Month: August 2015

Friday assorted links

1. More on China and the silver standard.

2. Is there too much cream cheese on your bagel for the same reason the air conditioning is too cold?

3. The gravity model (trade) in ancient times.  A remarkable piece.

4. Switzerland launches special trains for Asians, Rigi-Kulm edition.  But back home in China: “The service sectors we do have data for have flat or falling output similar to other industries.”  Lots of signs of pending negative growth in there.  And the NYT covers the rise of China’s zombie factories.

5. Critique of Daniel Bell on Chinese meritocracy.

6. The theological poverty economist.  And she is moving to GW.

7. The cash or the tuna?  The law firm is taking the cash.

8. One of Facebook’s founders is taking on the Fed.

9. New AEA video on how good and interesting the life of an economist is.  I don’t find it so informative, and it is odd how little economic reasoning it uses.

10. Can a novelist be too productive?

How left-leaning are lawyers?

Adam Bonica, Adam S. Chilton, and Maya Sen have an extensive new paper (pdf) on this subject:

American lawyers lean to the left of the ideological spectrum. To help place this in context, the mean DIME score among the attorney population is -0.31 compared to -0.05 for the entire population of donors. Moreover, some 62% of the sample of attorneys are positioned to the left of the midpoint between the party means for members of Congress. Morover, the modal CFscore is in the center-left. This places the average American lawyer’s ideology close to the ideology of Bill Clinton. To be more precise, the modal CFscore for American lawyers is -0.52 and Bill Clinton’s CFscore is -0.68. This confirms prior scholarship and journalism that has argued that the legal profession is liberal on balance. To our knowledge, however, this figure represents the most comprehensive picture of the ideology of American lawyers ever assembled.

There is however a (quite slight) bimodal nature to the distribution and a cluster of right-leaning attorneys has views similar to those of Mitt Romney.  Not so many lawyers are true extremists, at least not in this data set.  Figure 2 on p.19 will not reproduce for me but it is an excellent picture of the data, including comparisons with other professions.

We learn also that female attorneys are considerably more liberal than male attorneys, but the number of years of work predicts a conservative pull.  Being a law firm partner also predicts views which are more conservative than average.  If you consider “Big Law” attorneys, while they are overall to the Left, they are more conservative on average than the cities they live in, such as NYC or Los Angeles.  Lawyers in Washington, D.C. are especially left-leaning.

The top fourteen law schools all have distributions which lean to the Left (pp.28-29), and UC Berkeley has the most left-leaning alumni.  The five law schools, of the fifty surveyed, with right-leaning alumni are University of Oklahoma, Texas A&M University, University of Georgia, Louisiana State University, and Brigham Young University.  Pages 38-40 of the paper rank different major law firms by how left- or right-leaning their employees are.

Oil and gas, M&A, and energy lawyers are relatively conservative, see p.45.  Entertainment lawyers are relatively left-leaning, same for civil rights and personal injury lawyers.  Don’t even ask about law professors.  Public defenders are far more left-leaning than prosecutors, though prosecutors are still more left-leaning than lawyers as a whole.

This paper is interesting throughout.

My Product Hunt dialogue

I very much enjoyed this Live Chat, and I thank the participants for all of their stimulating questions and remarks.  Here is one excerpt:

Ben Casnocha:

How do you think your career and life would have been different if blogging, twitter, and digital media had be ubiquitous in your teens and 20’s? Would you have still pursued an academic path or would you have become a full-time columnist/commentator/speaker earlier on? I seem to recall you saying at one point that you’re glad the internet didn’t exist early on in your life as it gave you the time to read the classics and develop a substantive base of knowledge.

Tyler Cowen:

I am glad I was forced to live in “book culture” and “meat space’ for my first forty years. Or maybe thirty-five years would have been enough. People these days have lost the sense of information being scarce, and counterintuitively that makes it harder for them to develop profound thoughts. It’s like practicing chess by asking the computer right away, all the time, what the right move is.

[and later] …contemporary academic is overly bureaucratized and there is a very good chance I would [if I were starting today] look for another model of success and contentment. It is an open question whether or not I could find one. Whatever its limitations, there is still a followable formula for academic success, which of course is part of the problem.

Other topics include when is the best age to live in various parts of the world, Alban Berg and Rilke, Marc Andreessen, my one hidden talent, Rene Girard, labor market networks, optimal travel into the past, and which is the most underrated or overrated wisdom tradition.  Do read the whole thing.

What I’ve been reading

1. William Skidelsky, Federer and Me: A Story of Obsession.  An excellent short book on how tennis has changed through technology, the nature of excellence in human performance, and why fans are interested in sports and sports stars at all.  There is no great tennis stagnation.

2. Bill Hayton, The South China Sea: The Struggle for Power in Asia.  If you wish to be convinced that no one has much of a good claim to the Spratlys, this is the place to go.  The best guide to current disputes.

3. Padraig O’Malley, The Two-State Delusion: Israel and Palestine — A Tale of Two Narratives.  This “substance on every page” book can be read profitably no matter what your point of view on this conflict.  It has lots of economics too, most of all a good discussion of what it would take for a Palestinian state to be economically viable.  Definitely recommended.

4. Barry Allen, Vanishing into Things: Knowledge in Chinese Tradition, is a consistently interesting take on the history of ideas in China, including Daoism, Chan Buddhism, and much more.  It is unusual for a book to both make scholarly contributions and engage the common educated reader, most of all on these sometimes arcane topics.

I don’t currently have time to read it, but Robin Lane Fox’s forthcoming Augustine: Conversions to Confessions looks quite good.

Patrick Modiano’s newly translated Pedigree: A Memoir is perhaps excellent in the original French, but I found very little in it to hold my attention.

Jeremiah D. Lambert’s The Power Brokers: The Struggle to Shape and Control the Electric Power Industry is full of useful and interesting facts, organized by the stories of various personalities, including Paul Joskow and Kenneth Lay.  Cintra Wilson’s Fear and Clothing: Unbuckling American Style is written in exactly the opposite manner, breezy and fun but at times could use more facts.

Claims about China

Pay close attention to the 500+ stocks in China that are still frozen. Earlier it was reported virtually all these firms borrowed money with pledged stock near the peak of the market in May and June.  If these reports are true, it is likely that given the length of time these stocks have remained frozen, that these firms would be in technical bankruptcy.  That would be a major blow and cause all kinds of panic so clearly something will be worked out to soften the blow here.  These 500 firms might be the epicenter.

That is from Christopher Balding, the piece makes other points of interest as well.

Claims about electricity adoption and technological unemployment

This is from a recent working paper (pdf) by Miguel Morin:

When the adoption of a new labor-saving technology increases labor productivity, it is an open question whether the economy adjusts in the medium-term by decreasing employment or increasing output. This paper studies the effects of cheaper electricity on the labor market during the Great Depression. The first-stage of the identification strategy uses geography as an instrument for changes in the price of electricity and the second-stage uses labor market outcomes from the concrete industry—a non-traded industry whose location decisions are independent of the instrument. The paper finds that electricity was an important labor-saving technology and caused an increase in capital intensity and labor productivity, as well as a decrease in the labor share of income. The paper also finds that firms adjusted to higher labor productivity by decreasing employment instead of increasing output, which supports the theory of technological unemployment.

You will note of course that the short-, medium- and long-run effects here are quite different, and of course electricity is a major boon to mankind.  Still, technological unemployment is not just the fantasy of people who have failed to study Ricardo.

Here is a short summary of the paper, via Romesh Vaitilingam.

Thursday assorted links

1. Why do so many new restaurant names sound the same?

2. Why do papers with shorter titles get more citations?  The paper on that is here, six words in the title (“The advantage of short paper titles.”)

3. Worries about Greece, still nascent but worth noting.

4. Good review of volume IV of Elena Ferrante.  And German literary critic reviews IKEA catalog.  Is it perhaps the world’s most widely distributed new edition?

5. Uber with goats — “goats out of context…”(link is safe but it is to Playboy, fyi)

6. Who supports the public administration major at Auburn?

7. Is value-added trade growing nonetheless?

What would count as evidence for pending negative Chinese economic growth?

Liu, the bankrupt scrap dealer, said abandoning Beijing was her family’s only option. “It’s natural. We came here for work. We lost 200,000 yuan. We can’t afford to live here any more,” she said.

“Maybe one day we’ll return – but I don’t know when.”

That’s anecdotal of course, but it does seem to be a general trend.  So it’s time to start asking a very simple economic question: what would count as evidence for pending Chinese negative economic growth?  I don’t mean permanently negative, just negative for the duration of a recession.

Imports and exports falling 7-8% don’t cut it, because durables-based foreign trade falls much more rapidly than the rest of an economy.  You could have positive growth of three percent, mostly in the services sector, and still plunging demand for raw materials on global markets.

So what would count as a sign of pending negative growth?  When individual dealers with essentially no remaining capital return to the countryside for cheaper living costs?  Foreign investors wishing to leave the country or radically cut back?  Inquiring minds wish to know.

The Guardian article is here, with good cameos from Adam Minter and Christopher Balding.

Review of *NeuroTribes*, by Steve Silberman

This book already has done a good deal to raise the status of autistic people and also studies of autism.  Silberman is to be commended for extensive research into the lives of Hans Asperger and Leo Kanner and into the modern “neurodiversity” movement more broadly.  He has taken on a very difficult topic and turned it into what is likely to prove a commercially successful book.

That said, most reviews of this work, while positive, are not very assured.  It’s as if the reviewers know they are not well-informed about the topic and thus they stick to general praise, without delving into the details.  Or maybe they like the book’s conclusion and are reluctant to criticize the work as a whole.  I, in contrast, have a few more pointed remarks:

1. Leo Kanner, a co-discoverer of autism, is made out to be the bad guy, yet his writings are more subtle than Silberman indicates, even though one can pull some bad phrases and quotations.  Kanner in particular had a much stronger grasp of the diversity within autism (pdf) than Silberman grants.  It is hard, after reading that piece, to see how his conception of autism could be described as monolithic.

The contrast between Kanner and Asperger is much overdrawn.  The truth is closer to “they both had profound early insights and were unjustly neglected” rather than Silberman’s “sadly the Kanner approach to autism at first beat out the Asperger approach.”  The latter narrative is an over-dramatized storytelling convention of a popular book.  The real problem back then was how various minorities and “deviants” were treated, from gay individuals to lobotomized schizophrenics, rather than the dominant influence of Kanner’s ideas.

2. Silberman promotes an “along a spectrum (spectra?) model” rather than an “autistic yes or no” model.  Maybe so, but it is far from obvious that the “yes or no” model is false and in fact it explains some of the data better (pdf).  Silberman offers no scientific reason for his choice, and he doesn’t define the underlying concepts clearly enough to outline exactly what is at stake.  Silberman argues that the spectrum models are ethically superior and more humane, but that is an unjustified presumption and it also does not settle the substantive dispute.  In any case both models are capable of accommodating either respectful or disrespectful attitudes toward autistic people.

3. For a on autism, there is oddly little discussion of what autism is or might be.  That is author’s prerogative of course, but it means the book doesn’t offer much of a framework for judging the research history of autism, as it attempts to do.

4. Silberman devotes an entire chapter to the movie “Rain Man,” and in part the movie’s main role model, namely Kim Peek.  Yet the text fails to note it eventually turned out that Peek was not in fact autistic but instead probably had FG syndrome.  This is another instance of the book’s tendency to prefer a good story over the facts.  And that Peek was so ingloriously railroaded into the autism category is part of the actual story there (Dustin Hoffman played a role in doing that), yet that is a mistake which Silberman himself essentially repeats.

I hate to rain on the parade of this book because a) I love the topic, b) the author’s research is impressive, and c) the book is genuinely humane and tolerant and it will have an almost entirely positive impact on popular discourse.  Still, I think that the original organizing themes in the work are mostly wrong.

And oddly, for all its praise of autism and autistic ways of thinking, the style of the book is remarkably non-autistic.  It’s full of long stories and blah blah blah, rather than getting to the point.

Here is a review from Nature.  Carl Zimmer interviews Silberman.  Here is The Economist review.  Here is a related podcast.  Here is the Jennifer Senior NYT review.  Here is Silberman’s LATimes piece.  Here is a Morton Ann Gernsbacher review.  Here is The Guardian.  Here is The Atlantic.  Here is a PLOS interview with Silberman.

It’s an interesting read, but I don’t think you can trust what’s in there.

Wednesday assorted links

1. Are political values of corporations correlated with their kinds of lawbreaking? (speculative)

2. How should Bitcoin be governed?  Here is New Yorker coverage of Bitcoin governance.  And Joshua Gans on Nate Rosenberg.

3. Did silver wreck China?  And more on whether China has enough foreign exchange reserves.

4. Obamacare and accounting.

5. Burger collusion for a day.  You can imagine further variants on this idea…

6. The new infrastructure spending.

7. My Product Hunt live chat will be at 1:30 EST tomorrow.

Is the FDA Too Conservative or Too Aggressive?

I have long argued that the FDA has an incentive to delay the introduction of new drugs because approving a bad drug (Type I error) has more severe consequences for the FDA than does failing to approve a good drug (Type II error). In the former case at least some victims are identifiable and the New York Times writes stories about them and how they died because the FDA failed. In the latter case, when the FDA fails to approve a good drug, people die but the bodies are buried in an invisible graveyard.

In an excellent new paper (SSRN also here) Vahid Montazerhodjat and Andrew Lo use a Bayesian analysis to model the optimal tradeoff in clinical trials between sample size, Type I and Type II error. Failing to approve a good drug is more costly, for example, the more severe the disease. Thus, for a very serious disease, we might be willing to accept a greater Type I error in return for a lower Type II error. The number of people with the disease also matters. Holding severity constant, for example, the more people with the disease the more you want to increase sample size to reduce Type I error. All of these variables interact.

In an innovation the authors use the U.S. Burden of Disease Study to find the number of deaths and the disability severity caused by each major disease. Using this data they estimate the costs of failing to approve a good drug. Similarly, using data on the costs of adverse medical treatment they estimate the cost of approving a bad drug.

Putting all this together the authors find that the FDA is often dramatically too conservative:

…we show that the current standards of drug-approval are weighted more on avoiding a Type I error (approving ineffective therapies) rather than a Type II error (rejecting effective therapies). For example, the standard Type I error of 2.5% is too conservative for clinical trials of therapies for pancreatic cancer—a disease with a 5-year survival rate of 1% for stage IV patients (American Cancer Society estimate, last updated 3 February 2013). The BDA-optimal size for these clinical trials is 27.9%, reflecting the fact that, for these desperate patients, the cost of trying an ineffective drug is considerably less than the cost of not trying an effective one.

(The authors also find that the FDA is occasionally a little too aggressive but these errors are much smaller, for example, the authors find that for prostate cancer therapies the optimal significance level is 1.2% compared to a standard rule of 2.5%.)

The result is important especially because in a number of respects, Montazerhodjat and Lo underestimate the costs of FDA conservatism. Most importantly, the authors are optimizing at the clinical trial stage assuming that the supply of drugs available to be tested is fixed. Larger trials, however, are more expensive and the greater the expense of FDA trials the fewer new drugs will be developed. Thus, a conservative FDA reduces the flow of new drugs to be tested. In a sense, failing to approve a good drug has two costs, the opportunity cost of lives that could have been saved and the cost of reducing the incentive to invest in R&D. In contrast, approving a bad drug while still an error at least has the advantage of helping to incentivize R&D (similarly, a subsidy to R&D incentivizes R&D in a sense mostly by covering the costs of failed ventures).

The Montazerhodjat and Lo framework is also static, there is one test and then the story ends. In reality, drug approval has an interesting asymmetric dynamic. When a drug is approved for sale, testing doesn’t stop but moves into another stage, a combination of observational testing and sometimes more RCTs–this, after all, is how adverse events are discovered. Thus, Type I errors are corrected. On the other hand, for a drug that isn’t approved the story does end. With rare exceptions, Type II errors are never corrected. The Montazerhodjat and Lo framework could be interpreted as the reduced form of this dynamic process but it’s better to think about the dynamism explicitly because it suggests that approval can come in a range–for example, approval with a black label warning, approval with evidence grading and so forth. As these procedures tend to reduce the costs of Type I error they tend to increase the costs of FDA conservatism.

Montazerhodjat and Lo also don’t examine the implications of heterogeneity of preferences or of disease morbidity and mortality. Some people, for example, are severely disabled by diseases that on average aren’t very severe–the optimal tradeoff for these patients will be different than for the average patient. One size doesn’t fit all. In the standard framework it’s tough luck for these patients. But if the non-FDA reviewing apparatus (patients/physicians/hospitals/HMOs/USP/Consumer Reports and so forth) works relatively well, and this is debatable but my work on off-label prescribing suggests that it does, this weighs heavily in favor of relatively large samples but low thresholds for approval. What the FDA is really providing is information and we don’t need product bans to convey information. Thus, heterogeneity plus a reasonable effective post-testing choice process, mediates in favor of a Consumer Reports model for the FDA.

The bottom line, however, is that even without taking into account these further points, Montazerhodjat and Lo find that the FDA is far too conservative especially for severe diseases. FDA regulations may appear to be creating safe and effective drugs but they are also creating a deadly caution.

Hat tip: David Balan.

The Great Trade Contraction has been continuing

World trade recorded its largest contraction since the financial crisis in the first half of this year, according to figures that will feed concerns over the global economy and add fuel to a debate over whether globalisation has peaked.

The volume of global trade fell 0.5 per cent in the three months to June compared to the first quarter, the Netherlands Bureau for Economic Policy Analysis, keepers of the World Trade Monitor, said on Tuesday. Economists there also revised down their result for the first quarter to a 1.5 per cent contraction, making the first half of 2015 the worst recorded since the 2009 collapse in global trade that followed the crisis.

That is from Shawn Donnan at the FT.  Here is a previous post on the world trade slowdown, now a contraction apparently.

Immigration sentences to ponder

“I would never have been able to arrive at my destination without my smartphone,” he added. “I get stressed out when the battery even starts to get low.”

That is from Osama Aljasem, a 32-year-old music teacher from Deir al-Zour in Syria, who took a boat to Greece, walked to Belgrade, and hopes to continue to parts further north and west:

In this modern migration, smartphone maps, global positioning apps, social media and WhatsApp have become essential tools.

Recommended.  And yes, disintermediation is kicking in:

“Right now the traffickers are losing business because people are going alone, thanks to Facebook,” said Mohamed Haj Ali, 38, who works with the Adventist Development and Relief Agency in Belgrade, Serbia’s capital — a major stopover for migrants.

Facebook groups are used to pass along GPS coordinates and the prices charged by the traffickers have fallen in half.

Forthcoming Uighur markets in everything

Another sign on the door says that a new restaurant will be replacing Charlie Chiang’s and will be “opening soon.”

The new restaurant will be called Amannisahan and will serve Uyghur cuisine, according to the sign. In an indication that a quick reopening may indeed be in the works, Amannisahan says it’s currently hiring restaurant managers and waiters.

Take that Bryan Caplan!  And that’s for Crystal City, VA, by the way here is the Jorma Kaukonen song.

For the pointer I thank Michael Makowsky.