Are We Staying at Home By Choice or Because of Government Rules?

If the government removed all rules about social distancing, limited capacity, and mask-wearing in restaurants, stores, workplaces, entertainment venues from theaters to sports, churches, and other places, would you go back?  How people answer to that question is important to answering a bunch of questions. 

For example, have people been taking these kinds of precautions more because of government restrictions, or because of their own private concerns about health conditions? If government removed the restrictions, how much would people's behavior actually change? If many people are unlikely to change their avoidance behavior for a sustained period of time, then a full economic recovery from the effects of  the recession will be delayed. Moreover, the shape of that economic recovery may require a permanent reallocation of jobs from some sectors to others. 

In the October 2020 World Economic Outlook report from the IMF, Chapter 2 ("Dissecting the Economic Impact") has a discussion of government lockdowns vs. people's voluntary behavior in an international context. The authors write: 

This chapter’s first goal is to shed light on the extent to which the economic contraction was driven by the adoption of government lockdowns instead of by people voluntarily reducing social interactions for fear of contracting or spreading the virus. ... If lockdowns were largely responsible for the economic contraction, it would be reasonable to expect a quick economic rebound when they are lifted. But if voluntary social distancing played a predominant role, then economic activity would likely remain subdued until health risks recede. ...

Regression results show that lockdowns have a considerable negative effect on economic activity. Nonetheless, voluntary social distancing in response to rising COVID-19 infections can also have strong detrimental effects on the economy. In fact, the analysis suggests that lockdowns and voluntary social distancing played a near comparable role in driving the economic recession. The contribution of voluntary distancing in reducing mobility was stronger in advanced economies, where people can work from home more easily and sustain periods of temporary unemployment because of personal savings and government benefits. 

(For the record, when talking about government lockdowns: "The analysis uses a lockdown stringency index that averages several subindicators—school closures, workplace closures, cancellations of public events, restrictions on gatherings, public transportation closures, stay-at-home requirements, restrictions on internal movement, and controls on international travel—provided by the University of Oxford’s Coronavirus Government Response Tracker.")

There's a lot of ongoing research on the subject of lockdowns and personal choices,  and it would be unwise to treat any one study as the last word. That said, one study of the US experience that caught my eye is by Austan Goolsbee and Chad Syverson, "Fear, Lockdown, and Diversion: Comparing Drivers of Pandemic Economic Decline 2020" (Becker Friedman Institute Working Paper, June 18, 2020). From their abstract: 

This paper examines the drivers of the economic slowdown using cellular phone records data on customer visits to more than 2.25 million individual businesses across 110 different industries. Comparing consumer behavior over the crisis within the same commuting zones but across state and county boundaries with different policy regimes suggests that legal shutdown orders account for only a modest share of the massive changes to consumer behavior ... While overall consumer traffic fell by 60 percentage points, legal restrictions explain only 7 percentage points of this. Individual choices were far more important and seem tied to fears of infection. Traffic started dropping before the legal orders were in place; was highly influenced by the number of COVID deaths reported in the county; and showed a clear shift by consumers away from busier, more crowded stores toward smaller, less busy stores in the same industry. States that repealed their shutdown orders saw symmetric, modest recoveries in activity, further supporting the small estimated effect of policy. Although the shutdown orders had little aggregate impact, they did have a significant effect in reallocating consumer activity away from “nonessential” to “essential” businesses and from restaurants and bars toward groceries and other food sellers.

If personal voluntary choices are a big part or even a majority of the adjustment in the shifting patterns of hiring, work, shopping, entertainment, education, and health care--rather than government shutdowns--there are several implications looking ahead. Here are some thoughts from the IMF, based on its overview of the evidence: 

When looking at the recovery path ahead, the importance of voluntary social distancing as a contributing factor to the downturn suggests that lifting lockdowns is unlikely to rapidly bring economic activity back to potential if health risks remain. This is true especially if lockdowns are lifted when infections are still relatively high because, in those cases, the impact on mobility appears more modest. Further tempering the expectations of a quick economic rebound, the analysis documents that easing lockdowns tends to have a positive effect on mobility, but the impact is weaker than that of tightening lockdowns.

These findings suggest that economies will continue to operate below potential while health risks persist, even if lockdowns are lifted. Therefore, policymakers should be wary of removing policy support too quickly and consider ways to protect the most vulnerable and support economic activity consistent with social distancing. These may include measures to reduce contact intensity and make the workplace safer, for example by promoting contactless payments; facilitating a gradual reallocation of resources toward less-contact-intensive sectors; and enhancing work from home, for example, by improving internet connectivity and supporting investment in information technology.

The last point in particular seems worth emphasizing to me. Back in late March and early April, a common view of the pandemic was that it would be over in a few months. As one example of standard wisdom at that time, Ben Bernanke likened the economic effects of a pandemic and a lockdown to a severe snowstorm: that is, everything is disrupted for a time, but then returns to the previous normal. Thus, the early government response to the pandemic was focused on how to support income and job connections to employers for a few months. 

Of course, that view of pandemic-as-snowstorm is now outdated. It now appears that we may end up dealing with COVID-19 for the foreseeable future, From this viewpoint, supporting work and industry configurations as they existed in February 2020 is not a useful approach. Helping those whose lives have been upended by the pandemic is a worthy public policy goal, but thinking about how government can support and speed the economic adjustment to a new configuration may matter just as much. 

Just to be clear, the IMF argument does not claim that government lockdowns are "good" or "bad." Yes, lockdowns do have severe negative economic consequences. But if a lockdown stops the pandemic, then the medium-term economic results can easily be worth it. But as the IMF report says, "lockdowns are more effective in curbing infections if they are introduced early in the stage of a country’s epidemic. The analysis also suggests that lockdowns must be sufficiently stringent to reduce infections significantly." 

The widespread belief back in late March and April the pandemic would be over by, say, July 1 was also a reason that the early steps against the pandemic were relatively mild. At that time, longer and more stringent lockdown didn't seem worth it. We are still arguing up the present about different kinds of COVID-19 tests that can or should be available, and what kind of contact tracing and quarantining should happen when the results are positive. It may be that the key policy choice in a pandemic is whether or when to react very strongly for the first few months in the hope of ending the pandemic at that point and not needing to deal with it for a few years instead. But like all strong preventive actions, they are likely to be unpopular when taken. Even worse from a political point of view, if the strong actions then work, the bad outcomes they prevented will never actually be observed, and so the critics of such actions may never accept that they were needed. 

Politics and Attitudes Toward Vaccination

For many people, their willing to be vaccinated apparently varies with whether they are a supporter of the president. For example, here are the results of a series of Gallup polls taken since July on the question: "If an FDA-approved vaccine to prevent COVID-19 was available right now at no cost, would you agree to be vaccinated?" Through July and August, Democrats (blue line) were far more likely to say "yes" than Republicans. But in September, the share of Dems saying "yes" fell sharply while the share of Repubs saying "yes" rose sharply. 

What changed? In late August, the Centers for Disease Control sent out a notice asking states to be ready to operate vaccine distribution centers by November. One might both think that this this announcement was probably premature, with its timing determined by the political calendar, and also  hope that it might possibly be a meaningful statement about progress on a vaccine. But politically, it was being spun as good news for the Trump administration. Thus, Dem willingness to take an FDA-approved vaccine at no cost dropped sharply, while Repub willingness correspondingly rose. 

One might suspect that this kind of connection between politics and willingness to get vaccinated is a unique result of the high level of partisanship around the 2020 election, but one would be wrong. Masha Krupenkin has published an article in Political Behavior (published online May 5, 2020), "Does Partisanship Affect Compliance with Government Recommendations?" She asks: 

Are partisans less likely to comply with government recommendations after their party loses the presidency? To answer this question, I combine survey and behavioral data to examine the effect of presidential co-partisanship on partisans’ willingness to vaccinate. Vaccination provides an especially fertile testing ground for my theory for three reasons. First, both Republican and Democratic administrations have recommended vaccination as a public health measure. This provides natural variation in control of government, while keeping the government recommendation constant. Second, there is significant survey and behavioral data on vaccine compliance. This allows me to test the effect of partisanship both on peoples’ beliefs about vaccination, and their actual vaccination behavior. Finally, vaccination provides a “hard test” of the hypothesis, since the consequences of non-compliance can adversely impact individuals’ health. If partisanship affects receptivity to vaccination, this finding has important implications for the acceptance of other government interventions that do not carry such high costs for non-compliance. 

For example, one of her pieces of evidence is to look at kindergarten vaccination rates across California from 2001-2015. It turns out that when President Obama took over from President Bush, vaccination rates in Republican-leaning areas declined while those in Democrat-leaning areas rose. 

Another piece of evidence looks at surveys, like the Gallup poll data above, on willingness to be vaccinated. 

I look at three cases of partisan vaccination gaps. One of these is the smallpox vaccine in 2003, during the Bush administration. The other two are the swine flu (H1N1) and measles vaccines in 2009 and 2015, both during the Obama administration. This allows me to test whether Democrats and Republicans switch their perceptions of vaccine safety depending on which party is in power. ... Republicans were more likely to believe that vaccines were safe under a Republican president (smallpox vaccine), and Democrats believed the opposite (H1N1, measles). Partisan survey responses to perceptions of vaccine safety seem to “flip” depending on the party of the president.

In short, when people are deciding whether to vaccinate themselves or their children, whether they identify with the party of the president in power is a substantial factor. To put it another way, we all like to think that we are independent and fact-based in our judgment, and surely in some cases we are, but in other cases we are just acting as partisan herds of independent minds.   

Vaccinations are not the only illustration of this behavior. As I've noted before, when the Trump administration took actions to limit international trade, support for free trade sharply increased among Democrats. As I wrote there: "But these survey results may also suggest that US opinions about trade are just not very deeply rooted, and are more expressions of transient emotions and political partisanship." 

Another example that crossed my line of sight recently involves a Gallup poll question asking what share of people report that either they themselves or a family member has put off health care in the last 12 months for a serious or somewhat serious condition because of cost. As this issue of health care reform reheated as the Democratic primary process got underway in 2019, the share of Democrats reporting postponing care shot up.   

There is no obvious public policy change in 2019 that should have had a much bigger effect on D's than on R's in terms of health care costs. The Gallup report notes: "Whether these gaps are indicative of real differences in the severity of medical and financial problems faced by Democrats compared with Republicans or Democrats' greater propensity to perceive problems in these areas isn't entirely clear. But it's notable that the partisan gap on putting off care for serious medical treatment is currently the widest it's been in two decades."

For an overview of more evidence on how political and partisan identity shapes our perceptions of fact and our stated beliefs, didate. Brendan Nyhan provides an overview of some research in this area in "Facts and Myths about Misperceptions" (Journal of Economic Perspectives, Summer 2020, 34:3, pp. 220-36). My overview of Nyhan's article is here. 

A Nobel Prize for Auction Theory: Paul Milgrom and Robert Wilson

Auctions are widely used throughout the economy. The big auction houses like Christie's and Sotheby's are well-known for selling famous art, and many people have either attended a live auction at a fund-raising event or a flea market or participated in an online auction at a site like eBay. But the behind-the-scenes uses of auctions are far more important. The right for online advertising to appear on your screen is sold in an auction format. When the US government borrows money by selling Treasury debt, it does so in an auction format. When electricity providers sign contracts to purchase electricity from electricity producers, they often use an auction format to do so. Some of the proposals for a buying and selling permits to emit carbon, as a mechanism for the gradual reduction of carbon emissions, would auction off the right to emit carbon. 

One useful property of auctions is that in a number of settings they can discipline the public sector to make decisions based on economic values, rather than favoritism. For example, when a city wants to sign a contract with a company that will pick up the garbage from households, companies can submit bids--rather than having a city council choose the company run by someone's favorite uncle. When the US government wants to give companies the right to drill in certain areas for offshore oil, or wishes to allocate radio spectrum for use by phone companies, it can auction off the rights rather than handing them out to whatever company has the best behind-the-scenes lobbyists.  In many countries, auctions are used to privatize selling off a formerly government-owned company.

But the bad thing about auctions is that (like all market mechanisms), they can go sideways and produce undesirable results in certain settings. The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2020--commonly known as the Nobel Prize in economics, was awarded to Paul R. Milgrom and Robert B. Wilson “for improvements to auction theory and inventions of new auction formats.” For some years now, the Nobel committee has also published a couple of useful reports with each award, one aimed a a popular audience and one with more econo-speak, jargon, and technical detail. I'll quote here from both reports: "Popular science background: The quest for the perfect auction" and "Scientific Background: Improvements to auction theory and inventions of new auction formats."

A useful starting point is to recognize that auctions can have a wide array of formats. Most people are used to the idea of an auction where an auctioneer presides over a room of people who call out bids, until no one is willing to call out a higher bid. But auctions don't need to work in that way. 

An "English auction" is one where the bids are ascending, until a highest bid is reached. A "Dutch auction"--which is commonly used to sell about 20 million fresh flowers per day--starts with a high bid and then declines, so that the first person to speak up wins. In an open-outcry auction, the bid are heard by everyone, but in a sealed-bid auction, the bids are private. Some auctions have only one round of bidding; others may eliminate some bidders after one round but proceed through multiple rounds. In "first-price" auctions, the winner pays what they bid; in "second-price" auctions, the winner instead pays whatever was bi by the runner up. 

In some auctions the value of what is being bid on is mostly a "private value" to the bidders (the Nobel committee suggests thinking about bidding on dinner with a Nobel economist as an example, but you may prefer to substitute a celebrity of your choice), but in other cases, like bidding on an offshore oil lease, the value of the object is at least to some extent a "common value," because any oil that is found will be sold at the global market price. In some auctions, the bidders may have detailed private information about what is being sold (say, in the case where a house is being sold but you are allowed to do your own inspection before bidding), while in other auctions the information about the object being auctioned may be mostly public. 

In short, there is no single perfect auction. Instead, thinking about how auctions work means considering for any specific context how auction rules and format in that situation, given what determines the value of the auctioned objects and what what kind of information and uncertainty bidders might have. 

If the auction rules aren't set up appropriately, the results can go sideways. For some example, Paul Klemperer wrote a some years back on the subject of "What Really Matters in Auction Design." 

One of his examples was about what happened in 1991, when the UK used a process of sealed-bid auctions to see what company would be allowed to provide television services in certain areas. Klemperer writes: 

The 1991 U.K. sale of television franchises by a sealed-bid auction is a dramatic example While the regions in the South and Southeast, Southwest, East, Wales and West, Northeast and Yorkshire all sold in the range of 9.36 to 15.88 pounds per head of population, the only—and therefore winning—bid for the Midlands region was made by the incumbent firm and was just one-twentieth of one penny (!) per head of population. Much the same happened in Scotland, where the only bidder for the Central region generously bid one-seventh of one penny per capita. What had happened was that bidders were required to provide very detailed region-specific programming plans. In each of these two regions, the only bidder figured out that no one else had developed such a plan.

Another problem arises if the bidders find a way to signal each other to hold prices down. In some cases, the bidders can use the bidding process itself to send messages. Here's an example from Klemperer: 

In a multilicense U.S. spectrum auction in 1996–1997, U.S. West was competing vigorously with McLeod for lot number 378: a license in Rochester, Minnesota. Although most bids in the auction had been in exact thousands of dollars, U.S. West bid $313,378 and $62,378 for two licenses in Iowa in which it had earlier shown no interest, overbidding McLeod, who had seemed to be the uncontested high bidder for these licenses. McLeod got the point that it was being punished for competing in Rochester and dropped out of that market. Since McLeod made subsequent higher bids on the Iowa licenses, the “punishment” bids cost U.S. West nothing (Cramton and Schwartz, 1999).

Notice that the bids from U.S. West ended in the number 378, which was the lot number where the company wanted McLeod to back off. 

Of course, concerns like these have obvious answers. For example, set a "reserve price" or a minimum price that needs to be bid for the object, so no one gets it for (nearly) free. Also, set a rule that all bids need to be in certain fixed amounts, and that increases in bids also need to be in fixed amounts. But making these points both raises practical questions of how this should be done, and also shows some ways in which the practical rules of auctions can matter a lot. 

A more subtle but well-known problem with auctions is called the "winner's curse." It was first documented in the context of bidding by companies for off-shore oil leases. An analysis of the bids, along with how much oil was later discovered in the area, found that the "winner" of these auctions was on average losing money. The reason is that each individual company was forming its own guess about how much oil was on the site. Naturally, some companies would be more optimistic than others, and the most over-optimistic company of all was likely to bid highest and "win" the auction. A problem is that once bidders in an auction become aware of the risk of the winner's curse, they may become very reluctant to bid, so that the bids stop representing the actual estimates of value. 

In professional sports, this kind of scenario often plays out when free agents try to encourage bidding among teams for their services. From the player point of view, it only takes one high-end bidder, a bidder who perhaps is ignoring the winner's curse, to get a great contract. But many teams may decide to avoid the risk of overpaying and the winner's curse by not bidding at all. 

There are various possible responses to a winner's curse in an auction format. One is to find ways for the bidders to collect more private information, so that they can be more confident in their bidding. Another is a "second-price" auction, where the winner pays the price of the second-highest bidder. This format provides some protection against the winner's curse: that is, everyone can feel free to bid as high as they would like, knowing that if they are way out of line with the second-price bid, they will only have to pay the second-price bid. If a second-price bid greatly reduces concerns about the winner's curse and leads to more aggressive bidding, it can (counterintuitively) end up raising more money than a first-price auction. 

The auctions that most people participate in are "private-value auctions," where the issue is just how much do you want it--because you are planning to use it rather than to resell it. In this setting, a live auctioneer tries to get people emotionally involved in how much they want something, and in this sense to get them to pay more than they had perhaps planned to pay beforehand. As Ambrose Bierce wrote in his Devil's Dictionary published back in 1906: "AUCTIONEER, n. The man who proclaims with a hammer that he has picked a pocket with his tongue."

But auctions for oil leases, spectrum rights, privatized companies, Treasury debt, an so on have some element of being "common value" auctions, where the value of what is being sold will be similar across  potential buyers. As the Nobel committee writes: "Robert Wilson was the first to create a framework for the analysis of auctions with common values, and to describe how bidders behave in such circumstances. In three classic papers from the 1960s and 1970s, he described the optimal bidding strategy for a first-price auction when the true value is uncertain. Participants will bid lower than their best estimate of the value, to avoid making a bad deal and thus be afflicted by the winner’s curse. His analysis also shows that with greater uncertainty, bidders will be more cautious and the final price will be lower. Finally, Wilson shows that the  problems caused by the winner’s curse are even greater when some bidders have better information than others. Those who are at an information disadvantage will then bid even lower or completely abstain from participating in the auction."

But when you think about it, many of these "common value" auctions actually have a mixture of private values as well. For example, consider bidding on an offshore oil lease. The value of any oil discovered may be a common value. But each individual company may have specific technology for discovering or extracting oil that works better in some situations that others. Some companies may also already be operating nearby, or have facilities nearby. In short, lots of real-world auctions are a mixture of private and common values. As the Nobel committee writes: 

In most auctions, the bidders have both private and common values. Suppose you are thinking about bidding in an auction for an apartment or a house; your willingness to pay then depends on your private value (how much you appreciate its condition, floor plan and location) and your estimate of the common value (how much you might be able to sell it for in the future). An energy company that bids on the right to extract natural gas is concerned with both the size of the gas reservoir (a common value) and the cost of extracting the gas (a private value, as the cost depends on the technology available to the company). A bank that bids for government bonds considers the future market interest rate (a common value) and the number of their customers who want to buy bonds (a private value). ... The person who finally cracked this nut was Paul Milgrom, in a handful of papers published around 1980. ... This particular result reflects a general principle: an auction format provides higher revenue the stronger the link between the bids and the bidders’ private information. Therefore, the seller has an interest in providing participants with as much information as possible about the object’s value before the bidding starts. For example, the seller of a house can expect a higher final price if the bidders have access to an (independent) expert valuation before bidding starts.

In addition, Milgrom has participated in setting up new kinds of auctions. When auctioning radio spectrum to telecommunications providers, for example, how much you are willing to bid for rights in one geographic area may be linked whether you own the rights in an adjoining area. Thus, rather than auctioning off each geographic area separately--which can lead problems of collusion between bidders-- it makes sense to design a Simultaneous Multiple Round Auction, which starts with low prices and allows repeated bids across many areas, so that geographic patterns of ownership can evolve in a single process. There is also a Combinatorial Clock Auction, in which bidders might choose to bid on overall “packages” of frequencies, rather than bidding separately on each license. Milgrom also was a leading developer of the Incentive Auction, which the Nobel committee describes in this way;

The resulting new Incentive auction was adopted by the FCC in 2017. This design combines two separate but interdependent auctions. The first is a reverse auction that determines a price at which the remaining over-the-air broadcasters voluntarily relinquish their existing spectrum-usage rights. The second is a forward auction of the freed-up spectrum. In 2017, the reverse auction removed 14 channels from broadcast use, at a cost of $10.1 billion. The forward auction sold 70 MHz of wireless internet licenses for $19.8 billion, and created 14 MHz of surplus spectrum. The two stages of the incentive auction thus generated just below $10 billion to U.S. taxpayers, freed up considerable spectrum for future use, and presumably raised the expected surpluses of sellers as well as buyers.

The economic theory of auctions is clearly tied up in intimate ways with the practice and design of real-world auctions. More broadly, close analysis of buyers and sellers in the structured environment of auctions can also offer broader insights into how non-auction markets work as well. After all, in some ways a competitive market is just an informal auction with sellers offering bids hoping to get a higher price and buyers making offers hoping to get a lower price. 

For more from Milgrom and Wilson on auctions and related economics, here are some articles from the Journal of Economic Perspectives, where I work as Managing Editor. 

• Milgrom, Paul. 1989. "Auctions and Bidding: A Primer." Journal of Economic Perspectives, 3 (3): 3-22.
• Milgrom, Paul. 2008. "What the Seller Won't Tell You: Persuasion and Disclosure in Markets." Journal of Economic Perspectives, 22 (2): 115-131.
• Roth, Alvin E., and Robert B. Wilson. 2019. "How Market Design Emerged from Game Theory: A Mutual Interview." Journal of Economic Perspectives, 33 (3): 118-43.

Snapshots of Capital Punishment Trends

Back in 1972, the US Supreme Court outlawed the capital publishment statutes in all 50 states by a 5-4 decision in the case of Furman v. Georgia (408 U.S. 238 [1972]). All nine members of the court wrote separate decisions (!), so the exact legal reasoning behind the decision was less than crystal-clear. But broadly speaking, the decisions held that the death penalty could only be constitutional if applied in a consistent, non-arbitrary, and non-discriminatory way.  

Almost a half-century later, what are the big-picture patterns of capital punishment in the United States? Tracy L. Snell at the US Bureau of Justice Statistics lays out the patterns in "Capital Punishment, 2018 – Statistical Tables" (September 2020, NCJ 254786). Here's the pattern of US executions over time: 

One way of interpreting this graph was that the death penalty was on its way to being imposed only a very low levels in the 1960s, but after the nine-way Supreme Court decision eliminating all state capital punishment laws inflamed the issue, capital punishment then had a resurgence for a time, before fading again.

There are currently about 2600 prisoners under sentence of death. However, for some years now the number being removed from this category (usually by legal appeal or commutation of sentence rather than by execution) has been exceeding the number added. 

Here's a figure showing the racial mix of those under sentence of death. 

Strong opponents of the death penalty will of course feel that one execution is too many. But the Gallup poll suggests that at the national level, supporters of the death penalty continue to outnumber opponents. Moreover, at the state level there will be places with greater support or majority opposition to death penalty. 

This report doesn't address policy questions about the death penalty, like whether it may at least in some cases deter murder. My own suspicion is that this question is that statistical methods probably cannot answer this question--but of course, the lack of a clear-cut statistical answer means that each of us will weigh the various risks involved in different ways. For a blog post on this topic from a few years back, see "The Death Penalty and Deterrence: Why No Clear Answers?" (June 25, 2012). 

The "No Brown M&Ms" Story: Contract Theory at Work

 Eddie van Halen, the rock guitar legend for the eponymous band Van Halen, died a few days ago. I suspect that many readers already know the "no brown M&Ms" story, but it still seems worth memorializing here. 

The story is that when the Van Halen rock band was touring, they required that the promoter or the venue at each location sign an extremely long and detailed contract, with many seemingly arbitrary demands. One item in the contract stated that among the backstage munchies to be provided would be a bowl of M&Ms, but the contract then added "(WARNING: ABSOLUTELY NO BROWN ONES)."

The contract was quite clear that violation of any part was cause for the band to immediately cancel the concert, but still receive its full financial payment. I'm not aware of the band ever cancelling on these grounds, but there were stories that upon finding a brown M&M in the bowl, band members would go on a destructive rampage in the dressing room before being gradually talked down so that they were willing to perform. 

Years later, the logic behind this particular contract provision was explained. Here's how the lead singer David Lee Roth told the story in his autobiography (according to Snopes.com): 

Van Halen was the first band to take huge productions into tertiary, third-level markets. We’d pull up with nine eighteen-wheeler trucks, full of gear, where the standard was three trucks, max. And there were many, many technical errors — whether it was the girders couldn’t support the weight, or the flooring would sink in, or the doors weren’t big enough to move the gear through.

The contract rider read like a version of the Chinese Yellow Pages because there was so much equipment, and so many human beings to make it function. So just as a little test, in the technical aspect of the rider, it would say “Article 148: There will be fifteen amperage voltage sockets at twenty-foot spaces, evenly, providing nineteen amperes …” This kind of thing. And article number 126, in the middle of nowhere, was: “There will be no brown M&M’s in the backstage area, upon pain of forfeiture of the show, with full compensation.”

So, when I would walk backstage, if I saw a brown M&M in that bowl … well, line-check the entire production. Guaranteed you’re going to arrive at a technical error. They didn’t read the contract. Guaranteed you’d run into a problem. Sometimes it would threaten to just destroy the whole show. Something like, literally, life-threatening. ...

The folks in Pueblo, Colorado, at the university, took the contract rather kinda casual. They had one of these new rubberized bouncy basketball floorings in their arena. They hadn’t read the contract, and weren’t sure, really, about the weight of this production; this thing weighed like the business end of a 747.

I came backstage. I found some brown M&M’s, I went into full Shakespearean “What is this before me?” … you know, with the skull in one hand … and promptly trashed the dressing room. Dumped the buffet, kicked a hole in the door, twelve thousand dollars’ worth of fun.

The staging sank through their floor. They didn’t bother to look at the weight requirements or anything, and this sank through their new flooring and did eighty thousand dollars’ worth of damage to the arena floor. The whole thing had to be replaced. It came out in the press that I discovered brown M&M’s and did eighty-five thousand dollars’ worth of damage to the backstage area.

Well, who am I to get in the way of a good rumor?

Here's a 2012 video of Roth telling the "no brown M&Ms" story. For economists, of course, the story lives on as an example of contract theory at work. In some cases, it will be costly and time-consuming to check every aspect of a contract (a fact that applies in business and also personal settings). Rather than paying those costs of time and money, over and over, it may save time to choose one perhaps seemingly unimportant item that will be checked first. If that one part of the contract is breached, then overreact. Your reputation will lead future contractual partners to be more careful, and you will ultimately save time and energy. 

Yes, The Other Drivers Went Crazy

The relatively few times I was out on the road back in April and May, right after COVID-19 had started changing all our lives, it seemed to me that the proportion of crazy drivers on the roads was way up. Family and friends had similar hair-raising stories of other drivers blowing through red lights and juking down the highway like a fighter pilot in combat. However, I am congenitally mistrustful of whether anecdotes represent broader patterns, and thus was intrigued that statistics from the National Highway Traffic and Safety Administration (NHTSA) are backing up my experience. 

One NHTSA report is "Examination of the Traffic Safety Environment During the Second Quarter Of 2020: Special Report" (October 2020). Here's a figure showing total vehicle-miles travelled in the second quarter of 2020 as compared to second quarter 2019. In April, for example, miles travelled were down 40% in 2020 compared to the same month in the previous year.  Similarly, the number of total vehicle trips per day also fell about 40% that month. 

Use of mass transit dropped even more, by as much as 85% from the previous year.  For example, here's a graph on monthly urban rail trips: 

There isn't any single way of measuring "unsafe" driving, but the data provides a lot of clues. Taken together, the clues strong suggest a rise in unsafe driving among those who were on the roads in April and May 2020. 

For example, one clue is to look at the vehicle fatality rate per 100 million vehicle-miles travelled. For the last 10 years or so, it's been about 1.1 fatalities per 100 million miles travelled, and this was the rate in the first quarter of 2020. But the fatality rate rose to 1.42 per 100 million vehicle-miles travelled in the second quarter of 2020--a rise of about 30%.  Or to put it another way, vehicle-miles travelled fell 40%, but total fatalities fell only 3%--because those who were driving became more likely to have a fatal accident.

Another clue is to look at data from crashes. For example, a larger share of crashes involved "unrestrained" people who weren't wearing seat belts and those who were ejected from their cars. The NHTSA reports: 

Individual State’s data have pointed to a trend of reduced seat belt usage during Q2 months in 2020. For example, Virginia experienced a 15.4-percent increase in the number of unrestrained fatalities between January 1 and May 21, compared to the same period in 2019 (Virginia Department of Transportation, 2020). Minnesota also reported a higher proportion of unrestrained fatalities from January 2020 to June 2020 compared to 2019 (see Figure 7) (Office of Traffic Safety, 2020).

Or here's a figure showing the share of crashes where emergency medical medical services (EMS) was called where the driver was ejected from the vehicle. The rise in April 2020 (after week 12) is clear. 

Yet another clue comes from testing crash victims who are brought to trauma centers for alcohol or drugs in their system. There's no nationally representative data here, but here are the results of a small study of trauma centers in five cities:  

Thomas et al., (in press) analyzed blood samples from patients in five trauma centers who were treated from September 10, 2019, to July 18, 2020. Using March 17 as the cutoff between pre-COVID-19 and COVID-19 periods, the researchers tested the samples for evidence of drug and alcohol use among seriously and fatally injured road users, which included drivers, passengers, bicyclists, pedestrians, and micromobility users. ... [There was] significantly higher prevalence of alcohol, cannabinoids (these results are for the active components of marijuana), and opioids during the public health emergency compared to before. ... In addition, there was a significant increase in the proportion of people testing positive for more than one category of drugs during the public health emergency. 

Here's a final clue: It makes sense that average vehicle speeds were up in April and May 2020, because the sharp decline in traffic meant less congestion, However, it wasn't just average speeds that rose, but also the number of extreme speeders. The NHTSA report notes; 

In April and May 2020, news outlets reported large increases in the number of drivers cited for excessive speeds across the country. For example, the Atlanta Journal Constitution reported that the Georgia State Police cited 140 drivers for speeds over 100 miles per hour (mph) in one 2-week period (Wickert, 2020); the Los Angeles Times reported that citations for speeds over 100 mph had increased by 87 percent (McGreevy, 2020); and, the Chicago Tribune reported an increase of 14 percent in speeding citations from automated enforcement (Wisniewski, 2020). Virginia observed that from March 13 to May 21, 2020, speed-related fatalities made up about 50 percent of the overall fatalities, compared to 42 percent in the same period in 2019 (Virginia DOT, 2020).

Why were more people driving crazy in April and May? The NHTSA suggests some possibilities, but doesn't try to quantify them. One simple answer is that when drivers see a more wide-open road, more of them will channel their inner NASCAR.   Surely another answer is that many people were stressed, and a stressed driver is more likely to be unsafe. Another is retail alcohol sales overall jumped, and some larger share of drivers were transporting that alcohol internally.

Finally, the  police backed off from traffic enforcement at this time, too, says the NHTSA:

According to a survey released by the International Association of Chiefs of Police (Lum et al., 2020), more than half of the more than 1,000 responding agencies established policies explicitly reducing proactive enforcement including traffic enforcement, in both March and May 2020 when the survey was fielded, and nearly three-quarters had policies mandating the reduction in physical arrests for minor offenses. Drawn from their regular communications with statewide law enforcement entities, NHTSA Regional Administrators (personal communication) shared States’ self-reported decreases in traffic enforcement, including decreases in seat belt enforcement, impaired driving enforcement, and speed enforcement.

I have no deeper lesson here, except to note that the ways in which people react to changes and to incentives can often have many dimensions--some better and some worse--operating all at the same time.

The Education of Angus Deaton

Gordon Rausser and David Zilberman have "A Conversation with Angus Deaton" in the Annual Review of Resource Economics (2020, 12: pp. 1-22) For those not already somewhat familiar with Deaton's life and work, the first few page provide a capsule overview. The interview goes into more depth about his early education, working with Richard Stone and Arthur Lewis, and his more recent work including his thesis about "deaths of despair" in the US and his skepticism about the popular randomized control trial methodology.  As a sample, here are some Deaton's comments for how he entered the field of economics, which for modern American academics will sound as if Deaton arrived from some different planet. Deaton says: 

For me in high school, the great virtue of mathematics was you could do it very quickly. I had lots of time for writing and music and for playing sports and things that I actually cared about a lot more. When I went to Cambridge, that really didn’t work anymore. There were a lot of really serious mathematicians there. It’s something that we observe in  all of our classes, I think. You get these kids who come in and they’ve been superstars wherever they were before and suddenly realize they’re not such bright superstars compared with some of the other people in the class.

I spent a couple of years not really doing mathematics but playing cards and going to the movies and enjoying myself. Then at some point the authorities, like my tutor, said, “You can’t go on like this. You’ve really got to do something else. The mathematicians don’t want you anymore.” I said, “Well, I don’t really want them either.” Then I said, “Well, what should I do?” They said, “Well, there’s only one thing for people like you, and it’s called economics.” I had no idea what it even was. I said, “What’s economics?” ...

Oh, I would be 21 really. Then I was assigned an economics tutor and some material to read over the summer. I had a summer job working on the Queen Mary and the Queen Elizabeth, going back and forth between Southampton and New York every two weeks. I was selling clothes on board the ships. I remember sitting there with a copy of Samuelson’s Foundations of Economic Analysis (1947), or not that one, but the textbook. ... I thought it was wonderful. It just provided that shove, as it were, that nudge if you like. It was more of a shove than a nudge. It put me in a place that I really liked. ... 

I’ve often felt sort of closed off either deliberately or because I never trained. I never went to a PhD program. I had that one year of economics as an undergraduate. There were some stars there, like James Mirrlees, a later Nobel laureate, who was teaching. But these lectures were not very comprehensible. I spent a lot of time trying to figure things out for myself. I’ve often felt that I was right outside the mainstream somehow. ...

I was very envious of the superstar kids in my environment, the kids who’d done economics for three years and who were recognized geniuses. Mervyn King, for instance, was almost my exact contemporary—I think he is two years younger than I am. He was very much a superstar and never got a PhD, because in those days, if you were really good, you didn’t get a PhD. The PhDs were for the sort of failures who were trying to catch up somehow. I was certainly very envious, but over the years, as you said, I began to realize that the things you really learn are the things you figure out for yourself. Sometimes you make mistakes in figuring those things out by yourself and sometimes those mistakes can be productive. ...

Mostly, you look at something, you stare at it, you say, “I just don’t understand this.” Then 999 times out of a thousand, it’s because you made an error that you don’t understand something. But the one other time is the one when everybody’s making an error and it’s just not well understood. I think it was quite helpful not to be super well trained in the conventional stuff. ...

All through my career, I found people who would listen tome ask questions and didn’t mind my ignorance. That’s something that the American graduate school experience is very bad at. Students are terrified because they’re so competitive and also because they’re always frightened of confessing that they don’t understand. Part of the benefit to me of not having gone through that education was I was always looking for people who knew stuff, who would tell me.

And here is one of Deaton's comments on economic development and growth. 

In the back of Arthur’s book on economic growth (Lewis 1955), he raises this question, which doesn’t get asked enough: “Why? Why do we care about this at all?” Because a lot of people don’t. The Pope doesn’t really seem to care about economic growth very much. I don’t know whether Arthur actually talks about Mozart, but he talks about kids growing up in absolute poverty and how they never have the opportunity to develop what may be extraordinary innate skills. There are these buried talents—lost Mozarts, or lost Einsteins—a great term someone’s been talking about recently.

What development does is give people what Amartya Sen would call capabilities, which you just don’t have if you’re living in grinding poverty. The expressions of human genius and human  creativity are going to be stifled and stamped out if you don’t have economic development. That’s why you should have development.