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On a Fast Track to Nowhere?

Alex Tabarrok

Periodically when the FDA is criticized for slowing the approval of new drugs they announce a new policy like Fast Track. I'm skeptical of these announcements since they are inconsistent with the FDA's incentives. A recent investigative report in the Cleveland Plain Dealer seems to suggest that I am right to be skeptical but in the end makes me wonder whether Fast Track may be useful after all. Here's the part that supports my skepticism.

 

A decade ago, the Food and Drug Administration introduced a Fast Track designation for drugs in development that was intended to speed the availability of medical treatments for serious diseases.

However, a seven-month investigation by The Plain Dealer shows that this government blessing has not increased the number of drugs approved or moved them to market faster.

....Dr. John Jenkins, director of the FDA's Office of New Drugs, acknowledged that the Fast Track designation only gives companies the same access to FDA programs that was already in place when they lobbied Congress for the provision in 1997.

"There's really not much other, if any, benefit for Fast Track," he said.

The report, however, makes a big deal of the fact that stock prices do respond positively to Fast Track designation. The report spins this as pump and dump with the FDA in effect doing the pumping and insiders and hedge funds doing the dumping.

 

....frenzied trading occurs regularly when companies announce Fast Track status. The number of shares bought and sold more than doubled on 49 percent of days that companies announced Fast Track designations. Trading was 10 times higher than the day before in 22 percent of instances....hedge funds and others who [short the stock] bet that the price of a stock will fall - and it often does after the initial jump a company receives from Fast Track designation.

But I'm also skeptical of stories that suggest markets are systematically fooled by non-events and the numbers presented do not seem wildly inconsistent with a modest but real positive signal from being listed as Fast Track.

 

Stock prices of companies that trade on the New York Stock Exchange rose just 1 percent after Fast Track announcements... Excluding these companies, most of which are major pharmaceutical firms, Fast Track announcements boosted stock prices 11.5 percent.

I'll call this one a draw until further information arrives. What wisdom does the crowd offer?

Hat tip to Mike Giberson at Knowledge Problem.

December 12, 2007 at 07:25 AM in Economics, Medicine | Permalink | Comments (7)

Electrocution

Tyler Cowen

Successive versions of this George Bellows lithograph remove the witnesses one by one until only the executioner and his victim remain.

December 11, 2007 at 06:24 PM in The Arts | Permalink | Comments (0)

That Cyber #*$! Stole My Credit Cards

Alex Tabarrok

 

A program that can mimic online flirtation and then extract personal information from its unsuspecting conversation partners is making the rounds in Russian chat forums, according to security software firm PC Tools.

The artificial intelligence of CyberLover's automated chats is good enough that victims have a tough time distinguishing the "bot" from a real potential suitor, PC Tools said. The software can work quickly too, establishing up to 10 relationships in 30 minutes, PC Tools said. It compiles a report on every person it meets complete with name, contact information, and photos.

 

"As a tool that can be used by hackers to conduct identity fraud, CyberLover demonstrates an unprecedented level of social engineering," PC Tools senior malware analyst Sergei Shevchenko said in a statement.

From CNet. I did warn you.

December 11, 2007 at 01:46 PM in Education, Web/Tech | Permalink | Comments (19)

Subprimes and the threat of lawsuit

Tyler Cowen

I thought this was quite interesting, albeit exaggerated and overly polemic. It's an example of what can happen when securities buyers threaten to rebel against a high level of background fraud (which is otherwise just priced into average values). And here is Jim Surowiecki's column on the subprime crisis, which I liked very much.

Elsewhere on Mark Thoma's site, I learn that Jim Glassman has a new job.

Addendum: Here is Felix Salmon on the topic.

December 11, 2007 at 09:29 AM in Economics | Permalink | Comments (10)

Would it have helped to give freed slaves land?

Tyler Cowen

Melinda Miller says yes, based on a clever natural experiment:

 

Although over 140 years have passed since slaves were emancipated in the United States, African-Americans continue to lag behind the general population in terms of earnings and wealth. Both Reconstruction era policy makers and modern scholars have argued that racial inequality could have been reduced or eliminated if plans to allocate each freed slave family “forty acres and a mule” had been implemented following the Civil War. In this paper, I develop an empirical strategy that exploits a plausibly exogenous variation in policies of the Cherokee Nation and the southern United States to identify the impact of free land on the economic outcomes of former slaves. The Cherokee Nation, located in what is now the northeastern corner of Oklahoma, permitted the enslavement of people of African descent. After joining the Confederacy in 1861, the Cherokee Nation was forced during post-war negotiations to allow its former slaves to claim and improve any unused land in the Nation’s public domain. To examine this unique population of former slaves, I have digitized the entirety of the 1860 Cherokee Nation Slave Schedules and a 60 percent sample of the 1880 Cherokee Census. I find the racial gap in land ownership, farm size, and investment in long-term capital projects is smaller in the Cherokee Nation than in the southern United States. The advantages Cherokee freedmen experience in these areas translate into smaller racial wealth and income gaps in the Cherokee Nation than in the South. Additionally, the Cherokee freedmen had higher absolute levels of wealth and higher levels of income than southern freedmen. These results together suggest that access to free land had a considerable and positive benefit on former slaves.

Here is the paper, she is on the job market this year from University of Michigan. The abstract is vague on magnitudes, for more detail see pp.29-30, for instance:

 

The livestock calculations find that the difference in the wealth gaps was substantial, and ranged from 46% to 75%. For crop income measures, the difference in the gap was smaller, but still substantial. My estimates place it between 20 to 56%.

December 11, 2007 at 07:16 AM in History | Permalink | Comments (43)

Meta-recommendations

Tyler Cowen

I've spent lots of time scouring this year's "Best of" lists, and I thought I should pass along what I have learned. These are not my recommendations (though I often approve), these are what I have gleaned from the recommendations of media critics. They are my judgment of the most common selections on the "Best of" lists, noting that I did not check the lists from publications I do not enjoy and thus there is an implicit filter being applied.

So here is my aggregation:

1. Non-fiction book: Alex Ross, The Rest is Noise.

2. Fiction book: Tree of Smoke, or The Savage Detectives.

2. Miscellaneous book: Letters of Ted Hughes. Everyone loves this, I haven't read it yet.

3. Movie: No Country for Old Men. The Diving Bell and the Butterfly gets lots of picks, given that it is playing in only two cities.

4. Classical CD: Lorraine Hunt Lieberson Sings Peter Lieberson, "Neruda Songs." Read the excellent Ed Uyeshima review on Amazon, it is first.

5. Popular music: LCD Soundsystem, Sound of Silver, or possibly Neon Bible, by Arcade Fire.

I still can't figure out the consensus jazz CD of the year. Any help?

I might add that the non-meta me basically approves of this list, with two caveats. First, the Lieberson CD, while quite good, in part received so many mentions because the singer, Lorraine Hunt Lieberson, met a young and tragic death this last year. It was her husband who composed these songs for her. Second, I don't myself have clear picks for popular music. I do a lot of my popular music buying in December, when the "Best of" lists come out. I did put on LCD Soundsystem this morning but was bored by it on first listening.

December 11, 2007 at 05:56 AM in The Arts | Permalink | Comments (24)

Is human evolution accelerating?

Tyler Cowen

This paper says yes, over the last 40,000 years. The basic mechanism is that more people result in more adaptive mutations, plus environments have changed rapidly, due largely to technology and culture. Here is an LA Times summary, it claims that the pace of human evolution has accelerated hundredfold [sic] since the invention of agriculture (some reports indicate "ten to hundredfold").

How about this summary:

 

Prof Hawks says: "We are more different genetically from people living 5,000 years ago than they were different from Neanderthals."

As far as I can tell this looks legitimate. Here are one hundred different news summaries, here is Scientific American.

Thanks to several loyal MR readers for the pointer.

Addendum: Read this for explanation, it gets even more interesting toward the end, another implication is that viruses are more dangerous than we used to think.

December 10, 2007 at 09:38 PM in Science | Permalink | Comments (21)

The Myth of the Rational Amazon Book Reviewer

Tyler Cowen

Here is one review of Bryan Caplan from the Amazon.co.uk site:

 

The reality is a book written for the university educated and the class of society who never have to fear unemployment. The university style of writing makes it difficult to understand what he is going on about, since you have to keep looking up a dictionary. It is also rather boring, which makes it difficult to hold your concentration. The basic theme of the book is that economists think that the ordinary voter is irrational when it comes to politics and voting. The economist argues that because the economy keeps getting stronger; they are always right, and the public always wrong. Trade protectionism, mass immigration of cheap labour, downsizing which causes mass unemployment are all supported by the economist and not supported by the voter.

Here are his other reviews, he likes Sidney Bechet but doesn't say whether or not he votes. Thanks to Bryan for the pointer.

December 10, 2007 at 01:40 PM in Books | Permalink | Comments (37)

Argument by omission

Tyler Cowen

Sebastian Mallaby writes:

 

The political pressure to act reflects concern for homeowners. But as the blogger Tyler Cowen has written, there are better ways to target assistance to the deserving poor than by rescuing subprime borrowers. Given that they hold some responsibility for borrowing too much, subprime borrowers are not society's most unambiguously deserving group. And many of them are not poor, either.

Equally, the pressure to act comes partly from concern that the subprime mess is scaring investors away from whole classes of debt, with indirect effects on the economy. But if investor confidence is the problem, government meddling can backfire. The leading Democratic presidential candidates have proposed, variously, a moratorium on mortgage foreclosures, a freeze in loan rates and other measures to help homeowners at the expense of investors. This is hardly the best way to rebuild market confidence.

This is correct, although of course you would expect me to agree with myself. Mallaby does conclude that the government should do something, by the way.

Now read Paul Krugman's column on the same topic, from the same day. On a sentence-by-sentence basis, Krugman's claims hold up (though he probably exaggerates the extent of fraud in order to demonize the lenders). On policy, he argues that the bankruptcy courts should give borrowers a better deal. I, too, favor a looser bankruptcy law, but is this the right context for such a change? The two claims cited by Mallaby are never dealt with:

1. Subprime borrowers are not the most deserving poor, and many are not poor at all

2. Right now is not a good time to penalize credit-constrained banks or rewrite contracts against their interests

Maybe Krugman disagrees with these points, but we never learn why. The duty of the popular economist is to encourage audiences to move beyond simple good-bad stories and think in terms of opportunity costs and unintended consequences. As a writer, Krugman is one of the best clarifiers of all economists, of all time, ever. He has trained himself to specialize in clarification, but on some issues the truth is in fact murky and this psychological tendency to clarify leads him astray.

Clive Crook has a good column on the Paulson plan. Arnold Kling has very good commentary. Felix Salmon has a good analysis of Krugman the blogger vs. Krugman the columnist.

December 10, 2007 at 12:35 PM in Economics | Permalink | Comments (12)

Cap and Trade as Futures Market

Alex Tabarrok

Daniel Hall at Common Tragedies has an interesting argument for cap and trade over a carbon tax. Cap and trade with bankable and borrowable allowances can respond much more quickly than Congress to new information.

 

magine that in 2015 we get some bad news from the scientific community about climate change: the risk of truly damaging climate change are higher than previously thought. Although it would likely take Congress a few years to act on this info and revisit the question of what the cap should now be, firms would start banking more allowances today in anticipation of the government intervening to tighten the cap, and thus prices would rise immediately. Conversely, if new scientific info suggests the risks from climate change are lower than previously estimated, firms would start borrowing against future allocations (assuming borrowing is allowed) and prices could slacken in response to new info.

December 10, 2007 at 07:15 AM in Economics | Permalink | Comments (10)

How will on-line gaming change the world?

Tyler Cowen

Here is your typical breathless futurism, pulled off Digg. Let's assume the guy is right, and there will be purely virtual marriages, replete with virtual you-know-what, and many people will live full (virtual) lives without ever leaving their living rooms, etc.

In this world virtual nookie and related activities reap high-productivity gains and the price of such activities falls rapidly. They become a tiny percentage of gdp, much as agriculture has today, even though they are very important for our utility. The low-productivity activities -- most of all face-to-face meetings -- take up a big chunk of gdp, much as health care and education do today. Imagine that meetings for a cup of coffee are highly expensive (in relative terms), they require subsidy, and Robert Samuelson writes Op-Eds about how they will bankrupt us. Shocks to "the meeting sector" can send the economy into a tailspin.

In relative terms, transportation costs, broadly construed, will be exorbitantly high. By comparison, standard legal tariffs won't much matter and political boundaries will lose most of their influence over the geographic distribution of economic activity. Immigration will cease to be a major political issue, if only because it is so (in relative terms) costly. Why cross a border when you must give up many of your virtual lives to buy the bus ticket? Dialects will proliferate and styles of art, at least those in meatspace, will take divergent paths.

As with education today, people will try to get their (costly) meetings over with early in life. Again, in opportunity cost terms, it's not worth it for most people to give up so much virtual life just to go see Cleveland. Maybe meetings will become the new middle class entitlement, and subsidies to Amtrak will replace Social Security or Medicare as the largest item in the federal budget. Some columnists will claim that the government can supply meetings more cheaply. Conservatives will insist that people have to pay for their own meetings, and that certain social classes are taking advantage of the meetings privilege.

The price of land in cities will be very low, since people will have been able to spread out and conduct most of their lives from a distance. So meetings are inefficient, but when they do occur they will never be cramped. People will talk with their hands much more, because there will be no danger of hitting the people at the next table. Umbrellas will be large and bulky, and you won't need to get that flu shot. Restaurants will have room for expansive smoking sections.

The Alchian and Allen theorem will imply that only high-quality meetings will take place. Why incur a high meeting/transport cost for a mere piffle of a kiss on the cheek, or for the exchange of a small piece of gossip? Meetings will be highly intense, extremely memorable, and involve well thought out sexual extravaganzas.

December 10, 2007 at 06:48 AM in Economics | Permalink | Comments (15)

Videos of the three new Nobel lectures

Tyler Cowen

They are here, I haven't seen them.

December 9, 2007 at 05:31 PM in Economics | Permalink | Comments (2)

Dr. Joel Selanikio also advances economics

Tyler Cowen

EpiSurveyor is free, open-source software used to collect data—primarily medical survey data right now, although there's no reason other types of data couldn't be gathered—in areas where medical data is often out-of-date or incomplete, when it's even collected at all.

Because EpiSurveyor is aimed primarily at developing economies, it's designed to run on PDAs and mobile phones...and to transmit collected data back to a central repository via SMS.

In other words, you can put people out into the field and get (almost) real time data on the evolution of a village economy. The data are converted into useful forms right away, and gathering the data is easier in the first place, so the assistants are less likely to shirk. Here is more, here is the associated non-profit, here is a YouTube video. Data gathering is one of the most backward features of the social sciences, so development economists, take note. But should businessmen care as well?

I asked Selanikio what EpiSurveyor could use most right now—besides money, which is always welcome.

"We really need people who could help us develop a sustainable business model for EpiSurveyor. Ad-supported? Subscription fees? Two tiers of features? That sort of advice, from people who are truly qualified to give it, would be very helpful."

December 9, 2007 at 04:38 PM in Medicine | Permalink | Comments (1)

My answer

Tyler Cowen

The criticism personally offends him and he cannot tolerate it. Surely you have known people like this in conversation [and department politics?], and they didn't even have any guns or nuclear weapons or polonium behind them.

That's with help from Natasha. Here was Bryan's question:

Putin is popular...what's the point of persecuting the opposition?...if he's really so popular, why risk looking like a paranoid despot?

December 9, 2007 at 07:18 AM in Political Science | Permalink | Comments (24)

Benjamin Friedman

Tyler Cowen

Right or wrong, or perhaps somewhere in between, Clark’s is about as stimulating an account of world economic history as one is likely to find. Let’s hope that the human traits to which he attributes economic progress are acquired, not genetic, and that the countries that grow in population over the next 50 years turn out to be good at imparting them. Alternatively, we can simply hope he’s wrong.

Here is the full review.

Addendum: Here is today's NYT essay, arguing for the genetic unity of mankind, here is a previous Slate piece. Here is a good NYT excerpt:

During World War II, both black and white American soldiers fathered children with German women. Thus some of these children had 100 percent European heritage and some had substantial African heritage. Tested in later childhood, the German children of the white fathers were found to have an average I.Q. of 97, and those of the black fathers had an average of 96.5, a trivial difference.

Second addendum: Here is Deirdre McCloskey's review of Clark.

December 9, 2007 at 06:43 AM in Books | Permalink | Comments (31)

Get well

Tyler Cowen

Here are the updates on Bob Frank's heart attack. He seems to be doing fine. Bob Frank is not only a great economist and writer, but he is also an extremely friendly and generous man; we wish him well. Hat tip to Mark Thoma.

Elsewhere on the health front, the very smart and very adorable Virginia Postrel is continuing to recover from cancer treatment.

December 8, 2007 at 10:05 PM in Medicine | Permalink | Comments (4)

Illegality means illiquidity

Tyler Cowen

Guns:

There are few suppliers. While covering a certain neighborhood of Chicago, Sudhir Venkatesh (SV), the group’s undercover man, only found six suppliers or wholesalers at any given time. The gun brokers are almost all over 30, and have lived in the area for their entire lives providing them with solid networks and neighborhood trust, that help keep them in business. Many suppliers are discouraged to enter the market due to the difficulty in finding business and low profit margins. In the neighborhood area, the authors estimated only 1,400 gun sales in a year, compared to the 200,000-500,000 cocaine sales. Guns are a durable good, so customers usually don’t need to return frequently. Additionally, 30%-50% of attempted transactions go unfulfilled due to all sorts of logistic problems like agreement on the transaction location. Of the brokers that do conduct business, most charge between $30-$50 per transaction and charge an extreme markup on guns, possibly between a 3-5 multiple of the legal retail price. To make the transactions monetarily worth it for themselves, suppliers and retailers have to markup their prices in this way.

Here is much more of interest. Here is The Economist write-up of the story. One implication is that if a government has limited resources to enforce bans, it will do better by targeting durable goods, with less liquid markets, rather than frequently traded non-durables.

December 8, 2007 at 03:32 PM in Law | Permalink | Comments (12)

The Golden Compass

Alex Tabarrok

It lacks direction.

December 8, 2007 at 09:30 AM in The Arts | Permalink | Comments (17)

Tyrone on rent control

Tyler Cowen

Johan Almenberg, a loyal MR reader, asked me to ask Tyrone why rent control is a good idea. I walked over to Tyrone's crawl space, knocked, and posed the query. He ridiculed me and told me the question was really not worth his while:

You Troglodyte, surely you know the happiness literature shows that better or larger living quarters don't make people much happier. It's one of the pleasures we most quickly get accustomed to. So if rent control pushes everyone into a lower price, lower quality equilibrium for residences, that's for the better. If you want high cost living, go to Monaco or Aspen; low rents were what made New York City great. The greatest American city, during the highest cultural peak of its existence, had lots of binding rent control.

Rent control also encourages new or refitted buildings to have a greater number of smaller units. In other words, it brings more population to the city and we all understand the external benefits from having more people around. Furthermore the external social benefits of cities are highest for the elderly poor, who can't afford cars and would require external aid, and bagel-seeking young'uns, high in human capital, low in liquid wealth, and able to do great things for the world if only they are removed from the suburbs. That's exactly who rent control puts into your city.

Johan himself offers an interesting argument:

....if rent control makes it harder to live in a particular city temporarily, this encourages long-term commitments. This, in turn, could increase the repeated-game character of that city, which in turn could be good for cooperation. These sort of arguments – admittedly vague – tend not to get mentioned.

Did I mention that Tyrone is biased, because he lives under rent control himself? That's right, he lives upstairs in the crawlspace. It is the strongest force in the world that won't let me charge him a price any higher than zero. And the resulting arrangement seems to work out just fine.

December 8, 2007 at 07:39 AM in Economics | Permalink | Comments (16)