The unbearable weight of the future – a book review of What We Owe the Future

What if, several years before the emergence of the COVID-19 pandemic, someone warned you about the risks of a global pandemic? What if, prior to the release of the remarkable ChatGPT AI, that same person warned you that AI was developing far faster than people thought and might pose a risk to the human race? You might have laughed at them at the time, then wondered at their prescience a few years later.

Well, it turns out such prophets do exist. The long-termism movement has been worrying about existential threats to humanity’s survival for several years. They were funding pandemic research and AI research before COVID-19 and ChatGPT emerged. I set out to learn more about this prescient movement by reading the recently released What We Owe the Future by William Macaskill.

Macaskill, an associate professor of philosophy at Oxford, argues that we ought to value the lives and experiences of those living in the future as much as we value the lives of those living today. He further argues that because humanity could live for millions of years or longer, the numbers of future humans is very large (around 10^54 people). In any cost benefit analysis, that means even very small risks to their existence or their happiness count for a great deal.

That means we should spend more resources on preventing existential risks to humanity like AI taking over the world or global pandemics. It also means preventing things that would cause suffering for long periods, such as an extended period of technological stagnation or locking in values that prevent moral or technological growth. On their face, these seem reasonable arguments, yet I would argue there are deep flaws in it with profound consequences.

Making the improbable probable

Part of the genius of Macaskill’s approach is that because there are so many future lives at stake, they can outweigh any costs or downsides that might occur in the present without the need to do any fancy maths.

It reminds me of two children bickering in a playground. One says he’s won because he crossed his fingers twice. The other kid says he crossed his fingers three times. They go back and forth till one kid yells, “nuh uh, I win cause I crossed my fingers infinity times.” After all, everybody knows you can’t outnumber infinity.

Yet, like that kid who didn’t actually cross his fingers an infinite number of times, Macaskill is weighing up lives that may never exist or whose lives may be filled with intense suffering.

Macaskill sets out a broadly utilitarian decision-making framework in which you take the action that provides the most total benefit to everyone present and future. Macaskill is explicit about one assumption – that we should value the suffering or enjoyment of a person equally regardless of whether they live in the present or the distant future.

We should, in other words, act as though a future person’s pain were our own. Yet how should one person think about their own future pain or gain? Should a man go to university (costing $50,000) now in exchange for a higher income of $10,000 more per year of work in the future? A man following Macaskill’s approach might simply add up the income he would earn over his working life ($10k x 40 years) and decide it is way more than the cost of going to university ($50k in direct costs plus three years worth of study).

Economics, however, says it is not so simple. Despite adopting a similar utilitarian value framework, it says that we should value the future gains less than present gains or losses. One reason is because future gains are inherently uncertainty. The student may not live long enough to work until retirement age. The career for which the student trains may become obsolete. Another reason is because of opportunity costs. The student could instead invest that $50,000 and earn on average 9% in the stock market.

According to economics, we should therefore discount future income flows to adjust for opportunity costs and uncertainty. If we assume the cash flows are certain, then we should discount these future cash flows by 9% a year. The $10,000 the student earns in year four is equivalent to $10,000/(1.09%)^4, or $7,084 in present value terms. In other words, I could invest $7,084 today and expect on average to earn $10,000 in four years’ time so I would be indifferent between having $7,084 now or $10,000 in four year’s time. If I added up the present value of my increased income over 30 years, I get $77,423 of added income. The first analysis significantly exaggerated the benefits of studying because it did not take into account the uncertain nature of those benefits. The student should study at university since the benefits outweigh the costs.

By the same token, let us assume the government could spend $1 million now on AI research that has a 1% chance of preventing AI from extinguishing the human race in the year 2050. Forecasters think there will be 10 billion people alive then. Alternatively, the government could use that $1 million now on life saving drugs to save a million people living today. Should the government invest in AI research or the life saving drugs?

I know with certainty that the million people saved by the drugs exist, but I don’t know for sure what the population of Earth will be in 2050. The UN forecasts that it will be 10 billion with a high degree of uncertainty. It might be lower than 10 billion because birth rates keep falling. It might be zero if aliens invade and wipe us out before 2050. It might be way higher than 10 billion if we discover new technologies that let us increase our population.

Even if there are ten billion humans living in 2050, their lives may not be positive. Pollution may be so bad that they suffer more than they enjoy their lives. In such a case, each life of torture may actually count as a cost in Macaskill’s cost benefit analysis.

We cannot just imagine 10 billion happy people will exist in 2050 and argue that their happiness outweighs any cost in the present. We need to discount those future lives for this uncertainty. If I apply a discount rate of only 1%, then those 10 billion uncertain lives are worth 7.6 billion certain lives. Since there’s only a 1% chance the AI research prevents our extinction, I expect on average to save 76 million lives. That’s still way more than the 1 million lives saved with the drugs, so we should pay for the AI research.

The equation changes if we assume that our extinction event doesn’t happen till much later. If the world of ten billion people is saved in a thousand years’ time, their uncertain existences are only worth 477,118 certain lives. And we only have a 1% chance of saving their lives so we only expect to save 4,118 of them. We also have to account for the lives of their children – let’s say another 10 billion people fifty years after. Because fifty more years have passed, their lives are less certain and we only expect to save 2,901 of them. Repeating that calculation, we expect to save 1,740 of the first generation’s grandchildren. The maths gets complicated but you can see the diminishing returns mean that we would expect to save more lives by buying the drugs. The change in timing has made the AI research non-viable.

Macaskill, quite sensibly, never makes predictions about when these extinction events might happen. Since he ignores the level of uncertainty about whether those future lives exist, it doesn’t affect his calculations. Yet my simple example shows how much it does matter.

Derek Parfit, an Oxford philosopher who has been influential on Macaskill, and Tyler Cowan, an economist loosely affiliated with the rationalist movement, argued applying these social discount rates purely to account for the passage of time. Yet in that paper they acknowledge that we should discount for probability where, for example, a prediction is less likely to be correct the further in the future it is.

As foreshadowed, there are several types of probability that Macaskill does not account for:

• Existential risk: Long-termists are fond of estimating the risks of extinction in any given year, we might be wiped out by one of those before our action has the chance to save us from AI. Extinction risk may vary over time. It may decrease as we become a multi-planetary species, but it may also increase as we develop new ways to kill ourselves. As such, quantifying the aggregate extinction risk is a purely speculative exercise.
• Population variance: Population growth forecasts have not been particularly accurate historically. Malthusian predictions made in the 1980s turned out to be wildly pessimistic because we developed new agricultural technologies that allowed the planet to sustain more people than expected. Why do we expect our forecasts for a thousand years time to be more accurate than our forecasts a few decades ahead?
• Welfare variance: Macaskill is counting the net enjoyment and/or suffering of our descendants. Yet we have no way to objectively quantify this welfare or to measure its variance over time historically. Again, attempts to forecast future welfare are purely speculative.

Parfit and Cowen also dismiss the argument about applying discount rates to account for opportunity costs. They argue these costs should be considered directly. I agree. Yet Macaskill makes no attempt to consider the opportunity costs of taking actions now.

One could compare the benefits of taking long-termist actions against alternative uses of the resources in the present, such as comparing it to saving lives with medicine as I did earlier. There are also opportunity costs that arise over time. What if, instead of researching AI risk mitigation now, I invested the $1 million and conducted the research in a decade’s time when we have a clearer picture of the technology underpinning AI? Then not only would we have more money to spend, our research would be more effective. Of course, you do run the risk that the AI wipes us out or becomes socially entrenched before the research is completed, but you could account for that risk in your deliberation.

Hand waving is not philosophy

The benefit of ignoring the uncertainty about future lives is that it makes the maths much simpler. The happiness of trillions and trillions of people outweighs any costs that may be incurred in the present to achieve that happiness. Even a 1% chance of saving these future lives is equivalent to 100 billion times as much as a billion human lives.

Using such simplistic logic, you could justify any number of atrocities for the greater good. Some have already done so. Prominent long-termist, Nick Bostrom, has argued for instituting a global invasive surveillance state to prevent extinction-level terrorist attacks. Others have argued we should save the rich instead of the poor as they are more likely to influence the future. Another branch of long-termists call themselves pro-natalists who wish to steer the future by having more offspring.

Many long-termists may disagree with these particular conclusions, but they demonstrate how fluent practitioners can and have used the framework to justify terrible things in the name of people who may never be born.

By incorporating the inherent uncertainty of the future into our cost benefit analysis, we can limit the potential for these arguments. Because the benefits of saving future lives are no longer astronomically high, proponents would actually need to quantify the probabilities, costs and benefits.

This is ultimately to the benefit of the long-termism movement. You don’t want factions to emerge arguing for what would otherwise be indefensible positions. This could cause immense reputational damage to what would otherwise be a promising movement. You can’t influence the future if people think you’re a bunch of nutcases.

Locking in values to prevent value lock-in

A recurring thought I had whilst reading this book was about what values you use to measure benefits gained over a very long period. Values do, after all, change over time. I was surprised an Oxford philosopher did not address this obvious question.

The book asks us to imagine we leave a shard of glass on the beach. According to modern ethics, we don’t care whether a child is hurt in a year’s time or five hundred years’ time. What if we asked a person from five hundred years ago if they cared whether a gay person was cut by that glass? They might not have cared given the punishment for homosexuality back then was death.

Will those alive in the distant future value the quality of their lives the same way we would? I think it’s doubtful and there are realistic scenarios where it can skew our calculations.

What if new sentient life emerges? Macaskill assumes that an AI takeover would be a bad thing, as viewed from his supposedly neutral moral vantage. Yet that AI would be a sentient being (or possibly beings if an army of robots replaces humanity) which could adopt values which are morally superior to our own. They might craft a brighter future because their programming is not bound by all our behavioural biases. Or they might create a dystopian hellhole. We just don’t know and it’s hard to quantify the likelihood of either scenario.

What if our future selves don’t value a high population because they care more about the environment? Macaskill does discuss the suffering of farmed and wild animals. He agrees that the lives of caged animals are of negative utility because they are filled with suffering. Yet he argues that because animals have fewer neurons than humans, they suffer proportionately less. Adjusted for brain size, he argues there are fewer farmed animal neurons than humans by a factor of thirty to one. He doesn’t reach any conclusion about “whether the welfare of humans and farmed animals combined is negative”.

We could use Macaskill’s own trick against him, weighing the suffering of all those future chickens to argue against human overpopulation. A single chicken produces 1.4 pounds of meat. Americans eat 274 pounds of meat a year, equivalent to 195 chickens. (Yes, I know Americans eat a variety of meats but I’m keeping it simple). According to Macaskill, a chicken has 200 million neurons compared to a human with 80 billion neurons so 400 chickens are worth one human. An American eats that many chickens in just two years. In other words, an overpopulated world of humans relying on factory farmed chickens for food generates more suffering than enjoyment.

Based on that simplistic calculation, any action that stops the extinction of the human race actually increases the net suffering in the universe unless we can get rid of factory farming forever.

Conflicting aims

Macaskill says we should aim to prevent existential risks and also to prevent value lock-in. These goals may, on occasion, conflict.

To prevent values lock-in, Macaskill says that maintaining a society with multiple cultures is positive and argues we should have more charter cities. Yet a world with multiple societies with different values is one with far more co-ordination problems. Countries with sharply different value systems may be more likely to conflict. They may not all agree to reduce existential risk – for example, authoritarian regimes may create engineered pathogens increasing the risk of another pandemic.

Long-termism is still grappling with problems such as these. Its leaders should set out a framework guiding us through situations where our goals conflict.

Longtermism unearths underappreciated risks, but itself has hidden risks

The future is inherently uncertain. The fog of the future has led humanity to be short-sighted in our aims. I’m glad someone is thinking about the distant future and how to safeguard it. The long-termists should be praised for their prescience with regards to AI risk and pandemics.

Long-termism is a nascent philosophy and its methods are crude. It is telling that Macaskill never does a complete cost benefit analysis showing how one action has a net positive impact on the world.

Their utilitarian calculations are a form of modelling. Like all models, their results are heavily dependent upon their assumptions and methodology. A methodology is not good or evil, but a methodology that lacks rigour can be abused. It reminds me of the investment bankers and their financial models which can justify whatever conclusion you pay them for.

Long-termism currently sits in the hands of philosophers. What would happen if we placed it in the hands of politicians without developing safeguards? Nationalists could use it to start wars justifying the deaths of millions by quoting the benefits to the lives of countless trillions. If their calculations lack rigour, they can point out that the long-termists leader never bothered with full cost benefit calculation himself.

The long-termists must develop ways to make their calculations more rigorous so their methods cannot so easily be abused to justify immoral behaviour. One step they must take is to acknowledge the uncertainty of the value of the future lives they seek to save. By quantifying that uncertainty, they can stop acting like kids shouting that infinity is on their side.

Orthodox anti-trust law has competition

The twenty-first century has seen the rise of great tech giants like Google, Apple, Amazon, Facebook and Netflix. These tech titans are some of the largest companies to have ever existed. Their economic, social and political clout could enrich the world or tear it apart.

Yet Hollywood has taught us that the bigger they come, the harder they fall. A group of lawyers is challenging the might of the tech oligopolies. Calling themselves the New Brandeis movement, they argue that these monopolies are a threat to our economy and our democracy. They advocate for more vigorous application of competition law and other tools to reign in their power.

As a legal and economic policy wonk, I seek to critique this new movement by reviewing two of their major works, Amazon’s Antitrust Paradox by Lina Khan (who is now Chair of the Federal Trade Commission) and the Curse of Bigness by Tim Wu (who is now an advisor to the White House on competition policy).

What is at stake is democracy itself

The stakes for this battle are high according to Tim Wu. He argues that by removing the regulatory fetters from monopolists, we are recreating conditions that have led to dictatorship and fascism in the past.

In his history of competition law, the Curse of Bigness, Wu tells of how the concentrated state of industry in Germany and Japan facilitated the rise of fascism and imperialism.

Before WWII, the Germans legalised their industrial cartels and allowed mergers designed to create industry-wide monopolies. This was seen as allowing the inevitable triumph of strong companies over the weak. This rigid industrial structure would worsen the Depression, pushing German voters into poverty and Hitler’s open arms. In 1932, when the Nazi Party was on the brink of bankruptcy, the industrialists saved them with massive financial support, trusting that Hitler would save them from a communist uprising. The concentrated nature of German industry also made it easier for the Nazi’s to turn Germany into a command economy, a war machine.

In pre-war Japan, their industrial giants were interwoven into their political parties. Their zaibatsu conglomerates covered an enormous number of crucial industries. The ten largest ran most of the economy. The Mitsui and Mitsubishi zaibatsu each sponsored their own political parties. The Japanese military co-opted the power of the zaibatsu. How did this happen? Well, that’s a little unclear. Wu’s analysis of how the military used the zaibatsu to take over Japan is very sparse. He basically just quotes a study that describes the zaibatsu as “one of the groups principally responsible for the war and… a principal factor in Japan’s war potential.”

While Wu’s analysis is less than compelling in the case of Japan, I think he does correctly say that concentrating a nation’s economic power into fewer hands made it easier for dictators to rise. If these economic giants choose to back a dictator, their support can end a democracy. In other words, as Wu argues that “economic dictatorship tends to beget political dictatorship.”

The Allies, in the wake of their victory, made sure to break up the conglomerates in both countries. The law breaking up the German monopolist states its purpose clearly – “so they could not be used by Germany as instruments of political or economic aggression.” The lesson they learnt about competition, however, would be forgotten in coming decades.

Neoliberalism takes over competition law

Tim Wu and Lina Khan’s works together tell the story of how the conservative Chicago School of economics came to dominate modern competition law. Khan, in her academic paper, Amazon’s Antitrust Paradox, published in the Yale Law Review, tells the tale from a scholarly American perspective. Wu, in the Curse of Bigness, maps out the broader political and global dimensions of this shift.

Khan says that in the 1960s a foundation of competition law was economic structuralism, “the idea that concentrated market structures promote anticompetitive forms of conduct.”

A competing theory arose at the University of Chicago, known for its neoclassical or politically conservative approach to economics. According to Khan, “economic structuralists take industry structure as an entryway for understanding market dynamics, while the Chicago School holds that industry structure merely reflects such dynamics. For the Chicago School, what exists is ultimately the best guide to what should exist.”

The Chicago school assumed that many barriers to entry were irrelevant as they merely reflected market conditions. Any market dominance, they considered would be self-correcting and the courts did not need to intervene.

The Chicago school also argued that the sole normative objective of antitrust should be to maximize consumer welfare as measured by prices. The US Supreme Court, quoting the Chicago school’s chief acolyte, Robert Bork, adopted the consumer welfare standard in Reiter v Sonotone Corp.

Wu tells how this philosophical shift took place worldwide. Following the American adoption of the consumer welfare standard, the European Commission began adopting the language of consumer welfare. In 2005, as part of a modernisation initiative, the EC declared that enhancing consumer welfare and ensuring an efficient allocation of resources were the ultimate aims of the Commission’s work.

This led to competition regulators around the world ignoring mergers that would lead to significant industry consolidation. For example, Italian eyewear manufacturer Luxottica undertook a series of acquisitions that gave it significant market power. Despite glasses costing around $5 to $16 to make, they can charge between $125 to $400 on average in America. Despite these high profit margins, no one has challenged their dominance. Sunglasses maker, Oakley, tried to drop their prices but Luxottica retaliated by dropping them from their stores. This weakened them enough to make them a target for a hostile acquisition which was not blocked by regulators.

Age of the tech monopoly

The apathetic nature of the competition regulators would set the stage for the rise of the tech monopoly. Scott Adams, once wrote that Bill Gates took one look at capitalism and beat it like a kid with an internet connection. Microsoft, once the world’s largest company by market capitalisation has been supplanted by another tech company, Apple. Microsoft still remains dominant, ranking third largest with Alphabet (Google’s parent company) and Amazon right behind it at fourth and fifth.

The process of competition, that great leveller of companies, does not appear to be working. Google has a 91.9% market share of the global search market. Amazon controls 56.7% of the US e-commerce market. Nearly two thirds of Americans have a Netflix account. Windows accounts for 76% of all operating systems globally. These companies may not quite be monopolies in their core markets, but some come pretty close.

These companies have a natural monopoly in their core markets. A natural monopoly occurs where average costs decrease as production increases so that larger firms have lower average costs than smaller firms. High fixed costs (costs which do not vary with the level of production) and low marginal costs (which do vary with production) can create a natural monopoly.

Most online products have very low marginal costs (the cost to Google of providing a search to a consumer is almost zero) and very high fixed costs in terms of building highly complex tech platforms sustained by thousands of expensive engineers. Social media platforms are also characterised by network effects where existing users gain a benefit from new users joining a platform.

Network effects can also contribute to establishing natural monopolies. Network effects are where existing consumers benefit from another consumer consuming a product. The more people who are on Facebook or Twitter, the more value there is to people broadcasting on those platforms. This makes it more difficult for new social media platforms to challenge existing platforms which have already gained millions of users.

If tech companies are natural monopolies, then clearly government intervention is required to protect consumers from them. The question then is whether modern competition law is up to the task.

Should consumer welfare be the sole objective of competition law?

Khan and Wu make an able case that the Chicago school, with its assumption that the market is always right, has been too dominant over the development of American competition law. That is a self-defeating premise which means that companies can never be found to engage in anti-competitive behaviour. Yet, Khan does not clearly articulate an alternative to current case law.

I think the unspoken crux of their argument is that they wish to shift the evidentiary burden in favour of competition regulators. They don’t want to prove that increased consolidation from a merger will cause consumer harm (usually in the form of higher prices). They want courts to give them the power to block any merger that increases consolidation in an industry. They argue this would make it easier to stop consumer harm before a monopolist gains market power rather than after.

What is the harm in banning non-harmful mergers that result in significant consolidation? Surely having more competitors is a good thing. The reason is that mergers can create efficiencies, such as through increased economies of scale, that would allow firms to deliver lower prices to consumers.

Khan’s intention to remove evidentiary burdens from regulators is made more plain when she discusses predatory pricing. Predatory pricing occurs when a firm drastically cuts its prices below cost to drive other firms out of the market so that it can recoup its profits later on (usually by charging higher prices). In the Matsuhita and Brooke Group cases, the US Supreme Court ruled that one of the elements of predatory pricing is the need for recoupment. Until these cases, the government did not need to prove recoupment to win predatory pricing cases. In making this decision, the Supreme Court cited Chicago luminaries who believe predatory pricing is irrational and therefore rare. This decision made it much more difficult to win such cases with only a single win in recent years.

And yet should we remove the recoupment requirement? It may be inconvenient, but it is a crucial part of the economic definition of predatory pricing. The monopolist takes short term pain now for long term gain later. If the monopolist never recoups their profits, consumers win through lower prices. Banning price discounts without a requirement of recoupment would ban desirable behaviour, such as legitimate discounting.

What should be done about the tech oligopolies?

Khan argues that we either let competition restrain the tech oligopolies by enforcing our predatory pricing laws or we accept that they are natural monopolies and regulate them through a public utility regime.

As I explained above, I think some tech companies’ core  markets have similarities to natural monopolies. It doesn’t follow, however, that it would be easy to regulate them as such.

Public utility regimes have traditionally been applied to infrastructure like railroads and cable networks. Those things are easy to define in the law. You can force the railroad company or the broadband company to give all companies non-discriminatory access to the railroad or cable.

You could try turning the Google search engine into a public utility. To do this, you would force Google to give equal priority in searches to its own products and services compared to those of third parties. How would you monitor and enforce this requirement?

Let’s say I search for “Rick Ashley video” on Google and a link to the clip on YouTube (a Google sister company) pops up as the first result. Is that because Google’s algorithm secretly favours YouTube? Or is it the ‘best’ result since most videos are hosted on Youtube and most people link to it? It is quite difficult for an outsider to tell.

You could give the competition regulator access to Google algorithm, but that would require deep expertise to understand that a regulator likely could only get by hiring ex-Google staff. You can see from the Rick Astley example that there are soft ways that Google can promote its own services without explicitly preferencing Youtube – any search result that favours video results would favour YouTube links for example.

What are the next steps for regulating the tech giants?

A first step would be to build a firm evidence base on which to build policy reform. Several regulators have begun investigating the state of competition in tech.

The Australian competition regulator, the ACCC, was one of the first. In 2019, it published its inquiry into digital platforms. One of the findings was that Google and Facebook had substantial market power in relation to various markets in Australia. It is not illegal to possess market power in Australia, only to use it to substantially lessen competition. It’s not size that matters, it’s how you use it.

The ACCC identified mergers as a key area for reform. It recommended that courts consider whether a potential merger would remove a potential competitor and whether the acquirer would gain access to data that might give it a further edge over rivals. Large digital platforms should also notify the ACCC of certain mergers. These would both be helpful tools for the ACCC to have.

An even more powerful tool is requiring data portability. One of the highest barriers to entry is access to data. Data lets Google provide better search results and Facebook target its ads. Competitors without access to these datasets would struggle to provide a product of equal quality. The ACCC is investigating how major digital platforms might be forced to share their data with their competitors to create a more even playing field.

But smaller countries like Australia face a tough challenge in regulating these global giants. If Australia were to force Google to share its data with its competitors, Google may choose to simply shut down its Australian operations. It makes sense to sacrifice the measly US$3 billion in revenues it earns from Australia if that will insulate the US$258 billion it earns from the rest of the world.

The US must lead the way and it is. In 2020, the Justice Department brought an anti-trust suit against Google and it is set for trial next year. It also launched an action against Facebook owner Meta, though that case looks to be on thin ice.

Conclusion

Tim Wu’s book, the Curse of Bigness, is a book about competition written by a lawyer but it should be regarded as a book about politics. It lacks the detail and evidentiary base to be considered a serious legal or economic text. Viewed in that light, it makes a compelling case about the history of how we viewed competition and that changed the structure of our economy.

Lina Khan’s seminal and more celebrated work, Amazon’s Anti-trust Paradox, provides a scholarly companion. It details the evolution of American competition law towards the Chicago school and how that defanged the law.

The New Brandeis movement makes a persuasive case that American anti-trust law has been too permissive, allowing the creation of tech giants that threaten the integrity of our democracy. Their solutions generally have merit, though some may risk penalising pro-competitive conduct.

Should Australia introduce a UK style epetition system?

As regular readers know, I have severe ME/CFS so funding for ME/CFS treatments is dear to my heart. Recently, I’ve been following two petitions – one to the UK Government seeking research into whether microclots could be causing ME/CFS or Long COVID and another to the German Bundestag seeking funding for research and awareness campaigns for ME/CFS.

I was surprised to learn that the UK Government is required to respond if the petition reaches 10,000 signatures from UK citizens and the Parliament debates the petition if it reaches 100,000 signatures. The German Bundestag holds hearings if it reaches 50,000 signatures from anyone worldwide.

This is a fantastic way to shine light upon overlooked issues like ME/CFS. There is a long history of women’s diseases, like endometriosis and ME/CFS being ignored by doctors and governments alike.

Petitions have a long history in democratic politics. Famously, a petition helped get women the right to vote. They offer a direct line of communication between the People and their elected representatives. It offers a safety valve for anger and feeling in the community, as well as occasionally, a mechanism for redress.

Epetitions in Australia

I started wondering if Australia should introduce an official epetition system and was even more surprised to learn we already have one and the process is set out in the House Standing Orders.

Unlike the UK, there is no signature threshold for debate. The Chair of the Petitions Committee can present the petition to the House (singly or as a combined report), but debate is limited to ten minutes. Alternatively, an MP can agree to present the statement during time allotted for Members Statements or Constituency Statements.

The Petitions Committee shall respond to the petition on behalf of the House. The Committee can refer to the petition to the relevant Minister who is “expected to respond” within 90 days of presentation.

Despite superficial similarities to the UK model, barely anyone is aware of the official epetitions website. Most large petitions are circulated through http://www.change.org or organisations like Getup. Perhaps that’s because an official petition carries few advantages – MPs are already able to make members statements without needing a petition.

Reforming Australia’s Epetition System

A petition should grant you something an individual MP cannot already offer – such as requiring a response from the Government or a debate of the full House.

The existence of a signature threshold can help gain a lot of media attention. In the UK, the House debate becomes more of a spectacle and petitioners can lobby their MPs to attend the debate.

If a Government response is introduced, it should give at least two months to respond. It would take at least that long for the Government to go throug the policy making processes, including drafting and considering a Cabinet Submission. The risk is that giving the Government months to respond will deprive the issue of vital oxygen.

On the other hand, giving the Government insufficient time to respond will lead to knee-jerk rejections because the relevant Minister has no Cabinet authority to change policy positions or provide funding.

Pros and Cons

As I said, establishing an official petition system can help shine attention to a deserving cause as happened with ME/CFS in the UK and Germany. They can reinvigorate democratic debate and give a voice to the underprivileged.

Epetitions are not a panacea to our democratic woes. The Obama Administration introduced an epetition system called We the People, but was criticised for being slow to respond to petitions that gathered sufficient signatures. No law can force a government to respond or to respond in a meaningful way.

We may not always want the Government to respond to petitions. Imagine if anti-vaxers started petitioning to get rid of masks or vaccine mandates. Or if gun nuts wanted to roll back gun laws. These people have a right to express their views and a Government can always firmly explain why they disagree with the petition.

Ultimately, I think the strongest argument for reform is that the current system clearly doesn’t work. There are around 60 petitions on the official website and only a few have more than a hundred signatures. Minor changes could make the system work the way it was intended.

Why a SpaceX-style Martian economy would fail

Key points

• Mars will import most of its goods, so it needs to find a valuable export market quickly. The fact it can only launch cargo every 2 years due to orbital mechanics makes this very tricky.
• Mars can choose to be a mining economy or a tax haven/tourism economy, but currency dynamics make it difficult to be both.
• Mars could do both if it adopts a fixed currency and manages its economy by introducing a variable universal basic income.
• Because Mars is basically importing everything for the first few decades of its existence, it must use foreign capital (e.g. by borrowing debt) to pay for these imports. The cost of so much debt will strangle growth in the Martian economy for generations to come.
• Therefore, by applying orthodox economic theory, we quickly reach a situation where it makes sense for a Martian revolution to throw off the shackles of debt
• A foresighted Martian founder should set up the colony so noone thinks of themselves as Martian. Then it wont matter whether the Martian economy does well so long as individual Martians remain well paid.

Introduction

The year is 2200. Earth has established a functioning colony on Mars. Stories have been written about the science and society of such a colony, but what would its economy look like? Scant pages have been written on that topic. I’ve spoken before about how science fiction has underplayed the role of economics in shaping societies.

Im going to skip the question of how to fund the initial Mars colony. The decision about launching a Mars landing and colony will likely not be an economic one. The International Space Station provides no direct economic dividends, yet for the purposes of scientific advancement it receives and should receive funding.

So lets start with a colony that can supply itself with basic necessities – air, water, food and energy. It has a large enough population, say 1 million, to describe as an economy (as distinct from the Antarctic stations).

The solar system’s mine and tax haven

Initially, Mars will need to import everything that it cannot produce itself. This is almost everything except air, food, and water, so imports will almost be as large as consumption.

Lets look at what an economy looks like:

GDP = consumption – net imports + investment + government spending

Keynesian aggregate demand equation

Since almost all goods consumed are imports, consumption contributes very little to GDP. The economy will only be as large as returns on past investment (by whatever Earth-based entity established the colony, e.g. SpaceX or the NASA) and current government spending. That is not a real economy!

So Mars has to develop its own exports or learn to produce its own goods to offset those imports. What could Mars export? It could mine commodities such as iron ore, heavy water (for fusion power), and other precious ore deposits that we find there. We don’t yet know what ore deposits are on Mars, though it seems iron, chromium, aluminium, titanium, and magnesium may be there. Robert Zubrin, in the Case for Colonising Mars, says that because Mars has a history of vulcanism, it is more likely than the Moon to have useful ore deposits. It has been estimated that it is cost effective to export anything more expensive than gold from Mars.

Another major consideration is orbital mechanics. The cheapest way to transport goods from Mars to Earth is during a launch window every 26 months. Mars would be dumping its commodities onto the market every 2 years, causing major price shocks. Even with futures markets, I dont think it would be easy to manage these price shocks.

So maybe Mars could find an ore to mine that is profitable, but I doubt it would be sufficient on its own to fund the Martian economy.

Mars could supplement its mining by exporting intangible goods and services which dont need shipping. Mars could become a tax haven. Banks, wealth managers and corporations could domicile themselves there for tax purposes. While tax rates would be very low, Mars could earn some money by taxing the profits of these entities. There are other ways to extract money too. The British Virgin Islands, for instance charges registration fees for companies. It earned around US$200m from its 1m registered compabies. Keep in mind though that there is competition from existing tax havens that will limit this strategy. Will the rich see Mars as sufficiently stable place to hide their investments? Can Mars find loopholes that Ireland and the Caymans aren’t already exploiting?

Mars could also, as Zubrin suggests, sell IP from things invented on Mars. Just as many innovations stemmed from the Moon race, many innovations will also come from the Mars race. But until it develops a domestic capital base, all the investment needed to commercialize those ideas will come from Earth. So the lion’s share of the profits will go to Earth. More on this concept later.

It is harder to see Mars competing to sell other intangibles. For example, could it realistically compete with Hollywood in selling movies? Or selling pharmaceutical IP (could you trust a clinical trial conducted in low gravity on a foreign world?)

Tourism is another possibility. But how many tourists would be willing to spend 9 months travelling to Mars, spend several months there waiting for the orbital return window and then spending another 9 months travelling home? It might have happened centuries ago, but I have difficulty seeing it happen in the modern fast paced world.

Currency choice – does Mars want to be a mine or a bank?

So Mars can become the solar system’s mine, or the solar system’s bank. But a mining economy needs fundamentally different things from a tax haven.

A tax haven needs a stable currency. A rich person doesn’t want their wealth fluctuating up and down based on the currency of an economy they have no attachment to. A devaluation of the Martian dollar would reduce their purchasing power on Earth. Similarly, wealth managers and corporations don’t want their performance metrics skewed by currency effects.

A mining economy is likely to have a volatile currency. The Australian dollar for instance is highly volatile for a developed economy because it depends heavily on the iron ore and coal price. The Martian dollar will be even more volatile because its exports are more concentrated towards mining. It also dumps all its commodities on the market every 2 years (due to orbital mechanics).

The Martian government could fix its dollar or adopt a stablecoin. But then it would lose the ability to manage its economy through interest rates. Without a floating exchange rate or interest rates to soften the impact of commodity price changes, the Martian economy would take the full brunt of them. Each time the iron ore price went down, the economy would crash and each time the price goes up, the economy would overheat. The impact of commodity price fluctuations would also make it difficult to maintain its currency peg.

A solution could be to maintain a floating Martian dollar but allow bank deposits etc to be held in USD. This would only be a partial solution as the (US) dollarised part of the economy could not easily be managed by the Martian central bank through interest rates.

Another solution is to manage the economic cycle using fiscal policy instead of monetary policy. Mars could issue Universal Basic Income to Martian citizens and vary the Basic as needed to smooth out the economic cycle.

An unsustainably large current account deficit (CAD)

Mars is likely to run a large current account deficit (i.e. net exports will be negative). Mars is effectively importing all non-essential goods for the first few decades of its existence. The high transport costs will eat away at any profits it makes from exporting commodities and will add to the cost of imports. The only bright spot is its money from being a tax haven.

The CAD will be paid for by a large capital account surplus. That means all the profits from Mars’ exports will go to shareholders and lenders based on Earth.

A persistent CAD is not necessarily a bad thing. Australia has had a persistent CAD for many decades, even during its mining boom. Yes, the mining boom was largely funded by foreign capital but without that capital Australia would never have been able to fund those mines on its own. And many high income mining jobs were created as a result of the mining boom. The money from those jobs flowed into service industries, growing more jobs in Australia.

The difference is that Australia’s CAD was around 4% of GDP. Growth in GDP matched the growth in CAD ensuring that the capital imbalance did not become too large. By contrast, Mars is importing most (e.g. 80%) of its goods and most of its revenues from exports are spent on transport costs. Therefore, I’d expect the CAD to be around 40 to 60% of GDP!

This will ultimately constrain Mars’ ability to grow its economy even after it reaches self sufficiency. If interest or dividend payments back to Earth are higher than GDP, then the economy will actually shrink. A quick numerical example will demonstrate how quickly Mars would reach this situation. If the CAD is 25% of GDP, then after 4 years the stock of foreign debt/equity will be equal to GDP. Given the high level of debt, interest rates would probably be quite high maybe 10 to 20%. And the growth rate of GDP is also around 10 to 20%, so it would only take 4 or 5 years to get into this position.

How to fix an impossibly high CAD?

Multiple approaches would probably be required to tackle a problem of this size.

The obvious approach is to lower the CAD – minimise imports, maximise exports, and reduce transport costs. Have a spartan economy that produces its own essentials and has no luxury goods (much like the economies of the Antarctic stations). Maximise the exports of financial services and digital goods by creating a business friendly legislative regime. Invent fusion drives or more efficient ways to export goods back to Earth.

Another approach is to produce your own goods so you are less reliant on exports. Mars could mine its own metals and manufacture finished goods. But the economies of scale just aren’t there for mass manufacture. This could be very expensive (But then again, so is flying everything from Earth!)

Yet another approach is to convince the foreign capital holders to move to Mars (literally). If Elon Musk moves to Mars (in a world where SpaceX colonised Mars), then you stop making some dividend payments to Earth and keep that money in the Martian economy. If Musk spends his money on Mars, that increases domestic consumption and gets us closer to a self sufficient economy. But to the extent the CAD remains persistently high, you are just creating more and more foreign shareholders.

I suspect that in total these approaches are insufficient to address the problem. But there is one option that would free the Martian economy of it’s debts.

The silver bullet of revolution

I think this becomes fertile ground for a Martian revolution. You have an economy that supports bankers (who will overwhelmingly live on Earth). The level of debt is so high that Mars can literally never pay it back. So why bother trying? Why doesn’t Mars just default on its debt and equity obligations?

Just like a country can default on its foreign obligations, so can Mars. Countries like Argentina have done it and recovered their economies. You get locked out of capital markets for a few years and pay punishingly high interest rates after that for a few decades. But that is much cheaper than having to pay your entire GDP in interest payments.

The benefits to Mars of strong foreign investment

Just to be clear, Mars does benefit from the high level of interplanetary investment of capital. I think this is self evident since Mars has no domestic capital, but I think it’s worth saying less you think I’m a raving socialist. I did literally just advocate a Martian revolution!

Firstly, it allows a greater range of consumption than otherwise possible. Imagine only eating Martian potatoes the rest of your life.

Secondly, it allows more investments than are otherwise possible. Mars has no capital with which to build mines. Mines support high paying jobs that create more jobs. And the mining jobs will be high paying or else why would anyone move to Mars?

All I’m saying is that if your export ratio is so permanently out of whack, then at some point it will drag down your economy despite the benefits of interplanetary investment.

Can Martian revolution be avoided?

So if I was planning a Martian colony, are there ways to avoid violent revolution? I think there are several things you can do.

Firstly, make the Martian as self sufficiency as possible as early as possible. I discussed strategies for this above.

Secondly, you could cancel the debt/equity voluntarily. If the investments are treated as a charitablr donation to Mars, then Mars can reach economic self sufficiency much earlier. The best analogy I can think of is the Antarctic bases. Noone thinks of investments in the bases as an economic investment. They think of it as a scientific investment that does not need to be paid back.

Thirdly, you can set up the society so that no one thinks of the selves as Martian. You could make them one State of the founding nation (e.g. the USA). For example, I doubt Alaska has much domestic capital. But it doesn’t matter as much because it is treated as just another State. People have free movement between the States, they think of themselves as American citizens, they have the same rights. All the foreign capital needed to build the Martian economy can just be treated as an intergovernmental transfer.

Identity politics is therefore important. You could stop identity politics and Martian patriotism emerging by capping people from staying on Mars for more than 5 or 10 years.

The upshot of this article is that I think SpaceX’s plans for a Martian colony will lead to inevitable failure. Trying to get a commercial rate of return on the investment (in the form of building the colony then sustaining it with imports) would be quite unlikely even if they got a successful mining, tourism and banking operation running. The clawing back of that investment will act as a drag on the Martian economy preventing it from growing.

Why China may let Evergrande fail

There is a common assumption that China will not risk China Evergrande failing because it will burst China’s property bubble. There is a darkest timeline in which Evergrande fails leading to a bunch of large developers failing leading to a bunch of Chinese banks failing all leading to a massive real and financial catastrophe. But China has many places along this chain of events to intervene – and there are solid reasons not to intervene at the first step by bailing out Evergrande.

To find out whether China’s property market bubble will burst, we must ask what event will cause a sudden flood of distressed selling into the market?

1. The risk of a financial crisis is low

China has learnt the lessons from the Global Financial Crisis (GFC). It has not only implemented the Basel III banking rules, it has gone further than required. These rules require banks to hold more capital and to limit their exposure to the collapse of any one corporate group. China has recently asked its banks to again stress test their exposure to Evergrande.

That means Evergrande’s collapse should not directly cause any Chinese bank to go bankrupt or a financial system meltdown. There is a risk that Evergrande will just be the first of a series of property developers to collapse. This could in turn bring down the Chinese financial system. But for reasons I explain, the risk of a broader property bubble burst can be contained.

2. The risk of a property bubble bursting can be managed through the insolvency process

Evergrande owns around 1300 projects in 280 Chinese cities, around 2% of the Chinese real estate market. Some argue that a firesale of these assets could burst the Chinese property bubble.

But here’s the thing – these properties have been on the market for a year as Evergrande has been flogging off its assets (to no avail) to meet its debt obligations. If Evergrande enters insolvency, the liquidator can slowly sell off the assets over a number of years.

While selling 2% of the whole market at once sounds like a lot, it is actually quite manageable. By comparison, Australia turns over between 4 and 8% of its housing stock every year. Adding 1% over two years should be a cinch.

3. China has no interest in bailing out foreign bondholders or banks

Companies are obliged to pay secured and priority creditors first. Unsecured creditors, like the ordinary Chinese who bought new apartments from Evergrande, will be last in line.

During a restructure process, the Government has more leverage. Especially since, in a country without rule of law, it has more flexibility to change the rules as it goes along.

Once the secured creditors take their haircut through the insolvency process, the CCP can bail out Main Street outside the process.

4. Chinese property owners arent being forced to sell into a falling market

While stock market bubbles can be burst by a loss of confidence, property markets are illiquid and that tends to make them resistant to prices going down in nominal terms. They tend to either stagnate or suddenly crash because a lot of people are forced to sell into a falling market. Owners might be forced to sell into a falling market if they lose their jobs (but the real economy is doing well) or if the banks start foreclosing (but the banks remain well capitalised). And China can direct its banks to slow the rate they foreclose so the property market does not suddenly collapse.

Given the centrality of property ownership to Chinese culture, it seems unlikely the panic will be enough to make them sell their homes without some sort of direct trigger. If people stop selling their homes, then the supply of existing homes for sale decreases helping to stabilise the property market.

5. Property developers aren’t banks – they can be replaced quickly

The weakness in the chain is how many other big property developers will follow Evergrande into insolvency. But again, because China can force their restructuring or insolvency processes to go slowly, they may avoid a firesale of assets that leads to a swiftly falling property market.

Evergrande may not have a solvency problem. It has a liquidity problem and a crisis of confidence. Because of its well publicised difficulties over this past year, its not surprising that people werent eager to buy new apartments from them this year.

As soon as people lost confidence in Evergrande, it was screwed. Around half of Evergrande’s assets are developments under construction. Once the pipeline of new developments came to a halt, it lost the cashflows necessary to pay its interest.

Unlike a bank, it is not inevitable that a loss of confidence will cause a property developer to go bankrupt. That only happens if they are overleveraged. If you have sufficient cash to meet short term debt repayments, you will be safe in the short term. If you have a lower leverage ratios (measured as either net debt to equity or liability to asset ratios), you will be safer in the long run because you can sell assets to meet your long term debts.

China has been forcing large property developers to meet these requirements through its three red lines policy.

Most big property developers are starting to comply with China’s 3 red lines requirements. Nearly half of the 66 largest developers meet all 3 red lines. The only two major firms not to comply with all three red lines are Evergrande and Guangzhou R&F Properties Co. R&F is much smaller than Evergrande, with its liabilities a quarter of Evergrande’s.

Will Evergrande’s collapse cause people to stop building with other risky developers? Maybe. But there are plenty of other large, well capitalised developers they can still buy from. That in itself should insulate the property market from going into freefall.

Property is the cultural touchstone of China. A man cannot get a wife if he does not own his own house. Because the stock marlet is deemed unreliable, around 60% of Chinese wealth is held in property. It seems unlikely the Chinese will stop buying property altogether. It is more likely they may slow purchases and pursue a flight to quality property developers.

6. China will stabilise its banks rather than letting them fail

China’s leadership values stability above all else. It has been conducting stress tests. According to the Economist:

A stress test on banks’ exposure to the property sector conducted recently by the central bank concluded that an extreme scenario, in which loans to developers suffered a 15-percentage-point rise in their non-performing ratios, would eat up 2.1 percentage points of banks’ overall capital-adequacy ratios, reducing the industry average to 12.3%. Such a drop in the banks’ capital buffers, evenly spread across the banking sector, would be a tolerable depletion of protection

https://www.economist.com/finance-and-economics/2021/09/21/what-are-the-systemic-risks-of-an-evergrande-collapse

If banks come under too much pressure because multiple large developers collapse, China can flood the market with liquidity and alllow more forebearance.

Because it seems wisest to slowly sell off the properties of any developers, China may encourage banks to hold bad debts on their books for a longer period rather than forcing a firesale now.

This will slow economic growth as the banks have less money to lend and are dragged back by their non performing loan ratios. But it prevents a swift puncturing of the Chinese property bubble that would lead to widespread social unrest.

What does this mean for your investments?

If China does not bail out Evergrande, they have a choice of using government policy to engineer a slow deflation of their property bubble. This will also slow economic and property price growth for years, possibly decades to come. But China values social stability and would not tolerate a quick bursting of their property bubble. I have outlined some of the tools they have to slow the burst.

If you believe China will not bail out Evergrande and that the contagion can be contained, then strap on your seatbelts. Its going to be a wild ride next week.

We will likely see R&F and a few other developers come under increased pressure. We will see a flight to quality to better leveraged developers – so start buying them now.

Iron ore prices will plummet. Buy the dip by investing in iron ore miners. Fortescue (ASX: FMG) is one of the most leveraged. However, because Chinese construction is likely to slow, the iron ore miners are unlikely to recover to their current high prices for a while.

The financial system will come under pressure but will survive. Buy the dip in the banks share price – after you do your DD on their Chinese exposure.

Foreign property in places like Australia, Canada and the US with large Chinese diasporas will benefit as Chinese try to get their money out of the country. Buy shares in real estate companies in these countries.

Dont buy in China. If China goes down the route of bank forbearance, they are likely to end up in a permanent slow growth environment like Japan.

Nothing in this post is financial advice

Edit: Updated this post to add a quote from the Economist setting out the results of a recent stress test. I also note that there is much speculation that China will intervene to restructure Evergrande’s liabilities rather than letting it go insolvent. I think my analysis still works if this is the path taken.

Whether China takes the path of a restructuring or an involved liquidation, thorny legal questions will arise. The foreign bonds are governed by UK or US law. Attempts to subordinate their claims to those of ordinary investors will be litigated in western courts raising difficult questions of private international law.

Will the Great Resignation increase productivity?

The world is full of bullshit jobs. After a year of staring mortality in the face, a lot of people are trying to find more purpose and meaning in their lives.

Will people start to quit their bullshit jobs? Will this lead to a quiet productivity revolution as managers realise how bullshit these jobs are and quietly sweep them away?

Let’s wait and see.

What the meaning of life isn’t

What is our purpose in life? How should we spend our days on this Earth?

This is a question I sometimes ask myself. Like everyone else, I don’t know the answer.

But thanks to my illness, I now know what my purpose in life isn’t. I cannot spend my life doing nothing because I’ve spent a year doing nothing. It is the worst torture I can imagine.

Philosophers can talk about the difference between a life of being and a life of doing. Such debates have no end, but I can find some comfort in knowing with certitude what my life shouldn’t be about. I was born to live.

Update – How Many People Will Catch Long Covid?

In a previous post I argued that, based on current covid case numbers, around 4 to 7 million people had already contracted long covid. In this post, I will estimate how many people will catch long covid during this pandemic. It turns out, once the pandemic is over, around three times as many people will have caught long covid.

It’s now abundantly clear that we can no longer suppress or eliminate covid. Everyone is either going to be vaccinated or catch covid. We don’t know how many Americans will choose to become vaccinated, but just over 60% have gotten their first dose and vaccination rates are slowing. I therefore assume 70% of Americans will be vaccinated.

Those who are fully vaccinated with Pfizer have a 12% chance of catching covid (or 33% with Astra Zeneca). Since America is only using 3 vaccines – the Pfizer, Moderna and Johnson & Johnson vaccines, with only 5% take up of the Johnson & Johnson vaccines, I assume a 12% breakthrough infection rate.

Those who are unvaccinated (all of whom I assume will catch covid) have a 12 to 35% chance of catching long covid. As previously explained, I assume a 22% long covid prevalence rate for the purposes of this calculation. Those who are vaccinated and catch covid reduce their chances of getting long covid by half.

Taking this altogether, of America’s 260 million adult population, 6.6% (or 17 million people) will catch long covid because they are unvaccinated and 0.9% (2.34 million people) will catch long covid despite being vaccinated.

The impact on the labour market will also be greater than I previously calculated. Roughly 3.4% of the labour force will be forced to work part time and 1.7% will be forced to not work altogether.

How to survive a long lockdown – advice from someone who’s been locked down since October

With Sydney’s lockdown being extended again, we know that are the isolation and frustration will only increase.

I’ve been housebound with severe chronic fatigue syndrome (CFS) since October and completely bedbound since January. I initially did not cope well at all. Eventually, I learned to live with it and to be patient with my months long recovery process. Here’s how I did it and how it can help you cope too.

The first step is acceptance

If you can’t change something, then learning to accept it and to live within your new boundaries is the most psychologically healthy thing you can do. This is backed by reams of psychological evidence and is also what Buddhists believe.

No matter your opinion on lockdowns, the NSW Government is not going to remove the lockdowns until we hit the vaccination target. So learn to accept the fact a lockdown is happening and will last a while.

Learn to be present. I get very anxious whenever I think about how long it is taking me to recover and or when I start plotting out my steps to recovery months in advance. I feel calmer and better when I don’t think about time elapsing and focus on what steps I need to take today or this week to get better.

Focus on the positives, not the negatives. If you’re a negative kinda guy, like me, remember that it can always be worse. At least you’re not immunocompromised (like me), a pandemic can be an extra scary place for us. If you can’t walk outside, at least you’re not confined permanently to a bed or wheelchair like me. For me, I think of those times I used to be in even worse health or of people with even more severe CFS.

The past is a different country

Being present can also get you through some tough challenges. When I first became bedbound, the journey back to health looked so long and torturous that I did not think I could survive it. And yet here I am. If you focus on taking one begrudging step by one begruding step, you might one day look around and find yourself at your destination.

Buddhists don’t believe in an unchanging consciousness. I’ve found this helpful in enduring ongoing existential stress. I think of the past John who endured ongoing sore throats in October to be a different person to who I am now. As my memory fades, I think of the John who endured the living coma back in June as a different person too. In that way, I no longer think of myself as having lived through 12 months of pain. I can think of myself as only suffering whatever I’m suffering at the moment. It helps, trust me.

In the same way, don’t think of yourself as one person undergoing months of isolation. You can still enjoy yourself by reading a book or watching Netflix. Think of yourself not as a ‘person sitting alone for months’ but as a ‘person sitting alone reading right now’. That’s not such a bad thing after all.

If the anxiety or the boredom gets too much, just remember that this too will pass. You’ve endured anxiety and boredom before, just hang in there a little and things will get better again.

Make the most of the lockdown life

Lockdowns limit our choice of activities, but perhaps thats not entirely bad. Behavioural economics research shows that reducing choice can make us happier by reducing decision fatigue. You don’t need to choose between going out for dinner and watching Netflix – you can feel satisfied watching Netflix is the best thing to do.

Lockdown is also an opportunity to try new things. Everyone’s into baking bread, why not try that? Studies show that where people are forced to try a new bus route (or, by analogy, a new hobby), most of the time they discover they prefer the new thing and stick with it. Lockdown may have encouraged to bake bread, but you may find you enjoy it enough to keep doing it after the lockdown lifts. Besides, trying a new route to work can make you more innovative and creative.

For myself, CFS meant I could only read for fifteen minutes at a time for several months. I wasn’t happy living that life, but I was content with my choice about what activities I did.

It is only now that I’m better that I’m struggling with what to do with my time. Should I write blog posts? Should I read new books or watch Netflix? Should I write the next great Australian novel? I honestly felt a bit overwhelmed last week thinking through my choices. In a perverse way, getting better from my illness made me feel worse!

…but its ok not to be productive

The hardest thing I’ve had to learn is that you dont need to be doing something all the time. I’ve always tried to live life to the fullest. Spending every moment being productive or collecting unique experiences.

But surely having a disease that literally prevents you from doing productive things is a good excuse, right?

Deep down I questioned my worth as a human being. If I’m not out there helping others through my work as a public servant, if I’m not helping my friend or family, am I still worthy as a person?

You should consider whether you also subconsciously link your productivity with self worth. The two things are not linked. Your inherent humanity does not depend on your ability to help others or deliver a profit or have unique experiences. You don’t always need a purpose in life.

There is a different way of life with deep roots in ancient cultures. Its radically different from our busy lives, but a lifestyle embraced by the mediaeval Chinese and the Pacific Islanders. It’s living a life of being rather than a life of doing.

To quote from Ursula le Guin’s Earthsea series:

When I was young, I had to choose between the life of being and the life of doing. And I leapt at the latter like a trout to a fly. But each deed you do, each act, binds you to itself and to its consequences, and makes you act again and yet again.

Then very seldom do you come upon a space, a time like this, between act and act, when you may stop and simply be. Or wonder who, after all, you are.

Ursula le Guin, the Farthest Shore

Le Guin was inspired by Taoist thought. The concept of wu wei holds that acting in accordance with your true nature is the noblest path. A flea can jump higher than a man, not by any active decision, but by acting in accordance with its own nature. Man alone has been cursed with the ability to decide, and that blinds him as to his own nature.

Moving in accordance with your own nature lets you flow with the current, rather than preconceived ideas. It lets you tap into your inherent strengths.

If Taoism is too abstract for you, consider this anecdote I heard from an old manager of mine. His wife went to work in Papua New Guinea and he tagged along as a house husband. He said that men, predominantly, found it hard to adapt to a new life not imbued with the purpose of work. But he learned to love it, after he got over the relevance deprivation syndrome (he was a manager in an important role back home). Just chilling out playing soccer with local boys one day, to scuba diving the next.

He did what felt natural to him rather than making a conscious choice of constrained optimisation. He simply felt happier for it, more carefree.

It could be a more natural state of being. A friend reposted this inspiring quote from Twitter:

Western cultures believe we must be alive for a purpose. To work, to make money. Some indigenous cultures believe we’re alive just as nature is alive: to be here, to be beautiful & strange. We don’t need to achieve anything to be valid in our humanness.

https://mobile.twitter.com/melatoninlau/status/1419765478474485760?lang=en

Take the time to meditate and reflect

As Ursula le Guin said, it is seldom we get a time like this where we can stop and wonder who we are after all.

Self reflection is a powerfully clarifying experience. I’ve reflected on past mistakes, identifying how I could take a better path in future. I’ve relived wonderful experiences and adventures I had in the past.

It can be painful raking over your past mistakes. It can be even more painful realising you are likely to keep making some of those same mistakes because they arise out of your inherent personality. But our flaws are often the shadows of our strengths. Because my accomplishments also arose from my inherent traits, I realised I will accomplish great things again once I recover.

The process has helped sharpen my purpose in life. It has helped me identify the core me and laid out the paths I might take once I recover. It’s been a very clarifying process.

Learn to really relax

Lockdowns can really increase our stress and anxiety levels. From household disputes, tension and the fear of the global plague, all our circumstances can seem a little overwhelming. I’ve learned a few tricks to tackle chronic stress which I’d like to share.

Stress isn’t all in the mind – it’s a whole of body phenomenon and you can tackle stress with your whole body. Stimulating the vagus nerve, which stretches throughout your body, can destress your body. Try this simple ear massage.

Breathwork can also destress the body. Try box breathing to relax yourself – inhale through your nose for 4 seconds, hold your breath for 4 seconds, exhale through your nose for 4 seconds, hold for 4 seconds and repeat.

Or try 4-7-8 breathing (inhale 4 seconds, hold 7 seconds, exhale 8 seconds). It’s so powerful I can literally feel my body temperature drop when I do these exercises.

I do both breathing exercises just before bed and my smart watch tells me I sleep deeper and my body calms down more when I sleep. If it can help a chronic insomniac, it can help you!

Letting off steam can help relieve anxiety, but try to do it in a way that doesnt make others anxious. I’ve seen some friends posting constantly about the lockdown. Yes, Gladys made some very big mistakes and is wrong for trying to unlock when vaccination rates only reach 60%. But posting on Facebook won’t change anything and you’re making things worse for your friends with anxiety issues.

Feeling bleh? Try sitting in the sun

We naturally generate Vitamin D when our skin is exposed to sunlight. But we don’t generate enough Vitamin D indoors even if you’re sitting in a sunlit room. That’s because UV-C, the part of UV light that we absorb to generate Vitamin D, doesn’t pass through windows.

So get outside. You only need to get around 15 minutes every few days. Without sufficient Vitamin D, you can start becoming depressed within a few days.

Sit in the garden. There’s emerging evidence that exposure to green light can reduce pain. Nature relaxes us in ways that science is only beginning to understand.

Get some fake movement in you. Satisfy your wanderlust by watching travel documentaries (I recommend the Kindness Diaries on Discovery+). People watch with these live HD webcams.

Social connection remains important

In these times of isolation, social connection becomes even more important. Talk to friends on WhatsApp or Zoom. Hang out on Discord or Reddit. Sometimes that little ping notifying you of a Facebook like or Reddit upvote is just what you need.

Extroverts, help out your introverted friends by kick starting that group WhatsApp chat again. A lot of them have died as the pandemic has worn on.

Chronic anxiety wont magically disappear, but you can survive it

Often, self help articles will suggest their tips will make anxiety or boredom go away. We all know that’s crap. There are tricks for managing these often chronic issues, but we cannot eliminate them. They are a part of the human condition. A man who cannot get bored is a man who cannot get excited when the boredom ends.

Try the breathing exercises, they will probably help. But if some anxiety stays, then know that it will pass soon. It has before and it always does. You will survive it.

PS: If this post helped you, please let me know in the comments. I write these posts to try and help others. I don’t have ads and this blog will never become popular. Knowing it helped you gives me inspiration to write more.

Could Long Covid alone do as much economic damage as the Global Financial Crisis?

Key points

• Around 12 to 35% of covid patients still have symptoms such as fatigue a month after infection. This condition is known as long covid. Some 4 to 7 million Americans are likely to have contracted it already.
• Long covid can severely disable people to the point of being entirely housebound or bedbound. It can get worse if people try to exercise beyond their capacity.
• Most long covid patients can no longer work full time or work at all. 1.7 to 4.9% of the labour force could be forced to work part time and a further 0.55% to 1.6% could be forced to stop working altogether.
• This could be a negative shock to the labour market larger than the global financial crisis (GFC). The GFC caused around 3.1% of the workforce to work part time and 1.6% to leave the work force. It took a decade for the labour market to recover from the GFC.
• Unlike the GFC, this will be a permanent decrease in the labour supply. This would in turn shrink the potential size of the economy and lead to inflation. The economy may never recover these gains unless an effective treatment is found for long covid.
• No one has yet quantified the economic impact, which is being masked by the many other major economic events happening now. The labour market shortfalls in covid exposed industries provide some evidence that long covid is already having an impact.
• Because this is an unforeseen event, it could force central banks to unexpectedly slam the brakes early, abruptly slowing the economy. This might be avoided if governments provide support to persons who are already unemployed to temporarily do the jobs of these long covid patients until they get better.
• Research is needed into long covid to find a cure for these people. Policy is also needed to provide a supportive environment for them to return to work once they are healthy enough.

UPDATE: In a later post, I project how many will catch long covid once the pandemic is over. I estimate that 19 million people will catch long covid. This will force 3.4% of the labour force to work part time and 1.7% to stop working altogether. This is roughly the impact of the Great Recession on the US labour market.

Introduction

We all know the story. Covid came out of nowhere, forced us to close borders and then the entire economy. But thats over now. Once we’re sufficiently vaccinated, the economic impact of covid should disappear and we can start to recover, right? Thats what most of the economic analysis is saying.

But most economists have not considered the impact of ‘long covid’. I think it will permanently disable enough people that it will reduce the size of the labour force, leading to inflation rising unexpectedly early and forcing a sudden and sharp rise in global interest rates.

What is long covid?

The UK Government estimates that for about 12% of people who contract covid the symptoms linger for weeks and months after the initial infection. The flu-like symptoms may disappear, but some symptoms like fatigue, brain fog and no sense of smell remain. People who contract a mild case of covid are still able to be severely impacted by long covid. This ongoing illness is colloquially known as long covid.

Assuming around 12% of confirmed covid cases acquire long covid , there are roughly 4 million American long covid sufferers.

Long covid bears a striking resemblance to myalgic encelphalomyelitis/chronic fatigue syndrome (ME/CFS). ME/CFS often arises after a severe viral infection. About 10% of patients with glandular fever will contract ME/CFS, a strikingly similar ratio to those who contract long covid. The initial respiratory symptoms often disappear, leaving fatigue, brain fog and other symptoms. Frustratingly, conventional medical tests can detect nothing wrong with these patients, even those so severely affected they cannot walk or stand. More recent research suggests these patients have a multisystem disorder, affecting their immune, nervous, and digestive systems.

I know ME/CFS well. After a mild cold-like illness that lingered for a month, I contracted ME/CFS. That was three years ago and now I’m in a wheelchair unable to stand. A fortnight ago (until I found some supplements that helped me), I was unable to read for more than ten minutes at a time. Before I fell ill, I was an avid cyclist and hiker and a voracious reader.

The prognosis for ME/CFS patients is grim. There are no approved medications (although there are existing drugs which are known to help). No approved medications are likely to be forthcoming due to a historical lack of funds for research or clinical trials. Only around 5% of CFS patients fully recover, but around 30 to 60% experience some improvement. If patients do not carefully pace, their condition can deteriorate severely. In some cases (like mine), it can deteriorate even if you carefully pace your life. As a result, surveys show patients with ME/CFS have a worse quality of life than cancer patients or those with MS.

Although long covid closely resembles ME/CFS, some cases have visible organ damage which can explain their symptoms. Since unexplained fatigue is a hallmark of ME/CFS, these cases cannot be considered a form of ME/CFS. Other cases of long covid, however, could be considered a type of ME/CFS.

Whether or not long covid is a form of ME/CFS or not, the effects on people’s lives will be devastating. I have a friend who has a lung disorder. The cause of her illness is very different from mine, but both of us suffer debilitating fatigue and can no longer work.

How could long covid affect unemployment?

If long covid patients follow the work patterns of ME/CFS patients, the prognosis for the labour market is not good. It is rare that ME/CFS patients are able to work full time and many cannot work at all. One study found that only around 41.4% of ME/CFS patients were employed. Attempting to work could cause ME/CFS patients to overexert and have a fatigue crash that permanently and significantly worsens their condition.

After every pandemic, there are historical records of a portion of the population who do not recover and suffering from ongoing fatigue and other symptoms that resemble what is now known as ME/CFS. In one notable case, a pandemic in Africa was followed by a famine because the workers were too ill to farm. Covid appears likely to follow this pattern.

Long covid is likely to have a similarly destructive impact on patients’ employment. Around 45% of long covid patients work reduced hours and 22% can’t work at all. Of those still working, major adjustments were required. At least 45% of long covid patients worked from home, and many ask for other accommodations at work like flextime or moving to a role with lower physical or mental strain. “Mind over body” doesn’t work with chronic health conditions. If these people attempt to work more than they are able, they are very likely to end up in a wheelchair like me.

This means around 2.8 million Americans will be forced to work reduced hours or not work for health reasons. That’s an increase in the underemployment rate of 1.7 percentage points* and a reduction in the participation rate of 0.55 percentage points.

*technically this isn’t underemployment since these people are not seeking more hours of work. But it’s a lot easier saying underemployment than saying “part time for health reasons”, so I’m adopting this terminology in the rest of this post.

While these percentages appear small, they are significant. ME/CFS patients tend to be perfectionists with high standards and likely to have been very energetic before their illness. I think of them as people too ambitious or stupid to rest when they needed to recover from an illness. But we’re all familiar with this personality type. They’re the one in your group assignment who does all the work and does it early. They’re that overachiever at work. Taking these people out of the labour market will do disproportionate damage to productivity precisely because they’re the type of people who do all the work and do it well.

The impact of long covid is comparable to the shock to the labour market experienced during the global financial crisis (GFC). The US participation rate fell by 1.6 percentage points from 66.2% in January 2008 to 64.6% in December 2009. Despite a small bounce back, the participation rate has never recovered. This is partly to do with structural trends like automation and offshoring of jobs. But the lesson is that most of those who lost jobs during the GFC never reentered the employment market again.

During the GFC, the underemployment rate (measured as the number of persons in part time work for economics reasons as a proportion of the labor force) also jumped sharply by 3.1 percentage points. In Oct 2007, it was 2.8% and jumped to 5.9% by March 2009. It took a decade to return it to its former level (it was 2.6% in November 2019) as the economy gradually recovered.

That means, using the conservative assumptions stated above, long covid will force as many people to work part-time and a third as many people to lose their jobs as happened during the GFC. This impact is on top of the economic devastation wrought by lockdowns and border closures.

Could long covid be more common than the UK Government thinks?

In my calculations, I’ve used the UK government’s 12% long covid prevalence estimate. This is probably the most robust estimate but it is also significantly lower than other estimates. Other studies generally put the prevalence at closer to 30% of patients (roughly triple as many). According to a recent survey done by the Centers for Disease Control and Prevention, 35% of non-hospitalized patients who had mild COVID-19 cases did not return to baseline health 14 to 21 days after their symptoms started. Another of survey of both outpatient and hospitalised covid cases found around 31% contracted long covid. And yet another survey of non-hospitalised patients found a 35% prevalence rate.

The UK Government estimates there are around 1 million people with self reported long covid – around a quarter the total number of covid cases. Assuming this ratio of long covid cases to confirmed covid cases holds for the US as well, that implies there are 7.3 million long covid cases in the US.

Therefore, my conservative estimate could severely underestimate the number of long covid patients who are no longer fully employed. If we assume a 35% long covid prevalence rate, the underemployment rate woild rise by 4.9 percentage points and the participation rate would shrink by 1.6 points. If instead we assume a quarter of confirmed cases have long covid and that most of these cases are in adults, then the US underemployment rate would rise by 3 percentage points and the participation rate would fall by 1 point.

That means long covid could have an impact on the labour market the same size as that of the GFC. And, unlike the GFC, these people cannot return to the labour force as the economy recovers. They need a cure.

If these long covid patients do not recover, the economy will become permanently smaller. Governments should fund research into long covid and ME/CFS to ensure that any damage is reversible. The good news is that there are plenty of low hanging fruit. There are existing drugs like low dose naltrexone and Abilify that are designed for entirely different purposes but which have been found to help with ME/CFS. But because they are generic drugs, no-one has the funding and incentive to do a clinical trial to prove this benefit to a medical level of certainty.

Is there evidence of long covid’s impact in the economy?

Some evidence is emerging of labour market shortages consistent with the long covid hypothesis. The latest jobs report showed a larger than forecast increase in average hourly wages for a second straight month. This is a result of labour shortages in hospitality and leisure, and in other low wage industries. These are exactly the areas where we would expect to see the most long covid cases – in covid-exposed service industries and lower socioeconomic groups (who were disproportionately infected by covid).

If long covid has taken a large chunk out of the labour force, that would mean affected businesses would be unable to make as many goods or supply as many services if they cannot hire enough staff. As consumers demand more goods and services as the economy recovers, these businesses cannot increase supply to match demand. They can only raise prices, leading to price inflation. Because they cannot find workers at current wages, they must pay more, leading to wage inflation. In order to pay for these wage increases, businesses must charge higher prices, leading to further price inflation.

Inflation has been the great scourge of economists for decades. Large wage rises that are not caused by productivity increases will swiftly be followed by price rises, which in turn leads workers to demand more wage rises and then price rises. This is known as an inflationary spiral and will lead to hyperinflation if it is not controlled. To control inflation, central banks must raise interest rates and the longer they wait, the more abrupt and sharp the rate rises must be.

Long covid, short economic recovery

Since inflation has been stubbornly absent (a low level of inflation is desirable as it is necessary for growth) since the GFC, the Fed has adopted an explicit policy of waiting for inflation to actually appear before it raises rates (as opposed to raising rates in response to forecasted inflation, which is the historical practice).

Inflation has now actually appeared. In fact, last week’s headline US inflation number was the highest in 13 years and core inflation was the highest in nearly 30 years. But the Fed has argued these inflation figures are being skewed by supply bottlenecks and deflation during the pandemic. In other words, this is temporary inflation that will not lead to an inflationary spiral. I have no doubt a large component of last week’s inflation figures are transitory. The question is whether there is a non-temporary portion that is being masked by the transitory inflation. If so, the Fed could be forced to slam the brakes hard when the next inflation figures remain unexpectedly high.

I’ve been monitoring the financial and economic news and I see no sign that the Fed or other market watchers is conscious of the magnitude of the long covid problem and the risk to the labour market. One Bloomberg article points out that long covid “could have enormous social and economic consequences. And these will be magnified if problems end up lasting for years or decades.” But it didn’t attempt to quantify or elaborate on the problem. Neither did the recent Economist article on long covid.

If the Fed isn’t aware of the risk of long covid and if it is blinded by the transitory inflation caused by the pandemic, then there is a risk it could be caught unawares by the impact of long covid on the employment market. The market has priced in low rates until the middle of this decade. A sudden increase in rates would cause the share market to crash and economic growth to slow. Long covid could end up hurting us all.

An unhelpful transition

The US has one of the most dynamic economies in the world and it might well adapt to this labour market shock reasonably quickly. As a friend pointed out, long covid cases have been slowly occurring for a while now and businesses have had a year of lockdown to retool their businesses.

The most obvious ways to replace the former worked afflicted with long covid is with new workers or to automate/offshore the jobs away.

The first option holds some promise. As shown in the graph above, the US participation rate never recovered after the GFC. The millions of discouraged workers who lost their jobs ten years ago might be lured back into the market if there is a little wage inflation. Employers may be more willing to hire and retrain these workers in a tight labour market.

The difficulty is there will be many job matching issues. Many long covid patients will be located in big cities while the discouraged workers may be in rural areas. Many long covid patients may be in lower skill jobs like waitressing. But I would have made a terrible waiter even if I was fully healthy. And many other long covid patients may be in more specialised jobs.

Policy can help by providing retraining or labour matching programs to get these discouraged workers into jobs. But government can only do so much to bridge the gap.

In this more optimistic scenario, we could see the damage done by the GFC finally unwound over a decade later. But we are simply replacing discouraged workers from the GFC with disabled workers. Economic policy should aim to find jobs for these people as they recover. Otherwise, they may wake up one day fully healthy but discover their jobs have been automated away or taken up by formerly discouraged workers.

The other possibility is that businesses could automate away the jobs or move them overseas. This could increase the productivity of the economy, but at the expense of greater inequality and worse employment prospects for the unskilled. Ultimately, if taken too far, it will drag down on consumer demand and slow the broader economy. Automation is a far broader topic, but government can play a role in ensuring tax neutrality between investment in capital and labour.

A third possibility is that because long covid patients no longer receive income they stop purchasing discretionary goods. So while there is a negative shock to the supply side of the economy when they are removed from the labour market, there is a negative shock to the demand side of roughly equal size. In this world, the economy does not overheat with inflation. It’s just smaller than it otherwise would have been. I don’t know what to say about this third possibility except to point out that the world never works out so neatly. Perfect balance only occurs in economics textbooks and Buddhist mantras.

Conclusion

Long covid is likely to do as much damage to the US labour market as the Global Financial Crisis. While this is unavoidable, steps can be taken to limit flow on consequences. This includes retraining programs to replace long covid patients with discouraged workers in the short term. This could help prevent a disastrous unexpected rise in interest rates and stagflation. In the longer term, research into long covid treatments and rehabilitation can return these patients to good health and work.