Alex Tabarrok

Printing Cancer Killing Viruses

by on December 19, 2014 at 4:50 am in Economics, Science | Permalink

Cell biologist Andrew Hessel of Autodesk is designing viruses in software to attack a specific individual’s cancer and then using DNA Printers to create the viruses as a drug. Here from an interview with New Scientist (gated).

It’s really about making a specific medicine tailored to one person–”N-of-1″ medicine–rather than try to make it a best fit for a whole population. My vision is to create a personalized treatment that can be made in a day by printing bespoke cancer-fighting viruses.

I’m not fully convinced by his economic model but it may be useful as a vision-goal:

I see the business model shifting away from the blockbuster-drug model of the pharma industry–getting the best product for the most people and charging the most for it–to more of a Netflix model, in which you might purchase a subscription for all-that-you-need medicine to manage your cancer.

…I’m pretty sure I can get the virus printing costs down to a dollar a dose. The virus itself is designed by algorithms using diagnostic data from the patient. That info is put into a program that will design the cancer-fighting virus, so the cost of design is cheap. Then there’s testing, and there is no simpler test than on the patient’s own cancer cells in a dish. So that whole process should cost less than $100 end-to-end. If you are on a cancer subscription model paying $100 a month, I see that as ultimately profitable.

Hessel is also far too sanguine about the FDA who he thinks will allow this under “compassionate use.” No way – not today when the FDA prohibits 23andMe from even providing information about DNA and its probable consequences, see my post Our DNA, Our Selves. To make this a reality we will need scientific breakthroughs and also A New FDA for the Age of Personalized Medicine.

Smuggling Cubans

by on December 18, 2014 at 7:30 am in Economics, Law, Sports | Permalink

This post isn’t about smuggling Cuban cigars it’s an incredible story about smuggling Cuban baseball players.

The average wage in Cuba is about $20 per month so a typical Cuban might earn 50 times more in the United States but a star Cuban baseball player (who also earns about $20 per month in Cuba) might earn 10,000 times more in the United States. Markets abhor a price differential so there is an active market in smuggled Cubans.

Yasiel Puig, now a star player for the Los Angeles Dodgers, was smuggled out of Cuba in 2012. The smuggling operation was paid for by a group of Miami businessmen:

Investigators and court documents say Suarez was one of the Miami-based financiers of the 2012 smuggling venture in which Puig was taken by boat from Cuba to a fishing village near Cancun, Mexico, eventually crossing into the U.S. at Brownsville, Texas, on July 3 of that year. In return, the financiers were getting a percentage of the seven-year, $42 million contract Puig signed with the Dodgers.

The story is not unique

The plea is the second in Miami federal court this year involving the smuggling of a Cuban baseball player into the U.S. Last month, 41-year-old Eliezer Lazo was sentenced to 14 years in federal prison for conspiring to smuggle 1,000 Cubans, including baseball players such as Texas Rangers outfielder Leonys Martin.

Puig did in fact pay Suarez $2.5 million. A high price for a relatively simple operation–the going rate to smuggle an ordinary Cuban is about $10,000–but, as we will see, more than smuggling was involved. It took five attempts before Puig reached the shores of Mexico. On one of the earlier attempts Puig was captured by the US Coast guard who sent him back–after some of the crew asked for his autograph!

On the fifth attempt, Puig, along with “a boxer, a pinup girl, and a Santeria priest, the latter of whom blessed their expedition with a splash of rum and a sprinkle of chicken blood” managed to escape Cuba guided by the smugglers and their accomplices—“The Chinaman” and “The Hungarian”. Once in Mexico, however, the operation got messy because Mexico’s Zetas gang were acting as intermediaries and with Puig in hand they demanded a greater share of the proceeds.

“If they didn’t receive the money, they were saying that at any moment they might give him a machetazo”—a whack with a machete—“chop off an arm, a finger, whatever, and he would never play baseball again, not for anyone.” 

The case has lots of interesting asides: Why flee to Mexico first and only then to the United States? It’s all about the money and the weird rules of MLB:

A foreign-born player who immigrates without a contract is treated as an amateur by MLB; he can negotiate only with the team that drafts him. By declaring himself a free agent before arriving, that player can entertain all comers; the difference is worth millions. Federal law, of course, bars Americans from paying money to Cubans—or “trading with the enemy”—so a ballplayer like Puig needs not only to defect but also to establish legal residency in a country that he does not actually intend to live in.

Now back to the Zetas and the hostage negotiations.

As the standoff entered its third week, the smugglers began looking elsewhere to recoup their costs. The idea occurred to them that they could auction Puig off.

Eventually a rescue operation was staged by the Miami businessmen (details are unclear) and Puig escapes to Mexico City where in essence an auction is held in which the Dodgers win with a bid of $42 million over seven years. 

Puig, however, continued to be threatened by the Zetas, hence, it seems, the aforementioned $2.5 million dollar payment to the Miami businessman who in turn paid off the Zetas (a murder also appears to be related).

As if all of this isn’t astounding enough these details have come to light only because of a US civil case against Puig. Puig had been approached a few years earlier when he was just 19 by another would be smuggler. Fearing the state police who monitored him constantly, Puig alerted the sports ministry to the offer and they notified state security. The alleged smuggler was arrested by the Cuban police, jailed, and perhaps tortured. Now here is where it gets really strange. The alleged smuggler, still in jail in Cuba, and his mother are suing Puig in American court for $12 million dollars for turning the smuggler over to the Cuban authorities and thus potentially violating the Torture Victim Protection Act.

There are many lessons here about open(ing) borders, rent seeking, the law, and how making some trades illegal creates black markets often ruled by violence. Thankfully an opening of relations with Cuba may cause this market to wither away. Next up, college athletes.

David Cay Johnston takes a trip to Disneyland some 60 years after his first visit. It looks better than ever, even as America has declined.

broken fountain detroitEvery night Disneyland gets freshened up. When the park closes at midnight, the lights go up, and crews steam gum off the sidewalks, daub fresh paint where needed, water the flowers, polish the streetlights and examine the walkways. I had to look hard just to find unrepaired cracks on Main Street and the paved walkways. By chance, I got to walk backstage, where the asphalt and concrete surfaces were in near perfect shape, the walls painted, the handrails free of rust.

…Yet outside the gates, America fails to invest in its infrastructure, costing us lives from accidents, floods, sinkholes from water-main failures and explosions from faulty natural gas lines. Sidewalks buckle or heave after winter freezes, making many hazardous to walk on. America’s roads deteriorate, costing the economy in efficiency, though the front-end-alignment shops and tire dealers do well.

…The water fountains at Disneyland all worked, while in city halls and airports, many barely dribble because there is no budget to replace their filters before sediment clogs them.

Johnston’s piece is titled America should be more like Disneyland but instead of thinking seriously about what this means he fumbles on the 20 yard line and concludes that what makes Disneyland different is….happy thoughts. If only we were more like W.D., he says, “we could make America into a happy place.”

No, what makes Disney invest in infrastructure is not happy thoughts. Johnston is in fact clear about this:

The Walt Disney Co. invests in infrastructure because it makes the company money.

The problem with America is that our public infrastructure has been turned over to a fickle political process that is not governed by a rational calculation of cost and benefit, market test and experimentation but by a pursuit of power, glory and advantage that only rarely coincides with the public interest.

America should be more like Disneyland and to do that we need to develop institutions that allow more infrastructure to built by the private sector. Most ambitiously we need more cities as hotels, more proprietary cities. As Rajagopolan and I wrote in our study of India (in Cities and Private Planning):

The lesson of Gurgaon, Walt Disney World, and Jamshedpur is that a system of proprietary, competitive cities can combine the initiative and drive of private development with the planning and foresight characteristic of the best urban planning. A proprietary city will build infrastructure to attract residents and revenues. A handful of proprietary cities built within a single region will create a competitive system of proprietary cities that build, compete, innovate, and experiment.

Modern Principles, 3rd ed!

by on December 16, 2014 at 7:31 am in Books, Economics, Education | Permalink

Modern Principles 3rd
The third edition of the best written, most interesting principles of economics textbook, Modern Principles (economics, microeconomics and macroeconomics), hits the shelves any day now. The 3rd edition features a brand new chapter on asymmetric information, more material on economic growth including geography and growth, a new section on nominal GDP targeting and updated data and graphs throughout. Plus we have a very exciting and brand new feature used throughout the book…but I am going to hold off discussing that for a few more weeks. More to come soon!

Investing Aphorisms

by on December 13, 2014 at 7:24 am in Economics, Education | Permalink

Morgan Housel of the Motley Fool has a list of 122 Things Everyone Should Know About Investing And The Economy. Many are variations on a theme but here are a few I liked:

  • Investors want to believe in someone. Forecasters want to earn a living. One of those groups is going to be disappointed. I think you know which.
  • There were 272 automobile companies in 1909. Through consolidation and failure, three emerged on top, two of which went bankrupt. Spotting a promising trend and a winning investment are two different things.
  • I once asked Daniel Kahneman about a key to making better decisions. “You should talk to people who disagree with you and you should talk to people who are not in the same emotional situation you are,” he said. Try this before making your next investment decision.
  • For many, a house is a large liability masquerading as a safe asset.
  • “Success is a lousy teacher,” Bill Gates once said. “It seduces smart people into thinking they can’t lose.”

Geoengineering

by on December 12, 2014 at 12:20 am in Data Source, Science | Permalink

David Keith, a climate scientist at Harvard University, and author of  A Case for Climate Engineering, is interviewed at re/code.

There’s no question it reduces the global average temperatures; even the people who hate it agree you could reduce average global temperatures. The question is: How does it do on a regional basis?

By far the single most important thing to look at on a region-by-region basis is the impact on rainfall and temperature.

And the answer is, it works a lot better than I expected. It’s really stunning.

A lot of us thought that, in fact, geoengineering would do a lousy job on a regional basis — and there’s lots of talk on the inequalities — but in fact, when you actually look at the climate models, the results show they’re strikingly even.

Now, it’s not perfect and there are some things it won’t do. Turning down the sun does nothing for ocean acidification.

But it looks like it can cut, like, 80 percent of the total variation in climate, which is really stunning.

In some ways we should be singing it from the rooftops. But the scientific community is so painfully scared of talking about it. These papers come out, and people find the best ways to say, well, it sort of works, but it’s really awful.

The fact is, people really appear to have found a way to significantly reduce the climate risk — by more than half, which is a big deal.

Hat tip: Mark Frazier.

Here is the video of my panel at the Cato Conference on Growth (other videos at the link). John Haltiwanger leads off with a very good talk summarizing some of his work on declining business dynamism (see also his important paper with Decker, Jarmin and Miranda.) Amar Bhide follows with some skepticism about productivity statistics. My talk begins at 50:26. I discuss regulation and dynamism, why less-developed economies are more entrepreneurial than the United States, Japan’s Ise Grand Shrine and its lessons for entrepreneurship, how Zara is internalizing creative destruction and more.

Zuckerberg on Facebook v. Apple

by on December 8, 2014 at 7:31 am in Economics, Web/Tech | Permalink

Tim Cook, echoing others, recently said “When an online service is free, you’re not the customer. You’re the product.” Facebook’s Mark Zuckerberg took umbrage in an interview with Time:

“A frustration I have is that a lot of people increasingly seem to equate an advertising business model with somehow being out of alignment with your customers,” Zuckerberg says. “I think it’s the most ridiculous concept. What, you think because you’re paying Apple that you’re somehow in alignment with them? If you were in alignment with them, then they’d make their products a lot cheaper!”

Zuckerberg is only partially correct. Apple and Facebook both want to maximize profits but for Apple a key element in profit is increasing price above cost. Zuckerberg’s point is that one way of doing that is to take advantage of market power and raise price against the interests of customers. But Apple’s market power isn’t a given, it’s a function of the quality of Apple’s products relative to its competitors. Thus, Apple has a significant incentive to increase quality and because it can’t charge each of its customers a different price a large fraction of the quality surplus ends up going to customers and Apple customers love Apple products.

Facebook doesn’t charge its customers so relative to Apple it has a greater interest in increasing the number of customers even if that means degrading the quality. As a result, Facebook has more users than Apple but no one loves Facebook. Facebook is broadcast television and Apple is HBO. See my post Why Has TV Replaced Movies as Elite Entertainment for the diagram.

Our Guild-Ridden Labor Market

by on December 2, 2014 at 7:24 am in Books, Economics | Permalink

Could right and left unite in opposing occupational licensing? In an excellent primer Morris Kleiner makes the argument:

One unifying theme about the growth of occupational regulation has been the opposition from both the left and right of the political spectrum. Many on the left are concerned about the reduction in job opportunities, the increase in prices, and the diminished availability of services for those in or near poverty. On the right there is concern for economic liberty and access to the labor market and jobs. Many licensed professions are relatively low-skilled jobs, such as barbers, manicurists, nurse’s aides, and cosmetologists. The social costs of a bad haircut may be negligible, but the social costs of creating additional employment barriers for disadvantaged populations are not. Licensure laws often exclude ex-felons—defensible in many professions, but not in all, and such prohibitions make it extremely difficult for ex-offenders to find post-prison employment, thereby contributing to America’s high recidivism rate.

…If both the left and right oppose more occupational regulation, why is it growing? From the time of medieval guilds, service providers have had strong incentives to create barriers to entry for their professions in order to raise wages. In contrast, consumers who will be affected by the higher costs due to licensure are unorganized and arguably underrepresented in the political process.

Read the full post and Kleiner’s excellent book for many useful references. Here are previous MR posts on occupational licensing.

Cato is holding a conference this Thursday (Dec. 4) on The Future of US Economic Growth. Speakers include Nobelist Edmund Phelps, Ed Glaeser, Dale Jorgenson, John Haltiwanger and Erik Brynjolfsson. I will speak in the afternoon on the topic of entrepreneurship and whether economic dynamism is in decline. I will have some surprising things to say about dynamism and regulation. More information at the link.

GiveDirectly

by on November 30, 2014 at 7:35 am in Economics | Permalink

Consider GiveDirectly this holiday season for your charitable giving. As you may recall, GiveDirectly was started by four economists and it gives money directly to the very poor in Kenya and Uganda. GiveDirectly is a top-rated charity by GiveWell. The founders are committed to providing independent, randomized controlled trials of its process. One RCT has already been conducted with positive results and 3 others are under way. GiveDirectly publicizes the trials of its process before the results are produced. Impressive–the drug companies had to be forced to do this. Check out their website, they even provides real-time performance data. Here’s a bit more on their process.

GiveDirectly

A Colorado man, from Fruitvale (I am not making this up), was arrested for pointing a banana at the police. What makes this actually scary is the language of the police report:

The officers wrote in the police report they feared for their safety despite observing the supposed weapon was yellow.

“I immediately ducked in my patrol car and accelerated continuing northbound, fearing that it was a weapon,” Officer Joshua Bunch wrote in the report, according to the newspaper. “Based on training and experience, I have seen handguns in many shapes and colors and perceived this to be a handgun.”

The man was fortunate that he was only arrested. Had he been wielding a pointed stick he would surely have been shot.

Patents Do Not Increase Productivity

by on November 25, 2014 at 7:15 am in Uncategorized | Permalink

James Pethokoukis points us to this graph in the CBO’s new report on innovation. Patenting is way up but total factor productivity has barely budged. 112414patent

Boldrin, Allamand, Levine, and Ornaghi show something similar cross-sectionally, namely that the industries with the most patents are not the industries with the biggest increases in labor productivity. At best there is only a slight positive relationship between patents and labor productivity (see the paper for more).

Patents&Prod

 

Sewage Infrastructure

by on November 23, 2014 at 9:08 am in Food and Drink, Uncategorized | Permalink

This Vice documentary on sewage in New York is actually quite interesting. I would enjoy the Richard Scarry book.

Hat tip: Connor.

Defining Diversity Down

by on November 18, 2014 at 7:11 am in Economics, Web/Tech | Permalink

Marc Andreessen make some excellent points about diversity in a wide-ranging interview:

The critique of Silicon Valley is also that it isn’t very diverse. At Twitter, for instance, 90 percent of the tech employees are male and more than 50 percent of them are white.

I think these discussions are totally valid. Now, I disagree with many of the specific points.

What’s your take?

Shall we? Let’s launch right into it. I think the critique that Silicon Valley companies are deliberately, systematically discriminatory is incorrect, and there are two reasons to believe that that’s the case. No. 1, these companies are like the United Nations internally. All the diversity studies say that the engineering population is like 70 percent white and Asian. Let’s dig into that for a second. First, apparently Asian doesn’t count as diverse. And then “white”: When you actually go in these companies, what you find is it’s American people, but it’s also Russians, and Eastern Europeans, and French, and German, and British. And then there are the Chinese, Japanese, Koreans, Thais, Indonesians, and Vietnamese. All these different countries, all these different cultures. To believe in a systematic pattern of discrimination, you’d have to believe that we’re discriminatory toward certain people without being discriminatory at all toward an extremely broad range of ethnicities and religions. Because of Pakistanis, we’re seeing a higher-than-ever proportion of Muslim employees in a lot of our companies.

No. 2, our companies are desperate for talent. Desperate. Our companies are dying for talent. They’re like lying on the beach gasping because they can’t get enough talented people in for these jobs. The motivation to go find talent wherever it is is unbelievably high.

He is also spot on about online education.

Hat tip: Newmark’s Door.