Are Older People Aware of Their Cognitive Decline? Misperception and Financial Decision-Making

by  Tyler Cowen in

We investigate whether older people correctly perceive their cognitive decline and the potential financial consequences of misperception. First, we show that older people tend to underestimate their cognitive decline. We then show that those experiencing a severe decline but unaware of it are more likely to suffer wealth losses. These losses largely reflect decreases in financial wealth and are mainly experienced by wealthier people who were previously active on the stock market. Our findings support the view that financial losses among older people unaware of their cognitive decline are the result of bad financial decisions, not of rational disinvestment strategies.

That is from a newly published JPE paper by Fabrizio Mazzonna and Franco Peracchi.  Here are some less gated versions of the paper.

Fauci Didn’t Test

by  Alex Tabarrok in

I am not a Fauci hater but I think this criticism of Facui from epidemiologist and oncologist Vinay Prasad hits the mark:

Lockdown was specifically advocated for by Anthony Fauci (‘15 days to stop the spread’/ ‘hunker down’/ ‘shelter in place’), and Fauci would go on to make hundreds of other specific policy recommendations. Although he initially rejected it, by April 2020, he recommended community cloth masking to slow the coronavirus (an intervention for which we now have randomized data showing it doesn’t work).

Fauci opposed Ron DeSantis in numerous TV interviews in spring 2020 when DeSantis reopened schools. He called school reopening reckless— though it was widely embraced in western Europe at the time, and now clearly the correct policy choice.

Fauci supported vaccine mandates and border closure. He repeated the false statement that 6ft of social distancing had an empirical basis. Many in the media and medicine think criticizing him is unfair— he did the best he could with what he knew at the time—but it is fair to criticize a scientist who presented his views as facts when they were at best speculation. And, moreover, there is one criticism that no one can deny:

Although he was director of the NIAID, and although he controlled a 5 billion dollar infectious disease research budget, he chose to launch, fund and conduct precisely ZERO randomized trials of non-pharmacologic interventions.

Hat tip: MD.

Do we need antitrust action against “big alcohol”?

by  Tyler Cowen in

The argument here will be familiar to many MR readers, and it now appears in a Bloomberg column of mine.  Excerpt:

I say this as a longtime advocate of abstention, so make of it what you will, but: If Southern Glazer’s actions are limiting the supply of alcohol and boosting its price, then so much the better.

There is an overwhelming body of evidence that drinking alcohol leads to more traffic fatalities, reduced productivity and higher rates of violence, not to mention the unquantifiable cost in ruined lives. Legal prohibition of alcohol proved unworkable, but some of the benefits of reduced consumption can be gained by allowing prices to rise and to stay high. One NIH investigation estimated the costs of alcohol use amounted to 2.6% of US GDP.

If a monopoly has some positive social consequences, all the more reason to let it persist. I would also be pleased, for example, by a monopoly in non-medical marijuana.

There are many instances of unlawful monopoly power in market economies, and most of them are best ignored. The FTC, like most parts of the government, does not have unlimited resources.

There are numerous other arguments in the piece.

What are you people thinking?

by  Tyler Cowen in

Today’s suggested packing lists for seven-week camps can include a light blanket and warm comforter, two sets of sheets, six towels, three pairs of sneakers, 25 pairs of underwear, 25 pairs of socks, sports equipment and toiletries. Then, there are clothes for most every weather scenario, including a raincoat and boots, fleece jacket, more than 20 tops and shorts, and 10 pairs of pajamas—split between lightweight and heavy.

Miscellaneous items include foldable Crazy Creek chairs, a kaboodle to hold hair ties, makeup and nail polish, flashlights, decorative pillows for optimal bunk coziness, family photos to fend off homesickness, games and personalized lockboxes for, say, smuggled-in candy.

“Color War” is its own sartorial challenge. At this epic end-of-summer tournament, campers sport their team’s color and compete in events. But since the kids don’t know what color they’ll be assigned, parents often pack for four possibilities.

For the buying, many families make a “camp appointment” with a personal shopper at Denny’s, a children’s boutique in New York, New Jersey and South Florida. Associates greet them with their camp’s packing list printed out. Spencer Klein, whose family has owned Denny’s since 1978, says the average spend for a new camper appointment is $1,500 to $2,000. (A coveted perk: the store labels everything for free.)

As for those new service sector jobs:

This year, for the first time, Dara Grandis, a Manhattan mom of three, hired professional organizer Meryl Bash to pack for her three children, who head off in late June for seven weeks at camp.

Here is the full WSJ article by Tara Weiss, via the excellent Samir Varma.

How many hottest days of the year? (so far)

by  Tyler Cowen in
  • The average number of days in a year which can be called ‘hottest day of the year so far’ is 20.0
  • If we want to restrict the number of ‘noteworthy hottest days of the year so far’ to 3/year, we can restrict noteworthiness to days which are at least 20˚C and at least 1.6˚C hotter than the previous hottest day
  • The places which set the most ‘hottest day of the year so far’ records are in the south east of England

Here is the full post by Eliot Fosong, via Sam Enright.

The Marginal Revolution Theory of Innovation

by  Alex Tabarrok in

A FDA panel voted against approving MDMA (ecstasy) for post-traumatic stress disorder. Putting aside the specifics of the case, I was vexed by this statement on innovation from one of the experts voting no:

“I absolutely agree that we need new and better treatments for PTSD,” said Paul Holtzheimer, deputy director for research at the National Center for PTSD, a panelist who voted no on the question of whether the benefits of MDMA-therapy outweighed the risks.

“However, I also note that premature introduction of a treatment can actually stifle development, stifle implementation and lead to premature adoption of treatments that are either not completely known to be safe, not fully effective or not being used at their optimal efficacy,” he added.

A textbook example of making the perfect the enemy of the good. But the problem is even worse. Holtzheimer seems to think that treatments spring from the lab perfectly formed like Athena springing from the brow of Zeus. Indeed, Holtzheimer suggests that treatments should be kept in the lab until they are perfect. News flash: there are no perfect treatments–no drug or device in use today is completely known to be safe, fully effective, and used at its optimal efficacy. Not one. If we follow Holtzheimer’s counsel, we will never approve a new drug.

Innovation is a dynamic process; success rarely comes on the first attempt. The key to innovation is continuous refinement and improvement. A firm with sales gains greater resources to invest in further research and development. Additionally, they benefit from customer feedback, which provides valuable insights for enhancing their products and processes. Learning by doing requires doing. But if imperfect treatments are never approved, scientists often don’t return to the lab to refine and improve them. Instead, the project dies. Thus, when considering innovation today, it’s essential to think about not only the current state of technology but also about the entire trajectory of development. A treatment that’s marginally better today may be much better tomorrow.

Small steps toward a much better world.

Updating the Drake equation?

by  Tyler Cowen in

Planetary scientists Robert Stern from the University of Texas at Dallas and Taras Gerya from ETH-Zurich, the two co-authors on the study, suggest that the presence of both continents and oceans, along with long-term plate tectonics, is critical for the emergence of advanced civilizations. They consequently propose the addition of two factors into the equation: the fraction of habitable planets with significant continents and oceans and the fraction of those planets with plate tectonics operating for at least 500 million years. This adjustment, however, significantly reduces the value of N in the Drake Equation…

According to the new study, plate tectonics are crucial for developing complex life and advanced civilizations. Earth’s plate movements create diverse habitats, recycle nutrients, and regulate climate—all vital for life. It’s important for plate tectonics to last for 500 million years, Gerya explained, because biological evolution of complex multicellular life is extremely slow. “On Earth, it took more than 500 million years to develop humans from the first animals, which appeared around 800 million years ago,” he said.

Here is more from George Dvorsky, via the excellent Samir Varma.

Resurrecting some form of CAPM?

by  Tyler Cowen in

We find that procyclical stocks, whose returns comove with business cycles, earn higher average returns than countercyclical stocks. We use almost a three-quarter century of real GDP growth expectations from economists’ surveys to determine forecasted economic states. This approach largely avoids the confounding effects of econometric forecasting model error. The loading on the expected real GDP growth rate is a priced risk measure. A fully tradable, ex-ante portfolio formed on this loading generates a procyclicality premium that is statistically significant, economically large, long-lasting over a few years, and independent of the size, book-to-market, and momentum effects.

That is from a recent NBER working paper by William N. Goetzmann, Akiko Watanabe, and Masahiro Watanabe.

Mark Lutter reports on the Bahamas (from my email)

by  Tyler Cowen in

I won’t double indent, this is all Mark:

“The Prime Minister of the Bahamas recently gave a speech on revitalizing Grand Bahama. He called out the current asset owners of Intercontinental Diversified Corporation, a holding company for Freeport, for not re-investing and for selling off various pieces of the asset. He wants a world class partner to develop Grand Bahama. Half his cabinet attended the speech in person. It is the strongest stance a Prime Minister has taken in 50 years with respect to Grand Bahama.

Here is some additional background reading on Grand Bahama and Freeport. The Prime Minister has two years left in his term and has made revitalizing growth on Grand Bahama his political legacy. Some key facts about Freeport

  • 70k+ acres of developable land under Grand Bahama Development Company
  • Infrastructure to support 250k residents, current population is 50k
  • 25 minute flight to Miami
  • Existing legal framework for a charter city, though some of the rights of the Grand Bahama Port Authority, the city government, have been eroded over time

I hope you find this interesting enough to blog about and would appreciate a shout out. Happy to answer any additional questions you might have.”

TC again: Here Mark comments on Twitter.

The NIH Doesn’t Fund Small Crappy Trials

by  Alex Tabarrok in

A nice catch by Max at Maximum Progress:

[A common critique] is that the NIH funds too many “small crappy trials.” That quote is from a FDA higher up, but the story has been repeated by many others…I downloaded all of the clinical trial data from ClinicalTrials.gov to find out….The median NIH funded trial has 48 participants while the median industry funded trial has 67. The average NIH funded trial has 288 participants while the average industry trial has 335 and the average “Other” funded trial (mostly universities and the associated hospitals) has 923 participants.

By median or by average NIH trials are the smallest out of all the funders. This seems to confirm the “small crappy trials” narrative

…This narrative is reversed, however, when you split up the trials by phase.

Across all trials NIH funded ones are the smallest, but within each phase NIH trials are the largest or second largest. Their overall small enrollment average is just due to the fact that they fund more Phase I trials than Phase III. But NIH Phase I trials have a bigger sample size than industry funded trials on average.

This is an example of Simpson’s Paradox in the wild!

Arguing that the NIH should stop funding unusually small trials is easy but arguing that they should shift from funding the Phase I trials closest to basic research towards later stage trials is less clear.

The NIH’s clinical trial strategy is certainly not perfect and improving it is valuable. But a systematic bias towards “small crappy trials” doesn’t really seem like it’s an important problem facing the NIH.

Rhino capital markets in everything?

by  Tyler Cowen

In 2022 the World Bank priced the world’s first wildlife bond, raising $150 million that will be partially used for the conservation of black rhinos at two reserves in South Africa. Returns on those five-year bonds will be determined by the rate of population growth. It said at the time that it hoped that the structure would be emulated…

Under the rhino bond’s structure the issuer makes contributions toward conserving the animals instead of paying coupons and the buyers of the bond receive a payment based on preset targets for population growth. Black rhino numbers have dropped to about 2,600 from 65,000 in 1970, and may once have been as high as 850,000, according to documentation from the World Bank. They are smaller than the more common white rhino.

Here is more from Antony Sguazzin at Bloomberg.  As the article notes, Rand Merchant Bank is considering issuing wild dog and lion bonds as well, with the exact structure still being discussed.