Saturday, October 07, 2006

A bad equilibrium: better than NO equilibrium?

This from the WSJ, last week:

September 25, 2006

BELGIUM'S CULTURE OF CRASHES An old rule of thumb -- always yield to any vehicle coming from one's right -- coupled with a shortage of stop signs makes driving in Belgium a dangerous proposition, says the Wall Street Journal.

To make matters worse, cars on many of the smallest side streets still qualify for priority over those on major thoroughfares -- so long as they are coming from the right. That forces drivers on many boulevards to slam on their brakes without warning, causing some to get rear-ended.

Overall, failing to yield is the cause of more than two-thirds of the accidents at unmarked Belgian intersections that result in bodily injury and contribute to Belgium's relatively high traffic fatality rate, says Jacoby.

Last year, 11.2 per 100,000 drivers in Belgium died from driving accidents. Other countries have more stop signs and traffic lights; by comparison, deaths in the Netherlands were 4.6 per 100,000 inhabitants, 6.1 in Germany and 8.7 in France -- countries that border Belgium. Although the United States has a higher number of fatalities in absolute numbers --14.5 per 100,000 inhabitants -- there are more cars on the street in the United States, as a percentage of the population, than in Belgium; Americans also spend on average more time in their cars, traveling longer distances. When the difference in the number of cars is accounted for, Belgium has 22.4 traffic deaths per 100,000 cars compared with 18.1 in the United States. The government is trying to change the law in response to insurance company complaints and in an effort to encourage all drivers to slow down and pay more heed at intersections -- hopefully bringing Belgium's driving laws on par with the rest of the world.

ATSRTWT: Mary Jacoby, "As Cars Collide, Belgian Motorists Refuse to Yield," Wall Street Journal, September 25, 2006.

This reminded me of perhaps the most interesting single lunch I have ever enjoyed. It was up at VaTech, at a conference on public choice. I sat with Robert Sugden, Brit game theorist and just all around interesting guy. For 90 minutes, we talked about NOTHING but the problem of behavior at intersections. Bob knew every convention you could imagine, and could describe both the area of the world where that convention dominated (car on the right, car on the right unless one road is larger, dirt road turning onto gravel road, etc.) and the unanticipated consequences of using that convention. AND he knew of several fascinating instance of a stable convention collapsing in the face of even a relatively small number of people who used a different convention. Amazing person.

And THAT reminds me of the conversation I had with a Boston cab driver once. I told him I could never drive in Boston; too "chaotic", I said. He looked at me as if I were insane: "Chaos? Never. Let me show you." And he tried to tell me, from the "body language" of the cars (his phrase, an interesting one) what people were going to do. Clearly, the fact that Boston traffic has no lane markers or lights (those that exist are ignored) is NOT the same as chaos, though it may look like that to an outsider. The driver convinced me; Boston traffic had rules, though you had to be from Boston to know them.

So, he asked me where I was going, and I told him: "Shuttle to New York!"

He shook his head: "Now, THAT is chaos. I could never drive in New York. I'd have an accident. Those people don't know how to drive."

What he meant, of course, simply violated his own claim about Boston. Cab drivers in New York, I'm betting, have an analogous set of well-defined rules, conventions, and heuristics for knowing how to signal intentions and how to respond to those intentions. They are just different from those in Boston. It was interesting that the Boston driver did not see that ME saying "Boston is chaos" was the same as HIM saying "New York is chaos."

Does this mean Bob Dylan is ineffable?

Interesting story from JamBase.

An excerpt:

BECK BANNED FROM THE CHARTS
New album's extra features breaks rules
Beck's new album The Information has been banned from the UK chart
The record, which was released on October 2, has fallen foul of the rules set by the Official Chart Company.

The packaging of the CD, which includes a DVD feature and stickers that allow fans to design their own artwork, has made the album illegible in Sunday's (October 8th) countdown...


Careful readers will have noted that the typo: "has made the album illegible...." Clearly, they meant "ineligible." Now, I make too many typos myself to get all snarky about the typos of others. But that is not just a typo; the idea of Beck being illegible for a list....well, it made me laugh. I mean, given a choice between lots more sales and a list based on sales (except when an album is illegible), I'd take the sales.

Made me think of a whole suite of possible descriptions:

Beck is illegible
Michael Bolton is unpardonable
Bob Dylan is ineffable
Whitney Houston is divorced
Clay Aiken is unlistenable

Go ahead, on your own! It can be a new party game. First one to repeat an adjective, or to apply one that is clearly false (e.g., "Justin Timberlake is delectable!") is out of the game.

(Nod to MWT, who is indescribable)

Friday, October 06, 2006

Interesting Video from John McManus and JBS

A quick review of a DVD I recently watched on the plane, coming back from a conference in Montana.

It was “Overview of America,” produced by the John Birch Society and narrated by John F. McManus, President of JBS.

Mr. McManus has been President of JBS since 1991, and the organization has changed a bit from the more “in your face” tactics of the 1960s and 70s. McManus has worked for JBS for 40 years now, but his first career was electrical engineering. He still takes a careful, systems-based approach to understanding government and policy problems, and it shows in this short and well-executed video.

Don’t get me wrong; there is content here that dissenters will no doubt call “ideological.” Of course, for those people “social science” is simply whatever they happen to believe themselves, and “ideology” is what all those wrong people think. I don’t agree with everything Mr. McManus has to say here, but the systematic approach he takes, and the way he addresses issues of basic governance rather than small points of policy makes the video a very valuable tool for starting discussions.

The main claim that he makes, that there are in fact only a few viable forms of government, no matter how much we might wish it were otherwise, is both well-argued and persuasive. (Of course, I believe it myself, so persuading me wasn’t very hard!) The most stark part of the argument is likely also the most controversial: the only two forms of government that are viable in the long run are some form of totalitarian, or at least authoritarian, system or else a constitutionally limited republic. “Pure” democracies either don’t exist, or else lead quickly to Napoleon, or Stalin, Mao, or Castro. The fact that we can imagine a pure democracy is beside the point. I can imagine unicorns, but I don’t expect one to give me a ride to work.

(Overview of America, DVD and VHS, 2006; 32 mins., John Birch Society and available from American Opinion Book Services. Written and narrated by John F. McManus.)

Thursday, October 05, 2006

Dirty Davey: Once More, With Feeling

DD had some more thoughts on my screed from yesterday. It seems only minimally fair to post those thoughts without further commentary from me....DD in roman, my earlier gripes in italics, earlier still in bold/ital.

Oh, please. Stone-faced Joe's main job is to delay new drugs
to protect the profits of existing drugs.


I don't know that this is consistent with how the FDA works. Most importantly, the FDA approval process takes place AFTER the "patent clock" has started ticking. Quicker approval means a longer period without generic competitors.

Other branded/patented products represent much less of a threat to a drug than do the generics, so speed of approval is something the pharma companies really care about. (I am in pharma these days, so I have some notion whereof I speak.)

In fact, the entire concept of "intellectual property" is one
of government intervention in the market process... And yet
IP regulation is generally seen as an essential component of
a market which encourages innovation.


If you think enforcing property rights is the same as
"regulation," then you think that having speed limits is the
same as having a cop drive your car.


By ignoring the word "intellectual" you changed my entire meaning. INTELLECTUAL property regulation is in fact government intervention in the market process... and is not "enforcing property rights" in the classic sense. IP protection would be the law telling me I had to take the main road and not the shortcut through the neighborhood because someone else had discovered the shortcut first.


It seems to me that regulation of commerce here can be seen
as an alternative to...
(1) Very strict regulation of commercial speech and
advertising to enable informed consumer decision-making
and/or
(2) A chaotic world in which liability lawsuits are the
primary response to bad behavior in the market


You don't think #1 involves the courts?


Oh no--both (1) and (2) involve the courts.

What I'm saying is that having a regulation saying "you must get FDA approval to sell X to treat condition Y" is an alternative to...

(1) Requiring the seller of X to provide consumers with precise clinical data on the safety of X and its efficacy in treating Y, plus possible side effects and their likelihood, plus enumeration of which advertising or marketing claims constitute contractual obligation on the part of the seller,

and/or

(2) Lawsuits from many buyers for whom X does not resolve Y, or for whom X produces unacceptable or unexpected side effects, claiming that the understood conditions of the sale make the seller liable for the product's failure to perform, or that the information provided by the seller was false, incomplete, or misleading.


One could in fact argue that--unless we say "caveat emptor" and say the seller has no contractual obligation whatsoever--the liability risk of selling drugs in a non-FDA world (or unapproved drugs in an FDA-optional world) would be so high that no one would rationally enter the business or push the frontiers of research.

(And pure "caveat emptor" would be a return to snake oil salesmen--nothing could be really trusted to have any positive medical effect.)

Wednesday, October 04, 2006

A Top Ten List: Bush to Hastert

A top ten list, for phone calls/msgs from President Bush to Speaker of the House Denny Hastert.

#10. "Who came up with your public relations strategy for dealing with pedophiles on the staff? Have you been talking to the Pope again?"

#9. "Have you noticed Hillary has been kind of quiet? I hear Hugo Chavez hired away her speechwriter!"

#8. (a text msg): "LOL! luv ur Sgt Schultz bit on Foley: 'I no nothing!' ROTF!"

#7. "Hey, Denny: Why don't Republicans from Florida use bookmarks? They just bend the pages over! Don't you love that one? Denny, are you there, man?"

#6. "Cheer up, Denny! Our telephone polls are going to go 'way up, as soon as the citizens realize we are probably listening in!"

#5. "Hey, Denny, how about this one: Didja hear that Foley's seat is up for grabs? Wait, isn't that what got him in trouble in the first place? You aren't laughing, Denny! Man, this is great stuff, you gotta loosen up!"

#4. "Denny, how about we change G.O.P. to stand for 'Gay Orlando Pedophile'? Whaddya think?"

#3. "Tell ya what, let's just this die down. We can transfer Foley to a different parish, right?"

#2. "Now I know why you were so upset by the FBI raid on William Jefferson, Denny! You were afraid we might find Foley in his office with a couple of pages stuck together!"

And the number 1 message from President Bush to Speaker Hastert:

"Denny, you're doing a heckuva a job!"

Dirty Davey Responds.....

My man DD responds to my essay on EconLib, excerpted here on The End. Original in italics, DD in roman, MM in bold.

But we still face the same basic problem: can I
decide, and risk just my money, for great reward if I'm
right? Or will we decide, and risk our whole future budget,
on things we aren't very good at deciding?


Many of these examples, though, presume that the individual (a) is risking "only" money and (b) actually can make a fair assessment of the risks.

Nonsense, DD. No reason to believe that people are good at assessing risk. The point is that if they lose, or win, they get all the loss/profit themselves. So
they have better incentive to be right. But no way would I claim that inventors are good at assessing risks. The whole point is that they are nutjobs.



The examples come thick and fast: should we have a uniform
ethanol standard in all gasoline, or should we let gas
stations (or individuals) concoct their own fuel mix
formulas?


Ignoring individual petrochemists, for the moment, and focusing on sale through stations: what responsibility does a station have for being straightforward about what a mix is and where it works and doesn't work? What responsibility does a car manufacturer have for providing the owner with information on the limits and requirements of the engine? Will there be any sort of signage requirements, or will drivers away from their home stations have to pull into a station and read the fine print to figure out whether the formula is compatible with their car?

Pollution is a classic example of an externality; given that some ethanol requirements are to reduce petroleum emissions, should a market with less regulated fuel mixes have a more complex tax structure to capture these costs?

Private institutions would post recipes on the internet within just a few hours. It is easy to get information about things like this. Why do YOU think that the Department of Motor Vehicles has your best interests at heart? That is what always amazes me: people who don't trust markets, where there are incentives to take care of customers, assume the DMV and the Post office would do a better job. Why?

And if you are worried about pollution, yes, tax the hell out of the relatively more-polluting component. That is hardly "complex", compared to the current insane system of taxes and subsidies on fuel. We could actually simplify the tax system: tax petro-gas at another dollar a gallon. You liberals just don't want to have to pay more for gas, so you come up with psychotic schemes like CAFE.




Why not allow terminally ill, or even mildly ill, people to use whatever drugs they want, regardless of whether Median Joe (working through his stone-faced employee, the FDA) thinks that drug has five chances in a million of giving you a stroke?

Of course, we can't write off Joe at the FDA too quickly. Even if you argue that the individual consumer has a right to choose to take (or not to take) the five-in-a-million risk rather than delegating the choice to Joe, that argument presumes that the probability is known to the decision-maker. History, and observation of the market, indicate that the average pharma company is motivated to offer the sick a one-sided sales pitch rather than a sober assessment of safety and efficacy.

Oh, please. Stone-faced Joe's main job is to delay new drugs to protect the profits of existing drugs. If you think that the FDA cares about patients, you have just lost it. There are plenty of rank and file FDA-ers who want to serve the public, yes. But the FDA leadership more or less works directly for the drug companies.

Sure, shorten the patent period on drugs, and sharply cut the time required for development. The drug companies have nearly stopped developing new drugs for all kinds of diseases, because the FDA makes it so easy to make huge profits on little fiddles, small changes. ALL regulation is either designed, or soon comes to operate, to benefit the profits of the industry it regulates.

If you are saying that FDA performs some of the same functions as the (private!) Underwriter's Lab or Consumer Reports, okay. But why not let the FDA just do the research on the probabilities, rather than assume that everyone has the same risk preferences?


Markets, and market processes, are themselves a pretty important innovation,

But the innovation is actually a "regulated market" rather than a simple market of transactions... So the question is one of the optimal level of regulation. While one can argue that the FDA approval process restricts the entry of new drugs to the market, one could similarly argue that the patent system prevents new drugs from becoming widely and cheaply available.

In fact, the entire concept of "intellectual property" is one of government intervention in the market process... And yet IP regulation is generally seen as an essential component of a market which encourages innovation.

If you think enforcing property rights is the same as "regulation," then you think that having speed limits is the same as having a cop drive your car.

It seems to me that regulation of commerce here can be seen as an alternative to...

(1) Very strict regulation of commercial speech and advertising to enable informed consumer decision-making

and/or

(2) A chaotic world in which liability lawsuits are the primary response to bad behavior in the market

You don't think #1 involves the courts? The chaos is in the AL courts, under the FTC Consumer Protection Division. The only question is whether we have independent courts and open processes (#2), or closed iron triangles. Companies prefer #1 because (this will sound familiar) regulation is run to benefit the regulated, not the public. Stigler had this right, no matter how much you might wish it were otherwise.


Imagine that airlines could compete based on the level of security they provide. Let passengers choose their own security, along with a mix of price and inconvenience that some entrepreneur thinks would increase profits.

The obvious market response--that would undoubtedly be profitable and make many passengers feel far more secure--would be the "no brown people" airline. And yet I can't help but think that particular innovation violates the social contract. (I would also argue that a recipient of significant governmental support like an airline has a much greater obligation in such matters than does a private citizen.)

So when I say "compete based on security," you hear "in addition, repeal existing laws about discrimination on public accomodations." An odd ear you have.

It takes government to enforce real discrimination. The TSA guy standing there in all his thuggish glory is the one who does cavity searches on "brown people."

You think that because you can imagine a society without discrimination that a real-world government could do that. It can't, and it doesn't want to. Markets are color-blind, because greed is color-blind.


(Note from The End: Dirty Davey and I are old friends. And he really doesn't give a damn what I think. So this public battle is pretty much typical of our private, friendly conversations. I just thought I would share, because he raises some important points. And my responses are flippant because I don't have anything better than that to say)

Tuesday, October 03, 2006

Glock Airlines

I have a new piece on EconLib, the Liberty Fund forum hosted by my main man, Russ Roberts.

An excerpt, on Glock Airlines:

[The basic problem is this:] can I decide, and risk just my money, for great reward if I'm right? Or will we decide, and risk our whole future budget, on things we aren't very good at deciding?

The examples come thick and fast: should we have a uniform ethanol standard in all gasoline, or should we let gas stations (or individuals) concoct their own fuel mix formulas? Should the government subsidize hydrogen fuel cell cars, or let people at the extremes, perhaps two Mikes in some garage, work on the problem? Why not allow terminally ill, or even mildly ill, people to use whatever drugs they want, regardless of whether Median Joe (working through his stone-faced employee, the FDA) thinks that drug has five chances in a million of giving you a stroke?

Markets, and market processes, are themselves a pretty important innovation, one not always approved or understood by Median Joe. Why not let the market work at an even more radical level, one that many people might think goes too far? Imagine that airlines could compete based on the level of security they provide. Let passengers choose their own security, along with a mix of price and inconvenience that some entrepreneur thinks would increase profits.

And we could go further: imagine a security line at the airport where the guard looks at your boarding pass and asks, "Are you carrying any weapons?" When you say no, he gives you one, a 9mm Glock. "All passengers are required to carry these, sir. Airline policy." Not all airlines, mind you; only "Glock Air" (motto: "We just flew in from Cleveland, and boy are our arms locked and loaded"). You might choose to fly Glock. They have never had a terrorist incident, and if you push the flight attendant call button the guy comes running.

Or, you might not fly Glock. You don't have to. You might choose some other airline with a unique combination of services, safety, and schedule. In the current regulatory environment, too many decisions are one-size-fits-all, because we don't recognize the possibility that it could be different.

We have become too accepting of the views of the middle, in too many aspects of our lives. Worse, we have fallen victim to a soft but encroaching political paternalism. In many cases, it isn't even the median citizen who enforces his views on everyone. Instead, special interests and "public" lobbyists dominate the making of rules and decisions that force all of us to act as if we all had the same views on risk, taste, and service.

The thing to keep in mind is that market processes, working through diverse private choice and individual responsibility, are a social choice process at least as powerful as voting. And markets are often more accurate in delivering not just satisfaction, but safety. We simply don't recognize the power of the market's commands on our behalf. As Ludwig von Mises famously said, in Liberty and Property, "The market process is a daily repeated plebiscite, and it ejects inevitably from the ranks of profitable people those who do not employ their property according to the orders given by the public."

ATSRTWT

Do Batteries Fit Inside Prescription Bottles?

Chuck Brodsky put it best:

Philly fans, they’ve been known to get nasty
When Joe must go, they’ll run him out of town
I saw Santa get hit by a snowball
And then get hit again when he was down


On the return of T.O., from ESPN's cap of Monday Night Football:

Philadelphia scored on its first four possessions of the second half and, by early in the fourth quarter, much of the partisan crowd had departed, likely to plot nefarious strategies for The Return of T.O. Rumor is that the always sensitive Philadelphia crowd plans to greet Owens next Sunday with a shower of prescription bottles. One fan who did stay until the end of Monday night's game held up a home-made placard which read: "T.O. -- Get Well Soon So We Can Hurt You."

(nod to RN, who should know)

Never Mind....Senate is Vulnerable to Take-over

I have confidently predicted that there is no way that the Repubs can lose control of the Senate.

But it appears that was quite wrong.

Who knew that the Repubs would act like a bunch of Catholic Cardinals, and protect their resident pedophile child-abuser? At least the cardinals weren't SUPPOSED to have any political sense. Foley is an incredibly evil hypocrite.

A culture of corruption, indeed. I am surprised at how hard I am rooting for a Democratic tsunami in November. The Republicans are vile, corrupt, morally bankrupt demogogues.

And I say that in a loving way, mind you. What happened to my G.O.P.? Many might say I was always wrong to be a Republican, ever. But something has changed, something deep down inside the party. Rotten to the core.

Playing to Mixed Reviews

I have used this line, in one form or another on three radio shows in the last week:

"Have you noticed how quiet Hillary Clinton has been? I guess Hugo Chavez refused to return her speech-writer, after he borrowed her."

Plays to mixed reviews. One interviewer said, "Who go who?"