Jun 16, 2021Liked by Noah Smith

"forecasters couldn’t have predicted the breathtaking size and boldness of the three U.S. relief bills"

Just to push back on this slightly -- predicting the response of institutions is exactly part of the prediction game. I see this kind of excuse a lot in stock market predictions where (bearish) prognosticators often say something like "my prediction would have been totally right except the Fed did stuff". Predicting the Federal Reserve response is part of your job! It is part of the equilibrium you're solving for!

Biden was talking about massive stimulus at least as far back as March 2020. It isn't like predictions had to predict huge stimulus based on zero evidence. All you had to do was take a presidential candidate at his word. From an April interview with Politico:

"The former vice president said the next round of coronavirus stimulus needs to be “a hell of a lot bigger” than last month’s $2 trillion CARES Act"

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Well they TRY to predict it, but it's really really hard.

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This is definitely true and I don't really want to imply that people SHOULD have predicted better because I think that most people (both pundits and their audiences) underestimate how hard predictions actually are. If people had to attach confidence intervals to their estimates I think everyone would realise how futile most forecasts actually are. My go-to example are expected stock market returns. Places like Vanguard offer forecasts and their point estimate will be something like "US will return 5.4% over the next 10 years". But in the details of their methodology it'll actually say something like "the 25%-75% confidence interval is a return between 0.2% and 10.8%" and there's still a 50% chance it is outside those bounds! Which suddenly becomes...kind of useless?

Reality is just super complicated! Which people are always happy to point out in their area of expertise but ignore everywhere else. Ask someone how long it'll take to do something at their job and they'll be able to explain the 1,274 complicated things that make it not straightforward. Then ask them about the economy/covid/Palestine/crime/baskeball/child-rearing/whatever and suddenly everything has obvious and straightforward answers.

But people seem to have a deep seated need to have someone tell us with certainty how it is all going to turn out. John Kay & Mervyn King's book RADICAL UNCERTAINTY is hyper-discursive and overly long (500+ pages) but really hammers this point in. I'm not sure we'll ever, as a species, be able to really embrace that fundamental uncertainty.

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"Reality is just super complicated! Which people are always happy to point out in their area of expertise ... Then ask them about the economy/covid/Palestine/crime/baskeball/child-rearing/whatever and suddenly everything has obvious and straightforward answers."

Thanks for the morning laugh. Very true, and I, like everybody, am super guilty as charged haha.

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The President proposes, and Congress disposes.

There was far less reason to think the Senate, in particular, would pass such a large relief bill.

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Not really. Way back when, people were forecasting a blue wave in the Senate and a Biden win so huge it would clearly offer A Mandate, all of which makes a huge stimulus more likely.

There was no reason to think a Senate wouldn't pass massively popular legislation given that neither party cares about debt anymore after the Republicans spend 4 years embracing populism and purging the party of fiscal hawks.

Obviously this is 20/20 hindsight but given all of the above, it seems like the priors should have been assumption of further Federal stimulus from a Biden Presidency supported by a strongly Democrat Senate.

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I'm sure there were people forecasting that, along with everything else under the sun. It was never supported by evidence.

There are still plenty of Democrats who are scared of spending big, along with the ones belonging to the cult of bipartisanship. Calling Republican senators "populist" is just....do you not follow US politics at all? Everything they do is unpopular, and they block anything popular (because Republicans have no popular policies).

No one is saying stimulus wasn't on the cards. It is the extent and ease of passing that were genuinely surprising.

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Republicans can still be populist (even popularist) if most voters don't want anything to happen, which I think is true.

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Jun 16, 2021Liked by Noah Smith

Great post. Just two minor things: 1) great news that suicides fell, but I don’t think it necessarily means the pandemic wasn’t associated with spikes in poor mental health. There’s lots of reasons why those are two related but different questions. 2) Mills College, at least, was absolutely already going to close before the pandemic. I knew people who worked there and the writing was clearly on the wall before (one actually left a couple years ago specifically because it was clear the institution wouldn’t exist in a few more years), so I don’t think it’s quite right to blame the pandemic for that specific example, though of course the broader issue of the devastation the pandemic is wreaking on higher ed is of course true.

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Agree on both counts! (2) was what I was trying to get at by saying this was a pre-existing trend.

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Ah fair enough! I must have glanced too quickly over that part.

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It'd be interesting to see why so many were blindly taking 08-09 as a template... Like, are we not supposed to be, well, social *scientists*?

Now, fair enough, social sciences are abysmal. But if we cannot even categorize the COVID crisis as being different from a housing/debt bubble and crash, what hope do we have for any kind of macro prediction?

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Jun 16, 2021Liked by Noah Smith

I don't think macros should be quite so hard on themselves. It very well could be that the dire predictions greased the skids for the huge relief bills. That's part of what makes macro so hard - your predictions can counteract your predictions if people listen to them.

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Jun 16, 2021Liked by Noah Smith

There was lots of discussion of "state and local government relief" in the various covid recovery bills. I've seen lots of articles pointing out that state governments did fine, which then seem to imply that the state and local relief might not be needed. But it seems likely to me that localities may have taken a bigger hit - they often get a lot of their revenue from sales taxes (which likely fell drastically) and property taxes (which are probably basically unchanged, unless the few percent of people that became delinquent on mortgages also became delinquent on taxes).

On higher ed, it seems to me that there's several separate things. One is that smaller colleges were already in trouble because of the lower birth rates in the past 20 years compared to years earlier. Another is those cuts you mentioned that laid off lots of staff (which may be temporary if this is all janitorial and grounds staff that weren't needed when dorms or classrooms were closed). But I just read this article claiming that many universities had major budget *surpluses* this year, due to rising endowments: https://www.nytimes.com/2020/06/06/opinion/sunday/colleges-endowments-covid.html

I can't tell if this is something that just affects the 10% most elite universities, or if it's a broader trend, and what we should expect the effects next year and the year after to be. (Also, there's an interesting question whether someone takes the experience we all got with online education this past year to set up something like a MOOC that actually will have the effects everyone was thinking about a decade ago.)

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It may not be just higher ed that is in trouble. I bet that in a lot of places where K-12 public schools stayed closed for most of the year, parents will flee either to homeschool or private school (and private schools will be unusually oversubscribed for quite awhile because they are institutionally not built to respond to demand swings this large). In SF kindergarten applications are down 10%. Admittedly that may be an outlier in magnitude because SFUSD did an especially awful job of reopening, but it's probably directionally indicative.

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Jun 16, 2021Liked by Noah Smith

Great, great post. It’s almost as if the pandemic upended 40+ years of received economic “wisdom.”

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I did some digging into the higher ed employment numbers in my state and found that almost all of the job loss was among student workers - i.e. they're not paying students to staff the libraries and rec centers while everyone's remote. A lot of those jobs will come back in the fall as campuses reopen.

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Feels weird that when you mentioned “suicides fell” you purposely didn’t mention that deaths of despair (e.g overdoses) skyrocketed

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Different thing!

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Suicide is one of the "deaths of despair". The discrepancy just illustrates how the category is not useful, really. If they were caused by the same thing ("despair"), they should have risen or fallen in tandem.

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That isn't completely obvious - categorizing a death as a suicide or as an accidental overdose isn't always easy, and it's not clear whether pandemic conditions might have changed the way many of these deaths are categorized. (e.g., someone who ODed at home might be more likely to be categorized as accidental than someone who ODed in a different location - or I suppose it could go the other way)

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> Second, forecasters couldn’t have predicted the breathtaking size and boldness of the three U.S. relief bills, which together were far more generous even than what our rich-world peers offered:

It will probably take years of research to start to answer this question, but has the greater support in fact led to better economic outcomes for the US relative to its peer nations? My rough intuition suggests that the US has not had a recovery at 3x the rate of Europe.

On the other hand, maybe there's a difference between mid-pandemic support (Dec 2020 or prior on the graph) and end-pandemic support (2021 and onwards); the US generosity is tilted towards the latter compared to its peers.

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It's very hard to measure the recovery until enough people are vaccinated for much of the economy to restart again. We've only had a couple months of that in the US, and probably not any months of that in most of Europe.

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An apple is falling off a table. Noah catches it, and tells us all it wasn't actually falling in the first place, and points to the fact the apple is not on the floor as proof. And this Mark guy commenting below - those silly pundits making COVID seem so much worse, making such a fuss over a mere 4 million deaths, what a bunch of babies.

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The answer to the question "why was the economic fallout not as bad as initially feared" is very simple. Exceedingly simple.

Take a quick look at government debt...

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The world has not been able to fathom the disaster of India and COVID !

The Disaster of the Indian State and its Leader Narnia Modi – and the dream world in which the Indians reside.

At this point in history,let us remember what Beruni said

The Hindus believe that there is no country but theirs, no nation like theirs, no kings like theirs, no religion like theirs, no science like theirs.

They are haughty, foolishly vain, self-conceited, and stolid.

The dreams of being a SUPERPOWER and a member of the UNSC and the REALITY OF A 3 RD WORLD,NATION !

Y did this happen ?


The frames of the crematoriums used to BURN THE HINDOO DEAD BODIES HAVE “MELTED” !


https://www.hindustantimes.com/india-news/covid19-frames-of-crematorium-furnaces-melt-due-to-rush-of-bodies-in-gujarat-101618306897681.html 8

















COVID has exposed the worth of the Indian state,Indians and Its Polity .Indians were trying MAGIC COW PISS COLA,MAGIC COW DUNG CAKES, LIGHTING LAMPS AND CELL PHONES, CLAPPING HANDS, BEATUNG UTENSILS – to CURE COVID.

The Net Result is EVIDENT TO ALL. It is now in the small towns – and OUT of CONTROL !

The Indians were trying out 3000 year OLD – ANCIENT HINDOO MEDICINES, as under :

MAGIC COW PISS COLA (by drinking it – the smell will drive away the COVID Virus !)


MAGIC COW DUNG CAKES (by applying it on the nose and mouth and face – the COVID virus will get scared off)


The Indians were also trying out some MAGICAL RITUALS,OF THE RIG VEDA (also 3000 years old)

LIGHTING LAMPS (to attract the COVID Virus to the lamp fire and burn it)



LIGHTING CELL PHONES (to divert the Virus into the Phone)

CLAPPING HANDS ( to send sonic shock waves to the COVID virus)


BEATING UTENSILS ( to send sonic shock waves to the COVID virus)


The Indian PM – Modi ACTUALLY THOUGHT he had CONQUERED COVID – the moron did not know the concept of Wave 2 to Wave 10 !

He was CONGRATULATED by the Indians (just in January 2021) FOR DEFEATING COVID (as if COVID was an invader !) .


The Indian Virus is MUTATING and is NOW out of Control.The Lethal Mutations are STILL NOT detected – and will come out soon.The Indian VAX programme has slowed down and WILL Fail as 70% of the Population WILL NOT TAKE THE VAX.

Doom lies ahead !

If the GOI reports the ACTUAL DEATHS AND INFECTIONS – there will be CIVIL WAR in India.dindooohindoo

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I think it's more accurate to say "people who work for universities really are in trouble." University employment fell a lot faster than university revenues, which suggests that administrators took the pandemic threat as an opportunity to make staff cuts under the cover of crisis that would have been more difficult otherwise. But universities themselves got through with surprisingly few bankruptcies -- in part because in addition to firing a bunch of people they were very aggressive about opening in-person in Fall 2020, in some cases to the detriment of medically vulnerable people in local communities.

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The icing on the cake of a healthy stock market is that it became one of the leading factors that led to record-high charitable donations. https://www.fastcompany.com/90647835/americans-gave-a-record-471-billion-to-charity-in-2020

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You didn’t mention that there is a federal eviction moratorium until June 30. We’ll have to wait until then to know the true impact of the pandemic on housing stability. Although the evidence is suggesting there is likely not going to be a tidal wave of evictions.

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