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My spring 2020 Industrial Organization reading list and syllabus

It is long, do note that many topics are covered in the other half of the class, I tried to put this beneath the fold, but today WordPress software is not cooperating…

  1. Productivity

American Economic Review Symposium, May 2010, starts with “Why do Firms in Developing Countries Have Low Productivity?” runs pp.620-633.

Nicholas Bloom, Raffaella Sadun, and John Van Reenen, “Recent Advances in the Empirics of Organizational Economics,” http://cep.lse.ac.uk/pubs/download/dp0970.pdf.

Serguey Braguinsky, Lee G. Branstetter, and Andre Regateiro,The Incredible Shrinking Portuguese Firm,” http://papers.nber.org/papers/w17265#fromrss. 

Bloom, Nicholas, Raffaella Sadun, and John Van Reenen. “Management as a Technology?” National Bureau of Economic Research working paper 22327, June 2016.

David Lagakos, “Explaining Cross-Country Productivity Differences in Retail Trade,” Journal of Political Economy, April 2016, 124, 2, 1-49.

Dani Rodrik, “A Surprising Convergence Result,” http://rodrik.typepad.com/dani_rodriks_weblog/2011/06/a-surprising-convergence-result.html, and his paper here http://www.hks.harvard.edu/fs/drodrik/Research%20papers/The%20Future%20of%20Economic%20Convergence%20rev2.pdf

Tyler Cowen, The Complacent Class, chapter four, “Why Americans Stopped Creating,” 2017.

Ufuk Akcigit and Sina T. Ates, “Ten Facts on Declining Business Dynamism and Lessons from Endogenous Growth Theory,” NBER working paper 25755, April 2019.

Syerson, Chad “What Determines Productivity?” Journal of Economic Literature, June 2011, XLIX, 2, 326-365. 

Michael Kremer, “The O-Ring Theory of Economic Development,” Quarterly Journal of Economics, August 1993, 108, 3, 551-575.

Song, Jae, David J. Price, Fatih Guvenen, and Nicholas Bloom. “Firming Up Inequality,” Federal Reserve Bank of Minneapolis working paper 750, April 2018.  Do not bother with the very long appendix.

Nicholas Bloom, Raffaella Sadun, and John Van Reenen, the slides for “Americans do I.T. Better: US Multinationals and the Productivity Miracle,” http://www.people.hbs.edu/rsadun/ADITB/ADIBslides.pdf, the paper is here http://www.stanford.edu/~nbloom/ADIB.pdf but I recommend focusing on the slides. 

Tyler Cowen and Ben Southwood, “Is the rate of scientific progress slowing down?”, https://docs.google.com/document/d/1cEBsj18Y4NnVx5Qdu43cKEHMaVBODTTyfHBa8GIRSec/edit 

Patrick Collison and Michael Nielsen, “Science is Getting Less Bang for its Buck,” Atlantic, November 16, 2018, https://www.theatlantic.com/science/archive/2018/11/diminishing-returns-science/575665/ 

Decker, Ryan and John Haltiwanger, Ron S. Jarmin, and Javier Miranda. “Where Has all the Skewness Gone?  The Decline in High-Growth (Young) Firms in the U.S. National Bureau of Economic Research working paper 21776, December 2015.

Furman, Jason and Peter Orszag. “A Firm-Level Perspective on the Role of Rents in the Rise in Inequality.” October 16, 2015.

 

2. Competition and monopoly

Bresnahan, Timothy F. “Competition and Collusion in the American Automobile Industry: the 1955 Price War,” Journal of Industrial Economics, 1987, 35(4), 457-82.

Asker, John, “A Study of the Internal Organization of a Bidding Cartel,” American Economic Review, (June 2010), 724-762.

Tim Sablik and Nicholas Trachter, “Are Markets Becoming Less Competitive?” Economic Brief, Federal Reserve Bank of Richmond, June 2019.

Susanto Basu, “Are Price-Cost Markups Rising in the United States? A Discussion of the Evidence,” Journal of Economic Perspectives, Summer 2019, 33, 3, 3-22.

Esteban Rossi-Hansberg, Pierre-Daniel Sarte, and Nicholas Trachter, “Diverging Trends in National and Local Concentration,” NBER Working Paper 25066, Septemmber 2018.

David Autor, David Dorn, Lawrence Katz, Christina Patterson, John Van Reenen, “The Fall of the Labor Share and the Rise of Superstar Firms,” https://economics.mit.edu/files/12979, make sure you get the Oct. 2019 version, not the earlier NBER paper.

Whinston, Michael D., “Antitrust Policy Toward Horizontal Mergers,” Handbook of Industrial Organization, vol.III, chapter 36, see also chapter 35 by John Sutton.

Jan De Loecker and Jan Eeckhout, “The Rise of Market Power and its Macroeconomic Implications,” http://www.janeeckhout.com/wp-content/uploads/RMP.pdf.  My comment on it is here: https://marginalrevolution.com/marginalrevolution/2017/08/rise-market-power.html and see also me on intangible capital, https://marginalrevolution.com/marginalrevolution/2017/09/intangible-investment-monopoly-profits.html.

Chang-Tai Hsieh and Esteban Rossi-Hansberg, “The Industrial Revolution in Services, September 20, 2019, on-line.

Klein, Benjamin and Leffler, Keith. “The Role of Market Forces in Assuring Contractual Performance.”  Journal of Political Economy 89 (1981): 615-641.

Breit, William. “Resale Price Maintenance: What do Economists Know and When Did They Know It?” Journal of Institutional and Theoretical Economics (1991).

Bogdan Genchev, and Julie Holland Mortimer. “Empirical Evidence on Conditional Pricing Practices.” NBER working paper 22313, June 2016.

Sproul, Michael.  “Antitrust and Prices.”  Journal of Political Economy (August 1993): 741-754.

McCutcheon, Barbara. “Do Meetings in Smoke-Filled Rooms Facilitate Collusion?”  Journal of Political Economy (April 1997): 336-350.

Crandall, Robert and Winston, Clifford, “Does Antitrust Improve Consumer Welfare?: Assessing the Evidence,”  Journal of Economic Perspectives (Fall 2003), 3-26, available at http://www.brookings.org/views/articles/2003crandallwinston.htm.

FTC, Bureau of Competition, website, http://www.ftc.gov/bc/index.shtml, an optional browse, perhaps read about some current cases and also read the merger guidelines.

Parente, Stephen L. and Prescott, Edward. “Monopoly Rights: A Barrier to Riches.”  American Economic Review 89, 5 (December 1999): 1216-1233.

Demsetz, Harold.  “Why Regulate Utilities?”  Journal of Law and Economics (April 1968): 347-359.

Armstrong, Mark and Sappington, David, “Recent Developments in the Theory of Regulation,” Handbook of Industrial Organization, chapter 27, also on-line.

Shleifer, Andrei. “State vs. Private Ownership.” Journal of Economic Perspectives (Fall 1998): 133-151.

Xavier Gabaix and David Laibson, “Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets,”http://papers.ssrn.com/sol3/papers.cfm?abstract_id=728545.

Strictly optional, most of you shouldn’t read this: Ariel Pakes and dynamic computational approaches to modeling oligopoly:

http://www.economics.harvard.edu/faculty/pakes/files/Pakes-Fershtman-8-2010.pdf

http://www.economics.harvard.edu/faculty/pakes/files/handbookIO9.pdf

 

III. Economics of Tech

 

Farrell, Joseph and Klemperer, Paul, “Coordination and Lock-In: Competition with Switching Costs and Network Effects,” Handbook of Industrial Organization, vol.III, chapter 31, also on-line.

Weyl, E. Glenn. “A Price Theory of Multi-Sided Platforms.” American Economic Review, September 2010, 100, 4, 1642-1672.

Gompers, Paul and Lerner, Josh. “The Venture Capital Revolution.” Journal of Economic Perspectives (Spring 2001): 145-168.

Paul Graham, essays, http://www.paulgraham.com/articles.html, to browse as you find useful or not.

Acemoglu, Daron and Autor, David, “Skills, Tasks, and Technologies: Implications for Employment and Earnings,” http://econ-www.mit.edu/files/5607

Robert J. Gordon and Ian Dew-Becker, “Unresolved Issues in the Rise of American Inequality,” http://www.people.fas.harvard.edu/~idew/papers/BPEA_final_ineq.pdf

Browse through the first issue of Nakamoto.com on blockchain governance, read (or not) as you find useful.

 

IV. Organization and capital structure

 

Ronald Coase and Oliver Williamson on the firm, if you haven’t already read them, but limited doses should suffice.

Gibbons, Robert, “Four Formal(izable) Theories of the Firm,” on-line at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=596864.

Van den Steen, Eric, “Interpersonal Authority in a Theory of the Firm,” American Economic Review, 2010, 100:1, 466-490.

Lazear, Edward P. “Leadership: A Personnel Economics Approach,” NBER Working Paper 15918, 2010.

Oyer, Paul and Schaefer, Scott, “Personnel Economics: Hiring and Incentives,” NBER Working Paper 15977, 2010.

Tyler Cowen chapter on CEO pay in big Business, to be distributed.

Ben-David, Itzhak, and John R. Graham and Campbell R. Harvey, “Managerial Miscalibration,” NBER working paper 16215, July 2010.

Glenn Ellison, “Bounded rationality in Industrial Organization,” http://cemmap.ifs.org.uk/papers/vol2_chap5.pdf 

Miller, Merton, and commentators.  “The Modigliani-Miller Propositions After Thirty Years,” and comments, Journal of Economic Perspectives (Fall 1988): 99-158.

Myers, Stewart. “Capital Structure.” Journal of Economic Perspectives (Spring 2001): 81-102.

Hansemann, Henry.  “The Role of Non-Profit Enterprise.” Yale Law Journal (1980): 835-901.

Kotchen, Matthew J. and Moon, Jon Jungbien, “Corporate Social Responsibility for Irresponsibility,” NBER working paper 17254, July 2011.

Strictly optional but recommended for the serious: Ponder reading some books on competitive strategy, for MBA students.  Here is one list of recommendations: http://www.linkedin.com/answers/product-management/positioning/PRM_PST/20259-135826

Furman, Jason. ”Business Investment in the United States: Facts, Explanations, Puzzles, and Policy.” Remarks delivered at the Progressive Policy Institute, September 30, 2015, on-line at https://m.whitehouse.gov/sites/default/files/page/files/20150930_business_investment_in_the_united_states.pdf.

Scharfstein, David S. and Stein, Jeremy C.  “Herd Behavior and Investment.”  American Economic Review 80 (June 1990): 465-479.

Stein, Jeremy C. “Efficient Capital Markets, Inefficient Firms: A Model of Myopic Corporate Behavior.” Quarterly Journal of Economics 104 (November 1989): 655-670.

 

V. Sectors: finance, health care, education, international trade, others 

Gorton, Gary B. “Slapped in the Face by the Invisible Hand: Banking and the Panic of 2007,” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1401882, published on-line in 2009. 

Erel, Isil, Nadault, Taylor D., and Stulz, Rene M., “Why Did U.S. Banks Invest in Highly-Rated Securitization Tranches?” NBER Working Paper 17269, August 2011. 

Healy, Kieran. “The Persistence of the Old Regime.” Crooked Timber blog, August 6, 2014.

More to be added here, depending on your interests.

Are we undermeasuring productivity gains from the internet?, part II

From my new paper with Ben Southwood on whether the rate of progress in science is diminishing:

Similarly, the tech sector of the American economy still isn’t as big as many people think. The productivity gap has meant that measured GDP is about fifteen percent lower than it would have been under earlier rates of productivity growth. But if you look say about the tech sector in 2004, it is only about 7.7 percent of GDP (since the productivity slowdown is ongoing, picking a more recent and larger number is not actually appropriate here). A mismeasurement of that tech sector just doesn’t seem nearly large enough to fill in for the productivity gap. You might argue in response that “today the whole economy is incorporating tech,” but that doesn’t seem to work either. For one thing, recent tech incorporations typically involve goods and services that are counted in GDP. Furthermore, there is a problem of timing, namely that the U.S. productivity slowdown dates back to 1973, and that is perhaps the single biggest problem for trying to attribute this gap mainly to under-measured innovations in the tech sector.

Other research looks at “worst case” scenarios from the mismeasurement of welfare adjustments in consumer price deflators and finds a similar result: a significant effect that nonetheless does not reverse the judgement that innovation has been slowing. 

The most general point of relevance here is simply that price deflator bias has been with productivity statistics since the beginning, and if anything the ability of those numbers to adjust for quality improvements may have increased with time. For instance, the research papers do not find that the mismeasurement has risen in the relevant period. You might think the introduction of the internet is still undervalued in measured GDP, but arguably the introduction of penicillin earlier in the 20th century was undervalued further yet. The market prices for those doses of penicillin probably did not reflect the value of the very large number of lives saved. So when we are comparing whether rates of progress have slowed down over time, and if we wish to salvage the performance of more recent times, we still need an argument that quality mismeasurement has increased over time. So far that case has not been made, and if you believe that the general science of statistics has made some advances, the opposite is more likely to be true, namely that mismeasurement biases are narrowing to some extent. 

You will find citations and footnotes in the original.  Here is my first post on whether the productivity gains from the internet are understated.

Scotland Trainspotting fact of the day

Last year there were 1,187 drug-related deaths in Scotland, a record, and a staggering increase of 27 percent from the year before. Overdoses are more common in Scotland, by some measures, than even in the United States.

And:

Scotland wasn’t always the “sick man of Europe.”

Until around 1950, life expectancy there was on par with most of Western Europe, or better. But after World War II, things in Scotland improved more slowly than in any other Western European country.

If you would like an anecdote:

Mr. Nugent had been using the drug on and off since he was 19, but overdosed the first time he shot up again. He has overdosed three more times since last year.

“I’ve nearly died four times,” said Mr. Nugent, who turns 43 this month. “It’s getting harder for me to recover as I get older.”

Here is the full NYT story by Allison McCann.

My Conversation with Michael Pollan

I was very happy with how this turned out, here is the audio and transcript.  Here is how the CWTeam summarized it:

Michael Pollan has long been fascinated by nature and the ways we connect and clash with it, with decades of writing covering food, farming, cooking, and architecture. Pollan’s latest fascination? Our widespread and ancient desire to use nature to change our consciousness.

He joins Tyler to discuss his research and experience with psychedelics, including what kinds of people most benefit from them, what it can teach us about profundity, how it can change your personality and political views, the importance of culture in shaping the experience, the proper way to integrate it into mainstream practice, and — most importantly of all — whether it’s any fun.

He argues that LSD is underrated, I think it may be good for depression but for casual use it is rapidly becoming overrated.  Here is one exchange of relevance:

COWEN: Let me try a very philosophical question. Let’s say I could take a pill or a substance, and it would make everything seem profound. My receptivity to finding things profound would go up greatly. I could do very small events, and it would seem profound to me.

Is that, in fact, real profundity that I’m experiencing? Doesn’t real profundity somehow require excavating or experiencing things from actual society? Are psychedelics like taking this pill? They don’t give you real profundity. You just feel that many things are profound, but at the end of the experience, you don’t really have . . .

POLLAN: It depends. If you define profundity or the profound as exceptional, you have a point.

One of the things that’s very interesting about psychedelics is that our brains are tuned for novelty, and for good reason. It’s very adaptive to respond to new things in the environment, changes in your environment, threats in your environment. We’re tuned to disregard the familiar or take it for granted, which is indeed what most of us do.

One of the things that happens on psychedelics, and on cannabis interestingly enough — and there’s some science on it in the case of cannabis; I don’t think we’ve done the science yet with psychedelics — is that the familiar suddenly takes on greater weight, and there’s an appreciation of the familiar. I think a lot of familiar things are profound if looked at in the proper way.

The feelings of love I have for people in my family are profound, but I don’t always feel that profundity. Psychedelics change that balance. I talk in the book about having emotions that could be on Hallmark cards. We don’t think of Hallmark cards as being profound, but in fact, a lot of those sentiments are, properly regarded.

Yes, there are those moments you’ve smoked cannabis, and you’re looking at your hand, and you go, “Man, hands, they’re f — ing incredible.” You’re just taken with this. Is that profound or not? It sounds really goofy, but I think the line between profundity and banality is a lot finer than we think.

And:

COWEN: I’ve never myself tried psychedelics. But I’ve asked the question, if I were to try, how would I think about what is the stopping point?

For my own life, I like, actually, to do the same things over and over again. Read books. Eat food. Spend time with friends. You can just keep on doing them, basically, till you die. I feel I’m in a very good groove on all of those.

If you take it once, and say you find it entrancing or interesting or attractive, what’s the thought process? How do you model what happens next?

POLLAN: That’s one of the really interesting things about them. You have this big experience, often positive, not always though. I had, on balance . . . all the experiences I described in the book, with one notable exception, were very positive experiences.

But I did not have a powerful desire to do it again. It doesn’t have that self-reinforcing quality, the dopamine release, I don’t know what it is, that comes with things that we like doing: eating and sex and sleep, all this kind of stuff. Your first thought after a big psychedelic experience is not “When can I do it again?” It’s like, “Do I ever have to do it again?”

COWEN: It doesn’t sound fun, though. What am I missing?

POLLAN: It’s not fun. For me, it’s not fun. I think there are doses where that might apply — low dose, so-called recreational dose, when people take some mushrooms and go to a concert, and they’re high essentially.

But the kind of experience I’m describing is a lot more — I won’t use the word profound because we’ve charged that one — that is a very internal and difficult journey that has moments of incredible beauty and lucidity, but also has dark moments, moments of contemplating death. Nothing you would describe as recreational except in the actual meaning of the word, which is never used. It’s not addictive, and I think that’s one of the reasons.

I did just talk to someone, though, who came up to me at a book signing, a guy probably in his 70s. He said, “I’ve got to tell you about the time I took LSD 16 days in a row.” That was striking. You can meet plenty of people who have marijuana or a drink 16 days in a row. But that was extraordinary. I don’t know why he did it. I’m curious to find out exactly what he got out of it.

In general, there’s a lot of space that passes. For the Grateful Dead, I don’t know. Maybe it was a nightly thing for them. But for most people, it doesn’t seem to be.

COWEN: Say I tried it, and I found it fascinating but not fun. Shouldn’t I then think there’s something wrong with me that the fascinating is not fun? Shouldn’t I downgrade my curiosity?

POLLAN: [laughs] Aren’t there many fascinating things that aren’t fun?

COWEN: All the ones I know, I find fun. This is what’s striking to me about your answer. It’s very surprising.

W even talk about LSD and sex, and why a writer’s second book is the key book for understanding that writer.  Toward the end we cover the economics of food, and, of course, the Michael Pollan production function:

COWEN: What skill do you tell them to invest in?

POLLAN: I tell them to read a lot. I’m amazed how many writing students don’t read. It’s criminal. Also, read better writers than you are. In other words, read great fiction. Cultivate your ear. Writing is a form of music, and we don’t pay enough attention to that.

When I’m drafting, there’s a period where I’m reading lots of research, and scientific articles, and history, and undistinguished prose, but as soon as I’m done with that and I’ve started drafting a chapter or an article, I stop reading that kind of stuff.

Before I go to bed, I read a novel every night. I read several pages of really good fiction. That’s because you do a lot of work in your sleep, and I want my brain to be in a rhythm of good prose.

Defininitely recommended, as is Michael’s latest book How to Change Your Mind: What the New Science of Psychedelics Teaches Us About Consciousness, Dying, Addiction, Depression, and Transcendence.

Are the people in Middletown, Ohio “killers”?

As their budgets strain, communities have begun questioning how much money and effort they should be spending to deal with overdoses, especially in cases involving people who have taken near-fatal overdoses multiple times. State and local officials say it might be time for “tough love”: pushing soaring medical costs onto drug abusers or even limiting how many times first responders can save an individual’s life.

“It’s not that I don’t want to treat overdose victims, it’s that the city cannot afford to treat overdose victims,” said Middletown Council Member Daniel Picard, noting this industrial town in northern Butler County might have to raise taxes in response to the crisis.

Often, the only thing separating whether an overdose victim goes to the hospital instead of the morgue is a dose of naloxone, also known by the brand name Narcan, a medication that can reverse the effects of opioid overdoses.

Two doses of an injectable form of naloxone, Evzio, cost $4,500, up from $690 in 2014. The price of other forms of the drug, including the nasally administered Narcan, typically range from $70 to $150 per dose, officials say.

…Here in Ohio, first responders say it’s not uncommon for overdose victims to have previously been revived with naloxone at least a half-dozen times.

…Picard, the council member, has proposed a controversial three-strikes policy in which first responders wouldn’t administer Narcan to repeated overdose victims.

Here is the Tim Craig at WaPo story.  I do not know what is the proper response to such opioid cases, or how much money should be spent.  I do know that somewhere, somehow a line has to be drawn.  And if you are reading a discussion of health care policy that does not acknowledge such a line, and set out possible standards for it, beware of sophistry and illusion.

West Virginia fact of the day

The state of West Virginia has paid for so many burials for indigent people who have died from drug overdoses that the funding has run out five months before the end of the current fiscal year on June 30.

Kitchen said there have been so many drug overdose deaths in West Virginia, it often takes two to three weeks for the state medical examiner to complete the required autopsies. He said families then have the added stress of not being able to carry out a funeral for weeks after a death occurs.

Here is the article, via Anecdotal.  Here is a good Christopher Caldwell piece on opioids.

*Reading my Father*

The author is Alexandra Styron, daughter of William, who is portrayed as manic depressive.  I found this memoir compelling, and it has been making many “best of” lists.  Here is one excerpt:

By all accounts, my sister was a cheerful baby, smart and pretty, with an easy manner.  In short, an ideal firstborn.  Daddy was enthralled.  “Take a lesson from me and don’t get too interested in the child,” Irwin Shaw wrote in a congratulatory letter.  “Since Adam’s first birthday, I’ve barely written a word, as it is much more interesting to watch all the subtle and terrible currents that run through a complex human being than to sit at a typewriter and battle with the comparatively flat and lifeless material of art.  Dole the child out to yourself in small doses, for your career’s sake.”

You can buy it here.

Comedy recommendations

Steve Hely writes to me:

I'm a real admirer of your blog.  You offer such great recommendations.  But it seems you rarely recommend any comedy.  Are there any books, TV shows, movies, etc. that have made you laugh in recent years?

It's well-known that comedy hits don't usually export well to other countries, because comedy is so culturally specific and also so subjective.  So these are not recommendations.  What I find funny is this:

1. On TVCurb Your Enthusiasm and the better ensemble pieces of Seinfeld and also The Ali G Show.  The best Monty Python skits are very funny to me, although I find their movies too long and labored.  I find stand-up comics funny only when I am there in person.

2. Movies: The last funny movie I saw was I Love You, Man.  I like most classic comedies, though without necessarily finding them very funny.  Danny Kaye's The Court Jester is a good comedy which most people don't watch any more.  I enjoy the chaotic side of W.C. Fields in short doses.  Jerry Lewis is funny sometimes, plus there is Pillow Talk.  I like the first forty minutes or so of Ferris BuellerStardust Memories is my favorite Woody Allen film, though I like many of them.

3. Books: I don't find books of fiction funny, blame it on me.  I do find David Hume, and other classic non-fiction authors, to be at times hilarious.

On YouTube, I find the economics comic Yoram Bauman funny.  Colbert can be very funny.

I wonder how many dimensions are required to explain or predict a person's taste in comedy?

No Pain Relief for Tort Sufferers

James Hamilton takes a look at one of the key studies on Vioxx and heart attacks.  He is not greatly impressed.

I took a look at one of the studies on which the decision was
justified, written by Dr. David Graham and co-authors and published in Lancet
in February. This study looked at 8,143 Kaiser Permanente patients who
had suffered a heart attack and had also at some point taken a
nonsteroidal anti-inflammatory drug (NSAID), of which Vioxx (rofecoxib)
is one. Of these patients, 68 were taking rofecoxib while 4,658 were
receiving no medication at the time of their heart attack, a ratio of
(68/4658) = 1.46%. For comparison, the study looked at 31,496 other
patients who had also at some point taken an NSAID, matched for
characteristics like age and gender with the first group, but who
didn’t have a heart attack. The ratio of rofecoxib users to those with
no current medication was slightly lower (1.05%) in this second group,
which one might summarize as a (1.46/1.05) = 1.39-fold increase risk of
heart attack from taking rofecoxib compared to no NSAID. Is that
statistically significant, in other words, can you rule out that you’d
see a difference of that size just by chance? Yes, the study claimed,
but just barely.

On the other hand, this was not a controlled experiment, in which
you give the rofecoxib randomly to some patients and not others in
order to see what happens. Rather, something about either these
patients or their doctors led some of them to be using rofecoxib and
others not. Dr. Graham and co-authors looked at a variety of indicators
that suggested that the rofecoxib patients already had slightly
elevated risk factors for coronary heart disease. Once they controlled
for these with a logistic regression, their study found an elevated
risk factor of heart attack for rofecoxib takers of 1.34, which was not
statistically significantly distinguishable from 1.0.

The strongest evidence from this study was a claimed dose-effect
relation. Of these 68 rofecoxib-using heart-attack patients, 10 of them
were taking doses above 25 mg per day. Only 8 patients in the much
larger control group were taking so high a dose, implying an elevated
risk factor of 5 to 1 for high-dose patients. Again observable risk
factors could explain some of this, with the conditional logistic
regression analysis bringing the implied drug-induced risk down to 3 to
1. According to the study, this elevated risk factor was still
statistically significant, even though the inference is based on the
experience of just 10 patients.

The obvious question here is whether in fact the authors were able
to observe all the relevant risk factors. The study openly acknowledged
that it did not, missing such important information as smoking and
family history of myocardial infarction.

…[E]ven if
there actually is an elevated risk of the magnitude the studies suggest
but can’t prove, the question is whether I might want to accept a 1 in 4,000 risk of dying from a heart attack in order to get the only medication timt makes my pain bearable and a mobile life livable.  And if I say no to the Vioxx, I may end up taking something that is less effective for my pain but has risks of its own.

…. How did we arrive at a
system in which 12 random Texans are assigned responsibility for
evaluating the scientific merits of statistical evidence of this type,
weighing the costs and benefits, and potentially sending a productive blue-chip American company into bankruptcy protection?

See also my op-ed Bringing the Consumer Revolution to the FDA.

How to conserve flu vaccine

The flu vaccine is now running very scarce, you can wait for weeks and there is no guarantee of getting it at all. Most of the supplies are already in the hands of doctors. Note also the following:

Random immunization is almost useless because, for many viruses, more than 95% of the population must be vaccinated to prevent the disease’s spread.

But things are not as grim as they might sound. First:

An alternative to the flu shot is FluMist, a more expensive inhaled version of the vaccine, which is recommended for healthy people between the ages of 5 and 49. There are about 4 million doses available of FluMist, health officials said.

Although those below 5 and over 49 are the at-risk groups, they are less likely to catch the flu if the rest of us are healthy.

Second, we could administer flu shots more wisely by targeting superspreaders, here is one proposal:

Reuven Cohen of Bar-Ilan University in Israel and his colleagues propose a simple modification of random vaccination that is more effective, according to their computer simulations. The idea is to randomly choose, say, 20% of the individuals and ask them to name one acquaintance; then vaccinate those acquaintances. Potential super-spreaders have such a large number of acquaintances that they are very likely to be named at least once, the researchers found. On the other hand, the super-spreaders are so few in number that the random 20% of individuals is unlikely to include many of them.

Using the team’s vaccination strategy, a disease can be stopped by vaccinating less than 20% of the individuals, in some cases, according to their computer model of a human population. The method can also be tweaked: if a larger sample is asked for names, and those named twice are vaccinated, the total number of vaccinations required can be even lower.

The trick may be getting these people to take the shots, but surely economists can come up with a useful incentives scheme for that, I would prefer a subsidy over a tax.

What does a top British artist earn?

Last year the highest-earning British artist was Damien Hirst, the creator who cuts up dead sharks and puts them in formaldehyde. He pulled in twelve million British pounds last year (over twenty million dollars), although dealer’s commissions may have eaten into this figure. As an aside, many buyers of Hirst’s early dot paintings, see the link for an image, are unhappy because most of those works were made with ordinary household paints and are now falling apart.

A close second on the earnings list was Andrew Vicari, now resident in Monte Carlo, since 1974 he has been the official painter to the Saudi Royal Family.

What a pair. Hirst I admire for his visceral impact but I could not live with most of his works, not the least because some of them involve live, buzzing insects. Would you wish to own “the beauty of a disused shop full of butterfly pupae, hatching from white canvases, feeding on sugar syrup, mating, laying eggs and dying”? Or rather would you call the exterminator to get rid of something like that?

I wouldn’t hang a Vicari on my walls, check out his painting of the first Gulf War. I now have a better understanding why the Saudi Royal Family is in such trouble.

But let us look at the bright side. No one (well, hardly anyone) ever said capitalism was about rewarding people in accord with their merits. An unequal distribution of rewards is part of the system that generates more diverse art of many kinds, click here to see a compelling portrait by Lucien Freud, or here for a broader choice of images. Click here for a sparkling Howard Hodgkin, here for a broader choice of Hodgkin images, which always bring a splash of color. They are the British painters I will buy when they start paying bloggers.

The earnings information is from The Art Newspaper, one of the highest quality periodicals of any kind.