FDA Tiered Approval

have an interesting op-ed on a tiered approval regime for the FDA:

Instituting a codified approval paradigm based on four tiered levels of clinical effectiveness (biomarkers, clinical signs and symptoms, disease modification and clinical outcomes) — with evidence regarding clinical utility progressively increasing — would greatly reduce the regulatory uncertainty and subjectivity, as well as the time to approval of innovative medicines.

Moreover, the four tiers, coupled with a commitment to apply state-of-the-art technologies (Apple Watch, telemetry and other health monitoring systems) to obtain clinical evidence would allow for additional learnings from use of drugs by practicing doctors treating real world patients. This knowledge would unearth additional uses, information that can be added to the product label to allow safer and more effective use of drugs and the identification of drug combinations that lead to even greater health benefits.

See also Barley Madden’s work on Free to Choose Medicine which would similarly create dual tracks, one the standard FDA process and a second observational track that would bring drugs to market more quickly with the tradeoff being fewer clinical trials. As clinical trials rise in expense and more treatments are targeted towards smaller patients groups (i.e. personalized medicine) and as statistical techniques improve, we will need and can benefit from reforms to the FDA process along these lines.

*Dark Shadows: Inside the Secret World of Kazakhstan*

The demographic legacy of four centuries of Slavic settlement is striking along Kazakhstan’s 6,846-kilometre frontier with Russia, the world’s second longest land border.  In 2014, when the conflict erupted in Ukraine, Russians formed 22 per cent of Kazakhstan’s population nationwide (by 2018, that figure had fallen to just below 20 per cent), but in many places in the borderlands they were in large majorities: in Ust-Kamenogorsk, 67 per cent of people were Russians, while in the town of Ridder, further north towards the frontier, the figure was 85 per cent…

By 2018, the share of Kazakhs in the population had risen from 40 per cent to 67.5 percent and the share of the other largest ethnic group, Russians, had fallen from 37 per cent to 19.8 percent.  Kazakhstan’s two main cities used to be predominantly Russians; now Kazakhs dominate.  Astana’s Kazakh population hit 78 per cent in 2018, up from 17 per cent at independence (when it was still a backwater called Akmola and not yet Kazakhstan’s capital); Almaty’s Kazakh population had risen from 22 per cent to 60 per cent.

The government is also working hard to “Kazakhify” towns along the Russian border.

That is all from the new and excellent book by Joanna Lillis.  You may also have read that Nazerbayev, who has held power in Kazakhstan since 1991, announced yesterday that he is stepping down, hoping to take on more of a Lee Kuan Yew role in the country.

Who is most receptive to pseudo-profound bullshit?

This research systematically mapped the relationship between political ideology and receptivity to pseudo-profound bullshit—that is, obscure sentences constructed to impress others rather than convey truth. Among Swedish adults (N = 985), bullshit receptivity was (a) robustly positively associated with socially conservative (vs. liberal) self-placement, resistance to change, and particularly binding moral intuitions (loyalty, authority, purity); (b) associated with centrism on preference for equality and even leftism (when controlling for other aspects of ideology) on economic ideology self-placement; and (c) lowest among right-of-center social liberal voters and highest among left-wing green voters [emphasis added]. Most of the results held up when we controlled for the perceived profundity of genuine aphorisms, cognitive reflection, numeracy, information processing bias, gender, age, education, religiosity, and spirituality. The results are supportive of theoretical accounts that posit ideological asymmetries in cognitive orientation, while also pointing to the existence of bullshit receptivity among both right- and left-wingers.

Here is the piece, by, and Via the excellent Kevin Lewis.

Tuesday assorted links

1. Minimum wage hikes increase property crime.

2. Your memory influences the rent you end up with.

3. An alert whenever “danger” is nearby, a really bad idea (NYT).

4. “Women with a male twin were 15 percent less likely to graduate from high school than women with a female twin, and those who went to college were 4 percent less likely to finish it. They had a 12 percent lower probability of being married, and a 6 percent lower probability ofhaving children.”  Link here (NYT).

5. Peter Thiel and Cornel West speaking at Harvard.

6. The psychology of elite sports.

7. “Armando, the ‘Lewis Hamilton of pigeons’ sells for record €1.25m.

Amazon bans some anti-vaccine books

Amazon has now joined other companies navigating the line between doing business and censoring it, in an age when, experts say, misleading claims about health and science have a real impact on public health.

NBC News recently reported that Amazon was pulling books touting false information about autism “cures” and vaccines. The e-commerce giant confirmed Monday to The Washington Post that several books are no longer available, but it would not release more specific information.

I cannot say I am entirely happy about that (grossly underreported) development.  Here is the full WaPo story by Lindsey Beyer.

Has the Labor Share Declined? Maybe, maybe not.

In a 2017 post Asher Schechter correctly noted:

Of the various ills that currently plague the American economy, one that has economists particularly worried is the decline in the labor share—that is, the part of national income that’s allocated to wages.

Lots of theories have been proposed to explain the decline in labor share including automation, globalization and increased markups. In a big if true paper, Koh, Santaeulalia-Llopis and Zheng argue that all of these theories are wrong because there has been no decline in labor share once we take into account that the BEA changed how intellectual property was treated in the national accounts.

The lack of attention to measurement can severely misguide economic theory. We demonstrated that the change in the accounting treatment of IPP—from expensed to capitalized—gradually implemented by the BEA since 1999 is the sole driver of the decline of the accounting LS. Furthermore, our examination of the accounting assumptions behind the capitalization of IPP—mainly that all IPP investment rents are attributed to capital—indicates that less arbitrary and extreme assumptions on the factor distribution of IPP rents yield a trendless accounting LS. In other words, the LS decline is an artifact of the change in the accounting treatment of IPP in national accounts, and this is at odds with current macroeconomic theory that considers the accounting decline as an economic phenomenon at face value.

Labor share appears to have declined globally. Have most countries changed their accounting practices? Quite possibly, but more investigation is needed. Many of the theories are also quite plausible which perhaps explains the reluctance of theorists to give up on the “fact”. The Koh et al. paper has been circulating for a few years but most seem to brush it off. Autor, Dorn, Katz, Patterson and Van Reenen, for example, say:

Although there is controversy over the degree to which the fall in the labor share of GDP is due to measurement issues such as the treatment of capital depreciation (Bridgman, 2014), housing (Rognlie, 2015), self-employment and proprietor’s income (Elsby, Hobjin, and Sahin, 2013; Gollin, 2002) and intangible capital (Koh, Santaeulalia-Lopis and Zheng, 2016), there is a general consensus that the fall is real and signifi cant.

Wait and see is probably rational at this stage. If the paper makes it through peer-review at the JPE, it will be more difficult to ignore.

It is arresting how many facts are in fact open to question. Maybe.

Hat tip: David Andalfatto somewhere on twitter.

Women’s employment has shaped the course of recent business cycles

This paper studies the impact of changing trends in female labor supply on productivity, TFP growth and aggregate business cycles. We find that the growth in women’s labor supply and relative productivity added substantially to TFP growth from the early 1980s, even if it depressed average labor productivity growth, contributing to the 1970s productivity slowdown. We also show that the lower cyclicality of female hours and their growing share can account for a large fraction of the reduced cyclicality of aggregate hours during the great moderation, as well as the decline in the correlation between average labor productivity and hours. Finally, we show that the discontinued growth in female labor supply starting in the 1990s played a substantial role in the jobless recoveries following the 1990-1991, 2001 and 2007-2009 recessions. Moreover, it depressed aggregate hours, output growth and male wages during the late 1990s and mid 2000s expansions. These results suggest that continued growth in female employment since the early 1990s would have significantly improved economic performance in the United States.

That is the abstract of a new NBER working paper by Stefania Albanesi.

The great retrogression average is over

White, non-college-educated Americans born in the 1960s face shorter life expectancies, higher medical expenses, and lower wages per unit of human capital compared with those born in the 1940s, and men’s wages declined more than women’s. After documenting these changes, we use a life-cycle model of couples and singles to evaluate their effects. The drop in wages depressed the labor supply of men and increased that of women, especially in married couples. Their shorter life expectancy reduced their retirement savings but the increase in out-of-pocket medical expenses increased them by more. Welfare losses, measured a one-time asset compensation are 12.5%, 8%, and 7.2% of the present discounted value of earnings for single men, couples, and single women, respectively. Lower wages explain 47-58% of these losses, shorter life expectancies 25-34%, and higher medical expenses account for the rest.

That is from a new NBER working paper by Margherita Borella, Mariacristina De Nardi, and Fang Yang.

Women in the economics profession

Nearly 100 female economists say a peer or a colleague has sexually assaulted them. Nearly 200 say they were the victim of an attempted assault. And hundreds say they were stalked or touched inappropriately, according to a far-reaching survey of the field.

The results, compiled by the American Economic Association, also reveal deep evidence of gender and racial discrimination within the field. Half of the women who responded to the survey said they had been treated unfairly because of their sex, compared with 3 percent of men. Nearly half of women said they had avoided speaking at a conference or a seminar to guard against possible harassment or “disrespectful treatment.” Seven in 10 women said they felt their colleagues’ work was taken more seriously than their own.

Here is more from Ben Casselman and Jim Tankersley at NYT.

Alan Krueger, RIP

You probably all know by now that Alan Krueger has passed away, nonetheless it seems appropriate to offer tribute and condolences.  Alan and I were together in the same year at Harvard in the economics Ph.D program, and although he was on track to win a Nobel Prize and I have read most of his papers and books, I always associate him more with those years in the mid-1980s.  I am very saddened by the news.

A reverse Austrian business cycle theory

Did tight money from the Fed place too high a penalty on deposit funding of mortgages?:

Between 2003 and 2006, the Federal Reserve raised rates by 4.25%. Yet it was precisely during this period that the housing boom accelerated, fueled by rapid growth in mortgage lending. There is deep disagreement about how, or even if, monetary policy impacted the boom. Using heterogeneity in banks’ exposures to the deposits channel of monetary policy, we show that Fed tightening induced a large reduction in banks’ deposit funding, leading them to contract new on-balance-sheet lending for home purchases by 26%. However, an unprecedented expansion in privately-securitized loans, led by nonbanks, largely offset this contraction. Since privately-securitized loans are neither GSE-insured nor deposit-funded, they are run-prone, which made the mortgage market fragile. Consistent with our theory, the re-emergence of privately-securitized mortgages has closely tracked the recent increase in rates.

Here is the full NBER working paper by Itamar Drechsler, Alexi Savov, and Philipp Schnabl.

Monday assorted links

Density is Destiny: Economists Predict the Far Future

In a paper that just won the JPE’s Robert Lucas Prize, Desmet, Krisztian Nagy and Rossi-Hansberg model the evolution of the world economy over the next 400-600 years! Is it laughable or laudatory? I’m not entirely sure. The paper does have an insight that I think is very important, in addition to a number of methodological advances.

If we look around the world today we see that the places with the densest populations, such as China and India, are poor. But in the long-run of history that doesn’t make sense. As Paul Romer, and others, have emphasized, ideas are the ultimate source of wealth and more people means more ideas. As a result, innovation and GDP per capita should be higher in places and times with more people. The fact that China and India are poor today is an out-of-equilibrium anomaly that happened because they were slower than the West to adopt the institutions of free markets and capitalism necessary to leverage ideas into output. China and India weren’t relatively poor in the past, however, and they won’t be relatively poor in the future. With that in mind, a key long-run prediction of Desmet, Krisztian Nagy and Rossi-Hansberg becomes clear. If people are not allowed to migrate then the places that are densest today will not only equal the West, they will overtake the West in innovation and productivity.

One of the key determinants of these patterns is the correlation between GDP per capita and population density. As we mentioned above, the correlation is negative and weak today, and our theory predicts that, consistent with the evidence across regions in the world to-day, this correlation will become positive and grow substantially over the next six centuries, as the world becomes richer. Two forces drive this result. First, people move to more productive areas, and second, more dense locations become more productive over time since investing in local technologies in dense areas is, in general, more profitable. Migration restrictions shift the balance between these two mechanisms. If migration restrictions are strict, people tend to stay where they are, and today’s dense areas, which often coincide with developing countries, become the most developed parts of the world in the future…. In comparison, most of today’s high-productivity, high-density locations in North America, Europe, Japan, and Australia fall behind in terms of both productivity and population.

Thus, if migration restrictions are strict, density is destiny and the dense parts of the world will rule. But what if migration restrictions are loosened?

… if migration restrictions are lifted, then people today move to the high-productivity regions such as Europe and the United States and these regions become denser and so remain the high-productivity regions in the future. World welfare in this scenario goes up by a factor of three.

It’s much better to remove migration restrictions today because we get to a much richer world, faster. In addition, population is better distributed in accordance with natural amenities. All is not perfectly rosy, however, in the free migration scenario. So let’s conclude with a few sentences that would make Hari Seldon proud.

[in the free migration scenario]…growth in utility drops substantially in the short run as many people move to areas with high real GDP; hence these areas be-come more congested and become worse places to live (lower amenities). This initial loss in growth is, however, compensated in the long run by a large surge in productivity growth after year 2200.

British sentences to ponder

But holding the government to account is one thing, setting the agenda another. The Brexit crisis has shown this. In January and February, when MPs tabled amendments that would truly empower backbenchers — by giving them control of what is debated in the Commons, or setting up voting systems for MPs to rank different Brexit options — the majority stepped back. “I think the most remarkable thing is how unsuccessful we’ve been in taking control,” says one shadow minister. Faced with a choice of now or never, MPs generally decided it couldn’t be now. Only this week did they become bolder, rejecting May’s deal for a second time. In response, the government agreed to facilitate a vote on different Brexit options if they rejected it a third time.

“The last two years have thrown into sharp relief the things that parliament is good at and the things it is not good at. It is generally not good at legislating,” says Lisvane. “The things that have gone really well are select committees.”

That is from a long FT piece by Henry Mance, perhaps the best article I have read this week.

What I’ve been reading

1. Aladdin, a new translation by Yasmine Seale.  A wonderful, lively small volume, a good reintroduction to the Arabian Nights, recommended.

2. Shalini Shankar, Beeline: What Spelling Bees Reveal About Generation Z’s New Path to Success.  Not as analytical as I was wanting, but more analytical than I had been expecting.

3. Rowan Ricardo Phillips, The Circuit: A Tennis Odyssey.  Provides a good look at the interior world of tennis competition, with emphasis on very recent times.  A good look at how to think about the game, not only in the abstract, but as it plays out through the logic of particular events and tournaments.

4. Tim Smedley, Clearing the Air: The Beginning and the End of Air Pollution.  Perhaps the best extant introduction to the air pollution issue, one of the world’s most important and underrated crises, and no I am not talking about carbon.

5. Gordon Peake, Beloved Land: Stories, Struggles, and Secrets from Timor-Leste.  Mostly analytical, with real information blended with travelogue.  I can’t judge the content, but I was never tempted to put this one down and throw it away.

6. Roderick Beaton, Greece: Biography of a Modern Nation.  Excellent survey and overview, makes the late 19th century intelligible, among other achievements.  “For Greeks, unlike the concept of the nation, the state had always been an object of popular derision.”