Category: Current Affairs

Democracy: Theory and Practice

Amid all the scaremongering about a nailbitingly close election with a disputed outcome, it is worth observing that if you really believe in democracy, and if the election is close, then it doesn’t much matter who wins. The theory of democracy (stripped down to bare essentials, and omitting all sorts of caveats that I could list but won’t) is that the guy who gets more votes is the better guy. Surely, then, it follows that the guy who gets only slightly more votes is only the slightly better guy. And if one guy’s only slightly better than the other, then a miscount is no great tragedy.

You might have a strong preference for one candidate over the other, but if you have an overriding preference for democracy (“Let the majority rule, even when I’m in the minority”), then you can stop worrying about miscounts. Surely there’s not much difference between a world where Bush gets 3 more votes than Kerry and a world where Kerry gets 3 more votes than Bush. If Bush is the rightful president in one of those worlds, he’s got to be darn close to rightful in the other.

India impressions

Don’t expect a vacation in the ordinary sense of the term, as the main sight is India itself. None of the listed sights are the true highlights.

What was better than I had expected:

1. The overall friendliness, sparkle and wit of the Indians I have spoken to.

2. The quality of the food; I have a few times heard the erroneous claim that Indian food is better outside of India. Don’t believe it.

3. I recall an old saying that in matters of religion, every Indian is a millionaire. This becomes evident on one’s first day in the country.

4. Sitting in parks, people-watching, and seeing the human drama in the small things.

5. Availability of Western consumer goods, including Coca-Cola. It’s been a while since India has been stringently protectionist.

6. The prices of Indian classical music CDs, and yes I mean the legitimate issues; I now have a stock of Pandit Kumar.

7. It is easier to get a straight answer here than I had been led to believe.

My biggest problems:

1. Air quality in central Delhi. It is hard to walk for more than an hour. And more generally Delhi is not a city with anything to walk to, it is one cab ride after the other.

2. There is no street which is truly atttractive. At least I haven’t found one yet. That being said, I am no longer sure I want to find one. Even the “nice” parts of Delhi can be more run down than the not-so-nice parts of, say, Mexico City.

3. Being tempted by street food, so far I have yet to succumb, I fear what will happen when I do.

Assorted humorous moments: Seeing a large cadre of baffled Japanese tourists with newly-acquired red dots on their foreheads. Hearing my Taj Mahal guide speak of Billy Graham and Oral Roberts in glowing terms. Being considered a marvel because I know what a “mango lassi” is. Almost meeting an unfortunate end on a motorized tricycle rickshaw; the driver played a strategy of precommitment while entering a busy motorway.

Animals seen on trip from Delhi to Agra: Bears, monkeys, water buffalos, camels, swan-like birds, and cows too numerous to count.

Saddest moment: Seeing ultrasound clinics in rural areas.

I’ll write another post of this ilk once I have more experiences to relate. I am here speaking for Parth Shah’s Centre for Civil Society. They are an excellent group devoted to bringing market-oriented ideas to India.

Organ Transplants

Bob Hickey, who lives near Vail, had needed a transplant since 1999 because of kidney disease. He met donor Rob Smitty of Chattanooga, Tenn., through Matching Donors.com, a for-profit Web site created in January to match donors and patients for a fee.

On Wed. the transplant was performed. It is the first “publicly brokered” transplant to occur in the United States. It is currently illegal to pay donors so Rob Smitty, the donor, was not paid (Hickey did cover Smitty’s expenses). Hickey did pay to have his name listed by MatchingDonors.com and this has upset a lot of people. No one seems upset, however, by the fact that the Hickey’s doctors were paid, his nurses were paid, the hospital was paid etc.

See my article for more on organ donation. Kieran Healy at Crooked Timber comments on the definition of death and another organ donation case in the recent news.

Thanks to Taggert Brooks for the link.

Is India overpopulated?

India is not an overpopulated country. Its population density is lower than that of many other countries not thought of as overpopulated. In 1999, Belgium had a population density of 130 people per square mile; the Netherlands, 150; India under 120. It is the cities of India that are overpopulated. Singapore has a density of 2,535 people per square mile; Berlin, the most crowded European city, has 1,130 people per square mile. The island city of Bombay in 1990 had a density of 17,550 people per square mile. Some parts of central Bombay have a population density of 1 million people per square mile…Two-thirds of the city’s residents are crowded into just 5 percent of the total area…

I’m in Delhi, not Bombay, but you get the idea. The quotation is from Suketu Mehta’s new and excellent Maximum City: Bombay Lost and Found.

Kids pick the President

Regular readers will know that I am not greatly impressed by the first-born=conservative, later born=rebel view of birth order. Nevertheless, my kids were eager to vote after hearing that they could do so at the Nickelodeon website. The six year old was strongly in favor of George Bush, “because a new President will change the laws and I want to keep the same laws.” The three year old said, “I didn’t used to like John Kerry but now I do. John Kerry! John Kerry! John Kerry!”

Of course, the two kids then got into a fight.

Could the kid vote be a good predictor of how their parents will vote? Click here for the kids’ choice.

Prediction Markets Have Arrived!

Donald Luskin writes:

There is now no question whatsoever that the Bush re-election futures contract at Tradesports.com is being manipulated. Yesterday the price of the futures were sold down from about 55 (indicating the market’s estimate of a 55% probability of Bush’s re-election) to 10 (indicating a 10% probability) with a single 10,000-lot order entered by a single trader. An order that size represents twice the normal volume of an entire typical day’s trading. Within moments after the order was completed, the price recovered back to the low-mid-50’s.

According to sources at Tradesports, yesterday’s order was entered by the same individual who has heavily sold the Bush futures three times over the past month. The first instance was on September 14, when this trader sold the futures down from the mid-60’s to 49.6. The second instance was in the middle of the second presidential debate on October 8, when the futures were sold down from the high 50’s to 51.5. The third instance was right after the third presidential debate on October13. As the debate began the futures were priced at 57, and by the end of the debate they had risen to 60. Then a few moments later they were beaten down to 54 in a matter of minutes.

Luskin hints that George Soros might be at work. Wouldn’t that be cool! What I see as most interesting is a) an order twice the normal volume of an entire day’s trading had virtually no influence on the market price and b) prediction markets are now so widely followed that someone finds it worthwhile to try to manipulate them.

Should Luskin be worried that his candidate is being sold down? Not at all. A surprising result in these markets is that manipulators subsidize information traders. Think about it this way, by definition manipulators aren’t trying to predict the true outcome so they are likely to take losses and the more they try to manipulate the bigger the losses. Now if the manipulators are taking losses who is making money? The information traders! Manipulators, therefore, encourage and support the information traders. Manipulation isn’t impossible but it’s surprising how little information other trader’s need to not only avoid the manipulation but to profit from it.

Our colleague, Robin Hanson, has written a paper explaining the theory (warning, not for the mathematically faint hearted) and an experimental paper showing that the theory works in practice.

Thanks to Newmark’s Door for the link.

Please, please, no

I can’t take it again.

Within hours of the opening of advance polls in the American presidential election, problems were being reported in the state of Florida…

Within an hour, a Democratic state legislator reported getting an incomplete absentee ballot in Palm Beach County…..

And in Orange County, voting ground to a halt after the touch-screen voting system crashed for about ten minutes.

A senior deputy elections supervisor could not explain the brief outage, but speculated a faulty Internet connection may have been to blame.

Even before voting began, there were reports election offices across the state had been tossing out thousands of incomplete voter registration forms. Sparking fears this year’s registration forms could become the equivalent of the notorious “hanging chads” of four years ago…

Kramnik retains his chess title

He won the last point against Peter Leko (who?) in dramatic fashion to retain his world championship title. Here is a full account of the contest.

The match we all want to see, of course, is Kasparov against Vishwanathan Anand.

But hey, the FIDE world champion is Rustam Kasimdzhanov (who?), he will soon play a match against Kasparov for yet another world chess championship. In case you didn’t know, there are competing titles, as has often been the case in boxing.

Kramnik, of course, beat Kasparov fair and square in 2000 but Kasparov is still the world’s most highly rated player and considered the greatest player of all time. Unless of course you count these guys.

Sports leagues are often accused of exercising too much monopoly power. But they are also needed to define proper champions, generate publicity, and ensure that contests have some finality and achieve universal acceptance. The world of chess proves that these are not easy tasks.

Reality People

The Suskind article is a must-read. It begins with a courageous and devastating analysis by Bruce Bartlett.

Bruce Bartlett, a domestic policy adviser to Ronald Reagan and a treasury official for the first President Bush, told me recently that ”if Bush wins, there will be a civil war in the Republican Party starting on Nov. 3.” The nature of that conflict, as Bartlett sees it? Essentially, the same as the one raging across much of the world: a battle between modernists and fundamentalists, pragmatists and true believers, reason and religion.

”Just in the past few months,” Bartlett said, ”I think a light has gone off for people who’ve spent time up close to Bush: that this instinct he’s always talking about is this sort of weird, Messianic idea of what he thinks God has told him to do.” Bartlett, a 53-year-old columnist and self-described libertarian Republican who has lately been a champion for traditional Republicans concerned about Bush’s governance, went on to say: ”This is why George W. Bush is so clear-eyed about Al Qaeda and the Islamic fundamentalist enemy. He believes you have to kill them all. They can’t be persuaded, that they’re extremists, driven by a dark vision. He understands them, because he’s just like them. . . .

”This is why he dispenses with people who confront him with inconvenient facts,” Bartlett went on to say. ”He truly believes he’s on a mission from God. Absolute faith like that overwhelms a need for analysis. The whole thing about faith is to believe things for which there is no empirical evidence.” Bartlett paused, then said, ”But you can’t run the world on faith.”

What can I say? Read the whole thing.

Markets in Everything – Character Development

Acclaimed author Will Shetterly is auctioning the rights to be a character in his next novel.

If you win this auction, you or a character with a name and description of your choosing will make a cameo appearance in The Secret Academy, a novel that will be published by Tor Books. I’m Will Shetterly, award-winning author of novels and short stories. My best-praised book, Dogland, was called “A masterwork (that) deserves the widest possible audience” by Ellen Kushner, host of National Public Radio’s “Sound & Spirit.” Publisher’s Weekly said it was “A deceptively simple story, rich with complex characters and timeless themes.” And Kirkus called it, “Compelling, absorbing, hard-edged work, lit by glimpses of another, more fantastic reality … child-centered but tackling adult themes fearlessly and with great charm.”

I can’t promise that this book will be as good as Dogland. If you want to peek at what it looks like so far, I’m posting the current draft in installments at: http://secretacademy.blogspot.com

Your role may be brief, but I’ll do my best to make it memorable. The book is set around 1970, so you may have to be modified for the sake of the story. (It was a dangerous time for hair; be warned!) Most likely, you’ll end up being a student or a teacher. I wouldn’t make you an unlikeable character without getting your permission in writing first. (Alas, it’s not a melodrama, so you can’t be a villain, which is the part I would want in someone else’s book. Maybe another writer will provide the opportunity if this auction does well.)

Thanks to Cory Doctorow at Boing Boing Blog for the tip.

Vaccines: The Short Run

President Bush was correct when he said that liability risk is one factor in the recurrent shortage of vaccines. Based on a post by Mark Kleiman, suggesting that flu vaccines are immune from liability due to the Vaccine Injury Compensation Program, Brad De Long called Bush’s claim an “eternal lie.” To his credit, Kleiman (but not DeLong) quickly retracted his post when others pointed out that the VICP applies only to pediatric vaccines.

Liability is not the only issue, however. Costly FDA regulations and requirements, for example to remove thimerosal from vaccines despite no evidence of safety problems, have pushed firms out of the industry. See this paper in the The Independent Review (I am an assistant editor) for more on these regulations and their consequences.

A further problem is that the federal government is the major purchaser of vaccines, although not the flu vaccine, and it uses its monopsony powers and the law to require companies to sell at low prices. Firms have left the industry because they are squeezed on one end by regulation and on the other by low prices and, for vaccines like the flu vaccine not covered by VICP, potential liability. Note that even if the prices are high enough to earn the company a modest profit the point is that they are not high enough to make it worthwhile to make a surplus of vaccine that can be sold in the event of a contamination problem, as has happened this year. If the firms can’t price high during a shortage then there is no incentive to plan for a shortage.

Even without legal price caps there are significant disincentives to high prices. Here is a CDC spokesperson (link to audio file) on recent price increases:

Shame on the people who are price gouging. This is a reprehensible thing to be doing. I think an immoral thing.

Is it any wonder that firms don’t want in on this market?

Henry Miller, a former head of the FDA’s biotechnology division, summarizes well:

The fundamental problem is that government regulatory policies and what amounts to price controls discourage companies from investing aggressively to develop new vaccines. Producers have abandoned the field in droves….Although their social value is high, their economic value to pharmaceutical companies is low because of vaccines’ low return on investment and the exposure to legal liability they bring manufacturers….

Moreover, the FDA has a history of removing safe and effective vaccines from the market based merely on perceptions of excessive side effects — a prospect that terrifies manufacturers.

We need a fundamental change in mind-set: The rewards for creating, testing and producing vaccines must become commensurate with their benefits to society, as is the case for therapeutic pharmaceuticals.

Read Henry’s article for more on dealing with the problem today, (he notes, for example, that it may be possible to dilute current stocks and still maintain good effectiveness). Also, as Tyler reported last year, simply targeting vaccines to at-risk people is not necessarily the best approach. A better approach is to target super-spreaders, people who may not be at great risk themselves but who can and will spread it to many others.

Tomorrow: Vaccines: The Long Run.

Should we buy weapons from Iraqis?

Payments for weapons handed over in Sadr City on Monday reportedly ranged from $5 for a hand grenade to $150 for an AK-47 to $2,000 for a highly specialized mortar. It appeared that both noncombatants and Mahdi Army insurgents were taking part in the buyback.

Abdulla Abu Ghassan, a bakery owner, received $1,200 after turning in a grenade launcher, an assault rifle and ammunition, all of which he said he had kept after serving in the now-disbanded Iraqi army.

The idea, presumably, is to take weapons out of the hands of terrorists. But will this work?

Under an optimistic scenario, the weapons are gone and the Iraqis are richer. Under a pessimistic scenario, the terrorists use weapons sales to finance future operations. If the terrorists have accumulated large weapons inventories, this should not be hard to do.

The dynamic problems are formidable. By bidding up the price of weapons, we raise the return to accumulating large weapons inventories in the future. We also make the weapons market more liquid. So weapons buy-back plans become less effective over time, unless we create the expectation that price will be falling. This means we had better get it right now, if indeed we can.

In some models government does best by accumulating its own inventory. The government then precommits to selling its stock, and driving down prices, if private traders accumulate too many of the forbidden assets. Knowing this danger in advance, private traders might be reluctant to invest in large stocks. Now I am not suggesting this as a viable policy option (hey, why don’t we sell off some nukes from Colorado, and lower the world price? That would show those nasty North Koreans…). Nonetheless the scenario shows just how far buying weapons can be from an ideal, incentives-driven economic policy.

Addendum: David Nishimura offers more information.