Month: July 2015

Is the Great Reset coming first to immigrants?

Casey Warman and Christopher Worswick have a new and interesting NBER paper on Canadian immigrants.  Apparently even the better-educated ones are not reaping real gains from (supposedly) skill-enhancing technical change:

The earnings and occupational task requirements of immigrants to Canada are analyzed. The growing education levels of immigrants in the 1990s have not led to a large improvement in earnings as one might expect if growing computerization and the resulting technological change was leading to a rising return to non-routine cognitive skills and a greater wage return to university education. Controlling for education, we find a pronounced cross-arrival cohort decline in earnings that coincided with cross-cohort declines in cognitive occupational task requirements and cross-cohort increases in manual occupational task requirements. The immigrant earnings outcomes had only a small effect on overall Canadian earnings inequality.

Immigrants of course are rarely labor market insiders, so, when structural change is occurring, they step into the new world of labor markets before the natives do.  You will find non-gated versions of the paper here.

James Buchanan as Intellectual Entrepreneur

James Buchanan was a fountainhead of ideas, as his twenty volume collected works demonstrate. But there is another side to Buchanan’s contributions that is less apparent. Buchanan was more than a scholar, more than an idea man. He was also an intellectual entrepreneur who led a worldwide movement. We like to believe that good ideas defeat bad ideas, that the cream rises to the top, that truth wins out in the end, but as John Stuart Mill (1859) stated, “Men are not more zealous for truth than they often are for error.” Indeed, error may attract more zealots, since error can bend itself to flatter, and the truth does not bend.

Buchanan understood right from the beginning that for good ideas to win requires a movement, and a movement is not built on ideas alone, but also on students, on conferences, on outreach, on media, and on money.

That is the opening to a I talk I gave at the 2013 memorial, “James M. Buchanan: A Celebration of Achievement,” just now published.

Esperanto fans

Ayatolla Khomeini, too, waffled on Esperanto. Shortly after the Iranian Revolution, he urged his people to learn the language as an anti-imperialist counterpoint to English, and an official translation of the Qur’an followed. But adherents of the Baha’i faith had been fans of Esperanto for decades, and Khomeini was definitely not a fan of Baha’i, so his enthusiasm dimmed.

And Baha’i’s not the only smaller religion that’s embraced Esperanto as a liturgical language. In Brazil, which has one of the world’s largest populations of Esperantists, the language is intimately associated with the séance-centric Spiritist movement, and many followers of the neo-Shinto Japanese religion Oomoto have studied some Esperanto.

Mao Zedong liked Esperanto too. The Communist Party of China has published an Esperanto magazine, El Popola Ĉinio, since 1950, and state radio stations still regularly broadcast in the language.

And perhaps most famously, George Soros grew up speaking Esperanto, though his public involvement with the language hasn’t gone beyond getting his father’s Esperanto memoirs translated into English.

That is from a new Sam Dean article on the on-line revival in Esperanto, via Ted Gioia.

When will Sana’a run out of water?

Yemen’s capital, Sanaa, may run out of economically viable water supplies by 2017 as available groundwater is unable to keep pace with the needs of a fast-growing population, experts warn.

Per capita water consumption is right now about two hundred cubic meters per year, compared to a scarcity threshold of 1700 cubic meters per year.

The cost of water has tripled in the last year, and the population of the city is expected to double within the next ten years.

There has been talk of moving the capital, as well as desalinating seawater on the coast and pumping it 2,000 metres uphill to Sanaa. But there are no concrete plans.

It may be too late for the removal of various water subsidies to make a difference, even assuming that were to happen.  In the meantime, there have been few positive developments and of course the war is a huge negative.

It would be tragic, and in modern times unprecedented, if and when a major city simply runs out of water, and that could happen in about two years’ time.  Here is further coverage.

Markets in everything sandcastle butlers those new service sector jobs

butler

Building the biggest and the best sandcastles is an absolute must for children on beaches.

Now a travel company is stepping in to secure the all-important bragging rights for them – by launching the world’s first sandcastle butler service.

From Disney castles to favourite TV characters, the talented concierge staff will be on hand to transform a simple mound of sand into anything guests’ imaginations can conjure up.

Oliver’s Travels, a family villa specialist, is introducing the VIP service at selected destinations in Europe.

When guests book the service they will first get a sandcastle brainstorming session with the butlers in order to create an elaborate sand design.

There are more good photos at the link, and also tips on how to build a great sandcastle, all via the excellent Mark Thorson.

New interview with Ben Goldacre

Here is one good bit of many:

I have a deep-rooted prejudice which is that if people can talk fluently in everyday language about their job, it strongly suggests that they have fully incorporated their work into their character. They feel it in their belly. There are people with whom you talk about technical stuff and it almost feels like they can only talk about it in a very formal way with their best work face on – as if the information they are talking about has not penetrated within. Twitter cuts through that and is a way of finding people who are insightful and passionate about what they do, like junior doctors one year out of medical school who take you aback when you realise they know more than people whose job it is to know about a particular field, such as 15 year-old Rhys Morgan. He has Crohn’s disease and went onto Crohn’s disease discussion forums and discussed evidence, whilst noting down people making false claims about evidence for proprietary treatments. He ended up giving better critical appraisal of the evidence that was presented than plenty of medical students. This was all simply because he read How to Read a Paper by Trish Greenhalgh and some of my writings, so he has learnt about how critical appraisal works and what trials look like along with the strengths and weaknesses of different kinds of evidence. Thanks to Twitter, I have been able to read about people like Rhys in action and to see ideas and principles really come alive and be discussed and for that, it is wonderful.

For the pointer I thank Michelle Dawson.

What good is training in moral philosophy?

Eric Schwitzgebel and Fiery Cushman have an interesting paper (pdf, pubished Cognition version here) which raises that question rather directly:

We examined the effects of framing and order of presentation on professional philosophers’ judgments about a moral puzzle case (the “trolley problem”) and a version of the Tversky & Kahneman “Asian disease” scenario. Professional philosophers exhibited substantial framing effects and order effects, and were no less subject to such effects than was a comparison group of non-philosopher academic participants. Framing and order effects were not reduced by a forced delay during which participants were encouraged to consider “different variants of the scenario or different ways of describing the case”. Nor were framing and order effects lower among participants reporting familiarity with the trolley problem or with loss-aversion framing effects, nor among those reporting having had a stable opinion on the issues before participating the experiment, nor among those reporting expertise on the very issues in question. Thus, for these scenario types, neither framing effects nor order effects appear to be reduced even by high levels of academic expertise.

I wonder to what extent economists do better at treating sunk costs as sunk?  The pointer is from Michelle Dawson.

By the way, ethicists are not more ethical.  Just in case you were wondering.  Are economists more economical?

The economics of biosimilars

If I understand correctly, a biologic is “any medicinal product manufactured in, extracted from, or semisynthesized from biological sources,” and a biosimilar is a copy of a biologic.  Think of a biosimilar as harder to make than a generic drug and also requiring separate FDA approval.  Here is Wikipedia:

Unlike the more common small-molecule drugs, biologics generally exhibit high molecular complexity, and may be quite sensitive to changes in manufacturing processes. Follow-on manufacturers do not have access to the originator’s molecular clone and original cell bank, nor to the exact fermentation and purification process, nor to the active drug substance. They do have access to the commercialized innovator product.

Here is a Rand piece on the potential cost savings from biosimilars (pdf), but in percentage terms they do not become nearly as cheap as generic drugs, maybe 65-85% of the price of the original.

Zarxio was the first biosimilar approved by the United States, and the global biosimilars market could hit $55 billion by 2020.  Here is yesterday’s FT story about biosimilars draining away sales.

Here is a paper by Blackstone and Fuhr:

Various factors, such as safety, pricing, manufacturing, entry barriers, physician acceptance, and marketing, will make the biosimilar market develop different from the generic market. The high cost to enter the market and the size of the biologic drug market make entry attractive but risky.

Will cell therapies, which are relatively new and also hard to copy with biosimilars, save Big Pharma from the forthcoming patent cliff?

Biosimilars will become a bigger issue soon:

There are 11 biologic drugs that will face biosimilar competition in the next several years, according to data compiled by Evercore ISI. These drugs, which treat ailments from cancer to rheumatoid arthritis, raked in more than $50 billion combined in 2014.

The FDA is outlining biosimilar approval pathways, although the issue seems to be receiving almost zero attention from the outside world.

Why are men rather than women the first to give up traditional clothing?

But around the world men are the first to give up their ethnic costumes.  They are outside the village more, more likely to know the majority community’s language and understand the comments about them in the towns, more apt to conceal their ethnic identity in social or commercial encounters so as to become part of the anonymous mainstream.  In Yunnan the only minority men who may still dress in their ethnic style are the Tibetans, the Dulong, the Lisu, some northern Yi groups and the Yao.

That is from Jim Goodman’s The Exploration of Yunnan, a useful and appealing book about one of the world’s most attractive regions.

The Electric Vehicle Tipping Point?

Geoff Ralston, a partner at Y Combinator, argues that electric cars will soon dominate the world. He gives several arguments regarding cost and convenience that I take no issue with but his most interesting argument strikes me as wrong:

Gas stations are not massively profitable businesses. When 10% of the vehicles on the road are electric many of them will go out of business.  This will immediately make driving a gasoline powered car more inconvenient.  When that happens even more gasoline car owners will be convinced to switch and so on.  Rapidly a tipping point will be reached, at which point finding a convenient gas station will be nearly impossible and owning a gasoline powered car will positively suck.  Then, there will be a rush to electric cars….

Why is this wrong? Consider that in 2009 there were 246 million motor vehicles registered in the United States. A 10% reduction would be 221 million vehicles but that is how many vehicles there were in 2000. Was driving an automobile so much more inconvenient in 2000 than it was in 2009? No. Even a 25% fall in gas vehicles would bring us back only to the number of vehicles circa 1998.

More fundamentally, the argument goes wrong by not thinking through the incentives. Suppose that gasoline stations did become so uncommon that finding one was inconvenient. What will happen? More gasoline stations will be built! Ralston has implicitly assumed that building gasoline stations will add so much to the price of gasoline as to render that option uneconomic. In fact, gasoline stations are relatively simple, small businesses that easily expand or contract in response to the pennies on a gallon that people are willing to pay for convenience.

Addendum: By the way, even though the number of vehicles in the United States has been increasing, the number of gasoline stations has actually been decreasing, largely because greater fuel efficiency means that we want fewer stations.

Hat tip: Vlad Tarko.

Regulators are people too

The behavioral economics of government behavior remains a drastically underexplored field.  I recently received this email (excerpted) from the Brookings Institution:

In Behavioral Public Choice: The Behavioral Paradox of Government Policy, Gayer and Viscusi analyze several recent regulations, finding that many government actions are in fact also subject to bias.  Regulatory agencies have recently relied upon behavioral economics, a relatively new economics field, which identifies cognitive limitations and psychological biases that lead people to make choices that cause self-harm, thus suggesting a justification for government intervention.  However, Gayer and Viscusi develop an framework of “behavioral public choice” that recognizes that government officials are also subject to behavioral anomalies and to public choice incentives that can further lead to welfare-reducing or harmful policies. They document several government policies that institutionalize rather than overcome behavioral biases, as well as regulations that justify inefficient mandates “based on weak or nonexistent evidence of consumer irrationality.”

For example, the Environmental Protection Agency, the Department of Energy, and the Department of Transportation have recently justified mandating energy-efficiency standards for durable goods (cars, appliances, etc.) based on the assumption that consumers (irrationally) do not take into account future cost savings from buying an energy-efficient product. Yet the agencies offer little or credible evidence that consumers are persistently irrational in their purchasing decisions for energy-consuming products. The authors note that this approach to justify regulations based on weak evidence of consumer irrationality “illustrates a key negative consequence of misusing behavioral findings: the welfare loss associated with ignoring heterogeneous preferences.”