CSI: American Carnage (Tuesday, May 26, 2020)
WASHINGTON — Kevin smiles out from the screen at Dana, who asks, Do you think it’s possible unemployment will be in double digits in November? Kevin nods vigorously. Yes, he says, oh yes, of course I do, of course it’s possible. Is it probable? Well that depends. The president is seeking to remove as many corrupted work units as possible, so that creates a problem and an opportunity. Dana says, Explain. Kevin, smiles broadly, laughs modestly, and says, I’ll do my best, Dana. You see you have a relatively fixed number of work units, and yes, you have modest increase due to natality, which has been dipping in recent decades, but the overall number is fixed, for our purposes. To make the numbers work, okay. When you open up, how much of a shock is that to your totals? It depends on the proportion of eliminated units to total remaining units, okay. It’s a simple but tricky equation. The president said it is something along the lines of rate of change equals change in y over change in x. This corresponds to an increase or decrease in the y-value between the two data points. When a quantity does not change over time, it is called zero rate of change. So the president believes that it’s best to simply assume zero, although it is dependent on the as-yet undetermined mortality rate of the virus, which the president believes could well be less than zero. So the employment rate is dependent on several moving variables, which we are modeling, and I don’t have a definitive answer yet. We’re crunching the numbers as we speak. Remember, WW2 provides a clue. My good friend, the economist Robert Barro, has said that he thinks it looks a little bit like, at the end of World War II, the countries that didn’t have their capital stocks destroyed by the war, that, when the war ended, they pretty much got their economies going at a rate of 40 or 50 percent a year. Very exciting. You look at Europe, lots of wrecked capital stock. You look at the United States, no biggie. That’s a big contrast. So when the system takes a big negative hit in a black swan event, the question arises, how does that system get up and back on its upward slope? Right? We’ve lost at most 100,000 units – out of 330,000,000. That’s .03030303030303 percent of the units, a really good number. Remember, not all of those eliminated units are productive, okay. And of course we’re assuming, as I said, an effective zero rate of growth in total productive units, but actually, there is a slight growth, so the effective result is that the event serves to maintain the unit balance at no growth for the foreseeable future, up to and including November. Now here is the great part, Dana, and we’re really excited about this, we don’t have — our capital stock hasn’t been destroyed, our human capital stock is ready to get back to work, and so that there are lots of reasons to believe that we can get going way faster than we have in previous crises. So the numbers are going to go down, in terms of total units, but we are anticipating that, once you do your weeding, those productivity numbers are going to soar. Just soar. Tuesday, May 26, 2020