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The Greenback Stalls after Yesterday’s Surge as US Negotiators Move Closer to Last-Minute Deal

 Overview: Yesterday’s dollar surge has stalled. It is
consolidating its gains and is softer against all the G10 currencies. After
popping above JPY140…



Overview: Yesterday's dollar surge has stalled. It is consolidating its gains and is softer against all the G10 currencies. After popping above JPY140 yesterday, there were no follow-through greenback buying in Tokyo. Most emerging market currencies are also firmer, including the South African rand, which plummeted by 2.8% yesterday on the back of the central bank's warning of downside currency risks as it delivered a 50 bp hike. The Chinese yuan is also firmer to snap a four-day fall.

Reports suggest that the partisan forces in the US are negotiating a two-year debt ceiling/spending deal. This is part of the drama, and a last-minute agreement remains the most likely scenario. Most of the large equity markets in the Asia Pacific advanced, though Hong Kong was closed. Europe's Stoxx 600 is steady to slightly higher. It has fallen for the past three sessions. US equity futures are narrowly mixed. European 10-year bond yields are 1-2 bp softer, including Gilts yields, which had risen by more than 30 bp this week coming into today. The 10-eyar US Treasury yield is off four basis points to about 3.78%. Gold was sold through support at $1950 yesterday and briefly slipped through $1937 today before catching a bid to recovery back to $1957. A move above $1960 would help lift the tone. July WTI is also stabilizing after plummeting nearly 3.4% yesterday. It dipped below $71.00 yesterday and is in almost a dollar range above $71.50 today. It settled near $71.70 last week. 

Asia Pacific

Pressure continues to mount on the Bank of Japan to act. Yesterday, the Japanese government revised higher its economic assessment for the first time in ten months. It was upbeat consumption, production, and exports. Earlier today, Tokyo's May CPI was reported. The headline and core (excluding fresh food) rates slowed to a 3.2% year-over-year pace from 3.5%, which is slightly less than expected. The underlying rate that excludes fresh food and energy ticked up to 3.9%, a new cyclical high. The yen has been trending lower and fell to new lows for the year yesterday before steadying today. The yen has declined for seven of the past eight weeks. The yield on the 10-year JGB, which approached 0.35% last week and set a new high for the month earlier todays (0.45%) to draw near the 0.50% cap. At the same time, the 10-year breakeven (the spread between the inflation-linked security and conventional bond) has shot up from below 60 bp in the middle of last month to almost 100 bp now. Meanwhile, there is still speculation that Prime Minister Kishida is considering snap elections to take advantage of his bump in the polls. A new wrinkle has emerged, though in Tokyo. The problem arises because of the population shift toward the cities from the rural areas has led to re-drawing of districts. The junior partner in the national coalition (Komeito) and the LDP are fighting over which should run new candidates in the new districts in Tokyo. An agreement remains elusive and Komeito will not cooperate with the LDP in Tokyo, but the national coalition remains intact.

Australia's April retail sales were flat, disappointing expectations for a 0.3% increase. Australian retail sales rose by an average of 0.6% last year and averaged 0.2% in the three months through April. The squeeze on Australian households may intensify in the coming months as mortgages issued during the early days of the pandemic will begin floating. The highlight next week is the April CPI figures. The newly minted monthly series has been moderating this year after peaking last December at 8.4%. It was at 6.3% in March and may have slipped below 6% for the first time since April 2022. The central bank meets on June 6 and the market sees little chance of a hike. However, it is not convinced that the RBA is finished either.

The dollar kept knocking on JPY140 yesterday until it gave late in the session. Stops appeared to have been triggered, which may have also been related to the $1 bln of options expiring there today. The jump in US 10-year yields, above 3.80% for the first time in two-months helped spur the greenback's gains. Still, there were no further yen sales in Tokyo today and the dollar is consolidating and found support in early European turnover near JPY139.50. On the top side, the next important chart area is around JPY142.50. That said, the dollar's run-up has stretched the momentum indicators. Also, given the one-way nature of the recent move, words of warning from Japanese officials are increasingly possible. Our base case is that US yields are also near the end of their recovery and softer economic data next week (jobs and auto sales) will help cap both. The Australian dollar was sold through $0.6550, was the (61.8%) retracement of the dollar from the multi-year low set in the middle of last October near $0.6170. Follow-through selling pushed it briefly below $0.6500 earlier today before recovering to almost $0.6530. There appears to be little chart support ahead of $0.6400. Momentum indicators are stretched here too. Of course, they can remain oversold for some time, but it suggests the bulk of the move is over. PBOC officials cautioned banks about the exchange rate movement at the end of last week. Still, the yuan fell in the first four sessions this week and extended its losses into today before recovering. The dollar reached almost CNY7.08 before reversing and falling to nearly CNY7.0450. State-owned banks reportedly were the featured dollar sellers in the offshore market and when they pulled back, the greenback recovered toward CNY7.0650. The dollar's weekly gain of around 0.75% matches the gains seen in each of the past two weeks. It is the sixth weekly advance in the past seven weeks. The PBOC set the dollar's reference rate at CNY7.0760 (CNY7.0756 median projection in Bloomberg's survey). The dollar has entered our target band of CNY7.07-CNY7.11.


UK retail sales improved in May after falling a revised 1.2% in March (initially -0.9%). The 0.5% gain in May was a little better than expected. Excluding gasoline, retail sales rose by 0.8%. The UK reports its retail sales in volume terms. Investors are still reeling from the stronger than expected April inflation report. The 10-year Gilt yield may snap a seven-day increase today. During this run, the 10-year yield has by about 50 bp. The swaps market sees the year-end policy rate a little over 5.50%. It is a little softer today after rising consistently for the past seven sessions.

The eurozone highlight next week is the preliminary May CPI. The base effect suggests the pace will likely slow from April's 7.0% year-over-year rate. Last May (and June) eurozone CPI rose by 0.8% month-over-month. These will drop out of the 12-month comparison. Consumer prices are expected to have risen by 0.3% this month. This would see the year-over-year rate slow to around 6.4%, which would be the lowest since February 2022. The core rate is stickier. It slowed in April (to 5.6% from the cyclical high of 5.7% in March). It was the first decline since last June. A small decline in May is expected, which would be the first back-to-back slowing of the core rate since June-July 2021. The ECB meets on June 15 and the market is highly confident of a quarter point hike (to 3.50%) and sees the terminal rate closer to 3.75%.

A convincing break of $1.07 could spur a euro move toward March low near $1.0515. The year’s low was set on January 6 close to $1.0485. It has already come off almost four cents from its high and the downside risk may be another two cents. Momentum indicators are stretched, and the euro has settled near session lows in recent days. At this point, it may take a close back above $1.08 lift the tone. The euro has been confined to a narrow range of about a quarter-of-a-cent below $1.0745. There are some large month-end options expires at $1.0675 and $1.0750. Two-and-a-half weeks ago, sterling was approaching $1.2700, its best level since last June. The outside down day on Wednesday from a high near $1.2470 took it to about $1.2360, and yesterday's follow-through selling brough it to almost $1.2300. The break of our $1.2345 target opens the door to around $1.2240. If that is violated, it could spur another cent move. As one might expect with nine losses in the past 11 sessions coming into today, the momentum indicators are oversold. Sterling held yesterday's low so far today but may stall in front of $1.2380.


The US debt ceiling morass continues and Fitch's threat to downgrade its credit rate had little impact. There are reports today suggesting a two-year deal may be in the works. US yields through the curve are softer today. The dollar extended its three-week rally that carried it to new highs for the year against the yen, yuan, and the Australian and New Zealand dollars yesterday. It reached its best level against the euro in two months and US markets are closed on Monday and its best level against sterling since early April. The Dollar Index rose above 104.00 for the first time since St. Patrick's Day, surpassing the (61.8%) retracement of the bank-stress induced slide that saw it fray the 101.00 area.

The market's outlook for the June 14 FOMC meeting is fluid. The odds of a hike were more than halved to less than 20% after Fed Chair Powell spoke at the end of last week. The odds gradually rebuild this week and is back around 40% chance of a quarter-point hike. When the bank stress peaked in mid-March, the implied policy rate at the end of Q3 briefly fell by 4%. By the end of last week, it was a little above 5.0% and it reached 5.30% yesterday before easing back to around 5.22%. In addition, the Fed funds futures imply year-end effective Fed funds rate of about 4.90%. Coming into today, it has risen in 13 of the past 15 sessions. It began the advance with an implied yield of 4.11% on May 4. We suspect the interest rate adjustment is nearly over, and weaker jobs growth and auto sales due next week may persuade others.

A bevy of US data will be released today. Personal income is expected to have increased by 0.4% in April, matching the Q1 average. Personal consumption expenditures were flat in March after the 2% surge in January and a 0.1% gain in February. The median forecast in Bloomberg's survey projects a 0.5% increase. The Fed targets the headline deflator at 2% on average. A 0.3% increased that is expected translates into a nearly 4% annualized pace through the first four months of the year. (vs. ~3.3% in the previous four months. The year-over-year rate is expected to edge up to 4.3% from 4.2%. The core deflator may have held steady at 4.6% year-over-year. The advanced estimate of goods deficit in April is expected to have edged slightly higher to near $86 bln from $84.6 bln in March. It was around $106.3 bln in April 2022 and $86.3 bln in April 2021. A drop in Boeing orders in April (from 60 in March to 34 in April) can be expected to weigh on durable goods orders. Still, when defense and aircraft (and parts) are excluded, durable goods orders are expected to have fallen for the third consecutive month. A bright spot could be that core durable goods shipments may have risen for the first time since January. The final University of Michigan survey is also due. Market participants pay more attention to the inflation expectations than to the consumer confidence. Recall that the preliminary results showed the 5-10-year inflation expected rose to 3.2% (from 3.0%), which represented a new cyclical high. Note that the Atlanta Fed's GDP tracker will be updated after the data dump. The last iteration saw the US economy tracking about 2.9% annualized growth in Q2. This may be the best it gets for the next several quarters.

The US dollar reached CAD1.3655 earlier today, its best level this month but a little below the high seen at the end of April (~CAD1.3670). There are options for about $360 mln that expire today at CAD1.3665. The greenback retreated to around CAD1.3615 in the European morning. Support is seen in the CAD1.3580-CAD1.3600 area. The US dollar is trading within yesterday's range against the Mexican peso (~MXN17.7530-MXN17.8790). It has found a base over the last couple of sessions near MXN17.75. It may take a break of this week's low (~MXN17.7250) to boost confidence that the shake-out is over. The greenback closed near MXN17.7860 last week.


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Glimpse Of Sanity: Dartmouth Returns Standardized Testing For Admission After Failed Experiment

Glimpse Of Sanity: Dartmouth Returns Standardized Testing For Admission After Failed Experiment

In response to the virus pandemic and nationwide…



Glimpse Of Sanity: Dartmouth Returns Standardized Testing For Admission After Failed Experiment

In response to the virus pandemic and nationwide Black Lives Matter riots in the summer of 2020, some elite colleges and universities shredded testing requirements for admission. Several years later, the test-optional admission has yet to produce the promising results for racial and class-based equity that many woke academic institutions wished.

The failure of test-optional admission policies has forced Dartmouth College to reinstate standardized test scores for admission starting next year. This should never have been eliminated, as merit will always prevail. 

"Nearly four years later, having studied the role of testing in our admissions process as well as its value as a predictor of student success at Dartmouth, we are removing the extended pause and reactivating the standardized testing requirement for undergraduate admission, effective with the Class of 2029," Dartmouth wrote in a press release Monday morning. 

"For Dartmouth, the evidence supporting our reactivation of a required testing policy is clear. Our bottom line is simple: we believe a standardized testing requirement will improve—not detract from—our ability to bring the most promising and diverse students to our campus," the elite college said. 

Who would've thought eliminating standardized tests for admission because a fringe minority said they were instruments of racism and a biased system was ever a good idea? 

Also, it doesn't take a rocket scientist to figure this out. More from Dartmouth, who commissioned the research: 

They also found that test scores represent an especially valuable tool to identify high-achieving applicants from low and middle-income backgrounds; who are first-generation college-bound; as well as students from urban and rural backgrounds.

All the colleges and universities that quickly adopted test-optional admissions in 2020 experienced a surge in applications. Perhaps the push for test-optional was under the guise of woke equality but was nothing more than protecting the bottom line for these institutions. 

A glimpse of sanity returns to woke schools: Admit qualified kids. Next up is corporate America and all tiers of the US government. 

Tyler Durden Mon, 02/05/2024 - 17:20

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From Colombia to Laos: protecting crops through nanotechnology

In a recent breakthrough, DNA sequencing technology has uncovered the culprit behind cassava witches’ broom disease: the fungus genus Ceratobasidium….



In a recent breakthrough, DNA sequencing technology has uncovered the culprit behind cassava witches’ broom disease: the fungus genus Ceratobasidium.

Credit: Alliance of Bioversity and CIAT / A. Galeon

In a recent breakthrough, DNA sequencing technology has uncovered the culprit behind cassava witches’ broom disease: the fungus genus Ceratobasidium.

The cutting-edge nanopore technology used for this discovery was first developed to track the COVID-19 virus in Colombia, but is equally suited to identifying and reducing the spread of plant viruses. The findings, published in Scientific Reports, will help plant pathologists in Laos, Cambodia, Vietnam and Thailand protect farmers’ valued cassava harvest.

“In Southeast Asia, most smallholder farmers rely on cassava: its starch-rich roots form the basis of an industry that supports millions of producers. In the past decade, however, Cassava Witches’ Broom disease has stunted plants, reducing harvests to levels that barely permit affected farmers to make a living,” said Wilmer Cuellar, Senior Scientist at the Alliance of Bioversity and CIAT.

Since 2017, researchers at the Alliance of Bioversity International and CIAT have incorporated nanotechnology into their research, specifically through the Oxford Nanopore DNA/RNA sequencing technology. This advanced tool provides insight into the deeper mysteries of plant life, accurately identifying pathogens such as viruses, bacteria and fungi that affect crops.

“When you find out which pathogen is present in a crop, you can implement an appropriate diagnostic method, search for resistant varieties and integrate that diagnosis into variety selection processes,” said Ana Maria Leiva, Senior Researcher at the Alliance.

Nanotechnology, in essence, is the bridge between what we see and what we can barely imagine. This innovation opens a window into the microscopic world of plant life and pathogens, redefining the way we understand and combat diseases that affect crops.

For an in-depth look at the technology being used in Laos and Colombia, please explore this link.

About the Alliance of Bioversity International and CIAT

The Alliance of Bioversity International and the International Center for Tropical Agriculture (CIAT) delivers research-based solutions that harness agricultural biodiversity and sustainably transform food systems to improve people’s lives. Alliance solutions address the global crises of malnutrition, climate change, biodiversity loss, and environmental degradation.

With novel partnerships, the Alliance generates evidence and mainstreams innovations to transform food systems and landscapes so that they sustain the planet, drive prosperity, and nourish people in a climate crisis.

The Alliance is part of CGIAR, a global research partnership for a food-secure future.

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Public Health from the People

There are many ways to privately improve public health. Such responses make use of local knowledge, entrepreneurship, and civil society and pursue standard…



There are many ways to privately improve public health. Such responses make use of local knowledge, entrepreneurship, and civil society and pursue standard goals of public health like controlling the spread of infectious diseases. Moreover, private responses improve overall welfare by lowering the total costs of a disease and limiting externalities. If private responses can produce similar outcomes as standard, governmental public health programs—and more—perhaps we should reconsider when and where we call upon governments to improve public health.

Two Kinds of Private Responses

Following Vernon Smith and his distinction between constructivist and ecological rationality, private actors can engage in two general kinds of public health improvements. They can engage in concerted efforts to improve public health, and they can engage in emergent responses through myriad interactions.1 Three stories below—about William Walsh, Martha Claghorn, and Edwin Gould—indicate concerted efforts to improve public health.

Walsh, a Catholic priest and President of the Father Matthew Society in Memphis, Tennessee, used the society to organize a refugee camp outside of the city and helped hundreds of people avoid yellow fever during the 1878 epidemic—one of the worst yellow fever epidemics in the country.2 Shortly after learning mosquitos carried diseases prior to 1901, Claghorn chaired the Civics committee of the Twentieth Century Club in the Richmond Hill area of Long Island and led a community-wide anti-mosquito campaign, which rid the area of potentially infectious mosquitos.3 After realizing that many of his employees were sick with malaria, Gould—president of the St. Louis Southwestern Railway—used his wealth and business firm to finance and develop an anti-mosquito campaign throughout Texas.4

These stories show how individuals recognize a public health problem given their circumstances and use their knowledge and available resources to resolve the problem. More recently, we might all be familiar with private, constructivist responses to Covid-19. We all made plans to avoid others and produce our desired amount of exposure. Many people made facemasks from old clothes or purchased them from facemask producers. Businesses, retailers, restaurants, and many others adapted in various ways to limit exposure for their workers and customers. My favorite example, albeit not relevant for most, is the so-called bubble that was implemented by the NBA, which housed teams, encouraged play, and limited infection. The NBA finished their season and crowned a 2020 champion only because of the privately designed and implemented bubble solution. The key is that the bubble pursued all of those objectives, not just one of them. All of these responses indicate how private interactions among people can minimize their exposure, through negotiation, discussion, and mutually beneficial means.

In addition to privately designed solutions, emergent public health responses are also important, perhaps even more so. Long-term migration and settlement patterns away from infectious diseases, consumption to improve nutrition, hygiene, sanitation, and the development of social norms to encourage preventative behavior are all different kinds of emergent public health responses. Each of these responses—developed through the actions of no one person—are substantial ways to improve public health.

First, consider how common migration operates as a means of lowering prevalence rates. As soon as people realized that living near stagnant bodies of water increased the probability of acquiring diseases like malaria, they were more likely to leave those areas and subsequently avoid them. Places with such features became known as places to avoid; people also developed myths to dissuade visitors and inhabitants.5 Such myths and associations left places like the Roman Campagna desolate for centuries. These kinds of cultural associations are also widespread; for example, many people in North and South Carolina moved to areas with higher elevation and took summer vacations to avoid diseases like malaria. East End and West End, in London, also developed because of the opportunities people had to migrate away from (and towards) several diseases.6

While these migration patterns might develop over decades, movement and migration also help in more acute public health crises. During the 1878 yellow fever epidemic throughout the southern United States, for example, thousands of people fled their cities to avoid infection. They took any means of transportation they could find. While some fled to other, more northern cities, many acquired temporary housing in suburbs, and many formed campsites and refugee camps outside of their city. The refugee camps outside of Memphis—like the one formed by William Walsh—helped hundreds and thousands of people avoid infection throughout the Fall of 1878.

Second, more mundane public health improvements—like improvements in nutrition, hygiene, and sanitation—are also emergent. These improvements arise from the actions of individuals and entrepreneurs, often closely associated with voluntary consumption and markets. According to renowned medical scientist Thomas McKeown, that is, rising incomes encouraged voluntary changes in consumption, which helped improve nutrition, sanitation, and lowered mortality rates.7 These effects were especially pertinent for women and mothers as they often selected more nutritious food and altered household sanitation practices. With advancing ideas about germs, moreover, historian Nancy Tomes argues that private interests advanced the campaign to improve house-hold sanitation and nutrition—full of advice and advertisements in newspapers, magazines, manuals, and books.8 Following Tomes, economic historians Rebecca Stein and Joel Mokyr substantiate these ideas and show that people changed their hygiene, sanitation, house-hold cleaning habits, and diets as they learned more about germs.9 Such developments helped people to provide their desired exposure to germs according to their values.

Obviously, there were concerted public health improvements during this time that also explain falling mortality rates. For example, waterworks were conscious efforts to improve public health and were provided publicly and privately, with similar, positive effects on health.10 The point is that while we might be quick to connect the health improvements associated with a public water system, we should also recognize emergent responses like gradual changes in voluntary consumption.

Finally, social norms or rules that encourage preventative behavior might also be relevant kinds of emergent public health responses. Such rules identify behavior that should or should not be allowed, they are enforced in a decentralized way, and if they follow from the values of individuals in a community.11 If such rules pertain to public health, they can raise the cost of infectious behavior or the benefits of preventative behavior. Covering one’s mouth when sneezing is not only beneficial from a public health perspective, it also helps avoid earning disapproval.

The condom code during the height of the HIV/AIDS epidemic is another example of an emergent public health rule that reduced infectiousness by encouraging safer behavior.12 People who adopted safer sexual practices were seen to be doing the right thing—akin to taking care of a brother. People who refrained from adopting safer sexual practices were admonished. No single person or entity announced the rule; rather, it emerged from the actions and interactions of individuals within various communities to pursue their goals regarding maintaining sexual activity and limiting the spread of disease. Indeed, such norms were more effective in communities where people used their social capital resources to determine which behaviors should be changed and where they can more easily monitor and enforce infractions. This seems like a relevant factor where many gay men and men who have sex with men live in dense urban areas like New York and Los Angeles that foster LGBTQ communities.

Covid-19 provides additional examples where social norms encouraged the use of seemingly appropriate behavior, e.g., social distancing, the use of facemasks, and vaccination. Regardless of any formal rule in place, many people adapted their behavior because of social norms that encouraged social distancing, the use of facemasks, and vaccination. In communities that valued such behaviors, people that wore face masks and vaccinated were praised and were seen as doing the right thing; people that did not were viewed with scorn. Indeed, states and cities that have higher levels of social capital and higher values for public health tend to have higher Covid-19 vaccine uptakes.13

Improving Public Health and More

“Private approaches tend to lower the total costs of diseases and they limit externalities.”

While these private approaches can improve public health, can they do more than typical public health approaches cannot? Private approaches tend to lower the total costs of diseases and they limit externalities. Each aspect of private responses requires additional explanation.

Responding to infectious diseases and disease prevention is doubly challenging because not only do we have to worry about being sick, we also have to consider the costs imposed by our preventative behaviors and the rules we might impose. Thus, the total costs of an infectious disease include 1) the costs related to the disease—the pain and suffering of a disease and the opportunity costs of being sick—and 2) the costs associated with preventative and avoidance behavior. While disease costs are mostly self-explanatory, the costs of avoiding infection warrant more explanation. Self-isolation when you have a cold, for example, entails the loss of potentially valuable social activities; and wearing condoms to prevent sexually transmitted diseases forfeits the pleasures of unprotected sexual activity. Diseases for which vaccines and other medicines are available are less worrisome, perhaps, because these are diseases with lower prevention costs than diseases where those pharmaceutical interventions are not available. Governmental means of prevention also add relevant costs. Many readers might be familiar with the costs imposed by our private and public responses to Covid—from isolation to learning loss, and from sharp decreases in economic activity to increased rates of depression and spousal abuse.14 Long before Covid, moreover, people bemoaned wearing masks during the Great Flu,15 balked at quarantine against yellow fever,16 and protested bathhouse closings with the onset of HIV.17

Figure 1 shows the overall problem: diseases are harmful but our responses to those diseases might also be harmful.

Figure 1. The Excess Burden of Infectious Diseases

This figure follows Bhattacharya, Hyde, and Tu (2013) and Philipson (2000), who refer to the difference between total costs and disease costs as the excess burden of a disease. That is, excess burden depends on how severely we respond to a disease in private and in public. The excess burden associated with the common cold tends to be negligible as we bear the minor inconvenience of a fever, a sore throat perhaps, or a couple days off work; moreover, most people don’t go out of their way to avoid catching a cold. The excess burden of plague, however, is more complicated; not only are the symptoms much worse—and include death—people have more severe reactions. Note too that disease costs rise with prevalence and with worsening symptoms but eventually decline as more severe diseases tend to be less prevalent. Still, no one wants to be infected with a major disease, and severe precautions are likely. We might shun all social interactions, and we might use government to impose strict quarantine measures. As disease severity rises along the horizontal axis, it might be the case that the cure is worse than the disease.

The private responses indicated above all help to lower the total costs of a disease because people choose their responses and they use their local knowledge and available resources to select cheaper methods of prevention. Claghorn used her neighborhood connections and the social capital of her civics association to encourage homeowners to rid their yards of pools of water; as such she lowered the costs of producing mosquito control. Similarly, Gould used the organizational structure of his firm to hire experts in mosquito control and build a sanitation department. These are cheap methods to limit exposure to mosquitos.

Emergent responses also help to lower the total costs of a disease because such responses indicate the variety of choices people face and their ability to select cheaper options. People facing diseases like malaria might be able to move away and, for some, it is cheaper than alternative means of prevention. Many people now are able to limit their exposure to mosquitos with screens, improved dwellings, and air conditioning.18 Consider the variety of ways people can limit their exposure to sexually transmitted diseases like HIV. If some people would rather use condoms to limit HIV transmission, they are better off doing so than if they were to refrain from sexual activity altogether. Similarly, some people would be better off having relatively risky sexual activity if they were in monogamous relationships or if they knew about their partner’s sexual history. That people can choose their own preventative measures indicates lower total costs compared with blunt, one-rule-for-all, governmental public health responses.

Negative and positive externalities of spreadable diseases indicate too much infectious behavior and too little preventative behavior, respectively. Hosting a party is fun, but it also incurs the internal costs of the drinks and appetizers and, more importantly, perhaps the external costs of raising the probability that people get sick. Attending a local cafe can be relaxing, but you have to pay for a cup of coffee and you might also transmit a disease to other coffee drinkers. The same could be said for many other public and social activities that might spread diseases like attending a class or a basketball game, transporting goods and people, and sexual behaviors. Our preventative behaviors from taking a vaccine to covering your mouth and from isolation to engaging in safer sexual practices emits positive externalities. If left unchecked, negative and positive externalities lead to higher rates of infection.

Overall, we should continue to think more critically about delineating how private and public actors can improve public health and overall welfare. More importantly, we should recognize that private actors are more capable than we often realize, especially in light of conscious efforts to improve public health and those efforts that emerge from people’s actions and interactions. These private efforts might be better at advancing some public health goals than public actors do. Individuals, for example, have more access to local knowledge and can discover novel solutions that serve multiple ends—often ends they value—rather than the ends of distant officials. Such cases and possibilities indicate cheaper ways to improve public health.


[1] Smith (2009), Rationality in Economics: Constructivist and Ecological Forms, Cambridge University Press.

[2] For more on Walsh, see Carson (forthcoming), “Prevention Externalities: Private and Public Responses to the 1878 Yellow Fever Epidemic,” Public Choice.

[3] For more on Claghorn, see Carson (2020), “Privately Preventing Malaria in the United States, 1900-1925,” Essays in Economics and Business History.

[4] For more on Gould, see Carson (2016), “Firm-led Malaria Prevention in the United States, 1910-1920,” American Journal of Law and Medicine.

[5] On the connection between malarial diseases, dragons, and dragon-slaying saints, see Horden (1992), “Disease, Dragons, and Saints: the management of epidemics in the dark ages,” in Epidemics and Ideas by Ranger and Slack.

[6] For more on migration and prevalence rates, see Mesnard and Seabright (2016), “Migration and the equilibrium prevalence of infectious disease,” Journal of Demographic Economics.

[7] The American Journal of Public Health published several commentaries on McKeown in 2002:

[8] Tomes (1990), “The Private Side of Public Health: Sanitary Science, Domestic Hygiene, and the Germ Theory, 1870-1990,” Bulletin of the History of Medicine.

[9] Mokyr and Stein (1996), “Science, Health, and Household Technology: The Effect of the Pasteur Revolution on Consumer Demand,” in The Economics of New Goods, NBER.

[10] See Werner Troesken’s work on public and private waterworks in the U.S. around the turn of the 20th century. See Galiani, Gertler, and Shargrodsky (2005), “Water for Life,” Journal of Political Economy.

[11] Brennan et al., (2013), Explaining Norms, Oxford University Press.

[12] For more on the condom code, see Carson (2017), “The Informal Norms of HIV Prevention: The emergence and erosion of the condom code,” Journal of Law, Medicine and Ethics.

[13] Carilli, Carson, and Isaacs (2022), “Jabbing Together? The complementarity between social capital, formal public health rules, and covid-19 vaccine rates in the U.S.,” Vaccine.

[14] Leslie and Wilson, “Sheltering in Place and Domestic Violence: Evidence from Calls for Service During Covid-19.” Journal of Public Economics 189, 104241. Mulligan, “Deaths of Despair and the Incidence of Excess Mortality in 2020,” NBER, Betthauser, Bach-Mortensen, and Engzell, “A systematic review and meta-analysis of the evidence on learning during the Covid-19 Pandemic,” Nature Human Behavior,

[15] On the great influenza epidemic, see CBS News, “During the 1918 Flu pandemic, masks were controversial for ‘many of the same reasons they are today’.” Oct. 30, 2020.

[16] On yellow fever quarantine in Mississippi, see Deanne Nuwer (2009), Plague Among the Magnolias: The 1878 Yellow Fever Epidemic in Mississippi.

[17] On these closures, see Trout (2021), “The Bathhouse Battle of 1984.”

[18] Tusting et al. (2017), “Housing Improvement and Malaria Risk in Sub-Saharan Africa: a multi-country analysis of survey data.” PLOS Medicine.

*Byron Carson is an Associate Professor of Economics and Business at Hampden-Sydney College in Virginia, where he teaches courses on introductory economics, money and banking, health economics, and urban economics. Byron earned his Ph.D. in Economics from George Mason University in 2017, and his research interests include economic epidemiology, public choice, and Austrian economics.

This article was edited by Features Editor Ed Lopez.


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