Results for “first doses first”
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Graduating in a Recession Can Be Rough

Graduating in a recession can be rough. Wages start lower and advance more slowly. It’s hard to get hired at a top firm which means it takes longer to get on a rapid ascent career path. As Till von Wachter notes in a review of the long-term consequences of initial labor market conditions, failure to takeoff leads to choices which often makes things worse.

…initial labor market conditions persistently increases excessive alcohol consumption (Maclean 2015) and leads to higher obesity and more smoking and drinking in middle age (Cutler, Huang, and Lleras-Muney 2015)…College graduates entering during the 1980s recession experience higher incidence of heart attacks in middle age (Maclean 2013). Following all labor market entrants from these cohorts, Schwandt and von Wachter (2020) find that starting in their late 30s, unlucky entrants begin experiencing a gap in mortality compared to luckier peers that keeps increasing in their 40s, driven by higher rates of heart disease, liver disease, lung cancer, and drug overdoses.

…Marital patterns of unlucky cohorts are affected from the time they enter the labor market up into middle age, when these cohorts have fewer children (Currie and Schwandt 2014), are more likely to have experienced a divorce, and are more likely to live on their own (Schwandt and von Wachter 2020). Initial labor market conditions also have been found to have effects on attitudes towards economic success and the role of the government (Giuliano and Spilimbergo 2014) and to lead to increasingly lowering individuals’ self esteem (Maclean and Hill 2015).

Don Peck had a good popular survey of these effects in The Atlantic in 2010 that remains vital:

Andrew Oswald, an economist at the University of Warwick, in the U.K., and a pioneer in the field of happiness studies, says no other circumstance produces a larger decline in mental health and well-being than being involuntarily out of work for six months or more. It is the worst thing that can happen, he says, equivalent to the death of a spouse, and “a kind of bereavement” in its own right. Only a small fraction of the decline can be tied directly to losing a paycheck, Oswald says; most of it appears to be the result of a tarnished identity and a loss of self-worth. Unemployment leaves psychological scars that remain even after work is found again, and, because the happiness of husbands and the happiness of wives are usually closely related, the misery spreads throughout the home.

Especially in middle-aged men, long accustomed to the routine of the office or factory, unemployment seems to produce a crippling disorientation. At a series of workshops for the unemployed that I attended around Philadelphia last fall, the participants were overwhelmingly male, and the men in particular described the erosion of their identities, the isolation of being jobless, and the indignities of downward mobility.

Of course, most people who graduate during a recession do just fine in the grand scheme of things.You could have graduated in Sierra Leone. But if you want to be on a rapid ascent career path remember that your first job is not your last job, look for opportunity, and be prepared to take a risk and switch jobs early. Stay off drugs and alcohol.

From the comments, on HCTs

The box most bioethicists are in is so small their thinking can’t extend beyond a few target people. In this case, the control group in a vaccine trial.

The subjects could be paid for the risk, which is what we do for jobs all the time. Those risk/reward amounts for risky jobs are used to make estimates for the value of human life. Life insurance would allow high-risk people (us geezers) to join the trials.

Their box doesn’t even consider human challenge trials (HCT) that give you very rapid and accurate data on efficacy even with pay and insurance to cover the risk. The lives saved by a month faster approval is in the 10’s of thousands more than offsetting and risk to a few people. Tracking the first million doses for side effects would provide the side effect data that is usually within days of injection.

Outside their mental box, 1000 people per day are dying for each day they study the issue and delay a decision, but those lives are not included in their thinking and analysis.

That is from Dallas.  I would stress there are higher costs yet from delay, noting the hundreds of millions of people in developing nations who are falling back into poverty while the pandemic continues to rage.  Some of them are dying too.

New results on the Chinese vaccine

Importantly, this was the first study of an inactivated SARS-CoV-2 vaccine to include participants older than 60 years—the most vulnerable age group for this infection. In the phase 1 dose-escalating trial, the vaccine was given at a two-dose schedule at three different concentrations (2 μg, 4 μg, and 8 μg per dose) and was well tolerated in both age groups (18–59 years and ≥60 years). The older age group had lower rates of solicited adverse events than the younger adults: the overall rates of adverse events within 28 days after vaccination were 34 (47%) of 72 participants in the group aged 18–59 years, compared with 14 (19%) of 72 participants in the group aged 60 years and older. At the same time, in both age groups the vaccine was similarly immunogenic: the geometric mean anti-SARS-CoV-2 neutralising antibody titres measured by a 50% virus neutralisation assay 14 days after the booster dose were 88, 211, and 229 in the group aged 18–59 years and 81, 132, and 171 in the group aged 60 years and older for 2 μg, 4 μg, and 8 μg vaccine doses, respectively. Moreover, the authors tested cross-reactivity of the neutralising antibodies against several drifted SARS-CoV-2 isolates and showed the potential of their vaccine to protect against evolutionary diverged viruses, should they appear in circulation.

And:

The current study is the second to report the interim results of safety and immunogenicity of inactivated SARS-CoV-2 vaccine, with the first being the another β-propiolactone inactivated aluminium-adjuvanted whole-virion SARS-CoV-2 vaccine developed by Wuhan Institute of Biological Products.

Both studies showed very similar levels of adverse events and neutralising antibody titres post vaccination, which indicates the reproducibility of clinical results of similar vaccine modes produced by different manufacturers.

All good news of course, and this vaccine exists right now.  Just not for you!  Here is the piece from The Lancet, and here is associated commentary, also seeming to confirm the positive results.  A phase III trial is underway in the UAE to measure efficacy.  I cannot speak to data reliability issues, but presumably the referees at The Lancet find this credible enough to recommend publication.

Via Alan Goldhammer.

Cases vs. deaths in the Covid debates

Once upon a time, there were some herd immunity theorists.  They claimed that once a certain percentage of the population had been infected, the R for Covid would fall below one and the disease would become far less common and less significant.  Since these analysts were especially aware of heterogeneity issues (though common in the broader scholarly literature), these same herd immunity theorists tended to be less pessimistic than many of the mainstream forecasts.

To be clear, everyone knew that herd immunity was a general and universally accepted concept in the literature.  But these particular herd immunity theorists were the ones saying it really would matter, and they did so in the bold and fearless manner.  As I mentioned earlier, the NYT didn’t really start covering this issue until this August, a kind of unbelievable (and appalling) communications failure from public health experts who didn’t want to say anything that might be construed as minimizing expected risk.

Now, I don’t recall many of those theorists early on making a prediction about a specific number required for the herd immunity threshold to be reached.  Nonetheless, when deaths and hospitalizations collapsed in Sweden, London, and New York at about 20 percent seroprevalence, obviously it seemed that might be the critical level for herd immunity to kick in. (Higher measured levels of seroprevalence, such as for the slums of Mumbai might just come from the speed of ripping through a very dense and exposed community.)  And a lot of the observed later waves were in fact coming in other parts of these countries or regions, such as Barcelona following Madrid, or Arizona following New York.

These herd immunity theorists were correct in predicting an “earlier than the mainstream is telling you” collapse in deaths and hospitalizations in the hard hit regions.  And that is very much to their credit.

You will note that part of their prediction or implied prediction was that past the herd immunity point cases should fall, not just deaths.  Transmission just would not be very effective or speedy any more, so cases should be low whether or not people die in the hospitals or the hospitals can save them.  I’ll be coming back to this.

Then things started to go askew in the last few weeks.  First, it seems like a bad second wave came to an already fairly hard hit Madrid.  OK, you could say Madrid was never had 20% seroprevalence to begin with.  And then what appears to be a second wave has started coming to Israel, with rising hospitalizations.  Finally, it is believed that in Britian R equals about 1.7, and that a second wave of cases is on the verge of hitting London and Southeast England.  That hasn’t quite happened yet, but the informed authorities greatly fear it, and the numbers so far seem to indicate that as the trend.

Added all up, those data points are not decisive in rejecting the claims of these herd immunity theorists.  But they do make the herd immunity theorists look less correct than they did say three weeks ago.  Those “partial second waves,” or whatever they turn out to be, seem more active than one might have expected.  Again, though, the story is still unfolding and we should not rush to final conclusions.  But in the meantime we should update!

In response, many of the herd immunity theorists strike back and ask “where are the deaths“?  But that is not the right question for testing herd immunity claims.  Those claims were about transmission slowing down, and those claims should be true about Covid-19 cases whether or not more people are surviving in the hospital.  (Imagine for instance a perfect antiviral that saved everybody — would that mean herd immunity was true a priori?  Nope.)

Another claim from some of the less careful herd immunity theorists is that cases are rising again because testing is rising.  That doesn’t seem to explain observed patterns in Israel, Spain, or England, where in all instances actual Covid cases are rising above and beyond what is going on with testing policy, and by some considerable margin.  It probably does explain some parts of America, however.

It is very likely that death rates will be much lower this time around, because of better procedures, younger victims, lower doses, and possible (speculative!) variolation through mask use over time, exposing people to lower doses repeatedly and boosting their immune responses.

There is a temptation to say “few deaths, we don’t need lockdowns!”  Indeed, the more partisan of the herd immunity theorists are obsessed with the lockdown issue.  Lockdowns are important questions, but don’t let your lockdown views skew your interpretation of the numbers, and furthermore there are many other important Covid questions of interest, for instance:

1. How much more should we invest in better hospital procedures?  Better biomedical fixes?  And how much should we hurry?  If transmission is mostly over, you can relax much more, but ongoing cases both will bring some long-term damages (short of death) and also some ongoing panic, whether rational or not.

2. How do we deal with the fact that case numbers per se will scare people for a long time to come?  Again, if transmission is winding down, you don’t need as big a long-term plan here.

3. Should you let large swarms of tourists into your currently semi-protected region, say it is Venice, Italy or the less infested parts of Hawaii?

4. To the extent there is current herd immunity or semi-herd immunity as I call it, how fragile is that arrangement with respect to a possible rotation of potential super-spreaders?  And what might set off those fragilities?

For those questions, and indeed many others, it matters a great deal whether the original herd immunity prediction about “permanently low cases past the herd immunity threshold” is correct, or not.  Whether the death rate is high or low.  You really do need to understand about the cases in their own right, once you see this broader spectrum of issues at stake.

The more partisan herd immunity theorists wish to debate “how terrible will this be and will that justify a lockdown?”, and then they seek to talk you into a mood of not being so terrified, because frequently they are lockdown skeptics.  Again, that is a super-important question.  But don’t let it distract you from the other important questions at hand.

And for those other questions, as I’ve already stated above, the trajectory caseload predictions of the herd immunity theorists are looking worse than they did a few weeks ago.

Of course I will be giving you updates on this matter as time passes.  But this is the very latest, namely that some of the herd immunity theorists are on the precipice of being dogmatically wrong about matters of real import, just as were some of the most pessimistic mainstream predictions from March and April.

The case for a market allocation of vaccines

Or a partial such allocation, at least.  Here is my latest Bloomberg column:

The renowned economist Erik Brynjolfsson recently asked: “At least so far, I haven’t seen any one suggesting to use the market system to allocate vaccines. Not even those who strongly advocate it in other areas. Why is that?”

As one of several people copied at the bottom of the tweet, I feel compelled to take up the challenge.

I readily admit that a significant portion of the vaccines, when they come, should be allocated by non-market forces to health care workers, “front line” workers, servicemen on aircraft carriers, and so on.  Yet still there is room for market allocation, especially since multiple vaccines are a real possibility:

If you had to choose among those vaccines, wouldn’t it make sense to look for guidance from market prices? They will reflect information about the perceived value of both protection and risk. On the same principle, if you need brain surgery, you would certainly want to know what the brain surgeon charges, although of course that should not be the only factor in your decision.

And:

The market prices for vaccines could be useful for other purposes as well. If scientific resources need to be allocated to improve vaccines or particular vaccine approaches, for instance, market prices might be useful signals.

Note also that the scope of the market might expand over time. In the early days of vaccine distribution, health-care workers will be a priority. Eventually, however, most of them will have access to vaccines. Selling off remaining vaccine doses might do more to encourage additional production than would bureaucratic allocation at a lower price.

Say China gets a vaccine first — how about a vaccine vacation in a nearby Asian locale (Singapore? Vietnam?) for 30k?  Unless you think that should be illegal, you favor some form of a market in vaccines.

In any case, there is much more at the link.  Overall I found it striking how few people took up Erik’s challenge.  Whether or not you agree with my arguments, to me they do not seem like such a stretch.

A vaccine from Oxford?

In the worldwide race for a vaccine to stop the coronavirus, the laboratory sprinting fastest is at Oxford University.

Most other teams have had to start with small clinical trials of a few hundred participants to demonstrate safety. But scientists at the university’s Jenner Institute had a head start on a vaccine, having proved in previous trials that similar inoculations — including one last year against an earlier coronavirus — were harmless to humans. That has enabled them to leap ahead and schedule tests of their new coronavirus vaccine involving more than 6,000 people by the end of next month, hoping to show not only that it is safe, but also that it works.

The Oxford scientists now say that with an emergency approval from regulators, the first few million doses of their vaccine could be available by September — at least several months ahead of any of the other announced efforts — if it proves to be effective.

Here is more from the NYT.  I do not have a personal opinion on the specifics of this development, but it seems worth passing along.

Discovering Safety Protocols

Walmart, Amazon and other firms are developing safety protocols for the COVID workplace. Walmart, for example, will be doing temperature checks of its employees:

Walmart Blog: As the COVID-19 situation has evolved, we’ve decided to begin taking the temperatures of our associates as they report to work in stores, clubs and facilities, as well as asking them some basic health screening questions. We are in the process of sending infrared thermometers to all locations, which could take up to three weeks.

Any associate with a temperature of 100.0 degrees will be paid for reporting to work and asked to return home and seek medical treatment if necessary. The associate will not be able to return to work until they are fever-free for at least three days.

Many associates have already been taking their own temperatures at home, and we’re asking them to continue that practice as we start doing it on-site. And we’ll continue to ask associates to look out for other symptoms of the virus (coughing, feeling achy, difficulty breathing) and never come to work when they don’t feel well.

Our COVID-19 emergency leave policy allows associates to stay home if they have any COVID-19 related symptoms, concerns, illness or are quarantined – knowing that their jobs will be protected.

Amazon is even investing in their own testing labs.

Amazon Blog: A next step might be regular testing of all employees, including those showing no symptoms. Regular testing on a global scale across all industries would both help keep people safe and help get the economy back up and running. But, for this to work, we as a society would need vastly more testing capacity than is currently available. Unfortunately, today we live in a world of scarcity where COVID-19 testing is heavily rationed.

If every person, including people with no symptoms, could be tested regularly, it would make a huge difference in how we are all fighting this virus. Those who test positive could be quarantined and cared for, and everyone who tests negative could re-enter the economy with confidence.

Until we have an effective vaccine available in billions of doses, high-volume testing capacity would be of great help, but getting that done will take collective action by NGOs, companies, and governments.

For our part, we’ve begun the work of building incremental testing capacity. A team of Amazonians with a variety of skills – from research scientists and program managers to procurement specialists and software engineers – have moved from their normal day jobs onto a dedicated team to work on this initiative. We have begun assembling the equipment we need to build our first lab (photos below) and hope to start testing small numbers of our front line employees soon.

Actions and experiments like these will discover ways to work safely till we reach the vaccine era.

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?