EclectEcon

Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca


. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Saturday, December 10, 2005

Women's Curling Finals on CBC
groan

The weekend draws of the Canadian Olympic Curling Trials are being shown on CBC. I must say, aside from the team of Adamson and Palmer, I really prefer the TSN broadcast team to any other curling broadcasters.

[aside: I've been told that Scott Russell was once a student of mine.]

For live-blogging of the event, see this blog.

Sudoku Math and Strategies

For those of you who are still addicted to Sudoku, here are explanations of two strategies for solving them (courtesy of CMT):

The X-Wing:
X-Wings are fairly easy to spot, but a little harder to understand than some other techniques. Like others it relies on using positions of pencilmarks to infer enough to allow you to eliminate some other candidates.

X-Wings are when there are two lines, each having the same two positions for a number.
The Swordfish:

This is very similar to using X-Wings, in that it will allow you to use knowledge about rows to remove candidates from columns, and vice versa. Make sure you're happy with why X-Wings work before moving on to Swordfish!

The complexity here is that you're using knowledge from 3 rows at the same time - and that's what makes them harder to spot. Unlike X-Wings, they don't form a simple rectangle.

If you're really intrigued by the mathematics (and a bit of history) behind Sudoku, check out this article [h/t to Tyler Cowen]:
From a computational point of view, Sudoku is a constraint-satisfaction problem. The constraints are the rules forbidding two cells in the same neighborhood to have the same value; a solution is an assignment of values to cells that satisfies all the constraints simultaneously.

Best Use Ever Made of a Citroen 2CV

Watch this video [thanks to Kent for the pointer].

I want to see them try this with a Hummer.

Friday, December 09, 2005

Best Biz Blog in Canada -- VOTE TODAY!!

EclectEcon made it through the first round of balloting and is still in the running! Please go to this site and vote for The Eclectic Econoclast (the former name of this blog).

Today is the last day to vote!

More Pessimism about Tamiflu & Avian Flu:
Theoretical Effectiveness vs. Use Effectiveness

I wrote a couple of days ago about the likely difficulty of using Tamiflu effectively to help fight Avian Flu. Here is more from my friend:
This distinction [between theoretical and use effectiveness] is often employed in discussion of contraceptive use, and should be applied to proposed H5N1 medications as well.

Just as condoms are far less effective in the bedroom (or stairwell) as they are in mathematical models, one might expect a similar discrepancy between ideal use of Tamiflu, and what is likely to happen in the community.

For usually non lethal Influenza A (your annual scourge) the importance of starting, for non immunized folks, antiviral medication within the first 48 hrs has been well publicized. Such a restriction has limited the effectiveness of antivirals. Recognition of illness, delay in getting to a physician - almost impossible in some settings within 48 hrs except through emergency or drop-in clinics - and a further delay in acquiring the medication, all conspire against effective early use.

Bird flu H5N1 promises to make effective use of available antiviral medication even tougher, given the shorter incubation period, and earlier arrival time of peak viral load. If we add to this dilemma the proposal of central control of medication and all the logistical snafus inevitably attached.........

Then we get to problems in applying the medication. How much, how long, and compliance given known side effects.

The optimistic among us will think of this as a challenge.

Thursday, December 08, 2005

Merck and Vioxx: The Market Works......
if we have good information

One of the reasons we have laws against fraud and misleading advertising is that if consumers cannot trust the information provided to them, they will devote too many scarce resources to divining and confirming information in the marketplace. This basic economic principle lies at the heart of the US civil suit against Merck and Vioxx [h/t to BenS]:
Authors of a study funded by Vioxx maker Merck & Co. failed to disclose in a report published in the New England Journal of Medicine in 2000 that three additional patients in a clinical study suffered heart attacks while using the now-withdrawn painkiller, the journal wrote in an editorial released Thursday.

The editorial, written by the journal's editor in chief, Dr. Jeffrey M. Drazen, executive editor Dr. Gregory D. Curfman and managing editor Stephen Morrissey, also alleges the study's authors deleted other relevant data before submitting their article for publication.

"Taken together, these inaccuracies and deletions call into question the integrity of the data on adverse cardiovascular events in this article," the doctors wrote. Excluding the three heart attacks "made certain calculations and conclusions in the article incorrect."

Are All Suicide Bombers So Young?
Are All Martyrs Young?

I have been struck by the age of suicide bombers; they all seem so comparatively young. I do not recall having seen any stories of 65-or-70-year-old suicide bombers (or martyrs to other causes, for that matter). I expect the comments will soon be replete with counter examples, but certainly in a general sense my observation is typical. Why is that?

It seems terribly wasteful for young people to give their lives for a cause, even if you agree with the cause. Surely it would be a much better use of a society's scarce resources if its suicide bombers, martyrs, and even some soldiers, were its senior citizens, who are more likely to be a drain on the economy in the near future if they aren't already.

My colleague, Ron Wintrobe, has a paper forthcoming in Public Choice and a book forthcoming from Cambridge University Press on the economic rationality of extremism. His argument, basically, is that suicide bombers rationally choose this role because they get immense utility from the sense of membership and belonging that comes with being a suicide bomber.

His work is compelling. And it helps explain why we do not see senior-citizen martyrs. It seems that a sense of belonging is much more important to young adults than it is to senior citizens.

But is that always the case? Have there been absolutely no cases of senior-citizen suicide bombers or martyrs for any cause? I find it difficult to believe, difficult to imagine, and difficult to accept that there isn't a sufficiently high variance of personalities that not even one senior citizen has been used as a suicide bomber.

Further, I find it implausible that are not at least some senior citizens who, expecting that their heirs would receive handsome bounties, would be willing to become suicide bombers. Is it just that the thought of 72 virgins in heaven means so little to old guys or is it something else? What am I missing?

Bribes from Aussie Wheat Board Funded Suicide Bombers

From The Australian:
KICKBACKS paid by Australia's monopoly wheat exporter to the regime of Saddam Hussein were put into a bank account used to finance a $US10million ($13 million) slush fund for families of Palestinian suicide bombers.

US Government and CIA documents reveal a trail of blood money flowing from companies now known to have taken bribes into bank accounts in Jordan, which were then used by the Iraqi Government to pay money for deadly bombings or to buy weapons.

According to a US inquiry into the corrupt UN oil-for-food program, companies such as Jordanian firm Alia, which received hundreds of millions of dollars from Australian wheat exporter AWB, paid money into "front" accounts held under false names.

These accounts were then emptied each evening into Iraqi Government accounts at the same bank and used for its international transactions.

... AWB, the former Australian Wheat Board, has been accused of paying $US222 million in illegal bribes to the Iraqi Government through the corrupt program. Its payments represented the biggest single contribution to an estimated $1.5 billion in kickbacks uncovered in an investigation by Paul Volcker.

... AWB admits making the payments to Alia but insists it thought the fees were for transporting wheat around Iraq and did not know it was a front company for Saddam's regime.

Wednesday, December 07, 2005

the Ant and the Grasshopper
(Canadian style)

BenS sent this story. I have seen it before in other renditions, but this one bears repeating. It is from the Nov. 28th edition of Chron Watch (h/t to JP, but I am unable to find the precise link):

CLASSIC VERSION:

The ant works hard in the withering heat all summer long, building his house and laying up supplies for the winter. The grasshopper thinks he's a fool, and laughs and dances and plays the summer away. Come winter, the ant is warm and well fed. The shivering grasshopper has no food or shelter, so he dies out in the cold.
THE END

THE CANADIAN VERSION:
The ant works hard in the withering heat all summer long, building his house and laying up supplies for the winter. The grasshopper thinks he's a fool, and laughs and dances and plays the summer away. Come winter, the ant is warm and well fed. So far, so good, eh? The shivering grasshopper calls a press conference and demands to know why the ant should be allowed to be warm and well fed while others less fortunate, like him, are cold and starving. The CBC shows up to provide live coverage of the shivering grasshopper, with cuts to a video of the ant in his comfortable warm home with a table laden with food. Canadians are stunned that in a country of such wealth, this poor grasshopper is allowed to suffer so while others have plenty.

The NDP, the CAW and the Coalition Against Poverty demonstrate in front of the ant's house. The CBC, interrupting an Inuit cultural festival special from Nunavut with breaking news, broadcasts them singing "We Shall Overcome." Sven Robinson rants in an interview with Pamela Wallin that the ant has gotten rich off the backs of grasshoppers, and calls for an immediate tax hike on the ant to make him pay his "fair share."

In response to polls, the Liberal Government drafts the Economic Equity and Grasshopper Anti-Discrimination Act, retroactive to the beginning of the summer. The ant's taxes are reassessed, and he is also fined for failing to hire grasshoppers as helpers. Without enough money to pay both the fine and his newly imposed retroactive taxes, his home is confiscated by the government.

The ant moves to the United States, and starts a successful agribiz company. The CBC later shows the now fat grasshopper finishing up the last of the ant's food, though spring is still months away, while the government house he is in, which just happens to be the ant's old house, crumbles around him because he hasn't bothered to maintain it.

Inadequate government funding is blamed, Roy Romanow is appointed to head a commission of inquiry that will cost $10,000,000. The grasshopper is soon dead of a drug overdose, the Toronto Star blames it on the obvious failure of government to address the root causes of despair arising from social inequity.
THE END

Is Homeopathy Just an Expensive Placebo?
or maybe an inexpensive placebo?

Quite possibly homeopathy is no more effective for many complaints than a placebo. From Lancet, courtesy of J:

Biases are present in placebo-controlled trials of both homoeopathy and conventional medicine. When account was taken for these biases in the analysis, there was weak evidence for a specific effect of homoeopathic remedies, but strong evidence for specific effects of conventional interventions. This finding is compatible with the notion that the clinical effects of homoeopathy are placebo effects.

I realize that traditional physician/practitioners have a strong incentive to find that homeopathy is no (or not much) more effective than a placebo, but suppose they're right.... Suppose homeopathy is just a different form of placebo.

If that is the case, which is more efficient? Expensive placebo-like drugs or homeopathy?

Reminds me of the time BenS and I were in a large, discount drug store, and he asked the pharmacist, very loudly, "Where is your selection of placebos?"

Tuesday, December 06, 2005

The Winter of Our Discontent?

Salim Mansur, writing in the Toronto Sun, waxes Shakespearean:
As the long federal campaign unfolds, it might well become Canada's political winter of discontent.

But at some point during this period it will be worthwhile if Canadians reflect on the price people have paid for democracy — and how it is not to be taken for granted.

... Securing freedom and imposing democracies on Germany and Japan after World War II ... required a coalition of willing allies united by their commitment to democracy, and Canadians of that generation carried their responsibility with pride and devotion of a free people.

Canadians, in their winter of discontent, will likely remain preoccupied with domestic quarrels and wishes, however insignificant these are in the larger context of a world where evil is perpetrated by men — as in Darfur — and peril looms as Iran seeks to acquire nuclear capability.

The story of Iraq is a reminder that some people somewhere paid the price for those in democracy to enjoy freedom to choose how they will live and who will govern them.
It's a valuable reminder.

Asian Flu:
How Effect Will Tamiflu Be? (not very)

Some people are hoping that tamiflu will help halt Asian Flu as/if it starts sweeping across the globe. Do not be optimistic. My friend who is a semi-retired physician has written:

As you know, the only dimly lit corner of the room for efficacy of Tamiflu to save lives in a pandemic comes from the mouse study. In that study, up to 80% of the infected mice survived, if given eight days of treatment instead of the usual five. Only 50% of the latter group survived (or, you may prefer to say, fully half of the mice in this group survived). Those who have taken heart from this study have largely chosen to ignore the fact that the mice were given Tamiflu BEFORE being infected - a difficult act to follow for people in a pandemic. Now it seems there is WORSE news: while the suggestion was that higher than currently recommended doses would be more efficacious , an astute reader has uncovered the fact that the mice on the highest study dose were, in fact, given FIVE TIMES the currently recommended dose. The real expected mortality rate taking the recommended dose, even while starting before infection, would be quite abysmal, if results were directly transferable to humans.

The actual study, which I haven't been able to get yet, is:

Reference: H. Yen et al. Virulence may determine the necessary
duration and dosage of oseltamivir treatment for highly pathogenic
A/Vietnam/1203/04 (H5N1) influenza virus in mice.
Journal of Infectious Diseases DOI:10.1086/432008 (2005).

Here is the thread on the dosage bombshell:

Re:Mouse Studies of Oseltamivir Show Promise Against H5N1 Influenza Virus
« Reply #20 on: August 08, 2005, 04:31:26 am »

Quote from: hydra on August 07, 2005, 11:36:31 pm

Either I am crazy or the NIH is making a mistake. The highest dose used in this study is 10mg/kg/day. For a 75kg human male, that would mean taking 750mg/day of oseltamivir.

Now, I have a box of tamiflu sitting right in front of me. There are 10 capsules, each capsule contains 75mg, and the dosing instructions are take 1 capsule twice a day. The total dose per day is therefore 150/mg/day, NOT 750mg/day.

Therefore, this statement in the NIH article above "The highest dosage level, adjusted for weight, was equivalent to the dose currently recommended for humans sick with the flu. "
is wrong.

In fact, the recommended dose of human 2 capsules a day is about 2mg/kg/day, or about 1/5 the highest dose in this study.

Please correct me if I'm wrong.
For more on Avian Flu, along with many up-to-date items and links, be sure to bookmark this blog.

Monday, December 05, 2005

What Is It About Capital-Labour Substitution that Aussies Don't Understand?

Tyler Cowen links to a story about restrictions at the Sydney Opera House.
Under a new interpretation of WorkCover rules, players in the Australian Opera and Ballet Orchestra can't be exposed to sound levels higher than 85 decibels averaged over a day.

This will have implications for orchestral music generally, but its immediate impact is being felt on, of all things, the Australian Ballet's Sleeping Beauty. To avoid any one musician being exposed to excessive sound, the orchestra is working with relay teams of extra musicians: four separate horn sections, four of clarinets, four of flutes, and so on. The orchestra that begins a particular performance isn't necessarily the same one that finishes it.

It's a logistical nightmare and an expensive one, adding $100,000 to the ballet's production costs.
Surely a less costly way of dealing with the situation is to provide the players with partial-sound-deadening earplugs. They are inexpensive and effective.

But as a horn player, I love to see the increase in demand for horn players. If it keeps up, I might even turn semi-pro...

Christmas Music

I love traditional Christmas music. In fact, last April, I looked through the WinAmp offerings to see if there was any Christmas music available via internet radio in the spring. Alas, there wasn't.
I have to admit that makes sense. Surely the demand curve lies below the AVC curve for any potential producer. Put another way, the incremental costs of running a Christmas music internet radio station in April outweight any potential benefits, even if that station could capture the entire demand.
Actually, as recently as a month ago, there was no Christmas music available via internet radio. And two weeks ago, there were only two offerings.

As I write this, there are still only ten internet radio stations devoted to Christmas music. And searching through these ten has confirmed for me that I do not much like junky modern Christmas songs; I will not dignify them by calling them carols.

At the same time, our digital cable service now offers at least two different channels of Christmas carols, one of which is almost exclusively instrumental versions traditional carols. I love this channel. It makes for great background muzak.

In the past, I used to set up my 25-disk CD player about this time of the year to play all my Christmas music CDs. Now we just listen to cable.

Stephen Harper, the Tories, and the GST;
Perhaps It Is Time for a Revival of the Reform Party

Stephen Harper seems to be drifting increasingly away from sensible economic policies. This drift is both disappointing at best.

His latest pronouncement is to promise to lower the GST from 7% to 5%. For those of you outside Canada, the GST is the Goods and Services Tax, something like a national sales tax or value-added tax. Lowering it would not be a great economic policy.
  1. Keep in mind that the GST was implemented to replace the hidden and onerous manufacturers' excise tax (see here for details). As Alan Adamson points out in that link, after-tax prices, for the most part, declined after the implementation of the GST.
  2. The GST provides a disincentive for spending. To the extent that this effect leads to increased saving and investment, the GST and other value-added taxes promote future economic growth. Promoting long-term economic growth is probably the best way to fight poverty, reduce future problems of providing support for senior citizens, and improve overall standards of living.
  3. Reportedly, Harper said one reason to reduce the GST is to stimulate consumption spending. Why is that such a terrific goal? As I noted above, we should be stimulating more saving, not consumption spending. Furthermore, we do NOT need any more stimulus to aggregate demand in Canada. The unemployment rate is at a 30-year low, and, if anything, we are on the verge of additional unwanted inflation. We certainly do not need to stimulate additional consumption spending.
  4. A better way to reduce taxes and promote economic growth would be to cut the high-end marginal rates of income taxation. As Andrew Coyne says ($, h/t to Jack),
    It may seem that I am being too hard on Mr. Harper. After all, while the Liberals have suddenly discovered the virtues of cutting income taxes in theory, they aren’t promising to do much of it in practice: The recent economic update talked about a one percentage point cut in the two middle rates, five years from now. And when any party talks about income tax cuts, they mean exclusively tax cuts for the middle class.

    The justification, political or moral, is that a cut in the top rate would just benefit “the rich.” News flash: “The rich” profit just as much from cuts in the middle rates, or increases in the basic exemption, as their intended beneficiaries. Moreover, it’s pure windfall gain: The income on which they pay less tax is income they would have earned anyway.

    As long as we’re giving away money to the rich, we might as well make them earn it. That means cuts in the rate of tax on new investments, on the next dollar earned, not on investments they’ve already made. That means cutting the top marginal rate.
    Once upon a time, there was a party that understood this. Once upon a time, there was a leader who would have said this. As of now, that can no longer be said.
One reason many of us like having the GST be added on to sales, rather than be invisible (as the VAT is in Australia and many other places) is that it is a constant reminder that the gubmnt is taking money from consumers. Perhaps people don't like that reminder every time they buy something. Myself? I hate the bother of remembering and calculating the GST, so I'd prefer it was added into the posted prices. But I understand the reasons for keeping it visible - it keeps people aware of the large amount the gubmnt is taking from households.

UPDATE: Rick Hiebert points out in a comment at the Western Standard that the Reform Party also opposed the GST. Too bad.

Professors Respond to Incentives;
and so do students

The C.D. Howe Institute recently published a study that shows professors are more productive at universities that have merit-based salaries. Also, students at those universities seem to perform better. [thanks to Erin Airton for the pointer].

Let's suppose that the objective function of the university has nothing to do with education, research, or any of that airy-fairy stuff that university leaders talk about. Suppose, instead, that the objective function is to maximize the wealth of the university, including the expected net present value of future donations and future grants, etc., and future funding provided by various levels of gubmnt. With this objective function in mind, what matters is not quality of education or research, but perceptions of quality of education and research. As Ms. Eclectic says so cynically, "It's a business."

E.g. if a university can attract tonnes of really REALLY smart, innovative, creative, assertive, energetic students, then, even if the value added by the university is not worth a pinch of anything, it will appear that the university has done a great job. Further, its alumni, potential donors, and the politicians providing support for the university will tend to think the place is terrific.

With this view in mind, it is reasonable to be concerned about a simultaneity bias in the CD Howe study. What if good professors and good students tend to select schools that have merit pay for their professors? Then the existence of merit pay would have an incentive effect quite different from "merit pay encourages professors to do a better job."

And what if mediocre students select schools rated less highly. Then it might be a mistake to attribute causation to the CD Howe study results. Fortunately, the authors recognize this:
The salary structures at Canadian universities appear to matter. Evidence shows that the performance of universities with merit salaries exceeds that of other universities. They perform better in a variety of research-based and student quality measures without any sacrifice in other dimensions, such as student satisfaction. While such associations by themselves do not necessarily imply causation, the findings conform to the predicted consequences of different salary arrangements.

Sunday, December 04, 2005

My Christmas Card

Nobody objected to it last year. So here it is again.
It has been an annual card for my friends for the past twenty or so years.
Click here to see it.
[coarse language warning]

Balloon-Car Racing

As we were doing yesterday's crossword puzzle, Ms. Eclectic and I came across a word neither of us knew (but I expect Kent would): nacelle. Our search for information about the word led me to something I found much more fascinating than cowls of jet engines.

Balloon-car racing. Build a car, attach a balloon, blow up the balloon, let the car go, and see whose goes the farthest. The outcome depends on the engineering of the car, the blowing up of the balloon, and considerable luck.

Here are some photos of balloon racers.
 
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