market is always right.

    However, public health has some great things going for it – notably, a stronger regulatory environment (that was built up over vicious objection by pro-market advocates who blamed the FDA for causing untold billions in “economic losses”), and a cadre of employees with a vastly better professional ethic. Doctors confront choices _every day_ in which they have to choose between profit and doing the right thing, and usually they do the right thing. (Hospital administrators… not so much)

  10. “global public health officials are doing much better than our friends who watch over financial systems. ”

    Clearly the H1N1 virus needs to get some better lobbyists and hire a PR firm: “Disease suppression stifles the essential processes of viral innovation without which evolution itself could not proceed….”

  11. middle world guy

    As an interesting aside, Jared Diamond recently predicted a 49% chance of the collapse of U.S. society as we know it. His two books “Guns, Germs, and Steel” and “Collapse” are among my all-time favorite reads and highly recommened.

    With regards to health officials and their effectiveness to the emrging swine flu epidemic, I think its way too early to give them a positive review. Many anecdotal reports indicate the problem is actualy much worse than reported. Sound familiar?

  12. “We have to invest and innovate to stay ahead of disease”

    To stay ahead of disease we have to have sex and sanitation. Sex because germs and parasites adapt to us, and sex makes our children genetically different. The great leap is public health came through sanitation in the 19th century. For one thing, we do not empty our chamberpots into the street anymore. Our children and mothers do not die in numbers like they did back then.

    Antibiotics gave us another leap forward. However, bacteria have adapted. In our arms race with germs, we may never get much ahead of where we are now.

    Worldwide, we can still make great progress, as much of the world lives in unsanitary conditions.

  13. THe analogy between pathogens and fiancial market operators is good.

    However, let’s remember that fortunately, pathogens don’t have the ability to undermine and buy off the people in CDC and other public health services.

  14. On a cheerier note, maybe a great pandemic is just what we need. Fewer people to share the real wealth. It worked for 14th century Europe. ;)

  15. Bill Bradbrooke

    Big Finance has taken us exactly where we needed to go. It may not be pleasant but it’s time to face up and deal with it. We regulate nationally and wonder why we have problems operating in a supra-national world.

    By stalling Big Finance is rapidly becoming Small Finance. The US can turn to community banking and it is able to become self-sufficient; this, however, would be a step backward. [It may be all we can do at present, but it is still a step backward.]

    The way forward lies instead in creating an international intermediary to transfer credit between nations with surplus and those with deficits. A single medium of exchange must obviate advantages any one nation can take by gaming its own currency. Accounting standards must be uniform. There must be sufficient transparency such that trade, whether in goods, securities or currency, carries a premium truly commensurate with the risk of obfuscation or failure.

    To ignore this greater objective and focus on re-regulating our own financial system to achieve local self-sufficiency seems to me to be very similar to smashing knitting machines because labor-saving devices do away with jobs.

  16. Moving to a single medium of exchange prevents devaluation of currencies as a mechanism of adjusting debt and compensating for changing rates of labor productivity (wages).

    The only reason it works in the US is because we have a wealth transfer backstop – that is, taxation. Every year in the US, massive amounts of taxes get transferred from rich/higher income states (you know, those big government states) to poor states. Oddly, it’s the poor states that complain the loudest about this.

    In any case, unless an international currency were accompanied by an international fiscal mechanism (e.g. cross national taxes, world government, etc.) and a mechanism for structural debt adjustment for extreme situations, we face the very real possibility that such a currency could result in long term national serfdom for some nations.

  17. What happened to the theory that Baxter Laboratories created this virus and tested it in Mexico?

  18. Resident Evil 6, swine flu.

  19. Awesome. “Regulating the virus industry will lead to less evolution!!!!”

  20. May I please please recant my am comment insulting Mr. Summers. If the “big man says” Larry Summers is the new Robert Reich (NYT via Josh Marshall of TPM), I must say to Pres. Obama if you say so sir; to Mr. Johnson beg pardon guv’nor and to Mr.Summers bless you and keep you either you have evolved or I am but an ignorant microbe myself and why don’t you just outright plagiarize from the Reich blog–I bet he’ll cut you slack

  21. What do you make of this article about Larry Summers?
    Saying his office was warned about Harvard being at risk for exposure to derivatives and then the woman was fired for making the warning –

    http://www.thecrimson.com/article.aspx?ref=527380

  22. Exactly!

  23. Bill Bradbrooke

    Stats;

    I wasn’t thinking of a single currency or fiscal management from outside any individual economy. I had in mind a basket of currencies to benchmark the relative value of deposits and draws. I was thinking more of a cooperatively owned bank. Subscriptions would be proportional to individual GNPs. Deposits would earn interest and draws would bear interest with additional terms to assure repayment where appropriate. You’re right, once you come up with a single currency it has to be managed and that does sound a little like world government.

    Nonetheless, our best minds [guys like Simon Johnson] have to be looking outward in that direction. They have to seek creative solutions to banking and finance on a global scale. They can’t be focused inward. Cutting Big Finance down to size and leaving small, harmless financial entities is no answer. First of all, it is going to be very hard to do. We are master syndicators and coallition builders; it’s in our blood. Secondly, the little banks that remain will not have sufficient horsepower to bid on significant international business. Thirdly, the US would abdicate any leadership role in international finance. [None of this feels right. None of it feels American to me. Do you think?] Finally, and most importantly, Big Finance came about through an unholy alliance between Wall Street and Washington. Big Finance is a modern day analogue to Eisenhower’s Military-Industrial Complex. If we are going to chop US banks up and leave Big Government alone we have overwhelming statism. If we chop Big Finance up and chop up Big Government at the same time we have libertarianism in the extreme. Neither are appropriate for managing America today.

  24. There is a particular strain of idiocy in a segment of our population that evidences itself in the inability to apply logic and reason to an issue when that method interferes with a prior conviction. I refer to the folks who still think Cheney and Bush and their cohorts were not responsible for our current economic mess, dependent as they are on the failed Regan economic model, and to the loons among the anti-vaccination crowd which thinks, against all evidence to the contrary, that autism is caused by the MMR vaccine.

    Thanks to the former, the Republican party is likely to wither away even further, leaving only the wing nuts on the extreme right and the racists in the south to carry the banner. And the scourge of MMR is already on the rise in several countries, after once having been nearly eradicated world-wide, thanks to the anti-vaxxers and their irrational belief.

    The parallels between the business as usual idiots still in charge of the banks who are applying their failed economic policy and the timidity of President Obama’s allowing the foxes from wall street into the chicken coops of the White House cannot be ignored. Let’s hope that the anti-science policies of the past administration are thoroughly expunged so this current health threat can be met with some degree of success, at least.

  25. Our financial system had a very bad case of the worst contagious flu: the “Greed Flu.” Sub-strains included: mismanagement, poor judgment, and, most commonly, plain stupid. Treatment for this flu outbreak was managed with a large injection of taxpayer blood; the effects of which are still unclear though welcomed by the patient.

  26. “But more broadly, in terms of reducing vulnerability in the system, both public health and economics need to do better.”

    Smithfield. La Gloria.

    If there ever is another 1918, it will not be because some government emloyee freelanced with stocks from Fort Detrick, and it will not be because of some terrorist stocking up on H1N1, it will be because greed produced poverty, and inside people in poverty the diseases are bred.

    Antibiotics, meat, feces, and people confined to close quarters – if there is regulation, precention, risk management, it is sublte to the point of nonexistence.

  27. some guy in a cube

    “We have to invest and innovate to stay ahead of disease – there is no sense in which these are likely to be completely ”conquered” – because they change as we do.”

    Uh, excuse me, but they predate us by millions of years.

    We have to find a way to survive in THEIR world.

  28. > We haven’t found ways to think clearly enough about what
    > causes major crises – particularly, how do apparently stable
    > systems suddenly face the prospect of collapse?

    The Santa Fe Institute was founded in 1984 to study the principles and characteristics of complex adaptive systems and leads the world in thinking about about phase transitions that occur during the interaction of large numbers of components/actors/parts. Santafe.edu has 100+ multi-disciplinary researchers with backgrounds in physics, biology, mathematics, medicine, ecology, psychology, anthropology, computer science, and economics all focused on non-linear dynamics and emergent behaviors in physical, biological, and economic systems that resist simple equations.

    The Santa Fe Institute was founded by physicists from Los Alamos National Lab. It is a real think tank, without special interest groups paying them to influence policy, so it is a good source of understanding, not ideology.

    Simon: Seth Lloyd at MIT.edu is part of the Santafe.edu external faculty.

    A search for “economics” at Santafe.edu has 2700 results.

    (I have no relationship to Santafe.edu except for reading the scientific papers on their web site and attending two of their conferences in the early 1990s.)

  29. keenobserver

    If you liked “Guns, Germs and Steel” and “Collapse” by Diamond, you will have great interest in John M. Barry’s “The Great Influenza”(2004).

    The “flu” is very serious stuff.I am surprised that no post has mentioned this book. The book chronicles the complexity of the disease, the frustrations of the scientists, and the bombast of public officials.

    For example, we all understand what Katrina did to New Orleans, and the bungled methodology of the government dealing with the problem. Did you know that Philadelphia was almost wiped of the map from the pandemic of 1918?

    Read the book.