Month: January 2005

Vioxx and Tort

by  Alex Tabarrok in

We have two systems of drug regulation in the United States, the FDA and tort law.  Unfortunately, neither system works well.  FDA incentives push for excess delay and excess cost and the tort system appears random if not perverse in its operation with good claims receiving nothing and bad claims receiving billions.

Writing in the New Yorker, James Surowiecki discusses some relevant research from Kip Viscusi:

Merck would seem to have one big thing in its favor: the company
voluntarily withdrew Vioxx from the market. But while Merck executives
may have hoped to persuade people that they were acting responsibly,
plaintiffs’ attorneys have taken the withdrawal as an admission of
guilt…internal
company documents show that Merck employees were debating the safety of
the drug for years before the recall.

From a scientific perspective, this is hardly damning. The internal
debates about the drug’s safety were just that–debates, with different
scientists arguing for and against the drug….While that kind of weighing of risk and benefit may be medically
rational, in the legal arena it’s poison. Nothing infuriates juries
like finding out that companies knew about dangers and then “balanced”
them away. In fact, any kind of risk-benefit analysis, honest or not,
is likely to get you in trouble with juries….Viscusi has shown that
people are inclined to award heftier punitive damages against a company
that had performed a risk analysis before selling a product than a
company that didn’t bother to. Even if the company puts a very high
value on each life, the fact that it has weighed costs against benefits
is, in itself, reprehensible. “We’re just numbers, I feel, to them” is
how a juror in the G.M. case put it. “Statistics. That’s something that
is wrong.”…

Before a jury, then, a firm is better off being
ignorant than informed.

Why are labor unions declining?

by  Tyler Cowen in

Jane Galt asks:

Why hasn’t labour successfully colonised the non-manufacturing world, outside of the public sector?

Read the comments to her post, but I see a few major hypotheses:

1. It is now easier to fire people who try to organize unions.  Remember Reagan and the air traffic controllers?

2. Marginal products are easier to measure and markets are more competitive than in times past.  This lowers the scope for unions as a means of increasing the bargaining power of labor.

3. Physical capital — especially in service sectors — is less fixed than in previous times.  If workers organize, the capital will move to another sector or nation.  In contrast an auto plant is hard to move out of Michigan.

4. Government regulations, and superior market institutions for risk-sharing, render unions less necessary.

5. In the service sector the distinction between "management" and "labor" is more blurred than in traditional manufacturing firms.  Yes you have lawyers and secretaries, but the class of manual laborers who spend their lives with a single firm is smaller than in times past.

It remains a puzzle to me why unions are so strong in Hollywood, suggestions are welcome, I have turned on the comments if you have any ideas on this.

Our colleague Gordon Tullock

by  Tyler Cowen in

The new Liberty Fund edition of Gordon Tullock’s The Organization of Inquiry is out:

In this book, Tullock focuses attention on the organization of science, raising important questions about scientific inquiry and specifically about the problems of science as a social system. Tullock poses such questions as: how do scientists engage in apparently cooperative contributions in the absence of hierarchic organization and why are scientific contributions worthy, for the most part, of the public’s trust?

If you are fed up with publication lags, Gordon had the answer for that one too, circa 1980:

"Professor Gordon Tullock referees submissions to Public Choice himself and usually has a response in the mail within 48 hours."

See also Brad DeLong’s appreciation of Gordon. And here is a list of forthcoming volumes in the series.

A Swiss Miss Doesn’t Miss Much

by  Alex Tabarrok in

Switzerland continues to have more guns and less crime.  Here is a charming portrait by Stephen Halbrook of a Swiss shooting competition for boys and girls.

The greatest shooting festival in the world
for youngsters takes place every year in Zurich, Switzerland. Imagine
thousands of boys and girls shooting military service rifle over three
days amid an enormous fair with ferris wheels and wild rides of all
kinds. You’re at the Knabenschiessen (boys’ shooting contest).


This girl, one of 1,585 who competed, being coached in sharpshooting with the Assault Rifle 90, the Swiss service rifle.

Held since the year 1657, the competition traditionally has been both a
sport and a way of encouraging marksmanship in a country where every
male serves in the militia army. Today, girls compete along side the
boys. In fact, girls are now winning the competition.

It’s
September 13, 2004. In the U.S. on this date, the Clinton fake “assault
weapon” ban sunsets. In Zurich, some 5,631 teens – 4,046 boys and 1,585
girls, aged 13-17 – have finished firing the Swiss service rifle, and
it’s time for the shootoff.

That
rifle is the SIG Strumgeweher (assault rifle) model 1990 (Stgw 90), a
selective fire, 5.6 mm rifle with folding skeleton stock, bayonet lug,
bipod, and grenade launcher. The Stgw 90 is a real assault rifle in
that it is fully automatic, although that feature is disabled during
the competition. Every Swiss man, on reaching age 20, is issued one to
keep at home. Imagine all those teenagers firing this real assault
rifle while their moms and dads look on with approval, anxiously
awaiting the scores.

My Ethnic Dining Guide, revised

by  Tyler Cowen in

Here is the seventeenth edition.  Even if you don’t live near Washington D.C., here are  a few general tips for eating out:

         1. Avoid dishes that are "ingredients-intensive."  Raw
ingredients in America –  vegetables, butter, bread, meats, etc. – are below
world standards.  Even most underdeveloped countries have better raw
ingredients than we do, at least if you have a U.S. income to spend there, and
often even if one doesn’t.  Ordering the plain steak in Latin America may
be a great idea, but it is usually a mistake in Northern Virginia.  Opt
for dishes with sauces and complex mixes of ingredients.  Go for dishes
that are "composition-intensive."

          2. Appetizers often are better than main courses.  Meals composed of
appetizers and side dishes alone can be very satisfying.  Thai and
Lebanese restaurants provide the classic examples of this principle.

          3. Avoid desserts.  Most ethnic restaurants in America, no matter how
good, usually fall flat with the desserts.  Especially if the restaurant
is Asian.

          4. Order more than you plan to eat. 

Costco sells a Picasso drawing

by  Tyler Cowen

It was for $39,999…I love Picasso as much as the next guy, but this work just stinks, check out the image (and story).

Here is rule number one of art buying: if you can just walk up cold and buy it, don’t. 

For mysterious reasons unbeknownst to this cultural economist, the best artworks are rationed out to regular and longstanding buyers.  (Is it somehow price discrimination — make people work very hard to get the best — or does a gallery care about the quality/reputation of its buyers?  Or does it support market value to have excess yet rationed demand at the going price, a bit like a long line at a restaurant to signal popularity?  And what determines whether a work is sold through a gallery or at auction?)

Here is my earlier post on Picasso and Costco.

China facts of the day

by  Tyler Cowen in

Percentage of Chinese workers who have no pension, private or public: Eighty percent (kind of puts our social security dilemmas in context, no?)

Expected ratio of workers to retirees, circa 2030: Two-to-one

Projected shortfall of the Chinese national pension system by 2033: $53.3 billion

Those are all reasons why China may be an overvalued economy; see Business Week, 31 January, p.47 for more information.

Addendum: Daniel Drezner offers his India fact of the day.

Murakami and Kafka

by  Tyler Cowen in

The most important fact we gleaned from the records was that, medically speaking, the incident had caused no lasting impact on the children.  From right after the event to the present day, the examination and tests consistently indicated no internal or external abnormalities.  The children were leading healthy lives, just as they had before the incident.  Detailed examinations revealed that several of the children had parasites, but nothing out of the ordinary…The one notable thing was that the two-hour span during which the children had been unconscious in the hills was erased from their memory.  As if that part had been extracted in toto.  Rather than a memory loss, it was more a memory lack.

That is from Haruki Murakami’s new Kafka on the Shore.

He is one of the few contemporary writers always worth reading.  His Underground: The Tokyo Gas Attack and the Japanese Psyche is a minor (and neglected) classic of social science.  Or do you love intellectual-geeky science fiction, but think you have run dry?  Try his Hard-Boiled Wonderland and the End of the World.  The best "literary" introduction is probably A Wild Sheep Chase.