Month: August 2005

Cool underwater products

Here is a general listing, with photos, and sometimes prices.  Here is the most advanced "tourist submarine" available.  You can buy this "acrylic viewport globe" — modeled by an Italian designer — for only a few million.  Nor should you ignore this aquatic home, which remains unpriced and perhaps does not yet exist.  Here is evidence that the company is for real; see here also.  The film industry is one of their customers.  Here is their rationale for price discrimination.

Many thanks to Catherine for the pointer.

No Pain Relief for Tort Sufferers

James Hamilton takes a look at one of the key studies on Vioxx and heart attacks.  He is not greatly impressed.

I took a look at one of the studies on which the decision was
justified, written by Dr. David Graham and co-authors and published in Lancet
in February. This study looked at 8,143 Kaiser Permanente patients who
had suffered a heart attack and had also at some point taken a
nonsteroidal anti-inflammatory drug (NSAID), of which Vioxx (rofecoxib)
is one. Of these patients, 68 were taking rofecoxib while 4,658 were
receiving no medication at the time of their heart attack, a ratio of
(68/4658) = 1.46%. For comparison, the study looked at 31,496 other
patients who had also at some point taken an NSAID, matched for
characteristics like age and gender with the first group, but who
didn’t have a heart attack. The ratio of rofecoxib users to those with
no current medication was slightly lower (1.05%) in this second group,
which one might summarize as a (1.46/1.05) = 1.39-fold increase risk of
heart attack from taking rofecoxib compared to no NSAID. Is that
statistically significant, in other words, can you rule out that you’d
see a difference of that size just by chance? Yes, the study claimed,
but just barely.

On the other hand, this was not a controlled experiment, in which
you give the rofecoxib randomly to some patients and not others in
order to see what happens. Rather, something about either these
patients or their doctors led some of them to be using rofecoxib and
others not. Dr. Graham and co-authors looked at a variety of indicators
that suggested that the rofecoxib patients already had slightly
elevated risk factors for coronary heart disease. Once they controlled
for these with a logistic regression, their study found an elevated
risk factor of heart attack for rofecoxib takers of 1.34, which was not
statistically significantly distinguishable from 1.0.

The strongest evidence from this study was a claimed dose-effect
relation. Of these 68 rofecoxib-using heart-attack patients, 10 of them
were taking doses above 25 mg per day. Only 8 patients in the much
larger control group were taking so high a dose, implying an elevated
risk factor of 5 to 1 for high-dose patients. Again observable risk
factors could explain some of this, with the conditional logistic
regression analysis bringing the implied drug-induced risk down to 3 to
1. According to the study, this elevated risk factor was still
statistically significant, even though the inference is based on the
experience of just 10 patients.

The obvious question here is whether in fact the authors were able
to observe all the relevant risk factors. The study openly acknowledged
that it did not, missing such important information as smoking and
family history of myocardial infarction.

…[E]ven if
there actually is an elevated risk of the magnitude the studies suggest
but can’t prove, the question is whether I might want to accept a 1 in 4,000 risk of dying from a heart attack in order to get the only medication timt makes my pain bearable and a mobile life livable.  And if I say no to the Vioxx, I may end up taking something that is less effective for my pain but has risks of its own.

…. How did we arrive at a
system in which 12 random Texans are assigned responsibility for
evaluating the scientific merits of statistical evidence of this type,
weighing the costs and benefits, and potentially sending a productive blue-chip American company into bankruptcy protection?

See also my op-ed Bringing the Consumer Revolution to the FDA.

Not since Mark Twain

Jon Stewart destroyed Christopher Hitchens on Friday’s Daily Show.  Hitchens tried to take the line that people against the war in Iraq were capitulationist, blame America-firsters.  Here’s part of the transcript:

Stewart: The people who say we shouldn’t fight in Iraq
aren’t saying it’s our fault. That is the conflation that is the
most disturbing to me.
Hitch: Don’t you hear people saying that we made them nasty. . .
Stewart: I hear people saying a lot of stupid
[bleep]. . . But there is reasonable dissent in this country
about the way this war has been conducted, that has nothing to do with
people believing that we should cut and run from the terrorists, or that we
should show weakness in the face of terrorism, or that we believe that
we have in some way brought this upon ourselves.  They believe that this war is being conducted without transparency, without credibility, and without competence…
Hitch: I’m sorry, sunshine.  I just watched you ridicule the president for saying he wouldn’t give a timetable…
Stewart: No, you misunderstood why. . . .What I ridiculed the president [about] was [that] he refuses to answer questions from
adults as though we were adults and falls back upon platitudes and
phrases and talking points; that does a disservice to the goals that he
himself shares with the very people he himself needs to convince.

Hitchens knows he has been beat and can hardly wait to escape at the close (watch the video here). 

Unintended consequences

The September 11, 2001, terrorist attacks are increasingly viewed in the oil-rich Arab countries of the Persian Gulf as the catalyst for an economic boom when Arabs divested from America and reinvested at home.
    Arab investors pulled tens of billions of dollars out of the United States. They were angered by perceived American hostility toward Arabs. They worried their assets would be frozen by U.S. counter-terrorism measures. And U.S. markets happened to be plummeting while economies in the Persian Gulf were on the upswing, buoyed by rising oil prices.
    The results have been spectacular.
    Since late 2001, economies in the six Gulf Cooperation Council countries — Bahrain, United Arab Emirates, Kuwait, Oman, Qatar and Saudi Arabia — have soared, with stock markets up a collective 400 percent. The Standard & Poor’s 500 rose 24 percent over that period.

It is noted that rising oil prices have not hurt either; here is the story.  Dubai has probably been the biggest beneficiary.

Teaching students to *do* economics

Doing Economics, buy it here.  This book is based on the novel premise that undergraduate instruction should be based on teaching practical skills.  Imagine chapters like "Overview of the Research Process in Economics," "What is Research?", "Critical Reading or How to Make Sense of Published Research," and "Locating (and Collecting) Economic Data."  It is more mechanical and less incisive than I would like, but every serious undergraduate economics major should be familiar with this book.

By the way, here is what undergraduates actually do, courtesy of one anthropologist; thanks to the readers who sent in the link.

Judith Polgar will compete for the world’s chess championship

That is in Argentina, an eight-person double round robin tournament, coming this October.  Kasparov has retired and Kramnik is no longer formidable, so the winner of this tournament will be regarded as the world champion of chess.  Does Judith have a chance?  Here is an interview with her.  Note that the old stereotypes of female chess players no longer hold.  Here is a complete directory of photos, totally safe for work.  (Call me sick, but I find these pictures more fun than "real" pornography; there is at least an element of surprise each time you click.  Plus they make you doubt the predictive capacity of evolutionary biology)  Nor could Bobby Fischer beat Judith at "knight odds" and, these days, he probably could not beat her at all.

Econometric Society 2005 World Congress

Mahalanobis covers some of the latest papers from the Econometric Society meetings.   Here is a selection, more summaries at the previous link and much more here.

find money is more precious than time
: They say that time is more precious
than money but economists have shown that this isn’t the case. Researchers
presented a paper that shows people are more willing to share the fruits of
their labour rather than their money.

abortion increases a woman’s economic power
: The legalisation of abortion
and innovations in birth control have increased a wife’s clout in the home.
Results show that all women are better off, including those who don’t use birth
control, but only if it’s available to single women as well.

predicts how to get ahead in the research stakes
: The conundrum over whether
to share interim research results or play your cards close to your chest has
been answered.

siblings fare worse in educational attainment
: Children born later in
families don’t perform as well as their older siblings.

The fear of death

Robin Hanson writes:

Humans clearly have trouble thinking about death.  This trouble is often invoked to explain behavior like delays in writing wills or buying life insurance, or interest in odd medical and religious beliefs.  But the problem is far worse than most people imagine.  Fear of death makes us spend fifteen percent of our wealth on medicine, from which we get little or no health benefit, while we neglect things like exercise, which offer large health benefits.

Here is the (short) paper.  Here is another paper on the same topic, here is Robin’s interpretative take on the authors:

When the salience of death is increased, such as by standing next to a Mortuary, we tend to want to reward heros more and punish prostitutes more.  We tend to favor more those who praise our religion and nation and those who criticize others.  We become more reluctant to disrespect items like flags or crucifixes.  We think we are better drivers, and that others agree with us more.  We try harder to divert attention from our less popular features and group identifications.  We believe more in the supernatural.  People with high self-esteem are mostly immune to these effects.

My take: Bryan Caplan and I have an ongoing debate.  He holds the traditional economist’s view that people are usually more rational with more important or more decisive choices.  I see important exceptions to this principle.  Many critical choices cause people to freeze up, become more dogmatic, distract their attention, or engage in greater self-deception.   But I am not as skeptical as Robin is about the benefits of health care expenditures.

Addendum: Try this NBER paper on denial of death.

My bet on oil prices

John Tierney is looking to bet that oil prices will fall.  He can find some willing opponents here, and they will offer him the best odds available.  I’ve been urging Alex to short real estate investment trusts; if he has already done so I fear for his ruin.  Brad DeLong discusses Google.  Jane Galt warns against such bets, on the grounds that timing is everything and no one knows when the bubble will burst. 

It remains an open question why markets don’t sell long-term bets for those people who have "price knowledge" but not "timing knowledge."  The longest-term NYMEX crude oil futures sell for 84 months ahead; admittedly a forward contract can stretch longer.  But why can’t you make a 30-year bet on organized markets?  I see a few hypotheses:

1. There are few if any people who have real price knowledge but not timing knowledge.

2. The disagreement in the market is about timing, so shorter-term contracts attract the attention and volume.  You might disagree about whether something will happen this month or next, but you can’t argue about whether it will happen ten or eleven years from now.

3. Long-term contracts make economic sense and someday we will have them.  Right now we are out of equilibrium.  We await tolerant regulators and heroic entrepreneurs.

4. You can replicate long-term contracts by trading short-term contracts in successive fashion.  The informed traders have enough liquidity and borrowing power to make this work.  (But hey, if that is so easy, why not have even fewer oil futures contracts?)

5. Liquidity is scarce, and involves significant economies of concentration.  Intermediaries limit the number of contracts, just as we have limited trading locales and trading hours.  (Admittedly many of these limits have, for better or worse, broken down.)  Remember when the French used to trade stocks just a few times a day?

Take your pick or add to the list.  Unless you opt heavily for #3, the market is saying that a general knowledge of price — without a knowledge of timing — simply isn’t worth that much. 

My bet on oil prices will be restricted to buying another economy car, next time around.  It is better to spend the money on books anyway, no?

Thanks to Tim Bartlett for the pointer.

What I’ve been reading

Mutants: On Genetic Variety and the Human Body: The title says it all, this book is not for the squeamish.

Hunger’s Brides: A Novel of the Baroque, by Paul Anderson.  I’m a sucker for 1400-page Canadian novels about Mexican nun/poetesses who are learning to speak Nahuatl and are involved in murders.  The New York Times ran an article on how to deal with the book’s size and weight.

Chronicles, volume I, by Bob Dylan.  No, I don’t care about him anymore either, but  nonetheless this was one of the best books I read all summer.  A primer on what it means to be American and why low rents are good for artistic creativity.

Healthy Competition: What’s Holding Back Health Care and How to Free It, by Michael Cannon and Michael Tanner, published by the Cato Institute.

Sons of the Conquerors: The Rise of the Turkish World, by Hugh Pope.  A useful and entertaining book on modern Turkey and how it relates to Azerbaijan and the "stan" countries.  Short of actual travel, this is your best hope of gaining a knowledge foothold in these areas.

My favorite book this summer remains the accessible yet deeply philosophic The Time Traveler’s Wife.  More generally, Michael at offers a comprehensive set of links on what is new in the world of books.

Will increasing productivity render the welfare state obsolete?

Under one argument, economic progress will make welfare states harder to maintain.  Resource mobility (one result of greater productivity) will force states to lower tax rates to avoid the loss of capital and labor.

I no longer hold this view.  Instead I expect rising wealth to lead — for better or worse — to a massive expansion in welfare benefits.  In other words, income effects could outweigh substitution effects.

Matt Yglesias notes that Iceland has high levels of government spending yet is prosperous.  Note that the country has less than 300,000 people and 70 percent of their export earnings comes from fishing.  This is sustainable as long as the cod stick around.  Norway relies on the North Sea for oil and gas.  Botswana, the African success story, uses diamond wealth to maintain extensive public spending.

Some of the smaller Gulf economies have extraordinarily high productivity for their modest labor inputs, because of accessible oil or gas.  Qatar and Dubai have erected elaborate welfare states; most citizens don’t work at all, unless you count extended trips to the shopping mall.  Guestworkers handle most of the menial labor or even the white-collar jobs.  The point is not that every welfare state has external largesse, but rather that free lunches tend to produce welfare states.

Imagine that nanotechnology, or some other version of The Next Big Thing, came to pass. The bounty of nature would be replaced by the bounty of science.  Might our economy look a bit more like the welfare policies of the Gulf states, albeit with greater diversification?  Won’t we massively expand our welfare state?  Since the whole point is not to work, no one will complain much about the high (implicit or explicit) marginal tax rates.  The rush will be to get in, not to leave town.

Loan markets in everything

…a library in the Dutch city of Almelo plans to
start its own human lending program next month. "The customers can rent
a veiled Muslim woman and finally ask her all the questions they would
never dare to ask if they met her on the street," says the director,
Jan Krol. Of course, Mr. Krol must adopt his offerings to local tastes.
So apart from the usual suspects — a gay man, a Muslim and a gypsy —
there will also be a politician, a hard-drug user, a gay woman and a
German (that World War II episode).

Here is the story, and thanks to Don Boudreaux for the pointer.