Why Most Published Research Findings are False (2)

John Ioannidis’s argument that most published research findings are false has been getting some attention in the blogosphere because of a recent article in the WSJ.  In an earlier post I  explained why most published research findings might be false using a simple diagram.

Hat tip and thanks to Steve Novella at Neurologica Blog and Mark H at Denialism both of whom refer to my analysis adding many excellent insights of their own.

Broken Buildings, Busted Budgets

That’s by Barry B. LePatner and the subtitle is How to Fix America’s Trillion-Dollar Construction Industry.

The key problem is that building or new construction owners become completely dependent on information provided by their contractors.  The contractors experience cost overruns and the commissioning owners have to suffer delays, cost increases, and the general feeling of having been screwed over.  Opportunism and recontracting are rampant.  According to the author, no institution successfully helps commissioning owners distinguish between good and bad contractors.  Ex post the construction industry is not competitive, even though it has a large number of firms ex ante.

According to LePatner, the answer is to move to truly fixed-rate contracts.  This means no more passing cost onto owners, real penalties for delays, and much more risk on the construction company itself.  That in turn requires larger and more integrated construction companies instead of today’s small proprietorships.

If this is such a good idea, why doesn’t the market provide such a solution already?  Surely there is enough capital to support large construction companies.  I don’t know, and for that reason I cannot evaluate the author’s central proposal in an informed manner.  Nonetheless this book is argued on a very serious level and I found it definitely a worthwhile and stimulating read.

A must for anyone interested in the economics of construction, and a possible read for others as well.

A defense of employer-linked health insurance

The employer-based system provides a tremendous service to workers by providing a buffer between the plan administrator or insurer and the workers and their families.  The employer helps the employee navigate the system, is an advocate for the worker and frequently assists with claim appeals and disputes, not to mention assuring that premiums are efficiently collected.  Employers are also leading the charge on the health and wellness front.  Employers who seek to abandon this system out of hand should consider the consequences of having thousands of workers taking the time (on the job) to resolve the many issues and problems that will continue to occur under any insured scheme, but now with individuals left to navigate the system on their own.

I have been an employee-benefits professional for nearly 46 years and have worked with thousands of employees on every kind of health-care issue imaginable under every type of health-care plan.  Most of the problems are created by the patients and the health-care providers, not the dreaded insurance company.  That is unlikely to change.

That is Richard Quinn, of Verona, New Jersey, in a letter to The Wall Street Journal, Sept. 15, p.A7.  On net, I do not agree with this opinion, but this perspective is too often neglected in health care debates.

Every claim is wrong

I wondered whether that can be said of Naomi Klein’s new The Shock Doctrine: The Rise of Disaster Capitalism.  Still, at some fundamental level I liked this book.  Perhaps I still had the Greenspan memoir too fresh in my mind, but at least this text is alive.  Yes she refuses to admit that Chilean reforms, however horrible the accompanying atrocities, did represent a success for market economics.  Yes she misstates the role of Milton Friedman in just about everything.  Yes she suggests that black children in New Orleans, pre-Katrina, enjoyed equality of educational opportunity.  Yes she is naive enough to think that we need only put the good people in power.  Yes she repeats many timeworn fallacies about Halliburton.  Yes there is a senseless conflation of torture, Iraq, and the Coase Theorem.  And so on.

Still, at the heart of this book she pinpoints the discomfort that free market advocates have with democracy.  You can go the non-democratic route, you can claim that markets should stand above democracy, or you can reinterpret libertarian ideas as a general framework for social analysis and a program for gradualist democratic reform.  Either way, for all her mistakes, Klein has yet to lose this debate.

Student Blog Contest

America’s Future Foundation is pleased to announce a nationwide
contest
for the best conservative or libertarian college blogger. The
purpose of the contest is to encourage original liberty-minded blogger
journalism on college campuses and to identify young conservative and
libertarian talent who wish to pursue careers as journalists and
writers.

The contest is open to all graduate and undergraduate bloggers age
25 and younger. The winning blog will be awarded a cash prize of $10,000,
and be invited to be a panelist at an AFF Roundtable on higher
education in Washington, D.C. Awards will be announced on April 7, 2008.

The Tyranny of the Market

This new book is by sometimes Slate.com columnist and U. Penn economist Joel Waldfogel, of "Deadweight Loss of Christmas" fame.  The subtitle is "Why You Can’t Always Get What You Want."

This well-written monograph is the best extant non-technical treatment of fixed costs and how they limit product diversity.  On a given night, you can’t see a live performance of Samuel Beckett in Topeka, Kansas but maybe you can in the larger New York City; fixed costs are why they won’t set up the stage and hire the cast for only five viewers.

But Waldfogel is more pessimistic about the market than I am.  The book’s opening example is about how hard it is to find radio stations in underpopulated areas; satellite radio is mentioned on p.120 but I would have started with its reach and also its limitations (and here).  There is internet radio as well.  The first example in the empirical chapter is that it takes $900 million on average to develop a new drug, but regulations and the FDA are not mentioned.

I can recommend this book but I do not agree with its central conclusion: "Markets do not avoid the tyranny of the majority."  There are very few areas of my life, if any, where markets force me to follow the wishes of the majority.

Oddly the biggest problem is not mentioned and that is style and marketing.  Retail outlets do not carry many items, not because they couldn’t hang some of the stuff from the ceiling, but rather because they wish to project a focused image.  In other words, the real problem, when there is one, is the very limited attention spans of the consumers and the ad watchers and the product line gossipers.

In favor of boring meetings

Here is my Forbes piece (free registration required), in the October 1 issue.  Excerpt:

Meetings also confer a sense of control. Attendees feel like
insiders who have a real voice in decisions. This boosts their
motivation to implement ideas discussed as a group. For this reason it
is especially important to listen to the blowhards and the
obstructionists, who otherwise would pursue their own agendas rather
than support a common plan.

Frequent meetings help a business
apply bonuses and yearly evaluations with greater precision.
Evaluations are inherently problematic. The natural human tendency is
to feel slighted or get upset at anything less than a perfect
evaluation. By contrast, meetings reaffirm the value of the individual
to the company. When the time comes for the boss to offer criticism or
dock a bonus, a worker who has been to many meetings is more likely to
take the feedback in a constructive spirit and respond with improvement
rather than resentment.

In other words, meetings are fundamentally a form of "social theater" and should be analyzed as such.  Now if only speakers had to pay by the minute…   

A Law and Economics Exam Question

In Virginia the common law has long held that if a neighbor’s tree encroaches on your yard you may cut the branches as they fall over the property line but any damage the tree does to your property is your problem.  Your neighbor can even sue if your pruning kills the tree.  Last week the Virginia Supreme Court overruled this 70 year-old precedent so that now it’s your neighbor’s duty to prune or cut down the tree if it is a "nuisance."

Discuss.  Which rule is better the new rule or the old?  What does this ruling imply about Posner’s hypothesis about the efficiency of the common law?  What would Coase say? 

My Favorite Things Vermont

1. Calypso song about a Vermont native: "Guests of Rudy Vallee", and of course Vallee was a central figure behind the popularization of calypso in the United States.

2. Philosopher: John Dewey.  I can’t actually stand to read him, but if you recast everything he said, you can come up with some profound positions.

3. Undeserving Nobel Laureate: Pearl Buck.

4. Man with an iron rail through his brain: Phineas Gage.

5. Composer: Carl Ruggles – his 16-minute Sun Treader is one of the most underappreciated pieces of great American music.

That’s all I can think of right now.  I’m headed up to Middlebury for a day and a bit, as guest of David Colander.

Sentences of provocation

Our results suggest that if all states had primary enforcement seatbelt laws then regular youth seatbelt use would be nearly universal and youth fatalities would fall by about 120 per year.

Here is the paper.  My question: how many expected saved lives are required for this law to be a good idea?  Any comment on this post should suggest a specific numerical answer to that question.