Markets in everything
The entries in this series are still capable of surprising me:
A pair of Alabama conservation enforcement officers think they’ve come up with the perfect way for avid hunters to honor their loved ones for eternity.
Officers Thad Holmes and Clem Parnell [TC: great names] have launched Holy Smoke LLC, a company that will, for a price, load cremated human ash into shotgun shells, and rifle and pistol cartridges.
It’s the perfect life celebration for someone who loves the outdoors or shooting sports, Parnell says.
And to put your mind at ease:
The animal should be killed quickly by the shot, to prevent any possibility of spreading the ashes in the animal’s blood, he says. The area around where the animal was struck should not be consumed.
The article is here, the company’s web site is here, and I thank J. for the pointer.
Why Do Sandwiches Taste Better When Someone Else Makes Them?
Daniel Kahneman tells us:
When you make your own sandwich, you anticipate its taste as you’re working on it. And when you think of a particular food for a while, you become less hungry for it later. Researchers at Carnegie Mellon University, for example, found that imagining eating M&Ms makes you eat fewer of them. It’s a kind of specific satiation, just as most people find room for dessert when they couldn’t have another bite of their steak. The sandwich that another person prepares is not “preconsumed” in the same way.
Assorted links
1. Origins of the term “Great Stagnation”; was it Lester Thurow?
2. Deposits in Irish banks rise for the first time in a year.
3. Is there too much default correlation for EFSF leverage to work?
4. Smith on Caplan on single mothers; “Baby lust is quite real, almost certainly genetically determined and probably explains a fair fraction of the differences in outcome among women.”
5. The Japanese electricity forecast from the culture of the Swiss in Japan.
Can you eat decently at an indecent restaurant?
I have a short piece in the NYT Sunday magazine on that question, here is one excerpt:
Moisture is a key element to consider. Eggs, traditionally deemed a safe choice in diners, are easy to overcook and thus are often served dry and tasteless. Chili and other slow-simmering dishes are a better option, because they can be left on the stove forever and still taste O.K. The initial recipe may not be optimal, but the restaurant’s mistakes probably won’t make them worse, and the spices in a good blend can overcome mediocre ingredients. Ribs, which are usually cooked mechanically with little threat of human error, can also sit for a long time at low heat and will almost certainly taste better than they look. At an Italian restaurant, spaghetti is a safer choice than lasagna, since a lot of the moisture is added ex post, through the sauce, making it harder to dry it out.
Sentences to ponder
The rise in the cost of CDS on Morgan Stanley has outpaced that of other US banks and it now costs more to insure Morgan Stanley debt than the debt of Bank of America.
Here is more.
How to keep taxes low
Here is my latest NYT column, it is on why I am the true GOP low-tax candidate and how the others are trying to sell you a bill of goods. I’ll cut to the conclusion at the end:
The more cynical interpretation of the Republican candidates’ stance on taxes is that they are signaling loyalty to a cause, or simply marketing themselves to voters, rather than acting in good faith. It could be that candidates are more worried about having to publicly endorse tax increases than they are about the tax increases themselves. If that’s true, it is all the more reason to watch out for our pocketbooks; it means that the candidates are protecting themselves rather than the taxpayers.
The final lesson is this: Many professed fiscal conservatives still find it necessary to pander to voter illusions that only a modicum of fiscal adjustment is needed. That’s an indication of how far we are from true fiscal conservatism, but also a sign of how much it is needed.
And from earlier in the piece:
Promising never to raise taxes, without reaching a deal on spending, really means a high and rising commitment to future taxes.
Detached markets in everything
Most egg donors, who have exactly the same genetic relationship to offspring as sperm donors, come to the opposite conclusion: they are not mothers.
That is from the new and interesting Sex Cells: The Medical Market for Eggs and Sperm, by Rene Alemling.
Andy Grove on Reforming the FDA
In an important editorial in Science, Andy Grove, former Chief Executive Officer of Intel Corporation, advocates restricting the FDA to safety-only trials. Instead of FDA required efficacy trials patients would be tracked using a very large, open database.
The biomedical industry spends over $50 billion per year on research and development and produces some 20 new drugs….A breakthrough in regulation is needed to create a system that does more with fewer patients.
While safety-focused Phase I trials would continue under their [FDA] jurisdiction, establishing efficacy would no longer be under their purview. Once safety is proven, patients could access the medicine in question through qualified physicians. Patients’ responses to a drug would be stored in a database, along with their medical histories. Patient identity would be protected by biometric identifiers, and the database would be open to qualified medical researchers as a “commons.” The response of any patient or group of patients to a drug or treatment would be tracked and compared to those of others in the database who were treated in a different manner or not at all. These comparisons would provide insights into the factors that determine real-life efficacy: how individuals or subgroups respond to the drug. This would liberate drugs from the tyranny of the averages that characterize trial information today. The technology would facilitate such comparisons at incredible speeds and could quickly highlight negative results. As the patient population in the database grows and time passes, analysis of the data would also provide the information needed to conduct postmarketing studies and comparative effectiveness research.
Grove cites Boldin and Swamidass and especially Bartley Madden’s important book, Free to Choose Medicine, as inspiration for this proposal. By the way, I also recommend Madden’s book very highly (I am also proud to note my bias in this regard).
I have long advocated restricting the FDA to safety only trials (see, for example, FDAReview.org and my paper on off-label prescribing) and it seems that this idea, once considered outlandish, is now rapidly gathering advocates.
Addendum: Derek Lowe offers useful comments (see also Kevin Outterson below). One point that I think the critics miss is that nothing in Groves’s proposal and certainly not in Madden’s proposal which is somewhat different or in anything that I have advocated precludes randomized clinical trials for efficacy. Indeed, I strongly support such trials and have argued for greater funding so such trials can be done not by the pharmaceutical companies but by more objective third parties.
The culture that was Chicago
More than three-quarters of turn-of-the-century Chicago homicides led to no criminal punishment — not because the perpetrator could not be identified, but because no jury would convict. One historian’s study of Chicago homicide cases in that period reads like a compendium of bar fights that got out of hand, nearly all of which took place in front of witnesses and most of which ended in defense victories. A system in which easily identified perpetrators succeed so readily is bound to have a small prison population.
That is from the new and excellent book The Collapse of American Criminal Justice, by William J. Stuntz, recommended to me by the excellent Chug Roberts.
Frequent flyer markets in everything
Smoke poured into the airplane cabin and activity came to a screeching halt. As the captain yelled “Evacuate! Evacuate!” passengers did what comes naturally: They froze.
The “emergency,” staged with theatrical smoke in a full-motion airline cabin simulator, was part of an unusual British Airways safety course. Sixteen travelers from some of the airline’s top corporate customers and its advertising agency practiced jumping down evacuation slides, opening heavy airplane doors and scampering out smoke-filled crashed cabins. They also learned simple tips that could save lives.
It seems odd that an airline would want to train people to deal with catastrophe, but British Airways believes the course engenders customer loyalty and helps calm nervous fliers. The airline plans to open up the course, which costs about $210, to individual travelers next year, possibly letting passengers redeem frequent-flier miles to attend. About 11,000 people have gone through the class so far.
Bob Frank may not approve of this one:
“We teach people to react faster than anyone else so they are in the aisle first and down the slide first,” said Andy Clubb, a British Airways flight-attendant trainer who conceived of and runs the passenger course.
On the brighter side:
… it’s not simply survival of the fittest. Other passengers seeing someone react positively will quickly follow, and the prepared passengers become leaders, making the entire evacuation faster.
The article itself passes along some tips. For the pointer I thank Kurt Busboom.
Assorted links
1. How to organize information about science fiction and fantasy books.
2. The absurdity of metaphysics, and Thomas Reid on the immaterial souls of vegetables.
4. Democracies have higher TFP than do dictatorships (Norwegian pdf).
5. A good cartoon about tragedy.
6. Does chess and game skill help at trading? How about tennis and trading?
7. Paul Krugman responds on Ireland, original context here.
Free disposal?
The [Illinois] law allows parents of babies less than 30 days old to relinquish them, no questions asked, at police stations, fire houses and hospitals.
A good law, I say. And yet:
Despite the new law and successful adoptions, problems persist. Including the Bloomington newborn, 63 babies have been abandoned illegally during the last 10 years, nearly as many as were taken to the safe havens. They were left at churches, along roadways and, in some cases, thrown in garbage cans. Of those, 30 died before someone found them.
The story is here.
Leveraging the EFSF
I’ll repeat this link for background. I would feel better about the idea if the context were: “We can always go back to the trough, but leveraging the fund is the easiest way for us to strike quickly and decisively.” Instead I see too much of: “We can’t get any more from our taxpayers, so we’d better stretch this one as far as we can.” That’s just inviting the speculators to set up camp against you.
Who will fund the leverage? BRICS? American investors? Ultimately other Europeans? All of those parties already can construct their own leveraged positions in Italian government debt, if they wish. So presumably the leverage will be a hidden subsidy to the financiers, one way or another, to get them to participate. Subsidizing the debt buyers, rather than guaranteeing the debt (admittedly that may be impossible and undesirable for Germany), hardly seems like the way to go. You bear the costs of the bailout without any assurance it will work.
This German-language video suggests many of the German representatives do not know what they just voted for.
You’ll find lots of good comments on Twitter, and here. How about this take?:
“Germany voted for the EFSF extension. Greece celebrated by going on strike.”
Larry Kotlikoff on wages and sarcasm
Some prices and wages are set too high, thereby damping demand for output and for the workers needed to produce it. This is the standard sticky wage and price explanation for our economic malaise offered by Keynesian economists such as Paul Krugman and James Galbraith. I think there are fewer markets suffering from this problem than Krugman and Galbraith do, but there are enough such markets to make the case for government intervention. Indeed, the president should put these economists in charge of identifying the markets suffering from this problem and helping their participants set market-clearing prices and wages.
Via Mark Thoma, Jamie Galbraith objects to his cited role, and Paul Krugman piles on. Three points:
1. Call me strange, but I read Kotlikoff as being sarcastic in this passage, especially in the last sentence, objecting to the pretense of knowledge which he sees as embedded in some extreme forms of Keynesian doctrine. To respond to this criticism with a straight yet outraged face is to miss the joke and arguably at the same time to validate it. Kotlikoff is not actually suggesting that Krugman and Galbraith rule a new wage and price commission (surely that proposal and its specificity is the giveaway, no?), or implying that Krugman and Galbraith see price flexibility as the answer to our macroeconomic problems. He may, though, be wondering why they do not, which brings us to:
2. The “New Old Keynesians” repeat the Great Depression point that lowering wages will be destabilizing. During the Great Depression, there was a large negative nominal shock, nominal wage reductions for a broad swathe of the employed labor force in response, and a downward spiral of wages and prices, at least for a while. Fair enough, and one can model that coherently. Today we are talking about trying to lower reservation wages for 2-4 percent of the wage force, namely some of the currently and non-naturally unemployed. That is with a central bank which has set a fairly credible floor on nominal values. To criticize these targeted (potential) wage cuts by citing the Great Depression, or relevant models thereof, is a non sequitur. In fact it’s hard to find a good argument against such proposed targeted cuts; the best response is to cite excess capacity and claims the cuts won’t work but then they won’t lead to harm either.
3. Kotlikoff’s subsequent explanation of his stickiness point is on the mark and is not contested: “One example [of a stickiness] is the market for construction workers. A 1931 law called the Davis-Bacon Act effectively requires contractors using federal money to pay union wages. If the act were suspended or repealed, federal spending on much-needed infrastructure projects could create a lot more jobs. ”
4/5 of Kotlikoff’s piece is good. I don’t like his idea of “…assembling in one room the CEOs of the largest 1,000 U.S. companies and getting them to collectively pledge to double their U.S. investment over the next three years.” Does everyone have to double? Relative to what benchmark? What about the companies which are losing money or going under? What happens if a company breaks its pledge? Are they allowed to fly their private planes to the meeting? Do those with the biggest pledges get to sit next to the President? And so on. In the longer run, I don’t think it helps to politicize investment decisions.
Singularity Summit
I will be speaking at the NYC Singularity Summit, Oct.15-16., and also debating TGS with Michael Vassar. Other speakers include Ken Jennings on Watson (his new book on maps is suitably intense), Ray Kurzweil, Peter Thiel (his not on-line and excellent National Review cover story is the best introduction to his seminal views on stagnation, also note the Allison Schraeger piece, on financial innovation, in the same issue), and Sonia Arrison (I like her new book too, on aging).
Full information is here, including registration. The code MARGINAL2011 will get you $100 off.