New betting market in avian flu

by  Tyler Cowen in

Go to www.tradesports.com, click under Current Events, this link helps.  The contract is for whether bird flu is found in the U.S.; more useful would be a contract on whether human-to-human transmission becomes widespread and causes many deaths.  Bird flu in U.S. birds, while terrible for Perdue Chicken, is not what most people care about.  It is in this country, and Western Europe, that bird flu is least likely to mutate into a form deadly for humans.  Right now the market is saying 15 to 18 percent that bird flu will be confirmed in the U.S. before year’s end.

Thanks to Ryan Peterson for the pointer.

The Undercover Economist, part II

by  Tyler Cowen in

I once made the mistake of entering into a sportsman’s bet with the economist John Kay.  He wondered what would have happened if you had bought shares in the Great Western Railway, the most famous of all the rail companies in Britain, the birthplace of train travel.  He speculated that even had you bought them on the first day they were available, and held them for the long term, your returns would have been quite modest, say, less than 10 percent a year.  I couldn’t conceive that one of the most successful companies of the railroad revolution could have possibly returned such a modest sum to shareholders.  Off I went to flick through dusty nineteenth-century editions of The Economist and find out the answer.  Of course, Kay was right.  Not long after the Great Western Railway shares were put on sale for 100 pounds a share in 1835, there was a tremendous burst of speculation in rail shares.  Great Western shares peaked at 224 pounds in 1845, ten years after the company was formed.  Then they crashed and never reached that level again in the century-long life of the company.  The long-term investor would have received dividend payments and would have made a respectable but unremarkable 5 percent annual return…

Here is my previous post on Tim Harford’s The Undercover Economist, the hot popular economics book of the moment.  Here is a history of the railway.

Don’t put your faith in a central Tamiflu stockpile

by  Tyler Cowen in

Countries around the world are stockpiling Tamiflu, in anticipation of a possible avian flu pandemic.  This is better than doing nothing, but Tamiflu is unlikely to protect most of us, should a pandemic arrive.  Here are a few reasons why:

1. Tamiflu must be taken within the first two days of symptoms.  Your chance of getting some Tamiflu that quickly, in a pandemic, will not be great (of course you could buy some on your own).

2. Tamiflu, if taken preventively, can prevent you from getting sick in the first place.  But you would need two tablets each day.  Only essential medical personnel, and select  politicians, are likely to receive such treatments.

3. You show up at the emergency room with avian flu, and then they have to decide where you stand on the priority list.  Will the hospital fear a lawsuit?  How long will this take?  Will it require federal or regulatory clearance?

4. Given the crush of the infected, will you be afraid to show up at the emergency room in the first place?  Maybe you just have the common cold.  See point #1.

5. Many Tamiflu supplies will be exhausted on false alarms, such as colds and other flus.

6. A Tamiflu stockpile is only good for a few years.  If avian flu does not come soon, do you expect the stockpile to be replenished?  Or would avian flu become the new "swine flu", never to be uttered by politicians again?  The avian flu threat will likely be with us for at least ten years, in the form of a bird "flu reservoir" for possible mutation.

7. There is some chance that the virus will develop Tamiflu immunity over time, especially if Tamiflu is applied indiscriminately at the early stages of a pandemic.

8. Let’s say the virus arrives first in California.  Will Tamiflu supplies all be sent that way at first?  Will they ever later be shipped back to Kansas?  How much of the stockpile — an inevitable political football — will be available at any point in time?

Did I mention that the U.S. won’t be getting any more new Tamiflu for at least two years?  Right now we only have 4.3 million courses.

Comments are open.  Yes we should buy more Tamiflu, but we need to think harder about what else to do as well.

iPod bleg

by  Tyler Cowen in

I am soliciting song suggestions to put on my iPod; all genres are welcome.  There is no need to suggest famous songs, such as the classics of classic rock.  Most pieces of classical music are too long for how I use the medium.  Comments, of course, are open.

Housing Economics

by  Alex Tabarrok in

The NYTimes Magazine has an excellent article on the housing market based around a discussion of the development firm Toll Brothers.  Bob Toll the president of the firm is predicting that US housing prices will converge with those in Europe.

"In Britain you pay seven times your annual income for a home; in the
U.S. you pay three and a half." The British get 330 square feet, per
person, in their homes; in the U.S., we get 750 square feet. Not only
does Toll say he believes the next generation of buyers will be paying
twice as much of their annual incomes; in terms of space, he also seems
to think they’re going to get only half as much. "And that average,
million-dollar insane home in the burbs? It’s going to be $4 million."

Toll agrees with Glaeser et al. that the key force driving up prices is zoning and growth regulations.  In New Jersey it now takes Toll Brothers up to two million dollars in legal fees and ten years in time to get the permits necessary to build. 

Susan Wachter, a housing economist at the Wharton School at the University of Pennsylvania, has an interesting public choice insight about why zoning is worse in Europe.

European towns also have less incentive to encourage development,
Wachter says, because they generally do not, unlike their American
equivalents, depend on their local tax base to pay for education and
services, which tend to be federalized.

This implies that towns in states that reduce their reliance on the property tax – often done, as in CA, in order to "equalize" school funding or other expenditure – will soon restrict development.  Go to it graduate students.

Lots of other interesting material on the organization of the industry.

The Idea Trap lasts a long time

by  Tyler Cowen in

Here is the latest by Alberto Alesina and Nicola Scheundeln:

Preferences for redistribution, as well as the generosities of welfare
states, differ significantly across countries. In this paper, we test
whether there exists a feedback process of the economic regime on
individual preferences. We exploit the "experiment" of German
separation and reunification to establish exogeneity of the economic
system. From 1945 to 1990, East Germans lived under a Communist regime
with heavy state intervention and extensive redistribution. We find
that, after German reunification, East Germans are more in favor of
redistribution and state intervention than West Germans, even after
controlling for economic incentives. This effect is especially strong
for older cohorts, who lived under Communism for a longer time period.
We further find that East Germans’ preferences converge towards those
of West Germans. We calculate that it will take one to two generations
for preferences to converge completely.

Here is Bryan Caplan on The Idea Trap, one of his best pieces.

Who are the leading public intellectuals?

by  Tyler Cowen in

Remember that poll from a month or so ago?  Here are the winners, ugh to number one.  Here is the full list and vote tally; having a non-European, hard to spell or pronounce last name virtually guarantees you sink to the bottom.  Milton Friedman was the number one write-in candidate.  France had one name in the top forty.  Thanks to www.politicaltheory.info for the pointer. 

Domino

by  Alex Tabarrok in

Domino2_1The Undercover Economist invited me to chat about bounty-hunters after a screening of Domino, the new film "about" Domino Harvey, upper-crust British fashion model turned LA bounty hunter.  Alas, I never met Domino although I did once meet her bail-bondsman boss.

Unfortunately, Domino is only nominally about Domino Harvey – we get the message early on when Domino throws a knife half-way through a car’s front windshield (nfw imo) and then does a lap-dance to get out of a Mexican standoff.  By the time Tom Waits shows up as an angel we are long aware that this ain’t no biopic.

Thus if you are searching for information on the real thing read my paper or watch Dog: The Bounty Hunter which at least is "reality television."  (By the way, long-time readers will know that my research on bounty hunters has gone beyond the armchair.  Nevertheless, I cannot hold a candle to the bravery of the Undercover Economist.)

I won’t complain about the movie too much, however, as Domino does have plenty of violence, rock and roll, and sex served up with verve and hyperkinetic style.  And any movie with Keira Knightley will not fail to hold my interest at least some of the time.

Schelling and Kubrick

by  Tyler Cowen in

Director Stanley Kubrick, working on a movie in England, saw the review
when it was reprinted in a London Sunday newspaper, The Observer. He
contacted George, asking him to write a screenplay based on his book.

Kubrick and George got in touch with Schelling. Along with fellow
nuclear theorists Morton Halperin and William Kaufman, they sat around
for an afternoon and evening dealing with a quandary – Red Alert had
been written in 1958, before intercontinental ballistic missiles became
the primary delivery system for nuclear weapons, which changed the
plausibility of its scenario based on bombers.

"We had a hell of a time getting that damn war started," Schelling
says. "We finally decided that it couldn’t happen unless there was
somebody crazy in the Air Force. That’s when Kubrick and Peter George
decided they would have to do it as what they called a nightmare
comedy."

Schelling had been hoping for a serious movie. "The book was a
very serious study; there was nothing funny in it at all," he says.
But, like generations of moviegoers, he was not disappointed in the
result that came out in 1964.

"I was a little sorry they couldn’t do it without making it a black comedy, but I think it got the point across," he says.

Here is the full article (brief registration required), thanks to Paul Jeanne for the pointer.  And if you have nothing better to do, try to imagine how the works of other Nobel Laureates might have given rise to movies.

Should we confiscate Tamiflu property rights?

by  Tyler Cowen in

Tamiflu can combat avian flu, but the Swiss company Roche can’t get us more Tamiflu for well over a year.  They won’t (can’t?) set up a U.S. manufacturing plant for almost two years.  (Face it, in a pinch neither the Swiss nor anyone else will export much Tamiflu, no matter what the previous agreement.)  Roche holds a patent on Tamiflu but India will go ahead and produce a generic version; Taiwan has been making similar noises.  What should we do?  Here is one argument for producing generic tamiflu.  Andrew Sullivan concurs.

I suggest a different approach.  Let’s offer Roche a large prize for speeding up the construction of the U.S. plant.  This can include legal and regulatory waivers (Bush already has suggested this idea).  We also make it clear upfront that if a pandemic comes, the U.S. government will purchase Tamiflu doses at a relatively high price.  This latter round of payments can be made upfront, with a refund to the government if no pandemic arrives.  Ex post, the government distributes the doses for free, with medical workers and key individuals in the supply chain (food, transportation, Typepad) given priority.

Note how avian flu differs from AIDS.  AIDS is a relatively slow acting condition and the possibility of disease hangs around for decades.  Avian flu, if it becomes a pandemic, will likely come and go in a few waves of a few months each, spread out over a year or two.  That makes the case for abrogating property rights weaker.  The key question is not price but whether you have a stockpile at all.

We should not focus on avian flu to the exclusion of other emergencies, including bioterrorism.  Avian flu is just one possible pandemic of many.  If we confiscate property rights this time around, there won’t be a Tamiflu, or its equivalent, next time.  We also need to stop taxing our vaccine-producing infrastructure through liability law.

Respecting Tamiflu property rights would supply an international public good as well.  Many other countries will confiscate Tamiflu property rights.  If the U.S. holds the line, we are subsidizing global R&D and doing a greater service for the world than our critics are willing to admit.

Addendum: The worthier-than-ever Daniel Drezner notes that no country is well prepared for avian flu.  Comments, by the way, are open, please stick to the subject at hand.

The hum of status

by  Tyler Cowen in

Matt Yglesias quotes Franz de Waal’s new book:

They [people conversing] settle on a single hum, and it is always the lower status person who does the adjusting. This was first demonstrated in an analysis of the Larry King Live television show. The host, Larry King, would adjust his timbre to that of high-ranking guests, like Mike Wallace or Elizabeth Taylor. Low-ranking guests, on the other hand, would adjust their timbre to that of King. The clearest adjustment to King’s voice, indicating lack of confidence, came from former Vice President Dan Quayle.

The same spectral analysis has been applied to televised debates between U.S. presidential candidates. In all eight elections between 1960 and 2000 the popular vote matched the voice analysis: the majority of people voted for the candidate who held his own timbre rather than the one who adjusted.

On another note, Matt wonders whether he has a new worry.