Month: November 2017

Understanding differences in life expectancy inequality

The life expectancy gap at age 40 between high income and low income individuals is substantial. I explore how medical expenditures and unhealthy behaviors account for the life expectancy gap. The data reveals the following. First, low income individuals tend to spend more on healthcare than high income individuals at all ages. Moreover, health disparities by income is salient due to differences in unhealthy behaviors such as heavy smoking. To answer how much dierences in access to medical services and unhealthy behaviors can explain in light of these stylized facts, I construct a life cycle model. The distinctive features of the model are that it flexibly incorporates unobserved, potentially correlated initial human and health capital stocks and embed unhealthy behaviors. Furthermore, the model includes two health systems: private health insurance and Medicare. The main findings are i) differences in access to medical care driven by income inequality potentially accounts for 12.5% of the life expectancy gap, ii) health insurance increases longevity for low income individuals, but modestly, iii) the health condition when young shapes the trend in average medical expenditures by income groups and iv) the impact of differences in unhealthy behaviors is predominant in understanding the life expectancy gap.

That is from Tomoaki Kotera, a job candidate from the University of Wisconsin, here is the paper itself.

What it would take to change my mind on net neutrality

Keep in mind, I’ve favored net neutrality for most of my history as a blogger.  You really could change my mind back to that stance.  Here is what you should do:

1. Cite event study analysis showing changes in net neutrality will have significant and possibly significantly negative effects.

2. Discuss models of natural monopoly, and how those market structures may or may not distort product choice under a variety of institutional settings.

3. Start with a framework or analysis such as that of Joshua Gans and Michael Katz, and improve upon it or otherwise modify it.  Here is their abstract:

We correct and extend the results of Gans (2015) regarding the effects of net neutrality regulation on equilibrium outcomes in settings where a content provider sells its services to consumers for a fee. We examine both pricing and investment effects. We extend the earlier paper’s result that weak forms of net neutrality are ineffective and also show that even a strong form of net neutrality may be ineffective. In addition, we demonstrate that, when strong net neutrality does affect the equilibrium outcome, it may harm efficiency by distorting both ISP and content provider investment and service-quality choices.

Tell me, using something like their framework, why you think the relative preponderance of costs and benefits lies in one direction rather than another.

Consider Litan and Singer from the Progressive Policy Institute, they favor case-by-case adjudication, tell me why they are wrong.

Or read this piece by Nobel Laureate Vernon Smith, regulatory experts Bob Crandall, Alfred Kahn, and Bob Hahn, numerous internet experts, etc.:

In the authors’ shared opinion, the economic evidence does not support the regulations proposed in the Commission’s Notice of Proposed Rulemaking Regarding Preserving the Open Internet and Broadband Industry Practices (the “NPRM”). To the contrary, the economic evidence provides no support for the existence of market failure sufficient to warrant ex ante regulation of the type proposed by the Commission, and strongly suggests that the regulations, if adopted, would reduce consumer welfare in both the short and long run. To the extent the types of conduct addressed in the NPRM may, in isolated circumstances, have the potential to harm competition or consumers, the Commission and other regulatory bodies have the ability to deter or prohibit such conduct on a case-by-case basis, through the application of existing doctrines and procedures.

4. Consider and evaluate other forms of empirical evidence, preferably not just the anecdotal.

5. Don’t let emotionally laden words do the work of the argument for you.

6. Offer a rational, non-emotive discussion of why pre-2015 was such a bad starting point for the future, and why so few users seemed to mind or notice as the regulations switched several times.

7. Don’t let politics make you afraid to use your best argument, namely that anti-NN types typically develop more faith in an assortment of government regulators in this setting than they might express in a number of other contexts.  That said, don’t just use this point to attack them, live with and consistently apply whatever judgment of the regulators you decide is appropriate.

If you are wondering why I have changed my mind, it is a mix of new evidence coming in, experience over the 2014-present period, relative assessment of the arguments on each side moving against NN proponets, and the natural logic of the embedded trade-offs, whereby net neutrality typically works in a short enough short run but over enough time more pricing is needed.  Of course it is a judgment call as to when the extra pricing should kick in.

Here is what will make your arguments less persuasive to me:

1. Respond to discussions of other natural monopoly sectors and their properties by saying “the internet isn’t like that, you don’t understand the internet.”  If someone uses the water sector to make a general point about tying and natural monopoly, commit internet error #7 by responding: “the internet isn’t like water!  You don’t understand the internet!”

2. Lodge moral complaints against the cable companies or against commercial incentives more generally, or complain about the “ideology” of others.  Mention the word “Trump” or criticize the Trump administration for its failings.  Call the recent decision “anti-democratic.”

3. Cite nightmare or dystopian scenarios that are clearly illegal under other current laws and regulations.  Cite dystopian scenarios that would contradict profit-maximizing behavior on the part of the involved companies.  Assume that no future evolution of regulation could solve or address any of the problems that might arise from the recent switch.  Mention Portugal as a scare scenario, without explaining that full internet packages still are for sale there, albeit without the discounts for the partial packages.

Are you up to the challenge?

If I read say this Tim Wu Op-Ed, I think it is underwhelming, even given its newspaper setting, and the last two paragraphs are content-less, poorly done emotive manipulation.  Senpai 3:16 is himself too polemic and exaggerated, but he does make some good points against this piece, see his Twitter stream.

Net neutrality defenders, as of now you have lost this battle.  I’d like to hear more.

Further thoughts on why the end of net neutrality will be fine

If a cable company really is a monopolist, still they (mostly) maximize profit by giving customers (cost-constrained) what they want.  When the de Beers cartel had a monopoly on diamonds, did they also make you buy their favorite soda brand?  No, that would lower the overall value of the package and thus lower profits.

The main exception to this argument is that the monopolist may favor its own content.  Monopolizing instances of that practice still would be regulated under standard antitrust law, and also transparency requirements, and most of the critical discussion seems to ignore this.  Furthermore, it is harder to make a profit this way than you might think.  If Comcast promotes “the stupider Comcast version of CNN,” a lot of people just won’t be interested.  Most of these websites aren’t that valuable — look at the recent revenue results for Buzzfeed.  Nor do I think Comcast can get away with denying its customers say Google or Skype, either legally or economically.  That said, advocates of removing “neutrality” need to face up to the reality that they will be relying on discretionary regulation to a greater degree in some regards.  Read p.1 of the actual proposal:

Restore the Federal Trade Commission’s ability to protect consumers online from any unfair, deceptive, and anticompetitive practices without burdensome regulations, achieving comparable benefits at lower cost.

In the current debate, there is a common presumption that paying for slots hurts “the little guy.”  During the payola debates for radio, it turned out that payola favored the independent labels over the majors; see my book In Praise of Commercial Culture.  It doesn’t have to work out that way, but refusing to price scarce resources often helps the big established players, who can invest $$ to get what they want through bigger brand names or other means.   Note:

Pai says that one of the major mistakes of Net Neutrality is its pre-emptive nature. Rather than allowing different practices to develop and then having regulators intervene when problems or harms to customer arise, Net Neutrality is prescriptive and thus likely to serve the interests of existing companies in maintaining a status quo that’s good for them.

Furthermore, are there external benefits from small web upstarts?  Or are the external benefits from the big superstar internet companies?  If you are a Progressive who loves stable jobs and decent wages, you might think the more significant externalities are from the superstar companies.  Yet when it comes to net neutrality, all of a sudden the smaller companies are glorified and we need an ecosystem to foster them.  Overall, I don’t trust the regulators to make these decisions well, so I would rather take my chances with the market, even with some monopoly power at the cable end.

As Megan McArdle points out, over the last ten years consumers have opted overwhelmingly for the non-neutral private garden of Facebook.  That’s the real “threat” to net neutrality.  Personally, both as internet writer and user, I much preferred the older, semi-open, more neutral architecture of RSS and related systems.  The masses have spoken, however, and quite decisively in favor of less open systems and apps.  Nonetheless Alex and I still can do our thing on MR and in fact the project is thriving, and I would be shocked if it did not survive the new FCC decision.  That said, people want non-neutralities and they will introduce them to internet systems one way or the other, and suppliers will have to find ways to cope or perhaps even benefit.  To believe it could be any other way is a kind of wishful thinking, yes I want those old usenet groups back too.  All things considered, “net neutrality” is a biasing term, because the 2015-2017 period was by no means neutral either.  The notion represents a kind of undeserving “victory by language,” as who would wish to favor “bias” over “neutrality”?

Perhaps this point is misused a bit to make extrapolations, but still it is worth noting:

Pai…noted that today’s proposed changes, which are expected to pass full FCC review in mid-December, return the Internet to the light-touch regulatory regime that governed it from the mid-1990s until 2015.

More generally, I don’t see anything intrinsically morally wrong with a person deciding to “buy only one third of the internet.”  How many net neutrality supporters also favor or maybe even insist upon a’la carte pricing for cable TV?  What percentage of the public library do they take home over the course of their lifetime?

Or think of the whole issue in terms of a regulatory principal-agent problem.  Let’s say the water company has “too much” market power, and the public regulator doesn’t have the will or the resources to constrain the company properly.  Said company refuses to let Perrier flow through the pipes as an alternative option to plain tap water, for fear too much of the profit would go to France.  That somewhat mirrors potential problems from net non-neutrality.  But is it likely that a zero price for water is close to the correct solution?  I do get that alternative solutions might in some ways involve greater faith in outside regulators, such as antitrust authorities, but zero price is an awfully blunt instrument for a rapidly changing setting such as data flow.  It certainly hasn’t worked well for water, in a wide range of settings.

Finally, Viking notes in the MR comments:

The real benefits of net non neutrality would be applications that require a guaranteed minimum latency. Non net neutrality would allow some market participants to pay more for reduced latency, which could benefit video conferencing, virtual reality, remote surgeries, VOIP (already part of video conferencing) and other possibly new applications, say remote monitoring and control various kinds.

Are the defenders of net neutrality considering those opportunity costs in their assessments?  I don’t see it.

To be sure, net neutrality really might be better.  You might have a high opinion of the net neutrality regulator and a low opinion of all the other regulators of unjust or inefficient conduct.  You might think bandwidth won’t become scarce anytime soon, and that new, alternative uses for greater bandwidth just aren’t that promising.  You might think that access auctions disadvantage “the little guy,” and furthermore the positive externalities are on the side of the little guy, and thus we should stifle price-based access auctions.  You might think that rationing on a quantity/access basis will be more fair or efficient than rationing by price.  All that is possible.  But it seems hard to know those claims might be true.  Instead, those comparisons would seem to suggest a fair degree of agnosticism.  But when I read proponents of net neutrality, I am more likely to see a harsh excoriation of commercial incentives, or cable companies, than a balanced weighing of those considerations.

Neutrality ain’t neutral, it’s time to get over that myth.

Here is Tom Hazlett on the topic, here is my earlier column.

Wednesday assorted links

1. What should you infer from the cheapness of Costco Single Malt Scotch Whiskey?

2. “Adding to the already somewhat troubling nature of the launch, the event will simultaneously serve as the launch of Hughes’ California gubernatorial campaign…

3. “The Swiss town of Albinen, located in the scenic canton of Valais, wants to pay people 25,000 Swiss francs (£18,900) each to move there.”  Link here.

4. Rebecca Traister and Ross Douthat on the post-Weinstein moment, many of the best parts are toward the end don’t neglect to catch Ross on Andrea Dworkin.

5. Websites that record all of your keystrokes.  The list includes some famous companies.

6. How scalable are blockchains?

7. Geoffrey Manne has a very good WSJ-gated piece on why the AT&T antitrust lawsuit is not a good idea.  Here is a good Puzzanghera and James piece on the case.

There is no great lung stagnation

In 2013, the Post-Polio Health International (PPHI) organizations estimated that there were six to eight iron lung users in the United States. Now, PPHI executive director Brian Tiburzi says he doesn’t know anyone alive still using the negative-pressure ventilators. This fall, I met three polio survivors who depend on iron lungs. They are among the last few, possibly the last three.”

…In the 1940s and 1950s, hospitals across the country were filled with rows of iron lungs that kept victims alive. Lillard recalls being in rooms packed with metal tubes—especially when there were storms and all the men, women, adults, and children would be moved to the same room so nurses could manually operate the iron lungs if the power went out. “The period of time that it took the nurse to get out of the chair, it seemed like forever because you weren’t breathing,” Lillard said. “You just laid there and you could feel your heart beating and it was just terrifying. The only noise that you can make when you can’t breathe is clicking your tongue. And that whole dark room just sounded like a big room full of chickens just cluck-cluck-clucking. All the nurses were saying, ‘Just a second, you’ll be breathing in just a second.’”

…Mia Farrow only had to spend eight months in an iron lung when she was nine, before going on to become a famous actress and polio advocate.

Here is the full story, via the excellent Samir Varma.

What I’ve been reading

1. John Wyndham, The Day of the Triffids.  A remarkably readable and indeed prescient British work from 1951, you’ll find so much of the science and speculative fiction of the last few twenty years in here, a bit of Saramago too.  What if most (but not all) of the world goes blind but then has to fight-off plant-like invaders which turn out to be more intelligent than we had thought?  Underrated.

2.  The Acts of the Lateran Synod of 649, translated with notes by Richard Price.  I hadn’t realized how many of these early Church debates were kept and passed down to the current day.  The participants really do seem to know they are debating the intellectual framework for everything else to follow, and yet people hardly talk about these books.  They are among the most significant remaining traces of the ancient world, Rome and Constantinople in particular.  How can you beat this?: “If anyone says that God the Word who worked miracles was someone other than the Christ who suffered, or says that God the Word was with the Christ born from Woman, or was in him as in someone other than himself…let him be anathema.”  Down with monoenergism!

3. Helen Dale, Kingdom of the Wicked.  Here is Helen on her book:

Kingdom of the Wicked asks what would have happened had Jesus emerged in a Roman Empire that has gone through an industrial revolution. How, I wondered, would we react to him if he turned up in a society more (or less) like the present? The answer was not one I liked much. I thought we’d mistake him for a terrorist. The novel is informed – even overshadowed – by the destruction of civil liberties and gross expansion of executive power occasioned by the War on Terror, a war now in the process of becoming war without end.

I find it works both as fiction and as thought experiment; see the related essay by Mark Koyama.

4. Alexander Thurston, Boko Haram: The History of an African Jihadist Movement.  Makes a murky history relatively easy to follow, by the way: “Put all these ideas together, and “Boko Haram” means something like “Western culture is forbidden by Islam” or “the Westernized elites and their ways of doing things contradict Islam” — not just in schools but also in politics and society.”

Beyond Austerity: Reforming the Greek Economy, edited by Costas Meghir, Christopher A. Pissarides, Dimitri Vayanos, and Nikolaus Vettas, is an intelligent and useful look at where Greece goes next.

Tuesday assorted links

1. Self-driving cars will be better for wheelchairs.

2. “U.S. House of Representatives Financial Services Committee considered many important banking reforms in 2009-2010 including the Dodd-Frank Act. We show that during this period, the foreclosure starts on delinquent mortgages were delayed in the districts of committee members even though there was no difference in delinquency rates between committee and non-committee districts.”  Link here.

3. Reexamining the economics of NFL draft picks.

4. Bershidsky on Merkel and Germany.

5. Is George Orwell overrated?  I claimed this to Cardiff Garcia just yesterday, at least relative to Huxley.

6. What is up with Northern Ireland? (NYT)  A good and important piece.

7. How a made-up article garnered hundreds of citations.

Off Label Prescribing as Good as On Label

Once a drug has been approved for some use it may be legally prescribed for any use. New uses for old drugs are discovered quite often so off-label uses can be very different from FDA approved uses. Mitomycin, for example, was approved to treat stomach and pancreatic cancer but is used off-label in laser-eye surgery. Drugs prescribed off-label have not been through FDA-approved efficacy trials for the off-label use. In Assessing the FDA via the Anomaly of Off-Label Drug Prescribing I pointed out that off-label prescribing, therefore, gives us a window onto a world with much less FDA regulation.

Since off-label prescribing is common and in rapidly progressing areas of medicine often the gold-standard, I argued that the behavior of physicians validated off-label prescribing and demonstrated that physicians were willing and able to draw upon non-FDA sources of information to make rational prescribing decisions. Dan Klein and I also showed that physicians are supportive of off-label prescribing saying, for example, that it would be “crazy” to require FDA approval for off-label uses.

The support of physicians for off-label prescribing is telling but not dispositive. Perhaps physicians make hubristic mistakes in prescribing off-label. A new paper by Ladanie et al. (including John Ioannidis) provides important information. The authors search the literature for all the RCTs when an off-label drug was pitted against an on-label drug. They conclude:

Our meta-epidemiological analysis of 25 different treatment indications for off-label drug use provides no empirical evidence supporting any assumption of generally inferior treatment
effects associated with off-label use. On the contrary, the summary effect estimates across all indications would even be compatible with more favorable effects, on average, of the off-label
treatment. However, the heterogeneity is substantial and the on-label comparators are not necessarily the best approved treatment option in all 25 topics. While some off-label
treatments are clearly better, others are clearly not.

The finding is especially impressive because although off-label treatments are sometimes the gold standard they are also often used when standard treatments have failed. Thus, in an RCT, off-label treatments could be worse on average and yet still provide a very useful weapon in the medical armory.

One might argue that if off-label treatments are as good as FDA-approved treatments then the FDA should have higher standards. FDA required clinical trials, however, already cost hundreds of millions of dollars and years of effort, creating drug lag and drug loss. Rather than condemning the FDA, what these results indicate is that the medical system–physicians, hospitals, insurers, scientists–does a good job at evaluating new uses for old drugs. As Dan Klein and I noted in our precis on off-label prescribing:

The off-label experience testifies to the fact that much knowledge about efficacy and safety is produced outside the FDA regulatory apparatus. The Pharmacopoeia’s recognition of off-label
indications years ahead of the FDA demonstrates that physicians and scientists have certified thousands of drug indications quite independently of the FDA, even when those indications are not
very closely related to the original indications. In addition to the Pharmacopoeia, there are several other forms of professional certification, including the American Hospital Formulary Service Drug Information, HMO formularies, and a wide array of specialist professional periodicals and information services. NIH studies, clinical results and determinations from other countries, and other professional, science-based judgments are examples of nongovernmental, non-mandatory certification.

Hat tip: Michelle Dawson.

Books that had hidden influence on me

Way back when, I considered the ten books that influenced me most, a list I still stand by.  In response, someone asked me to name the books that influenced me, but whose influence I probably was not aware of.  Let’s ignore the semi-contradiction in that request and plow straight ahead!  Here goes, noting that if memory serves I read most of these between the ages of 10 to 12:

1. Alexander Kotov, Think Like a Grandmaster.  From this book I realized you could think you understood a chess position, but then later learn you didn’t really understand it at all.  A huge lesson, one I learned again and to a higher degree when high-quality chess computers came along.  Most of the commentariat on economic and social affairs could use a reminder on this one.  This book also taught me that you learn by doing — trying to solve actual problems — not so much from pure reading.  Or the two in close conjunction.  It may be the distortions of memory, but still I feel this is one of the best books I ever have read.  Hail the Soviet training system!

2. Bobby Fischer, My Sixty Memorable Games of Chess.  Reflects a certain kind of classicism in thinking and method.  Later, it was revealed much of the analysis was faulty and in part was from Larry Evans and not Fischer himself.

3. Reuben Fine, Basic Chess Endings.  I wasn’t influenced so much by this book itself as by a long series of articles in Chess Life and Review, showing the analysis was full of holes.  See my remarks on Kotov.

4. David Kahn, The Code-Breakers, The Story of Secret Writing.  I read this one quite young, and learned that problems are to be solved!  I also developed some sense of what a history could look like and what a history should report.  I recall my uncle thinking it deeply strange that a boy my age should be reading a book of such length.

5. Rudolf McShane and Jakow Trachtenberg, The Trachtenberg System of Basic Mathematics.  From this I learned how powerful the individual human mind could be, and also how much school wasn’t teaching me.  It began to occur to me that the mainstream doesn’t necessarily have the best or only methods.  That said, non-mainstream approaches still have the responsibility of coming up with the right answer.  Query: does it these days ever make sense to actually use this stuff?

6. The Baseball Encyclopedia, or something like that.  From this book I began to figure out statistics and how they fit into broader patterns of historical explanation.  I spent a lot of time with this one even before the age of ten.  It helped me understand my baseball cards in terms of a much longer perspective and also, if I recall correctly, it explained the underlying meaning of many of the statistics, albeit in what would today count as a very naive, non-Moneyball manner.  I still know that Chief Wilson hit 36 triples in 1912.

Honorable mentions: Jonathan Livingston Seagull, Zen and the Art of Motorcycle Maintenance, and The Joy of Sex, all given to me by my mother.  I believe they helped inculcate some of the 1960s-70s ethos of individual freedom into my thinking.  I also consumed numerous sports memoirs, such as Jerry Kramer’s Instant Replay: The Green Bay Diary of Jerry Kramer and also the war memoir Guadalcanal Diary.  From those I began to think about the relationships between character, work habits, teamwork, and success.  The Making of Star Trek helped me master the details of what was then my favorite TV series, and also to think about cosmopolitanism across different kinds of intelligent beings.  In addition to chess I also was influenced by playing paper and dice war games, most of all Barbossa (the exact title may differ slightly), a really scary game where you have to consider the possibility the Nazis could have won and thus think about the contingency of history.  I began to understand that violence could be a reality that stood above all else and how important it was to avoid such a scenario.

Then there is youthful science fiction, though perhaps that someday gets a post of its own.  I read a lot of books about music too, many about jazz solos and chord composition, including in American popular music.  Much earlier, maybe ages 5-8, it was maps and books full of facts about the world (ahem) and animals, most of all the taxonomic arrangement of the animal kingdom.

Finally, at the time I was fully aware that I wasn’t getting a single one of these titles through my formal school system.

Monday assorted links

1. America is still a suburban nation.

2. “Evidence from applying this framework to these data indicates that between and 45 and 75 percent of the
burden of corporate taxes is borne by labor with the balance borne by capital.”  That estimate seems high to me, but this paper is a serious effort.

3. Germany bans children’s smart watches.

4. “One of the friends who helped her through that period was Ivanka Trump, though their relationship has grown more complicated.”  This article is really quite something.  NYT, you have to keep on reading to grasp the narrative.

5. 100 cryptocurrencies in four words or less.  You can play this game in your car with the children.

6. Most popular names for girls, state-by-state, year-by-year  What is it with Nebraska and “Addison”?

Your Next Government

Google is building a small city within Toronto:

Toronto has about 800 acres of waterfront property awaiting redevelopment, a huge and prime stretch of land that amounts to one of the best opportunities in North America to rethink at scale how housing, streets and infrastructure are built. On Tuesday the government and the group overseeing the land announced that they were partnering with an Alphabet subsidiary, Sidewalk Labs, to develop the site.

Not to be outdone, Bill Gates is thinking even bigger, a 25,000 acre site for a new city near Phoenix that might take advantage of Arizona’s forward thinking rules on self-driving cars.

All over the world, we can see the beginnings of a move from nation-states to smaller, more decentralized and agile communities such as common interest developments, special economic zones and proprietary cities. Your Next Govenment is Tom W. Bell’s primer on this coming revolution. If you want to find out the latest on the Honduran Zede or the Polynesian seasteading project, both of which Bell has been involved with, YNG is your first stop. Bell also covers the history of these movements from Henry Ford’s failed Brazilian city, Fordlandia, to the use of special economic zones and foreign trade zones in the United States.

For anyone starting such a community, Bell has up-to-date recommendations on the principles of governance including how to adopt an appropriate legal code.

Recommended.