[Note: THE FOLLOWING MATERIAL HAS NOT BEEN PROOFREAD. WE ARE PUBLISHING IT AS A TEMPORARY MEASURE WHILE FINISHING THE PROOFREADING, IN THE INTEREST OF TIME.]

Russ Roberts:

I guess I could see it being a very powerful reducer of our zero and death if we made all… I shouldn’t have said we made all. If nursing homes chose or sports teams chose to use these tests frequently, they were cheap enough, quick enough and that would allow… Again, you could… There you could be tested before the game. You could show up at the game as a fan. There could be a tailgate party for people waiting for the results. The ones who were positive would be told they have to go home.

Russ Roberts:

There would be a lot of different ways that a test that was cheap, quick and relatively painless could make life better. But I’m wondering about the… I’ll call the Civil Liberties issue. Would you require people with a positive test to go home? Would you pay them to go home as you alluded to a little bit ago? Would you force them to wear an ankle bracelet or install an app on their phone that would allow people to monitor where they’re keeping quarantined?

Paul Romer:

So the basic answer that I want to get to this is that until we have the capacity to test and get this valuable information, it’s premature to worry too much about what we do with that information.

Russ Roberts:

Fair enough.

Paul Romer:

But I do agree that we want to use that information in ways that protect liberty and protect our freedom and don’t encumber us too much. I think there ways to do that. This is part of why I’m very suspicious of the digital contact tracing. I just don’t see how you do that without further eroding notions about privacy and without further entrenching the power of a few just a couple of very powerful firms right now. They have been in discussions where people are saying, “Well, just the new world is we’re going to have to force everybody to carry a cellphone when they’re out on the street.”

Russ Roberts:

With that app on installed that’ll beep if they fail to test so everyone will know.

Paul Romer:

I don’t want to live in a world where we’re forcing everybody to carry and use the product of a couple of firms.

Russ Roberts:

We’re on the same page.

Paul Romer:

I’m not happy about that outcome. The other kind of test results, I have some co-authors on a paper who are from Scandinavia. Their attitude was that there could be a version of this testing that you do at home. Really the progress is so fast that very soon you’ll be able to do a version of the molecular PCR tests at home.

Russ Roberts:

Like a pregnancy test to strap or-

Paul Romer:

Well, like a pregnancy test or the molecular tests involved, putting things in a little pot and keeping it warm for a little while. But we could manage that. It’s simpler than a bread maker. But their attitude was give people the ability to find out whether they’re infectious and then just trust them to do the right thing.

Russ Roberts:

Knowing that some of them won’t. That’s okay. It’s better than something.

Paul Romer:

Yeah. It was like these Scandinavians were instructing me, the guy from the US that’s the home of freedom about actually if you just let people know information, they generally will do things and it turns out okay.

Russ Roberts:

We understand that not everybody will, but there is no solution short of full martial law which I think most of us don’t want that is going to eradicate, fully suppress this. By the way, of course as we’re recording this today, in Wuhan it was announced they have a few new cases. So it’s not clear how well some people have done and with other techniques and et cetera.

Paul Romer:

The modest version of this would just make it possible for everybody to know if they’re infectious and most people aren’t going to want to infect their colleagues, aren’t going to want to infect their friends.

Russ Roberts:

Their grandmother.

Paul Romer:

They’ll take heightened precautions. So I think that’s the simplest way to do it. The next step up would be to say, “Well, there’s certain things where counterparties might not agree to do things with you unless you can show you’ve got a test result.” Like my dentist may not want to see me because they didn’t go to work for me to wear a mask when I’m in the dental chair. My dentists may not want to see me unless I get a test and that’s his choice. I don’t think you need the government to force that.

Paul Romer:

You could even say as part of our security screening stuff at the airport, you’ve got to have either a recent test or take a test at the airport to fly in an airplane. So that could involve a little bit more coercion. But there’s lots of incremental steps we can take to use this information that could save a lot of lives and also bring back the economy. One of the things I would do if we could just get a little bit more testing online from one of these university labs, just get them free of the FDA, get them so they can produce like 20, 50,000 tests a day, just have them test everybody involved in baseball and restart the baseball season.

Paul Romer:

Maybe don’t bring fans into the stands yet, but you could televise games in a stadium. You could test all the players, all of the coaches, the umpires. Any of the service workers who support them. So you could easily start televised baseball games without any risk that we’re going to cause a big spreading event that kills other people and makes the virus spread faster.

Russ Roberts:

We’re talking a minute ago about people doing the right thing. Of course, when your livelihood is at stake, I think it’s tempting to take a chance on hurting other people when it’s otherwise costly to you. As you said before, it might be worthwhile to pay people not to work in certain settings once they got a positive test and if they can’t work from home, et cetera, et cetera. It’s really important to remind people that a lot of people are going to get a positive test who have zero symptoms, who have nothing wrong with them. We do not know yet the full long-term consequences, but most young people get this, nothing happens to them. They don’t even know they have it. Now again, we don’t know the long-term effects, et cetera, but I think that that has to stay front and center.

Paul Romer:

But I think it’s good to emphasize too that this is one of these areas where there’s big kind of like community or social effects not just individual effects. The major league baseball might actually say to play, you have to get tested and if you test positive, we’re not going to let you play because this is part of how we protect the reputation of the entire league. Otherwise, people come shut us down or something. So at various scales, we may have to require people and say, “Look, if you’re not okay with these rules, it’s fine. Just take the season off. Come back next year and maybe we won’t have to require the testing next year.”

Russ Roberts:

I see there being a number of groups here that are desperately working to do something. So let me list them. There are people like you and a little bit like me, but more you than me who were freelancing, trying to spread the word, trying to get ideas out there. There’s government, which is very slow, very laborious, very role oriented, struggling to respond with any urgency as is tragically the healthcare system, the medical supply chains. We’ve exposed a lot of, I think tragic bureaucratic problems with the medical supply chain and we’re going to-

Paul Romer:

Although can I just break character and say something nice about government?

Russ Roberts:

Yeah.

Paul Romer:

The congress did allocate 25 billion for testing. It’s a small part of a much bigger, more complicated response. But there’s been a little bit of positive motion.

Russ Roberts:

Yeah, that’s good. Government does some things, and it takes a while for it to… I don’t know if any of that money has been spent yet, I doubt it. But it well eventually. So we got government, we got individuals like you and me trying to spread the word about what we think is the right thing to do or try to spread information which is very valuable. Then we have foundations like Gates and others. Still bureaucratic but in a different way, but with large sums of money available anywhere, and I think are working very hard to try to do something. Then finally we have people, and I’ll call them Silicon Valley. They’re not obviously all in Silicon Valley, but talented creative people who are racing, working around the clock right now, trying to find a vaccine, trying to find… All kinds of things are happening that I think will lead to some wonderful things down the road even some of them will fail.

Russ Roberts:

But we’re going to learn a lot. This is really what I would call a full-court press among skilled people here. So the question is there’s a bit of a coordination problem here which is, and it’s also the fact that we’ve taken all the money out of the medical system except in certain places. On certain places, you can make a lot of money still. That’s not the places we want that to be all the time and here we want to be in testing, let’s say hypothetically and we’d like somebody to be able to make either a lot of money testing or some way to get the feedback loops correct.

Russ Roberts:

So you could overcome that a little bit. Do you have an idea of how we might mobilize either to get the FDA’s hand a little less clenched around this to take advantage of the economies of scale that you and I both believe would be enormous once this got started. Who are the players who might… And Paul, you got a lot of contacts. People do listen to you. So what are you trying to do? What could we do?

Paul Romer:

I think the administration has already signaled that the FDA is willing to defer to the states if the State Health Department will take the lead on some of these questions. So I think the next step is to persuade the governors that they have the freedom to create a different kind of regime for certifying tests and letting tests unfold. To get the governors to think of themselves as the purchaser of these testing services, many of which they’ll probably buy from their university laboratories within state, maybe out of state and use the commitment of the funds together with the regulatory freedom to say to some of these laboratories with all of this expertise and all of this specialized equipment, if you can provide the tests, we’ll pay you and you’ll be able to cover the costs you incurred to scale this activity up.

Paul Romer:

I think, this involves a commitment by the states to pay for a stream of testing services out into the future. In the middle of this depression, the state budgets have been hammered so ideally we have the federal government that borrows, they give money to the states, the states use that money to go purchase testing services.

Paul Romer:

So let me suggest an alternative model because I don’t find that encouraging. Although a handful of governor’s would make a big difference. You don’t need every governor right away to jump into action. A trial-and-error here is always good. Let some people try it, see what happens. If their states do better, people can say, “Hey, I want to try that.” The thing I notice here, Rutgers, I’m sure there’s some fine people there. Maybe they can produce 5,000 tests. We need 25 million, maybe 50 million.

Paul Romer:

Actually, we need probably more than that because we’re going to be tested early and often. So we need two things, it seems to me. A producer of the tests and a reader of the tests. Those people need to have some credibility ideally as a way to stamp you as clean for now. To do that, I think you need a really large sum of money and a set of industrial level production folk either in the pharmaceutical industry, testing industry. We got to get those folks mobilized. I hate to say it, these people we’re picking on today, but you need an Elon Musk to grab this by the throat and say, “We’re going to make this work and get it done.”

Paul Romer:

Well, let me give you my second kind of a piece of this strategy. So one piece is like these purchase commitments. There will be revenue that if you scale up to be able to produce tests, there’ll be revenue for you if you do it. Another piece though is I’ve said we should create a billion dollar prize that the federal government will give to the first laboratory that shows that it can process 10 million tests a day.

Paul Romer:

If they were competing for a billion dollars, I’ve talked to people in these labs that the molecular genomic stuff is actually pretty easy. They realize the problem they’re going to face is the logistics. How do you get that many tubes in the door, open the tubes, get them. They’re going to need to get services from an Amazon or a Musk or something, but they could hire that in. If they were competing for a billion dollar prize, they would do it. I think there’s no question in my mind that somebody would collect on that prize certainly within six months, maybe sooner.

Russ Roberts:

Well, I like the Chico Marx line from Night at the Opera when they ask… I think Groucho asked him if he can sail tomorrow and Chico says, “If you pay me enough I can sail yesterday.”

Paul Romer:

Exactly.

Russ Roberts:

The greatest cinematic expression of incentives matter. If it’s a $10 billion prize, they might be able to do it less than six months. So here’s my advice to you, Paul and then we’re going to move on to a different topic unless you have something else to say. I want Fred Smith of FedEx or Ryan Petersen of, I think it’s Flexport where these are people who are really good at flying tubes around. So you need a transport thing and then you need a lab to do the turnaround and they need a place that’s producing the tubes and whatever it is, the cups, the boilers or whatever it is to do it quickly.

Russ Roberts:

So I’d like to see you put together an ad hoc committee of extremely talented people who are a mix of logistics, production, science and mobilize this. You got to convince them that this is not just like one other thing we need to be doing, but might be the single best thing we could be doing. I’m open to that myself which is good, but I don’t belong on the committee. So anyway, I think it’s going to-

Paul Romer:

Let me just say that I’m writing an op-ed, I’ve written an op-ed. I’m trying to shop around with Representative Don Beyer and Representative Gonzales, Democrat and Republican from the house pushing this idea of big prizes. The prize for the big centralized lab is one the price for the device at home is another. I think we should use prizes as a way to motivate some big mobilized efforts to solve these problems.

Russ Roberts:

Well, the prize they’ll get the talent to coalesce without a committee. Okay. Let’s go to a different topic if we might. Something I think you’ve thought about. I know everybody is thinking, “I’m thinking about it,” which is what we might call globalization or free trade. So a lot of very smart people right now are saying that… And some not so smart people, I have to say, but a large group of people are saying, “This whole trade thing, this is the kind of thing you get.” And they’re right.

Russ Roberts:

A global world is more susceptible to a pandemic than a world of the Middle Ages. A global world is richer than the Middle Ages. I like to say we’ve tried by local. It’s called the Middle Ages. It’s not a world most of us want to live in, but I do think that the aftermath of this however it ends going forward, whatever the next chapter is, it’s going to involve a conversation about our relationship with China as a trading partner and maybe in other ways I’m afraid to say, I think it will also diplomatically, militarily, we’re in for some dark times. But just economically just on the trade issue, how do you see… I think with me, pretty much a free trader, what’s your response to this situation as a free trader?

Paul Romer:

So one of the first things is that a lot of the problem we face with the spread of viruses right now is just the fact that people want to move around. Unless we’re willing to be draconian and limiting people’s freedom to move around, we have to just face the fact that viruses are going to spread all over the world more quickly than they ever have before. I think their benefits from letting people move around and I think it’s in principle problematic to say we’re not going to let people do something they want to do. This is part of why I’m so keen on trying to… Let me just start.

Russ Roberts:

Yeah, I hear you out there. Go ahead to see if you can quiet those folks down.

Paul Romer:

It’s problematic to try and say that somehow somebody’s going to decide that other people can’t do things they want to do like go see relatives, go see friends, go visit things. Part of why I think it’s so important for us to invest in this testing infrastructure so that when somebody says in the future, “Oh no, they’ve got SARS-CoV number three or number four which is emerged in some other country.” We’ll say, “Well, we’re ready for it. Somebody is going to bring that into the United States, but we’re already testing everybody every two weeks.”

Paul Romer:

As soon as somebody shows up, we’ll find out where it is. We’ll isolate them. We’re good to go. So I think of this investment in the testing infrastructure as a kind of like a health defense that will protect us on a permanent basis from the spread of viruses in the future. And they’re going to spread. I don’t think there’s any way to just pretend that isn’t going to happen or to wish it away.

Russ Roberts:

Well, I guess there is this issue that we talk about what people might have to do to for me to trade with you, to take you as a patient in my dentistry office or to serve you in my restaurant or to have you work in my nursing home. We might want to say we don’t really want to trade with countries so much who have wet markets and really creepy animals. I don’t understand why China has not responded to this by saying forget whether they’re culpable in any way for any of this in sinister ways which I don’t think we have any evidence for, but I think it probably came from… At least we knows other viruses have come from animals in China. Wouldn’t we encourage them to say maybe not do that. I don’t know. Or if you do want to do it because it’s your culture, whatever, which I totally respect, don’t be surprised if people don’t want to buy your stuff.

Paul Romer:

Well, first, I think the Chinese have a pretty big incentive to get this under control. Obviously, they may have some incentives to try and sweep under the rug mistakes or problems from the past, but I think they’ve got a big incentive to solve this. But even if we do decide that they’re not doing a good job at that. What are we going to do? I think buying the goods is really quite separate from the question of the mobility of the people.

Russ Roberts:

Fair enough.

Paul Romer:

Restricting the mobility of the people is going to infringe on the freedoms of people even US citizens who want to go visit places. I guess I don’t think we can solve the by just saying, “We’re not going to have people interact with people from China.”

Russ Roberts:

Well, I don’t know enough of the medical side. Maybe you don’t either. But if we’re at SARS-CoV-17… Right now we’re in what, SARS-CoV-2?

Paul Romer:

Two, yeah.

Russ Roberts:

Well, let’s take three then. SARS-CoV-3, next coronavirus that is scary and creepy and hurts people, we’re not going to immediately be able to test, right? We’re going to have to start from scratch again, develop a new test.

Paul Romer:

This is where it really is pretty cool. They’ve made amazing progress in this world of reading RNA strings so they’ll have all of this… It’s just like all the hardware ready to go and then somebody needs to just tell them, “Here’s the RNA string for this new virus.” Everybody just plugs it into their equipment, and boom, they’re ready to go. So we could be ready to test at almost the drop of the hat as soon as we identify the new viral agent.

Russ Roberts:

Have you looked at all into the vaccine situation or is it just so fraught with uncertainty?

Paul Romer:

I haven’t looked in detail, but I will tell you that though I think the FDA should just back off, get out of the way on this testing process and let the states run with this, I think the FDA actually has to be very careful about approving a vaccine because we have this very tenuous consensus right now that it’s okay for the government to require parents to vaccinate their children. These vaccinations for childhood diseases, these save just hundreds of millions of lives every year.

Russ Roberts:

Incredibly safe.

Paul Romer:

We don’t want to lose that consensus.

Russ Roberts:

It’s true.

Paul Romer:

We have another episode of a vaccine with side effects that are unexpected that kill some. We could in this country at least, just lose the consensus for my mandatory vaccination.

Russ Roberts:

Great point.

Paul Romer:

So I think they’ve got to go carefully on this. And that means it takes time to check all that out and so I think we just have to allow for the fact that in many cases it took five or 10 years to come up with a vaccine for some new disease. So we might get lucky, but we might not and we shouldn’t cut any corners.

Russ Roberts:

I’m guardedly optimistic about that just because again I think there’s an immense amount of human creativity being focused on that one thing. But it may not be solvable quickly.

Paul Romer:

We don’t have an effective vaccine to control influenza. It’s not a disease, but we’ve been working on that one. We don’t have one for the cold. We’ve got a few successes but a few failures.

Russ Roberts:

Let’s close to talk about the labor market which I think about a lot lately. There was a really beautiful piece in the New York Times Sunday magazine a few weeks ago by Gabrielle Hamilton. She’s the chef and founder of a restaurant in New York Prune. I liked it for a lot of reasons. Beautifully written. I recommend it to folks. We’ll put a link up to it. The other reason I liked it is it captured the human dimension of this, the dashing of dreams when a business… Which happens all the time in capitalism, it’s not just during pandemics. But a business that somebody put their life into, put all their hopes, all their capital, all their emotional capital and then it’s over. This happens. Competition comes along. In this case, it’s a pandemic.

Russ Roberts:

But you think about the cascade of effects so the busboys, the waiters, the waitresses, the suppliers, the truck driver, all the people who threw the beautiful tapestry of interactions that emerge out of buying and selling, that are now cut. So those people have to go reassemble into some other collection of employment. Of course, there’s a lot of places that are booming if you can handle it. There are many, many jobs that are booming, but they’re very specific, they don’t usually involve the talents of… I’m talking about fulfilling orders, delivering packages.

Russ Roberts:

Some wonderful expansions going on obviously that our economic responses that you’d expect at a market system. But part of the challenges is that it’s really hard to reallocate people partly because we cushion the blow, which is a humanitarian thing through unemployment insurance or through other forms of aid. Do you have thoughts on what we can do to make that reassignment better as… Reassignment is the wrong word because nobody is doing the assigning.

Paul Romer:

Reallocation, yeah.

Russ Roberts:

Reallocation. I say that with the important side point which I think is totally, I just don’t know how this is going to play out, but it’s possible people won’t want to eat in restaurants for five years. I don’t think that’s true. I think well we’ll go back to “normal” quicker than most people think, but all the people who drive Uber, all the people do these things that are really creative and wonderful are suddenly going to find themselves with nothing. And the question is, is that reassignment is… Let me frame it one more way. We put the economy in a freezer and when we thaw it, it’s not like, “Everybody go back to work now.” No, they’re not because a lot of those places aren’t going to work whether you allow them to go back or not.

Paul Romer:

I think one of the strengths of the US economy was that we had a system where people’s jobs could just go away, but it was also a system where it was relatively easy to go get a new job. So those high rates of turnover of job destruction, job creation, that was a good system to be in. The problem with a period right now is we’ve gotten a huge surge in job destruction and no offsetting huge surge in job creation.

Paul Romer:

This is what we run into it in most recessions, we just have it in much bigger quantities than we’ve ever faced before. So I think it’s hard to know how to respond to this. I think one side of it is just to recognize that there’s some ambivalence on the part of most voters about just cash transfers as a way to help other people. I think there’s a lot more support for the idea that you can offer somebody something in exchange for work that they do.

Paul Romer:

So I think we should be looking at things like possibly even the Civilian Conservation Corps that Roosevelt set up during the 1930s, which is not a particularly attractive job option, but at least it’s something so that you can make sure that people aren’t just destitute if they just run out of other options.

Paul Romer:

So I think we may end up thinking about these job creation, kind of government job creation opportunities where the goal is not to make them permanent jobs, not necessarily to make them even particularly attractive jobs, but at least jobs that give people a bare minimum of security and dignity, and independence. Beyond that, I think that the most important thing to do is just to stop the fear which is killing the restaurant business and killing my chance to go see my dentist.

Paul Romer:

Again, I think all we need is the information whose infectious right now. If we just knew whose infectious right now or whose infectious with the next pathogen in the future, we just had that information. We could make some small adjustments and get back to the economy that we had. Maybe some jobs like programs, maybe some continuing financial help to just get people from going into bankruptcy. But as much as possible, just remove the fear and then let people go back to doing what we do which is figure out ways to work together and create value.

Russ Roberts:

My guest today has been Paul Romer. Paul, thanks for being part of EconTalk.

Paul Romer:

Good. It’s a pleasure.