Pandemic Chronicles: Vaccination and the Tipping Point to Herd Immunity

Society is at a tipping point with two critical issues: climate change and the COVID-19 global pandemic. A tipping point is a phenomenon where enough people have collectively changed their social behavior to push society towards either a positive or negative direction. The climate change crisis is similar to the current public health pandemic in that it requires coordination among individual members of society in order to avert a disaster.

Ideally, countries would make good on their treaty commitments by investing in clean energies and take steps to meet greenhouse gas reduction targets. But since the Paris climate change treaty is voluntary and non-legally binding, what actually happens is some countries set meaningful national targets and takes steps to get there while other countries free ride by staying their current course.

In a Nature article “Tipping Climate Cooperation,” the authors use game theory to explain the global coordination dilemma between nations to address a problem that might become dangerous some day but not immediate.Their insight shows that When the uncertainty is small, however, societies are much more likely to coordinate efforts and avoid the tipping point.

In climate change forums, countries like America and China are strategic actors who weigh the choice of cutting or not cutting greenhouse gases depending on their payoffs. Each country’s pay-off (or expected benefits) in treaty adoption are dependent on the other country’s choice. As the payoff matrix above shows, there are two states of the world that represents Nash equilibria. A Nash equilibrium is a condition where neither country can improve its payoff or outcome by changing its strategy.

One Nash equilibrium captures the ideal scenario in which both countries don’t renege on their treat commitments and take actions at home to cut CO2 emissions. But the other state of the world (i.e. Nash equilibrium) is where neither country chooses to invest in clean energy or measures to cut carbon emissions. That’s a less desirable scenario because society is worse off. Yet, given then uncertainty around climate change risks in the short term, there is no immediate pending disaster.

Because of short-sightedness or lack of domestic support, free rider countries are less likely to jump on the bandwagon. To reach the ideal scenario, several things need to happen, including directly observing the real catastrophic impact of extreme weather patterns, or improving scientific research to reduce the uncertainty about the tipping point. These social, political, and economic considerations are similar to the current state of the COVID-19 pandemic.

Herd Immunity – Coordination Problem

At the beginning of May 2021 the U.S. government and the Centers for Disease Control and Prevention updated its guidance to allow Americans to go about their daily lives without a mask if they are fully vaccinated while calling out those unvaccinated to get vaccinated in order to get the same treatment in common public squares. After an intensive COVID-19 vaccination campaign to reach millions of Americans, experts believe America is at an inflection or tipping point to averting the raging pandemic. Previously, there were a lot of uncertainty whether we would reach the end of the tunnel on this dark chapter in the modern public health crisis. But since vaccinations and aggressive public health measures have taken place, more people will have an incentive to get vaccinated. Why? The tipping point.

Tipping point in collective behavior: over half of the U.S. are vaccinated. The unvaccinated are now the minority. Monthly cases and deaths are trending down. Society, governments, and organizations are rewarding the vaccinated to prompt social change in the unvaccinated population.

There are places that people would like to attend, like places of worship, grocery stores, and night clubs. These places have different levels of restrictions for those who are not vaccinated while allowing those who are vaccinated to enter without wearing a mask.

Chart: CDC's New Mask Guidance for Vaccinated, Unvaccinated People
Source: CDC Guidance

For churches, since it’s a place of faith, those centers recommend attendees who aren’t vaccinated to follow health guidelines by wearing masks and maintaining social distance. Worship centers tend to not impose hard requirement to show attendees are vaccinated, rather it’s an honor system.

Church Mask Policy Change

Nightclubs and Ride Shares

Nightclubs, on the other hand, are social spaces that attract people of all backgrounds. People interact closely and crowds tend to be more concentrated. Those places have an incentive to impose a requirement for people to show evidence of vaccination to enter. For example, Rumi is a nightclub in New York City populated with millenials and Genzers. To enter, customers go through two checkpoints: (1) age verification and temperature check; (2) vaccination card. These same people often commute using ride sharing services including Uber and Lyft, both of which have stated that they will maintain current mask restrictions for all customers (or no service).

Shopping Centers

Grocery stores approach the new government guidance in different ways, ranging from requiring all shoppers to still wear masks and maintain social distance to allowing the vaccinated to be maskless. Because of either hard requirements or public pressures from a large number of people who are vaccinated, people who are unvaccinated will have an incentive to get vaccinated. The combination of these policies carried out by private organizations, accompanied by local ordinances and requirements, as well as sustained commitment and guidance by the government to end the pandemic, will help push American society over the tipping point.

Consider the scenario below, where each Customer can choose to get vaccinated or not get vaccinated. Their individual choices and payoffs are dependent on what the other Customer do. If Customer 1 takes an effort to vaccinate, Customer 2 could be a free rider and not vaccinate. Why? Customer 2 may not want to take the effort, and may want to take advantage of others getting vaccinated and free ride off a perceived herd immunity. The expected payoff for C1 and C2 is (1,2), respectively.

There are two important outcomes from this decision matrix. The first is where both Customer 1 and Customer 2 vaccinate, which is the desired Nash Equilibrium, since neither Customer could increase its payoff by changing their strategy. Both Customers 1 and 2 choose to vaccinate after seeing a certain threshold of the population get vaccinated with minimal risk, while the vaccinated have the benefits of attending more more venues and activities. If unvaccinated customers wish to get the benefit accruing to vaccinated customers, then the unvaccinated have an incentive to get vaccinated. If enough unvaccinated people think that way, this establishes a tipping point in the health pandemic that inches us close to herd immunity. The other scenario, the undesirable Nash Equilibrium, is where Customer 1 and Customer 2 do not vaccinate. Here the expected payoffs are (2,2) for Customer 1 and 2, respectively. The social drivers for customers making this choice could be the following:

  1. if they’re skeptical of vaccines;
  2. if the unvaccinated don’t think there’s enough supply
  3. if they believe the pandemic will worsen (no light at the end of the tunnel)
  4. if the unvaccinated think their other people will also stay unvaccinated.

If the above drivers are strong enough, then it pushes society away from the tipping point and further away from herd immunity. The choices that we as individuals make based on our own expected payoff can put our friends, neighbors and overall society at risk.


Lenton, Timothy M. 2014. Game Theory: Tipping Climate Cooperation. Nature Climate Change 4 (1): 14–15

America’s Long Struggle to Create a Central Bank

On this day, December 23, 1913, President Wilson entered the Oval Office. In a jubilant mood he went around the room to shake hands with key advisers and associates while giving a congratulatory nod to the influential Congressman from Virginia, Carter Glass.

Wilson proceeded to use the four golden pens on his desk to sign the Federal Reserve Act. Wilson and his group of partners in arms had achieved the landmark legislation of his domestic agenda: the creation of the Federal Reserve. This culminated from more than 120 years since Alexander Hamilton had attempted the grand experiment of a central bank that floundered through multiple presidential administrations. Arthur S. Link, a Wilson biographer, captured that this moment “Thus ended the long struggle for the greatest single piece of constructive legislation of the Wilson era and one of the most important domestic Acts in the nation’s history.’’

But what is the Federal Reserve? When was it created? Was Presidential Wilson the mastermind behind it or some other driving force?

Wilson’s domestic agenda centered on the New Freedom. One key pillar is banking reform. In the realm of economic policy, creating a central bank would be Wilson’s enduring legacy, following a century of struggle to create a permanent national bank by the nation’s founders. This battle of more than a century has sputtered and spin since Alexander Hamilton’s fight for a national bank under George Washington’s cabinet. Wilson did not command economic thought leadership that motivated him to advocate for a central bank.

The urgency was more in response to a confluence of factors, including the Panic of 1907 and public policy support from various parties from bankers to Congressional leaders. Wilson’s 1912 election ran his campaign on a progressive platform. He was also leveraging on his reformist agenda as a New Jersey governor. He pledged financial reform, but never explicitly mentioned establishing a central bank. Though he was a government cholar, Wilson didn’t have sufficient knowledge of banking. So he relied on two key advisers: Louis Brandeis, a Boston attorney serving as an outside adviser, and William McAdoo, Wilson’s Treasury Secretary.

While Louis Brandeis was Wilson’s most trusted voice from outside the White House bubble, like his predecessors, the president needed someone in his cabinet who could carry through monumental efforts like banking reform. He needed someone who had a business mindset but not beholden to bankers because that person would broker legislative proposals with repercussions for the broader economy. That is where William Gibbs McAdoo played an key role. Like Wilson, McAdoo had roots in the South. He began his law practice in Chattanooga, Tennessee and thereafter moved to New York to lead a railroad company. With an eye for politics, McAdoo became head of the Democratic National Committee in 1912, and gave support to candidate Wilson’s bid for the White House. As an independent lawyer-business leader who also had political ambitions, McAdoo would become Wilson’s U.S. Treasury Secretary and a close confidant. McAdoo was pivotal in the passage of the Federal Reserve Act and financing of World War I which Wilson reluctantly entered.

Congress, who represented various economic areas of the country, wanted regional banks to control the Federal Reserve System. That decentralized representation would be a counterbalance against Wall Street’s influence. Meanwhile, President Wilson wanted a centralized board to place a check on regional Federal Reserve banks, assuming those entities would be owned by private banks. William Jennings Bryan, a progressive voice in the Democratic party leadership, was committed to currency reform but opposed to a Wall Street take over. He was vocal during the 1912 Democratic convention in expressing support for Wilson. Because of his standing as a public leader with oratorical power, and a strong following in rural areas, Wilson appointed Bryan as his secretary of state. Bryan remarked, “The currency can be given all the elasticity it needs without increasing the privileges of the banks or the influence of Wall Street.” Wilson later would echo Bryan’s point, in saying “The greatest monopoly in this country is the money monopoly.”

The progressive wing was highly skeptical that the new system could be taken over by private banks, and Wall Street could undermine oversight on the banking system. Louis Brandeis in particular did not want bankers to be part of the Federal Reserve Board since as part of the banking system, they could not be trusted with objectivity and having public interest in financial stability and regulation

To reconcile the various perspectives on the central bank plan, President Wilson sought the advice of folks in Congress, relying on Representative Carter Glass of Virginia, who became chairman of the House Committee on Banking and Finance, and the committee’s adviser, H. Parker Willis, an economics professor from Washington and Lee. In order to get a viable version of the bill out of committee, Glass and Willis actively hashed out the pros and cons of the banking proposal.

During the negotiations, President Wilson consulted his trusted economic adviser, Brandeis, for direction. Congressman Bryan and Glass had valid concerns to which Brandeis came up with a middle ground. Brandeis told the president: “The conflict between the policies of the Administration and the desires of the financiers and of big business, is an irreconcilable one”. He warned that “Concessions to the big business interests must in the end prove futile.’’ To push forward, the proposal needs to satisfy both conservative and the progressive stakeholders. However, Brandeis voiced his concern that the proposed central banking system should not be owned by private banks but public. He argued that private interests would have undue influence over the system, and government oversight would be steered to benefit the industry while undermining public interest.

On June 17, President Wilson met with Congressman Glass, Secretary of the Treasury William G. McAdoo, and Senator Robert Owen of Oklahoma, chairman of the newly created Senate Banking and Currency Committee. The stakeholders landed a final proposal. There would be 12 regional banks around the country that are owned by private banks. In DC, a centralized Federal Reserve Board would be exclusively controlled by the government. For a sustainable currency, Federal Reserve Notes would be accepted as obligations of the United States. This avoids the pitfalls of the greenback currency that was issued on a temporary basis by Abraham Lincoln’s government to finance the Civil War. This compromise between the various views on central banking gave the proposal enough momentum to become a landmark legislation.


Heckscher, A. (1991). Woodrow Wilson: A Biography. Charles Scribner’s Sons.

Hofstadter, R. (1955). The Age of Reform. Vintage.

Link, A. S. (1956). Wilson: The New Freedom. Princeton University Press.


What is the President’s Brain Trust?

Do you ever wonder what the keys are to successful presidential leadership? Are you curious why past presidents like George Washington, Lincoln, and Franklin Delano Roosevelt were able to steer the country through calamities and turbulent periods? Historians might say these leaders had charisma, or an ability to manage a vast number of priorities, had a clear strategy, or perhaps they were born into the role. 

Just like any chief executive, however, the president’s success depends on a close group of advisers. From casual circles to trusted confidants, advisers are core parts of any White House to tackling an array of challenges, thinking through the fog of uncertainty, or spurring bold ideas. 

This is the very theme of my new book: The President’s Brain Trust. American presidents rely on their brain trust as a sounding board for their proposals; to get quick feedback and strategic advice when they make choices—from consequential to small. This tradition harks back to America’s founding fathers as they guided a new country that just emerged from the Revolutionary War. 

In this book, you’ll be able to see the evolution of the original cabinet from Alexander Hamilton’s grand economic plan under George Washington through Lincoln’s ambitious team who financed the civil war effort, and from FDR’s academic group of law school professors during the Great Depression to the network of intellectuals and Nobel Laureates under John F. Kennedy. 

I’ve taken copious notes of fascinating stories behind crucial periods in American history. Drawing on interviews and archival collections, I wanted to get a good look into executive leadership, the personalities and governing style of presidents, and their teams who influenced the decision-making process. 

Presidential leadership starts with the president and the team, none other than the president’s brain trust. 

Reluctant War President and the Pandemic

In 2020-2021 we are living in peacetime with no major global conflict, but the United States is at war against a global pandemic and an economic crisis unseen since the post-war period. One year into the COVID-19 public health crisis, America reached a grim milestone: 400,000 dead and 24 million infected, while healthcare capacity is stretched. Yet, history reminds us that 100 years ago America and the world faced a deadly pandemic during a world war that decimated a continent and cities. Woodrow Wilson, the schoolmaster, was the commander in chief durinf this pivotal period.

World War I broke out in Europe in 1914, but it was not until three years after when the United States officially joined. During his reelection campaign for a second presidential term, Woodrow Wilson was reluctant about openly supporting the war. Though the war was intensifying in Europe, Wilson’s position to maintain United States neutrality reflected the state of nation at the time. But when Germany escalated tensions by attacking American military assets in neutral areas, President Wilson was left with little choice. To officially commit troops to the other side of the pond, the commander chief must ask Congress for a war declaration.

On April 2, 1917, President Woodrow Wilson, using his presidential power, convened a special joint session of the United States Congress, to issue a declaration of war against the German Empire. At the special address, Wilson addressed the State of War with Germany to Congress: “The world must be made safe for democracy. Its peace must be planted upon the tested foundations of political liberty. We have no selfish ends to serve. We desire no conquest, no dominion. We seek no indemnities for ourselves, no material compensation for the sacrifices we shall freely make.”

Congress gave the president what he needed: the declaration of war came on April 6. With the official backing of Congress, President Wilson was full steam ahead to allocate resources to support the war. The production frontier between guns and butter are now clearly focused on guns.

Wilson began his second term as a wartime president; therefore, it made strategic sense to establish a War Cabinet, assigning Secretary McAdoo the responsibility to finance the war. Wilson relied on McAdoo to finance World War I, much like Lincoln who relied on Salmon Chase, to finance the Civil war. McAdoo believed in the war effort, and believed that it should be driven by the people. McAdoo remarked: “Any great war must necessarily be a popular movement. It is a kind of crusade; and like all crusades, it sweeps along on a powerful stream of romanticism.” The question became what were the viable financing options? Would it solely rely on the government’s budget or perhaps leverage the power of the newly created central bank? How would the government mobilize support behind this effort? All these questions were on the mind of McAdoo as he amped up financing capacity before the U.S. entered the War.  

There were several options: printing money, borrowing, or taxation. The economy was operating at near full capacity at the time. The tradeoff had to be shifting industrial resources towards the war effort. Printing money was not a feasible option since the Federal Reserve Act of 1913 established the Federal Reserve Notes as official obligations of the United State. McAdoo learned from the lessons of Lincoln’s experience with printing the greenback which led to inflation and declining confidence in the country’s money management. It ended up being a combination of taxation measures and borrowing. The borrowing program was done through Liberty Bonds. The regional federal reserve banks were the fiscal agents to offer the bonds.

Source: World War I poster depicting Lady Liberty, Courtesy of Library of Congress

On April 9, 1918, celebrities Charlie Chaplin and Douglas Fairbanks drew thousands to Wall Street and the foot of the United States Sub-Treasury building located at Federal Hall. Nearly five decades earlier, the sub-treasury building took market orders from the White House that would spark a market crash and a resulting depression. 

The iconic photo shows Charlie Chaplin is being held up by actor Douglas Fairbanks to rally support for the War. The rally took place at the foot of the United States Sub-Treasury Building, which is now known as Federal Hall. 

Following that act was a musical performance by Fairbanks and vocalist Harvey Hindemeyer who got the crowd in a rendition of “Over There,” the war anthem written by Broadway impresario George M. Cohan.

Unlike the COVID-19 pandemic of 2020-2021, which took place during peacetime, Wilson had to make tough decisions during the Spanish Flu almost a century ago when there was a major world war I. He needed to rally the public, albeit reluctantly, but as commander in chief, he needed to finance the war. The flu was merely an afterthought. Wilson did not discuss it publicly nor took any public health measures. The parade must go on was the rallying cry. But that came at a huge public cost.

On September 28, 1918, the Philadelphia Liberty Bond Parade drew 200,000 people. The crowd lined up for two miles along the parade route to cheer on uniformed troopers, Boy Scouts, and marching bands. Pressured to meet city bond quotas, salesmen readily handed out bonds to war sympathizers. The flu spread immediately, becoming one of the largest known outbreaks in the world. Within a matter of weeks an estimated 45,000 Philadelphians were stricken with the flu and with 12,000 dead. By contrast, St. Louis city imposed social distancing measures and locked down its public squares, including churches, parks and non-essential venues. The severity of the flu between Philadelphia and St. Louis remains a lesson of history.

This was a predictor for the grueling death toll that would come. The largest contributor to the spread of the Spanish Flu was the massive mobilization for the war. By June 1918 millions of young American men were packed in tight quarters and deployed to Europe. The influenza spread like wildfire across the continent; all told, the pandemic killed between 50 and 100 million people around the world, more than the battlefield. By financial metrics, the war bond campaigns were a success. In total the four national drives raised more than $17 billion with twenty million people subscribing.

Public health interventions and epidemic intensity during the 1918 influenza  pandemic | PNAS


Sutch, R. (2015). Financing the Great War: A Class Tax for the Wealthy, Liberty Bonds for All,. Federal Reserve.

A Christmas Carol – the Virtues and Vices of the Market Economy

This week in 1843 Charles Dickens published his book A Christmas Carol that would become a gift of joy and timeless tradition for society. But Dickens also imparted an incredibly powerful story of economic ideas that sheds light on severe economic problems while inspiring charity. Dickens invokes Adam Smith, the Scottish moral philosopher who is considered father of modern economics. In his landmark book, Inquiry into the Nature and Causes of the Wealth of Nations, Smith extolls the benefits of free markets as the foundation of capitalism, in which voluntary exchanges by members of society, motivated by the pursuit of individual self-interest, translates into collective good. Smith captured the economic interactions during the emerging industrial era at the time that still rings true:

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantages.” 

In the early scenes before his ghostly hauntings, Mr. Scrooge declined to donate to a charity cause. He even criticized for the overpopulation problem that resulted in people who take more from public resources than they contribute. In the Christmas Carol Scrooge in his callous way, said that: “If they would rather die, they had better do it, and decrease the surplus population.”

What Scrooge describes follows the lines of the population theory advanced by the economist Thomas Malthus. He used statistics to theorize that a growing population over time would drop off when society cannot supply sufficient food and basic necessities. Within time war, famine and natural disasters will flatten out population growth. This dire prediction gave economics its name as the dismal science. Personally Dickens grew up in a large family of eight children. Due to unfortunate circumstances, Dickens dropped out of school to start working to support his family.

In Dickens’ Christmas story, Mr. Scrooge is a cold workaholic banker. Yet, there’s little moral judgement on his profession nor does Dickens calls for the downfall of capitalism. Rather he calls out the greed and excesses of society, via the miserly, lonely banker, Mr. Scrooge. Like Adam Smith, Dickens notices a glimmer of hope in capitalism based on the virtues and sympathy that people have for one another.

Dickens has always been sensitive to the plight if the poor. An earlier event affected him deeply, According to reporting by the NY Times, in the fall of 1843, Dickens visited Samuel Starey’s Field Lane Ragged School, a school that provided education for slum children. When his father’s bankruptcy sent him to debtors’ prison, the twelve year old Dickens resorted to working long hours at a boot-blacking factory for no more than six shillings a week. Though he did help make ends meet for his family, he was scarred by the working conditions of the ragged children and men working warehouses and factories.

Dickens became a vocal critic of the widening wealth gap in Victorian England era, with a particular cry for the poor children who had to work at an early age. The tens of thousands of homeless children languished on the streets; life was brutish. Compared to his American counterparts, Dickens is slightly ahead in his progressive thinking, equivalent of a muckraker, a movement in America in the dawn of the 20th century that involved writers and journalists who published outrageous working conditions and economic injustices. Upton Sinclair, a novelist and journalist, wrote a harrowing account in The Jungle about labor conditions in the meat packing industry and slum urban dwellings with large immigrant demographics. Like Dickens in Britain, the American muckrakers shed light on deplorable economic issues which led to public policy changes and industry reforms. President Theodore Roosevelt and his White House team would take up the cause of economic justice during the Progressive era.  

The letters inscribed on his tomb reads: “He was a sympathiser to the poor, the suffering, and the oppressed; and by his death, one of England’s greatest writers is lost to the world.”

In honor of this holiday classic, here are a few of my favorite excerpts from A Christmas Carol: 

“Reflect upon your present blessings—of which every man has many—not on your past misfortunes, of which all men have some.”

″‘Business!’ cried the Ghost, wringing its hands again. ‘Mankind was my business. The common welfare was my business; charity, mercy, forbearance, and benevolence, were, all, my business. The dealings of my trade were but a drop of water in the comprehensive ocean of my business!‘”

“‘There are many things from which I might have derived good, by which I have not profited, I dare say,’ returned the nephew. ‘Christmas among the rest. . . . And therefore, uncle, though it has never put a scrap of gold or silver in my pocket, I believe that it has done me good, and will do me good; and I say, God bless it!‘”


Dickens, C. (1843). A Christmas Carol. In Prose. Being a Ghost Story of Christmas. Chapman & Hall.

Malthus, T. (1798). Principle of Population.

Mortimer, J. (1993, December 24). Poorhouses, Pamphlets and Marley’s Ghost. The New York Times.

Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations.

The Troika Strikes Back

With a raging virus holding back the economic recovery and a return to normalcy, much attention has focused on President Biden’s pick for his core economic team. Janet Yellen, former chair of the Federal Reserve, is slated to be the U.S. Treasury Secretary. The Treasury Secretary is a prominent cabinet member who is typically seen as the president’s economic spokesperson. Cecilia Rouse, a Princeton labor economist, would become head of the President’s Council of Economic advisers (CEA). The CEA is akin to the White House’s internal think tank, often filled with PhD-trained economists who take temporary leave from academia to work at the White House. Their responsibilities include combing through policy proposals, crunching large datasets, and briefing the president on an array of topics ranging from economic stimulus to education programs and healthcare reform options. Lastly, Neera Tanden, currently head of a DC-based think tank, is the nominee for the Director of the Office of Management and Budget. The OMB helps shape the president’s budget priorities, and, by extension, administers the budget across the massive U.S. federal government, including investments in vaccine research and public health programs. In some ways President Biden’s choice for his team is groundbreaking while in other ways it’s rooted in tradition.

The Troika: Heads of the US Treasury Secretary, Council of Economic Advisers, Office of Management & Budget

No doubt the pandemic and the economy are top of mind for the new administration. That’s part of the decision to nominate these three candidates with gravitas, knowledge and policy experience. It would be the first time that a woman or a minority would hold any of those positions. But it’s no coincidence that these three roles are mentioned in the same breadth. The U.S. Treasury Secretary, the chair of the Council of Economic Advisers and the OMB director make up the Troika, a body of advisers who help the president plan, formulate and execute their economic agenda.

A loosely defined group, the Troika was likely introduced during the Bill Clinton White House, when the group of advisers closely coordinated on important issues such as debt reduction, healthcare reform, global trade, and financial crises in emerging markets like Southeast Asia and Latin America. How impactful the Troika is depends on their relationship with the president, their personality, and the events facing the country.

This is the theme of my research from the past few years which informs my book, “The President’s Brain Trust. It’s a fascinating look at presidential advisers as core components to any White House, from George Washington’s cabinet to Franklin Delano Roosevelt’s network of law professors. Each president picks their own team that would serve as an extension of the White House brain. The makeup and demographic of the chief executive’s advisers have evolve remarkably since George Washington’s first cabinet, evident by the recent selection by President Biden. Under George Washington, Alexander Hamilton was the sole member of the White House economic team who performed the work of a full size team, just as the new country emerged from a revolution. There was no Troika. A formal federal budget did not exist nor was there a central bank. There were no P.h.d economists who crunched forecasts and complex scenarios like the impact of vaccines on a global pandemic. What a remarkable change!

Alexander Hamilton, U.S. Secretary of Treasury under George Washington, was the ‘original member’ of the Troika

Pandemic in Peace Time vs. Public Health Crisis of World War I

COVID-19 is once in a century public health storm. The only comparable event is the Spanish Flu from a century ago that coincided with World War I. As the world enters a winter with a resurgence in cases, there are waves of record COVID cases popping up in major urban centers as society deals with the challenges of reopening the economy and fatigue from social distancing. If current trends persist, the coronavirus could take the worst toll on society for a public health crisis during peace time.

As of Q4 2020, there are 242 thousand deaths and 10.5 million COVID cases in the United States alone. A Stanford study at the end of Q3 2020 found that fewer than 1 in 10 Americans have antibodies to coronavirus. Based on this study of nationally representative analysis of virus antibodies, it means that at least 9 percent of the U.S. population been infected with COVID-19.

Cumulative deaths from COVID-19
Total Reported COVID-19 Cases

Major drivers of virus transmission are public events and spaces where people interact, such as restaurants, shops, places of worship and other social gatherings. Those infected persons can then transmit it to people in their family and close circles. Important to note is we’re living in peace time in 2020.

There is no major war like what we faced a century ago when there were massive movements of troops. What we do have today is constant movement of people, not so much for the battlefield, but traveling for business and leisure, in an interconnected world with opened borders marked by globalization. Our modern economic life is much busier, have diverse needs and encompasses human collaboration and interaction in connected spaces. It’s what the economist Alfred Marshall referred to as the “ordinary business of life.” But these are extraordinary times.

The Center for Disease and Control Prevention estimates that 675,000 people in the United States contracted the Spanish Flu during the 1918 pandemic (HN1N virus). It infected about 28 percent of all Americans.

The biggest driving factor for transmission were urban density and troops mobilizing for World War I. President Wilson faced the challenge of the deadly Spanish flu while committing U.S. forces to fight the war. Like any commander in chief, President Wilson did not make decision lightly (Wilson would later suffered from the flu during post-WWI peace. negotiations in Paris).

In April 1917 had officially entered World War I with 378,000 in the armed forces. It wasn’t long until the draft established 32 large recruiting camps, each housing 25,000-55,000. The first cases of the Spanish Flu were detected in the spring of 1918. There were a few reported severe cases and a handful of deaths in rural Haskell, Kansas. The nearest military training ground, Camp Funston in Fort Riley, Kansas, about 100 soldiers had contracted the flu. Within a week, that figure shot up to a few hundred. With the “war to end all wars” at stake, there was no turning back. In May 1918, hundreds of thousands of U.S. troops would be deployed to the war front in Europe.

Massive movement of troops would be a key contributor to the deadly spread of the Spanish Flu. There was no social distancing. But unlike today’s peace time, soldiers were not dining at restaurants or at their local pubs. They were largely ground troops fighting conventional warfare, situated in crowded quarters and foxholes. On the aggregate, the Spanish Flu is thought to claim more lives than troops dying from the battlefield.

The Journal of the American Medical Association posted the following eerie observation on December 28, 1918:

“The 1918 has gone: a year momentous as the termination of the most cruel war in the annals of the human race; a year which marked, the end at least for a time, of man’s destruction of man; unfortunately a year in which developed a most fatal infectious disease causing the death of hundreds of thousands of human beings. Medical science for four and one-half years devoted itself to putting men on the firing line and keeping them there. Now it must turn with its whole might to combating the greatest enemy of all–infectious disease” 

 Cots set up in gymnasium for flu patients
Military hospital for Spanish Flu patients

Why People Hoard and How Game Theory Can Help Stop a Crisis?

This is part of my pamphlet series Pandemic Chronicles that looks at the Coronavirus public health and economic crisis with the lens of game theory.

Hoarding behavior is not new. It happens when people feel the need to accumulate things regardless of its perceived value whether they’re sports cards or antique pens. During a normal environment, collecting goods for private consumption does not harm anyone; it reflects that person’s individual preference. But during a public health crisis, like the COVID-19 pandemic or the Spanish Influenza 100 years ago, hoarding behavior negatively affects other people and society. There are several reasons why:

  • Amassing goods takes away the supply of goods for people who need it more like the elderly, women and children.
  • Piling on large quantities causes supply disruptions and artificially increases prices and thus opening opportunities for black markets. Black markets draw in actors with perverse incentives to manipulate and take advantage of other consumers.

To understand what drives hoarding and potential ways to address it, we can draw lessons from game theory and the economics of stockpiling.

Shoppers vying for last unit of paper towels.

The Psychology of Hoarding

Individual hoarding can impact society when it becomes a larger panic buying scenario that causes rationing and irrationally high prices. In a crisis, where people, markets, and government may not have all the answers, it fuels a desire to hoard. When the COVID pandemic struck with the first wave in 2020, it wasn’t uncommon to see empty shelves at American stores, especially for consumer goods such as hand sanitizer and a range of toiletries. At the store, customers are behaving in strategic interactions of whether to stock up on certain goods or engage in normal buying based on their needs for the day or week. However, in a pandemic, thew news and social media can fuel anxiety and the perception of scarcity. If panic sets in, customers have reasons to stockpile.

Consider a scenario where two customers walk into a store:

In this situation the customers make independent decisions whether they should engage in normal buying behavior or hoarding. They both have all information available to make a decision, including the price and quantity on the shelf. It’s been a tense few weeks since COVID cases have spiked and the area is still in locked down except for essential businesses. Social media communities have shared posts of stores running low on supplies. On the way in there was a line of customers who had already filled up their shopping cart with supplies.

With that backdrop, Customers 1 and 2 arrived at their relevant aisle. For Customer 2, if she thinks that Customer 1 will try to hoard, then Customer 2 best hoard because if she acts business as usual, she would not able to get the item she needs. Vice versa, when Customer 1 thinks that Customer 2 will hoard, he has an incentive to panic buy. When both customers choose to hoard, the whole store is worse off. Ideally, both customers adopts normal buying behavior but in a non-cooperative situation where newspaper and social media propagate fear and anxiety, grocery stores had to take drastic actions by imposing quota per customer which is an enforcement mechanism against individual irrational actions that harm the public good.

Stores impose rationing policy with 1 unit/household cap

Hoarding more than you need is not necessarily irrational behavior. Like other strategic situations, game theory helps us understand the social psychology of a person’s thinking in response to how other’s act. If you see others panic buy, your instinct is to buy the goods before the other person buys it. Each person’s optimal strategy is to beat the other guy to the paper towels or pasta package. That is represented by a Nash Equilibrium where each player has not incentive to deviate from their strategy. It is a no regret strategy given what they know about the situation. But the dreaded Nash Equilibrium in this case is sub-optimal for society. If enough people stockpile, the result are supply shortages and hefty prices. In 2020, we saw a demand surge for essential goods, masks, hand sanitizers, certain medicines, and various groceries. This demand run up of consumer goods, coupled with the economic lockdown of non-essential businesses, disrupted supply chains, which further put pressure on store supplies.

How do we stop panic buying?

There needs to be ways to counter people’s greed and fear. There’s social psychology, a belief that others are greedy. If that’s true, that incites panic buying, in order to not be the sucker (i.e. sucker’s payoff). That social psychology becomes a negative self-fulfilling prophecy that begets further hoarding.If everyone buys just what they need, there would not be shortages. These solutions could involve encouraging kinship, socially responsible behavior, explaining to people that this is a long-term game, signaling to shoppers that supplies are coming.

EConomics of Hospital Stockpiling

Large quantity purchases also caused supply shortages for healthcare front line workers. Masks, gloves, and respirators, which are personal protective equipment (PPE) for medical staff and hospitals, became scarce during Q1 2020. In the medical mask market, hospitals and states resorted to alternative channels to only find themselves competing against hucksters, profiteers, governments, and individual hoarders. Facing a global demand surge and scarce market, buyers faced the choice of acting as a good neighbor or panic buy. Just like customers in the stores, medical supply purchases do not want to be the sucker and miss out on supplies. There are reports of people stockpiling medical masks and selling it on the secondary market. That drove up prices which attracted copycats who sold poor quality medical masks. When official government guidance came out recommending mask wearing in public spaces, the general population went to alternative markets online and other shady networks, which exacerbated the problem but presented more opportunities for profiteers.

Solutions to Medical Supply Shortages

The motivation for stockpiling medical equipment is the same as collecting large quantities of household goods. However, countermeasures to the medical supply problem must be broader and forceful given the impact on the hospitals, doctors and people who are the nation’s first line of defense.

In a broken market with competing demands, one option is to rely on the federal government to serve as an efficient coordinator to purchase and manage distribution of supplies. The executive branch can invoke the National Defense Production Act to ramp up the manufacturing of masks, face shields, and other PPE. Historically, presidential administrations have used this authority to purchase critical military equipment to support infrastructure repairs and impacted citizens following natural disasters. In the same way, the government can leverage that authority to centralize supply management on strategic goods and services to deal with a global health pandemic. The government can deploy this policy strategy to fight a raging crisis by compelling private entities to produce medical supplies. When society is on a path to recovery, the same authority allows the government to guarantee purchases of the vaccine supply and manage its distribution.

For a broader crisis fighting strategy, strong leadership and communication to inform society and individuals. Hoarding behavior is rooted in panic and uncertainty about the future. That can be part of public health campaign to inform and address people’s doubt, fear and uncertainty. Private organizations also found creative ways to institute quotas on goods and services. For example, purchases of high demand products such as masks are subject to a cap per household. Stores used its soft power by posting signs that encourage customers to respect one another by not panic buying while maintaining a social distance from other shoppers.


With any crisis, decision-makers need to understand social psychology with empathy and putting themselves in people’s shoes. Game theory could be useful to understand how people make decisions in reaction to other people’s actions and what they see on the news. Once we understand how social psychology can break markets and worsen the crisis, governments and practitioners can use a combination of hard power like presidential authority and public health information campaigns to address the pain points so that our critical infrastructure and front line staff can continue to perform their duties to get society back to normal.

America’s Crisis, First of Many

This is an excerpt of the prologue to the book that I’m writing, which chronicles financial panics and crises in America that stretches from the modern era back to the nation’s founding…..

It was a fateful dinner. The young American Republic is no more than a decade old but already staring at its first crisis. Thomas Jefferson, the U.S. Secretary of State, brokered a dinner meeting between US Treasury Secretary Alexander Hamilton and Virginian leader James Madison. The trio were in a heated battle over the proper role of national government in resolving  fundamental issues in the fledgling economy. Congressional lawmakers formed coalitions based on their view of what would be the optimal structure for America’s economic foundation. 

Even at its founding, America is characterized by compromise, conflict, and crisis. The Republic was in a chaotic state coming out of the Revolutionary War. It was more like a loose collection of sovereign states, much less a perfect union. States were divided geographically and economically.  The country had a $80 million debt, with a mix of foreign, domestic and state debts. Absent a credible repayment plan, the United States runs the risk of destroying its ability to borrow from creditors and undermining its obligation to pay the Continental Army. Yet, the national government was ill equipped to deal with the crisis. 

The predecessor to the Constitution was The Articles of Confederation, an agreement among the 13 states, written against the backdrop of wartime urgency. There was a valid fear against a central government coming out of the War for Independence. The post-war document outlined America’s first government, but the temporary framework was missing a president and a court system. The only branch was the Continental Congress which wielded little power. Absent a federal government and a coherent national economic strategy, the thirteen states organized themselves around their own economic interests. They freely imposed tariffs on imports and exports to and from other states. 

Making matters worse, economic security was inextricably linked with national security. During the War for Independence, Union troops starved and faced backlogs of unpaid compensation for their services. In December 1777, 11,000 Continental Army Troops made camp at Valley Forge. Washington’s troops were in a desolate situation, cold and starving. Washington petitioned the Congress for food, clothes and fresh supplies. Congress failed to act. Compounded by diseases like influenza and typhoid, 2,000 troops died. 

Hamilton served as a Captain of the New York Independent Artillery Company during the first two years of the War. Washington enlisted Hamilton to his staff as a lieutenant-colonel thanks to his fine writing skills. This skill was tested in Valley Forge, as Hamilton joined other aides-de-camp to pen letters to governors and members of Congress, seeking help. On February 13th, 1778, Hamilton wrote to New York Governor George Clinton: “…exert yourself upon this occasion, our distress in infinite…Desertions have been immense and strong features of mutiny begin to show themselves…” (Chernow 2004)

To fund supplies for the Continental Army and national operations, the country scraped money from the states. With good reason, states were skeptical of sending funds to a dubious central authority. In an ill-attempt to fix financial woes, Congress printed money which rendered currency in the colonies near worthless and undermined public confidence in the currency and the government’s ability to respond. 

Congress didn’t have the authority to raise revenue through taxation to fund a federal government. It was actually the preference of influential players such as Thomas Jefferson who believed in the vision of a pastoral America with individual liberty, land ownership, unfettered by government. Alexander Hamilton, then a New York delegate to the Continental Congress,  held the opposite view. He saw the dangers of states pursuing their disparate interests that counteract national goals. He even warned George Washington and his superiors about this lack of unity but failed several times. At one point he asked to resign from his state public office to retreat into private life but Washington talked him out of it. 

Valley Forge was a pivotal moment that solidified Alexander Hamilton’s view that without real political reform, the country would not have the institutions to foster economic stability. Without necessary reforms, the country could disintegrate into factioning states. 

Hamilton’s fear would escalate a few years later. States were cash strapped from Revolutionary war debt. On June 17, 1783, while meeting at the Pennsylvania State House, Congress received a message from soldiers of the Continental Army stationed in Philadelphia that they are demanding backlog pay for their service during the War. Congress balked.  In the next several days, soldiers from Lancaster, Pennsylvania, abandoned their posts to join with brothers in arm from the city barracks. United with 400 strong, they surrounded the State House and refused to let the Delegates leave without getting addressing their demands. Soldiers forged an insurgency to trap Congressional delegates in the halls of Philadelphia, including Hamilton. This became known as the Philadelphia Mutiny.

Hamilton would draw the hard lessons learned from the Philadelphia Mutiny to his duties as Treasury Secretary. He did not want the new country to start off on shaky foundations. He would formalized this proposal into a grand plan that everyone now knows as the Hamiltonian economics program. Approving this package is not an easy feat. A different post will cover the fateful dinner that drove the grand bargain of 1789.


Chernow, Ron. Alexander Hamilton. New York: Penguin, 2004. Print.