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Reasons For Scepticism About Nominal GDP Targeting

There has been an ongoing push for a switch to nominal GDP targeting by Market Monetarists and some mainstream allies. Although I agree that being able to hit a nominal GDP target would be attractive, it would also be attractive to have a yacht. There …

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There has been an ongoing push for a switch to nominal GDP targeting by Market Monetarists and some mainstream allies. Although I agree that being able to hit a nominal GDP target would be attractive, it would also be attractive to have a yacht. There are a few fundamental issues with nominal GDP targeting. The first is that the target is going to be harder to hit than an inflation target. The second is that it is unclear how much of an advantage the change would have in practice — as opposed to in neoclassical models. Finally, it looks like a much harder proposition to convince voters that a nominal GDP target makes more sense than an inflation target.

One of the more approachable discussions of nominal GDP targeting is this discussion from Bullard from a few years ago: https://www.stlouisfed.org/publications/regional-economist/second-quarter-2019/bullard-nominal-gdp-targeting. I must confess that I read some of the nominal GDP targeting literature years ago, but have not kept abreast of the latest developments.

Yay For Abolishing the Business Cycle

The usual means of justifying a switch to nominal GDP targeting is to point to advantageous properties within in mainstream models. This requires one to take these models seriously, which I do not. However, it is easy to see that there would be theoretical advantages over inflation targeting — under a key assumption.

Let us assume that we can use monetary policy to achieve the following.

  1. We can control the rate of nominal GDP growth.

  2. We can control the rate of inflation.

Controlling nominal GDP growth implies that we are controlling gross domestic income. This means that we have stabilised gross incomes. This means that we have effectively abolished the business cycle.

Given a choice between stabilising inflation and abolishing the business cycle, I can see the attractions of the latter possibility. However, the last time mainstream economists promised that they could use the science of macroeconomics to abolish the business cycle — the 1960s — it did not work out well.

When we look at neoclassical models, they are built around the assumption that all markets clear in equilibrium — which includes forward markets. If the central bank is not happy with with a possible future path for the price of goods, it allegedly can change interest rates so that prices go where they are supposed to. (How exactly a central bank can set the policy rate based on expected prices without those prices being already determined in markets is one of those questions that neoclassicals prefer to avoid discussing.) This means that the central bank can enforce its objectives on the economy.

Neoclassicals switch between arguing that economic mathematical models are tentative but empirically sound to then demanding that policy be examined using models which imply implausible central bank powers. As such, we need to look at the empirical record and ask whether a different policy framework might have fared better.

Nominal GDP and Inflation Correlated

When we look at past cycles, we discover that both nominal GDP and inflation tend to be pro-cyclical. (If we define “inflation” as the change in the GDP deflator, nominal GDP growth and “inflation” are mechanically linked by real GDP growth. This means that the two time series are at least somewhat correlated — both rise and fall in a linked fashion.

The correlation is not perfect, the usual observation is that inflation lags the cycle, while nominal GDP is coincident with the business cycle (almost by definition). Although economists love discussing various theoretical “shocks,” it is very hard to find situations where inflation and nominal GDP go in opposite directions for anything other than short periods of time.

This means that there is not going to be a major difference in policy decisions in terms of dealing with large changes to the business cycle (e.g., recessions). Where one might see a difference is in cases where growth and inflation are steady — and only one variable differs from its target. We had such stability in the middle of the business cycles from 1990-2020, but that has not been the situation recently.

Level Targeting

One of bright ideas that Market Monetarists have been pushing is a level target — rather than trying to get the target variable to grow near a target level, instead there is a level target that grows at desired rate. That is, instead of hoping that nominal GDP growth is around 5%, we instead pick a reference level of nominal GDP, and grow that target by 5% per year.

This means that if we overshoot the desired growth rate, the level of the targeted time series will deviate from the target level. This implies the need for a corresponding overshoot of growth to erase the deficit. For example, imagine that the nominal GDP growth target grows by 5% per year, and we start out at the target level. If growth undershoots by 1% (4% growth), we would need 6% nominal GDP growth in the second year to erase the deviation — just returning to 5% growth is not enough.

The alleged advantage of this involves (surprise, surprise) expectations. If the policymakers commit to erasing deviations from target, this is supposed to affect behaviour so that the deviations will not be allowed to happen. (It works great in the models, trust me.)

Given my control engineering background and decent knowledge of modern economic history, such a policy framework is horrifying to me. Unless the expected return to target is drawn out extremely slowly, policymakers are committing to a policy of destabilising growth dynamics. For every deviation that happens, a corresponding “counter-deviation” has to happen. Any sort of inertia in the response to policy pretty much guarantees oscillatory deviations (assuming that central bankers were not impeached for raw incompetence, which is what one would expect to happen in the real world).

Meanwhile, if the time to erase deviations is stretched out to a long period, policymakers are effectively saying that they want a cycle that deviates from desired growth rates for an extended period. If there is a growth overshoot, they then want a long period of sluggishness to follow.

In any event, this resembles the rather disastrous policy stances of the inter-war Gold Standard. Policymakers forced through austerity policies in order to regain pre-World War gold parities, which did not help the brittle political economy of the period.

What Would Have Happened This Cycle?


It is very hard to see how using a nominal GDP target would have made a difference in this cycle. Both inflation and nominal GDP had a similar pattern — an undershoot of desired levels during the pandemic itself (oil futures prices going negative), coupled with an overshoot afterwards.

  • If the target were expressed as a target growth rate and not a level target (like most inflation targets now), then we would have had an unavoidable undershoot due to the pandemic restrictions, then the overshoot as restrictions reversed and stimulus hit. Although it might have been easier to believe that inflation would be “stickier” than nominal GDP growth and thus be more transitory, the extent of the nominal GDP overshoot we saw was obviously incompatible with either a nominal GDP or inflation target on a forward-looking basis.

  • If the target were expressed as a level, it is hard to see the attractions. In the figure above, I set a target nominal GDP level for the United States that grows at 5% per year, with a base year of 2018. The entire pandemic/post-pandemic trajectory just brings us back to target. The burst of inflation that was politically unpopular was literally what a level target objective implies is an “optimal” outcome.

Paging Goldilocks

In this current cycle, if policymakers were to hit either an inflation or nominal GDP target, they needed to steer the economy to the Goldilocks outcome: growth continued without causing inflationary bottlenecks. In places like Canada and the United States, there was considerable fiscal support to compensate for the enforced shutdowns. This meant that demand was supported while supply constrained, which implies bottlenecks. Although one could imagine that alternative policy frameworks could have resulted in better outcomes, those frameworks were not put in place in advance, and there was no way of organising them amid the administrative chaos.

Monetary policy — by conventional standards — was loose, and thus allegedly accentuated the fiscal stimulus. (Many MMTers will debate the effects of monetary policy.) The only way that the recent inflation spike would have been avoided if central bankers managed to fine tune monetary policy settings so that growth remained more moderate. (In my view, supply chain disruptions implied at least a transitory inflation spike, so I am not holding forth the possibility that inflation rates be perfectly on target — which some of the more extreme Market Monetarists insist that central banks can achieve.)

However, central banks were stuffed to the gills with neoclassical doctorates who gave us a consensus view that the inflation spike would be transitory. Even putting aside the effects of the Russian war of aggression, this was a serious forecast miss. If your massive teams of neoclassical economists blow their forecasts, it does not matter what objective you set for them: they are going to miss it.

Political Issues

Even if we grant there are some technical advantages for nominal GDP targeting, the main reason I do not take the policy seriously is that it has serious political disadvantages versus an inflation constraint of some form. (This could either be an inflation target, or a fuzzier objective that mixes an inflation goal with goals for employment or growth.) I will sketch out the argument here, since it is a subtext of my previous article discussing the political attractions of an inflation target.

The most important issue is that a nominal GDP growth target does not answer the question: why does a fiat currency have value in exchange? A currency peg offers a somewhat self-evident answer to that question — although if the peg is to another fiat currency, it raises some philosophical questions. An inflation target is a vague commitment to “peg” to the price of a basket of domestic consumer goods, which is understandable to everyone except the CPI conspiracy nutters. What does a nominal GDP target allow someone to buy?

James Bullard in his earlier linked article alluded to “communications issues,” which is what I am referring to. I write advanced popularisations of concepts in this area of economics, and I do not see any particularly exciting way to sell the policy.

The first barrier is that I would guess that a very small number of people understand what nominal GDP is. Although it is clear that many people do not understand the CPI either, they at least have a somewhat instinctive idea of what “inflation” is supposed to be. (The popularity of a certain website that adds 6% to US CPI inflation rates tells us that a lot of those people are innumerate.) We see a lot of references to GDP in financial/economic media, but it is typically real GDP, not nominal. Telling people that the central bank should drop worrying about inflation to target some economic concept that they have never heard of is a hard sell.

Shifting gears and saying that stabilising nominal GDP will have attractive properties runs into the question of why not target what you are actually interested in? If having stable nominal GDP means that inflation would be stable, why not target inflation and drop the indirection? Saying that you want to abolish the business cycle raises the question as to why not target a key business cycle indicator like unemployment? Why not be crazy and give the central bank a dual mandate like “maximum employment, stable prices” (and maybe even throw in “ moderate long-term interest rates”)?

Saying that CPI inflation rates are supposed to average 2% is meaningful for both households and firms. For households, it gives a guideline for financial planning. For firms, they generally cannot expect their output prices to deviate too far from 2% over extended periods. A nominal GDP target gives us very little information to most economic agents. Is the growth inflation or real? What will population growth be?

Although a 2% inflation target was somewhat arbitrary, a 5% (or whatever) nominal GDP target is even more arbitrary. The 1990-2020 period saw inflation run around 2% in most of the developed countries (Japan being a notable exception), and one can argue that it is low enough that it was not a political issue other than for the hard money nutters. There is no law of economic nature that determines the breakdown in nominal GDP growth — is 5% nominal growth the result of 1% real growth, 4% inflation, or 4% real growth, 1% inflation? Those two outcomes are going to be viewed in very different ways by politicians, while central bankers are supposed to be indifferent to them under a nominal GDP target.

Concluding Remarks

This treatment is brief because I do not view nominal GDP targeting to be politically viable. Mainstream economists are going to use the concept to publish papers, but it is going to be hard to convince people outside their in group. In the real world, people who have been paying attention have seen highly credentialled first claim to have abolished the business cycle (“the Great Moderation”) only to have them take desperate actions to save the financial system. (That financial fragility was courtesy of light touch regulation championed by prominent mainstream economists.) More recently, central bankers dropped the ball on their “transitory inflation” call. This is not a great environment to try to convince people that pretty much the exact same people are now going to micro-manage nominal GDP.

Email subscription: Go to https://bondeconomics.substack.com/ 

(c) Brian Romanchuk 2022

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International

Weekly Digest – December 16, 2022

Friday, December 16, 2022Volume 3, Issue 59 Quote of the Week “Remember that you must behave as at a banquet. Is anything brought round to you? Put…

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Friday, December 16, 2022
Volume 3, Issue 59


Quote of the Week

“Remember that you must behave as at a banquet. Is anything brought round to you? Put out your hand and take a moderate share. Does it pass by you? Do not stop it. Is it not yet come? Do not yearn in desire toward it, but wait till it reaches you. So with regard to children, wife, office, riches; and you will some time or other be worthy to feast with the gods. And if you do not so much as take the things which are set before you, but are able even to forego them, then you will not only be worthy to feast with the gods, but to rule with them also. For, by thus doing, Diogenes and Heraclitus, and others like them, deservedly became divine, and were so recognized.”

— Epictetus, The Enchiridion, 15


Fortune Cookies

Fortune cookies are entertaining because they come with a vague statement that can often be interpreted positively. But they are usually not to be taken seriously. This is why I find myself annoyed when I read “fortune cookies” on Twitter that provide vapid advice claiming to make inherently difficult things easy to accomplish. 

Since we are approaching the end of the year when many people start thinking about New Year’s resolutions, I thought that I would provide eight (hopefully) higher quality “fortune cookies” of my own that took many years to figure out. 

  • Almost nothing worthwhile can be achieved without considerable effort. If you want something, be prepared to work very hard to get it.
  • If you hate your job, find a different one or switch to a different career. If you are still young, “retirement” is almost certainly a mistake. Find something that you are good at and enjoy doing and then commit to it wholeheartedly. 
  • Commit to reading 25 pages per day. That is over 9,000 pages per year and will put you at the very top in terms of attainment of wisdom, provided that you read with purpose. While difficult at first, it will get easier in time. Eventually, it will be very difficult to not read on a daily basis. Such days will feel incomplete.
  • Start a journal. Writing for fifteen minutes every morning can make a big difference in setting the tone for the day and keeping your goals on track.
  • Avoid hatred at all costsHatred leads to disaster and harms the person doing the hating more than the target of hatred. Instead of falling into hatred, disassociate from toxic people, especially in cases of lies and deception.
  • Be kind to others, especially those who through no fault of their own have been dealt a bad hand. But never allow someone to take advantage of your kindness. Provide a helping hand, not a handout, and never facilitate dysfunctional behavior. Cut people out of your life who are only interested in money.
  • Avoid envy. The people you see on social media who appear to have “perfect lives” almost certainly do not. Many are secretly miserable and hide behind beautiful fictions posted on social media to fool themselves as well as others.
  • Do not confuse frugality with cheapness. Default to generosity when it makes sense. Being cheap when it comes to health and well-being is stupid, and the same is true for intellectual pursuits. Books distill thousands of hours of the author’s time for the cost of a restaurant meal or less. Never budget for books.

These might be “fortune cookies”, but they could actually make a positive impact even though none are necessarily easy to implement. I can say that all of these concepts have helped me despite taking years or, in some cases decades, to really figure out.


Articles

Consoles and Competition by Ben Thompson, December 12, 2022. This article provides over forty years of history of the video game industry before analyzing the FTC’s attempt to block Microsoft’s acquisition of Activision. As someone who is not familiar with the intricacies of this case, I found the lengthy discussion of the industry’s history very valuable since it provides necessary context. “For the record, I do believe this acquisition demands careful overview, and it’s completely appropriate to insist that Microsoft continue to deliver Activision titles to other platforms, even if it wouldn’t make economic sense to do anything but. It’s increasingly difficult, though, to grasp any sort of coherent theory to the FTC’s antitrust decisions beyond ‘big tech bad’.” (Stratechery)

Sea Change by Howard Marks, December 13, 2022. In this memo, Howard Marks points out that forty years of declining interest rates represented a major tailwind for investors. He likens falling interest rates to a moving walkway in an airport. Just as moving walkways make life easier for weary travelers, falling interest rates act as an assist for investors. However, this secular decline in interest rates appears to be at an end which represents a sea change in the investment landscape. Investors need to be aware that the strategies that worked well over the past forty years may not lead to outperformance in the future. (Oaktree Capital)

The California Effect by Mr. Money Mustache, December 10, 2022. The cost of living is famously high in the San Francisco Bay Area where Mr. Money Mustache recently spent a few days observing the attitudes of people with very different approaches to spending money. The reality is that even in the most expensive regions, spending excessively is always a choice, not an inevitable mandate. “San Francisco professionals live in a place where 25-year-old tech workers enjoy $200,000 starting salaries, yet still have credit card debt and car loans, and they think that is normal.” (Mr. Money Mustache)

The College Essay Is Dead by Stephen Marche, December 6, 2022. Will artificial intelligence kill the college essay? Anyone who has played with ChatGPT, a new AI tool that recently opened to the public, might be asking the question which this article explores. I admit to being a little baffled about the handwringing. After all, when I was in college three decades ago, we took exams using technology no more advanced than blue books and a pen or pencil. AI might help students cheat on work done outside the classroom, but you cannot fake your way through an exam where there is no technology other than paper and a writing implement. (The Atlantic)

Ideas That Changed My Life by Morgan Housel, December 7, 2022. Among other topics, Morgan Housel makes an excellent case for reading. Otherwise, your personal experiences will excessively influence your perception of how the world works. “Your personal experiences make up maybe 0.00000001% of what’s happened in the world but maybe 80% of how you think the world works. People believe what they’ve seen happen exponentially more than what they read about has happened to other people, if they read about other people at all. We’re all biased to our own personal history.” (Collaborative Fund)

Thankfully, Life Is Full of Problems by Lawrence Yeo, December 7, 2022. I was reminded of Viktor Frankl when I read this article. Frankl held that people gain a sense of purpose not through a tensionless state but by struggling and striving toward a personally meaningful goal. Lawrence Yeo makes a similar case. What we must do is to “upgrade” from dealing with meaningless problems to a focus on addressing “heavyweight” problems. (More to That)

The Gift of Time by Nick Maggiulli, December 13, 2022. Almost everyone thinks about money in terms of goods or services it can buy. But money is really the gift of time: “Because everything I write isn’t really about money, it’s about time. Time with your loved ones. Time to enjoy yourself. Time to live the life you want. In the end, all of your money will be converted back to time anyways. If not now, then later. And if not by you, then by someone else. Possibly after you’re gone.” (Of Dollars and Data)

Be Wary of Imitating High-Status People Who Can Afford to Countersignal by Rob Henderson, December 11, 2022. This article argues that we should avoid emulating people who have achieved status far above ours, and instead look to those who are just somewhat ahead of us. People with very high status can afford to exhibit unusual behavior. For example, a famous author doesn’t need to use Twitter personally to surface his writing because his fans will do this for him. That’s not the case for most authors seeking wider distribution of their work. (Rob Henderson’s Newsletter)

How Neuroscience Confirms the Most Ancient Myths About Music by Ted Gioia, December 12, 2022. Music has a tremendous capacity to influence our lives as listeners, often putting us into flow states conducive to productivity. For example, I often listen to The Dave Brubeck Quartet’s performance at Carnegie Hall in 1963 when I want to get serious work done. For musicians, performing can induce an even deeper flow state, as Ted Gioia describes: “In the midst of an intense performance, the music seemed to be playing itself.” This article on music and neuroscience is part of a book being published in installments on Substack. (The Honest Broker)


Podcasts

Tom Gayner Discusses the Evolution of Markel, December 14, 2022. 56 minutes. This is a wide-ranging interview covering topics including Berkshire Hathaway’s recent investment in Markel, the growth of Markel Ventures in the context of the company’s overall capital allocation strategy, the use of leverage, and how investing during the pandemic was more challenging than the financial crisis. (Boyar Value Group)

The Essays of Warren Buffett, January 20, 2022. 1 hour, 58 minutes. According to Lawrence Cunningham’s newsletter, which you can sign up for here, the sixth edition of his compilation of Warren Buffett’s shareholder letters will be released early next year. I have the first and second editions and highly recommend the book. While all of the letters are available on Berkshire’s website, the compilation is organized by topic and adds significant value. In this podcast, David Senra provides his enthusiastic commentary about what he took away from this book. (Founder’s Podcast)

Master of Precision: Henry Leland Founder of Cadillac, May 31, 2020. 1 hour, 10 minutes. I think Steve Jobs and Henry Leland had much in common in terms of insisting on high quality and viewing their role as craftsmen, paying obsessive attention to details. “There always was and there always will be conflict between Good and Good Enough. In opening up a new business one can count on meeting resistance to a high standard of workmanship. It is easy to get cooperation for mediocre work, but one must sweat blood for a chance to produce a superior product. —Henry Leland” (Founders Podcast)

DoorDash: Looking for Profitable Routes, December 14, 2022. “DoorDash was founded in 2013 by four Stanford students, who saw an opportunity to make it easier for people to get the food they love delivered to them. Today, DoorDash’s three-sided marketplace serves as one of the largest local delivery companies in the world, serving millions of customers and partnering with hundreds of thousands of restaurants across 27 countries, run rating at over $50 billion of gross merchandise value.” (Business Breakdowns)


Twitter Threads

This is a brief thread on the importance of reading. It is based on The Use of Letters, a journal entry I wrote early last year. Why would anyone voluntarily limit their understanding of the world to just their own direct experiences?

Checking quotes frequently is counterproductive. There is too much noise in quotes when checked on a daily basis and doing so is likely to make most investors miserable.

The origin story of the Eiffel Tower:


A Shepherd and His Flock in Winter

From Wikipedia:

Frederick Ferdinand Schafer (August 16, 1839 – July 18, 1927) was a German-born American painter. He was born in Braunschweig, Germany and he emigrated to the United States in 1876, at age 37. 

Schafer’s paintings, which mostly depict landscape scenes in California and other western states, are dated between 1873 and 1911. There are many scenes of Yosemite National Park included in a catalog of his paintings. As the weather turns colder, I thought that this scene of an unknown location captures the season quite well.

A Shepherd and His Flock in Winter, Frederick Ferdinand Schafer (public domain)

Here is a description of this painting by Jerome H. Saltzer, Professor of Computer Science Emeritus at the Massachusetts Institute of Technology:

“This painting might be described as luminist in style. Paintings such as this one may be the basis for the suggestion that Schafer’s later work was lighter, but the shortage of dated paintings makes it difficult to confirm that suggestion.”


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International

FDA advisory committee votes unanimously in favor of a one-shot COVID-19 vaccine approach – 5 questions answered

Many questions remain about next steps for US vaccine policy. But the FDA advisory panel’s hearty endorsement of a single-composition COVID-19 vaccine…

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The FDA advisory committee discussed vaccine safety, effectiveness of the current shots, potential seasonality of COVID-19 and more. wildpixel/iStock via Getty Images Plus

The U.S. Food and Drug Administration’s key science advisory panel, the Vaccines and Related Biological Products Advisory Committee, met on Jan. 26, 2023, to chart a path forward for COVID-19 vaccine policy. During the all-day meeting, the 21-member committee discussed an array of weighty issues including the efficacy of existing vaccines, the composition of future vaccine strains and the need to match them to the circulating variants of SARS-CoV-2, the possibility of moving to an annual-shot model, the potential seasonality of the virus and much more.

But the key question at hand, and the only formal question that was voted on, following a proposal from the FDA earlier in the week, had to do with how to simplify the path to getting people vaccinated.

The Conversation asked immunologist Matthew Woodruff, who has been on the front lines of studying immune responses to COVID-19 since the early days of the pandemic, to walk us through the big questions of the day and what they mean for future COVID-19 vaccine strategies.

What exactly did the advisory committee vote on?

The question put before the committee for a vote was whether to move to one COVID-19 vaccine consisting of a single composition for all people – whether currently vaccinated or not – and away from the current model that includes one formulation given as a primary series and a separate formulation administered as a booster. Importantly, approved formulations could come from any number of vaccine manufacturers, not just those that have currently authorized vaccines.

The U.S. Centers for Disease Control and Prevention currently requires that the primary series of shots, or the first two doses of the vaccine that a patient receives, consist of the first generation of vaccine against the original strain of SARS-CoV-2, known as the “Wuhan” strain of the virus. These shots are given weeks apart, followed months later by a booster shot that was updated in August 2022 to contain a bivalent formulation of vaccine that targets both the original viral strain and newer subvariants of omicron.

The committee’s endorsement simplifies those recommendations. In a 21-to-0 vote, the advisory board recommended fully replacing, or “harmonizing,” the original formulation of the vaccine with a single shot that would consist of – at least for now – the current bivalent vaccine.

In doing so, it has signaled its belief that these new second-generation vaccines are an upgrade over their predecessors in protecting from infection and severe illness at this point in the pandemic.

If the FDA panel’s recommendation is endorsed by the CDC, only a single composition of vaccine – in this case, the updated bivalent shot – will be used for both vaccinated and unvaccinated people.

Will the single shot remain a mixed-strain, or bivalent, vaccine?

For now, the single shot will be bivalent. But this may not always be the case.

There was a general agreement that the current bivalent shot is preferable to the original vaccine targeted at the Wuhan strain of the virus by itself. But committee members debated whether that original Wuhan vaccine strain should continue to be a part of updated vaccine formulations.

There is no current data comparing a monovalent, or single-strain, vaccine that targets omicron and its subvariants against the current bivalent shot. As a result, it’s unclear how a monovalent shot against recent omicron subvariants would perform in comparison to the bivalent version.

What is immune imprinting, and how does it apply here?

A main reason for the debate over monovalent versus bivalent – or, for that matter, trivalent or tetravalent – vaccines is a lack of understanding around how best to sharpen an immune response to a slightly altered threat. This has long been a debate surrounding annual influenza vaccination strategies, where studies have shown that the immune “memory” that forms in response to a prior vaccine can actively repress a robust immune response to the next.

This phenomenon of immune imprinting, originally coined in 1960 as “original antigenic sin,” has been a topic of debate both within the advisory committee and within the broader immunological community.

Although innovative strategies are being developed to overcome potential problems with routinely updated vaccines, they are not yet ready to be tested in humans. In the meantime, it is unclear how bivalent versus monovalent vaccine choices might alter this phenomenon, and it is very clear that more study is needed.

Is the committee considering only mRNA vaccines?

While a significant portion of the discussion focused on the mRNA vaccine platform used by both Pfizer and Moderna, several committee members emphasized the need for new technologies that could provide broader immunological protection. Dr. Pamela McInnes, a now-retired longtime deputy director of the National Center for Advancing Translational Sciences, highlighted this point, saying, “I would make a plea for ongoing research on broader protection, maybe different platforms, maybe a different approach.”

A good deal of attention was also directed toward Novavax, a protein-based formulation that relies on a more traditional approach to vaccination than the mRNA-based vaccines. Although the Novavax vaccine has been authorized by the FDA for use since July 2022, it has received much less national attention – largely because of its latecomer status. Nonetheless, Novavax has boasted efficacy rates on par with its mRNA cousins, with good safety profiles and less demanding long-term storage requirements than the mRNA shots.

By simplifying the vaccine schedule to include only a single vaccine formulation, the committee reasoned, it might be easier for competing vaccination platforms to break into the market. In other words, newer vaccine contenders would not have to rely on patients’ having already received their primary series before using their products. Companies seemed ready to take advantage of that future flexibility, with researchers from Pfizer, Moderna and Novavax all revealing their companies’ exploration of a hybrid COVID-19 and flu shot at various stages of clinical trials and testing.

Would the single shot resemble flu vaccine development?

Not necessarily. Currently, the influenza vaccine is decided by committee through the World Health Organization. Because of its seasonal nature, the strains to be included in each season’s flu vaccine strain for the Southern and Northern hemispheres, with their opposing winters, are selected independently. The Northern Hemisphere’s selection is made in February for the following winter based on a vast network of flu monitoring stations around the globe.

Although there was broad consensus among panelists that the shots against SARS-CoV-2 should be updated regularly to more closely match the most current circulating viral strain, there was less agreement on how frequent that would be.

For instance, rapidly mutating strains of the virus in both summer and winter surges might necessitate two updated shots a year instead of just one. As Dr. Eric Rubin, an infectious disease expert from the Harvard T.H. Chan School of Public Health, noted, “It’s hard to say that it’s going to be annual at this point.”

Matthew Woodruff receives funding from the National Institute of Health and the US Department of Defense to support his academic research.

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Spread & Containment

Measles virus ‘cooperates’ with itself to cause fatal encephalitis

Fukuoka, Japan—Researchers in Japan have uncovered the mechanism for how the measles virus can cause subacute sclerosing panencephalitis, or SSPE, a…

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Fukuoka, Japan—Researchers in Japan have uncovered the mechanism for how the measles virus can cause subacute sclerosing panencephalitis, or SSPE, a rare but fatal neurological disorder that can occur several years after a measles infection.

Credit: Kyushu University/Hidetaka Harada/Yuta Shirogane

Fukuoka, Japan—Researchers in Japan have uncovered the mechanism for how the measles virus can cause subacute sclerosing panencephalitis, or SSPE, a rare but fatal neurological disorder that can occur several years after a measles infection.

Although the normal form of the measles virus cannot infect the nervous system, the team found that viruses that persist in the body can develop mutations in a key protein that controls how they infect cells. The mutated proteins can interact with its normal form, making it capable of infecting the brain. Their findings were reported in the journal Science Advances.

If you are of a certain age, you may have gotten the measles as a child. Many born after the 1970s have never gotten it thanks to vaccines. The condition is caused by the virus of the same name, which is one of the most contagious pathogens to this day. The World Health Organization estimates that nearly nine million people worldwide were infected with measles in 2021, with the number of deaths reaching 128,000.

“Despite its availability, the recent COVID-19 pandemic has set back vaccinations, especially in the Global South,” explains Yuta Shirogane, Assistant Professor at Kyushu University’s Faculty of Medical Sciences. “SSPE is a rare but fatal condition caused by the measles virus. However, the normal measles virus does not have the ability to propagate in the brain, and thus it is unclear how it causes encephalitis.”

A virus infects cells through a series of proteins that protrude from its surface. Usually, one protein will first facilitate the virus to attach to a cell’s surface, then another surface protein will cause a reaction that lets the virus into the cell, leading to an infection. Therefore, what a virus can or cannot infect can depend heavily on the type of cell.

“Usually, the measles virus only infects your immune and epithelial cells, causing the fever and rash,” continues Shirogane. “Therefore, in patients with SSPE, the measles virus must have remained in their body and mutated, then gained the ability to infect nerve cells. RNA viruses like measles mutate and evolve at very high rates, but the mechanism of how it evolved to infect neurons has been a mystery.”

The key player in allowing the measles virus to infect a cell is a protein called fusion protein, or F protein. In the team’s previous studies, they showed that certain mutations in the F protein puts it in a ‘hyperfusongenic’ state, allowing it to fuse onto neural synapses and infect the brain.

In their latest study, the team analyzed the genome of the measles virus from SSPE patients and found that various mutations had accumulated in their F protein. Interestingly, certain mutations would increase infection activity while others actually decreased it.

“This was surprising to see, but we found an explanation. When the virus infects a neuron, it infects it through ‘en bloc transmission,’ where multiple copies of the viral genome enter the cell,” continues Shirogane. “In this case, the genome encoding the mutant F protein is transmitted simultaneously with the genome of the normal F protein, and both proteins are likely to coexist in the infected cell.”

Based on this hypothesis, the team analyzed the fusion activity of mutant F proteins when normal F proteins were present. Their results showed that fusion activity of a mutant F protein is suppressed due to interference from the normal F proteins, but that interference is overcome by the accumulation of mutations in the F protein.

In another case, the team found that a different set of mutations in the F protein results in a completely opposite result: a reduction in fusion activity. However, to their surprise, this mutation can actually cooperate with normal F proteins to increase fusion activity. Thus, even mutant F proteins that appear to be unable to infect neurons can still infect the brain.

“It is almost counter to the ‘survival of the fittest’ model for viral propagation. In fact, this phenomenon where mutations interfere and/or cooperate with each other is called ‘Sociovirology.’ It’s still a new concept, but viruses have been observed to interact with each other like a group. It’s an exciting prospect” explains Shirogane.

The team hopes that their results will help develop therapeutics for SSPE, as well as elucidate the evolutionary mechanisms common to viruses that have similar infection mechanisms to measles such as novel coronaviruses and herpesviruses.

“There are many mysteries in the mechanisms by which viruses cause diseases. Since I was a medical student, I was interested in how the measles virus caused SSPE. I am happy that we were able to elucidate the mechanism of this disease,” concludes Shirogane.

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For more information about this research, see “Collective fusion activity determines neurotropism of an en bloc transmitted enveloped virus” Yuta Shirogane, Hidetaka Harada, Yuichi Hirai, Ryuichi Takemoto, Tateki Suzuki, Takao Hashiguchi, Yusuke Yanagi, https://doi.org/10.1126/sciadv.adf3731

About Kyushu University
Kyushu University is one of Japan’s leading research-oriented institutes of higher education since its founding in 1911. Home to around 19,000 students and 8,000 faculty and staff, Kyushu U’s world-class research centers cover a wide range of study areas and research fields, from the humanities and arts to engineering and medical sciences. Its multiple campuses—including the largest in Japan—are located around Fukuoka City, a coastal metropolis on the southwestern Japanese island of Kyushu that is frequently ranked among the world’s most livable cities and historically known as a gateway to Asia.


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