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Four biographies for President’s Day

Four biographies for President’s Day

In the past several years, I have read four biographies of overlooked or more controversial Presidents. On this President’s Day, I thought I would briefly discuss each in order of how well I thought they covered their topic.
I. “The Man Who Saved the Union: Ulysses Grant in War and Peace,” by H.W. Brands.
This is one of two recent biographies that have comprehensively rehabilitated Grant, who previously was denigrated as a corrupt drunkard who somehow managed to blunder into winning the Civil War. But when he died in 1885, he was lionized in both the North and South. HIs pallbearers included his Union partner William Tecumseh Sherman and Confederate General Joseph Johnston. Tens of thousands marched in the procession. Grant’s tomb is a huge monument along the Hudson River in New York City.
Brands shows that while Grant was an incompetent businessman, who probably was cashiered from the army for drunkenness in the 1850s, he was the right man in the right place at the right time in 1861. For Grant had been a quartermaster during the Mexican War, and became a master of logistics. If Lee was the master tactician, then along with Sherman, Grant was the better strategist, starving the Confederate army of industrial supplies and food, all the while relentlessly pushing forward (As an aside, James Lee McDonough’s “William Tecumseh Sherman” is also a very good recent biography).  When Lee hoped for a Lincoln defeat in 1864, Grant ensured it didn’t happen by organizing the first massive absentee balloting, wherein state officials registered and collected ballots from his union armies. His military history of the Civil War, completed four days before his death, is still regarded as a classic and taught at military academies.

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Big Pharma Influence in State, Federal Government, and Everyday Life

How Pharma Influences Legislation They Do Not Like

From 2006 to 2015, pharmaceutical companies spent $880 million in lobbying state and federal legislatures and contributing to campaigns to prevent laws restricting Opioid prescriptions. Their lobbying expenditures has outstripped those advocating for greater controls on prescriptions by 200 times giving them greater influence at the state level.

In 2015, 227 million prescriptions were written for opioids such as OxyContin, Vicodin, and Fentanyl. This was enough prescriptions to give nine of ten adults a bottle of pills. With its aggressive lobbying, the pharmaceutical industry maintains the “status quo of aggressive prescribing of opioids and reaping enormous profits” according to Dr. Andrew Kolodny of Physicians for Responsible Opioid Prescribing.

Opioids are used to interact with the receptors (protein molecule that receive chemical signals from outside a cell causing a cellular/tissue response) in the body. They work with sites in the brain and nervous system known as opioid receptors to stop pain messages from reaching the brain effectively telling you to not feel pain. Opioids are used to counter pain from injuries, surgery, and chronic pain.

While campaigning for a law limiting the initial prescription quantity of an Opioid, Jennifer Weiss-Burke came to realize the strength of the pharmaceutical lobby in New Mexico. Her son Cameron was sent home with a bottle of Percocet to combat and dull the pain from a broken collar bone. A few years later, Cameron died of a heroin over dose.

Jennifer Weiss-Burke had lobbied the New Mexico legislature to limit “initial” pain-killing opioid prescriptions to seven days outside of the needs of chronic pain patients. The bill died in the New Mexico legislature. There was no open discussion of its merits, suggested improvements, proposed compromises, or discussed safeguards to protect those using Opioids for chronic pain. Instead, the Pharmaceutical Lobbyists privately called on each legislator to discuss why they should oppose the bill Weiss-Burke was advocating.

One of the manifestations of substance abuse in New Mexico was prescription drug overdose death. It was not a significant problem ten years before; but, it was developing and unidentified as a significant problem. In 2011, Cameron Weiss Burke died of a heroin overdose. Between 1992 and 2013, New Mexico was at or near the top for drug overdose deaths nationwide. In 2013, New Mexico had a drug overdose death rate of ~ 22 per 100,000 ranking third nationally behind West Virginia and Kentucky (CDC). Yet, the New Mexico legislature chose not to react to this plague and take action?

The pharmaceutical industry is profitable and wields influence across both sides of the aisle in
Congress and at the state level. In the past its lobbying efforts paid off with Congress blocking Medicare, Part D, and the ACA from negotiating directly with Pharma on pricing. Just how strong and profitable is pharmaceuticals? As Dr. Perry Wilson explains; “Different chronic diseases have different patterns of price increases. The biggest increase was seen in diabetes care (1993 – 2013) and driven largely by the rising prices of pharmaceuticals” of which the cost of manufacturing did not increase. Now Secretary of HHS, Alex Azar as the CEO of Eli Lilly raised the price of the century old drug Humalog used to treat diabetes by 345% taking it from $2,657.88 per year to $9,172.80 per year.

With greater profitability comes the ability to employ lobbyists who can call on state and congressional legislators. The Opioid industry, associated companies, and their allies have contributed to many candidates at state-level offices and employ an army of lobbyists covering the 50 state legislatures. From 2006 to 2015, the Pain Care Forum, a loose coalition of drugmakers, trade groups and dozens of nonprofits supported by industry funding, spent $740 million to stop laws governing the prescription of opioids. Up from 2016, the pharmaceutical and health products industry spent a record $78 million in 2016.

Because of their lobbying strength in Congress and states, laws and regulations are skewed to benefit the pharmaceutical industry. Medicare, Part D, and the ACA are blocked from negotiating directly with Pharma while insurance companies are too small to take on Pharma and often resort to using Medicare pricing plus a markup. With the appointment of nominee for HHS secretary Alex Azar, the environment for lower pharmaceutical costs by allowing Part D, Medicare, and the ACA to negotiate directly looks dim.

What If They Like a Piece of Legislation?

The pharmaceutical industry can block state legislation by lobbying. If they like a piece of legislation, they can also lobby for it. Fifty-eight pharmaceutical and 26 biotech companies spent $192 million to push the 21st Century Cures Act bill through Congress in 2016. The bill potentially saves drug and device companies $billions in bringing products to market. The Food and Drug Administration will have new authority and tools to speed up approvals and shortcut the process.

– Medical schools, hospitals, and doctors will see increased research dollars coming from a $4.8 billion windfall to the NIH biomedical research organization subject to annual appropriations. “60 schools, 36 hospitals, and several dozen groups representing physician organizations” spent $120 million in lobbying efforts.

– Over two years, $1 billion in state grants will be spent to address Opioid abuse and addiction most of it going to treatment. Mental health and Research got a boost with $millions for old and new programs. Mental health, psychology, and psychiatry groups spent $1.8 million in lobbying disclosures including the 21st Century Cures bill.

– Specialty disease and patient advocacy groups supported the legislation and lobbied Congress. Many of these groups get a portion of their funding from drug and device companies. The bill includes more patient input in the drug development and approval process. The passage of the bill shows off the clout of such groups in their spending of $6.4 million in lobbying.

– More than a dozen computer, software and telecom companies also kicked in for Cures Act lobbying totaling $35 Million in lobbying on the Cures Act as well as other legislation. It will benefit hospitals and groups requiring new technology and programs.

– Funding for the giveaways? The ACA lost $3.5 billion or 30% of its funding taken from its Prevention and Public Health Fund established to promote the prevention of Alzheimer’s disease, hospital acquired infections, chronic illnesses and other ailments.

The bill does nothing to address the rising cost of pharmaceuticals. It promotes unproven and unsafe drug and device approvals which groups such as Public Citizen, Consumer Safety Org., The Associated Press, The Center for Public Integrity, and the National Center for Health Research fought against. The bill leaves the FDA under funded with a miserly boost of $500 million through 2026 to take care of the additional priorities imposed upon the FDA.

And The Politics?

Michigan Representative Fred Upton’s sponsored 21st Century Cures which will save drug and device companies $billions in bringing products to market by short circuiting FDA testing. The Food and Drug Administration will have new authority and tools to bypass studies and speed up approvals. Translated what this means is; the bill allows the FDA to approve new uses, or indications, for existing drugs without rigorous clinical trials and tests now being conducted following proven practices. This would include not taking randomized samples to prove the new drugs are safe and effective. Instead, the FDA could rely on “real world evidence,” which includes observations, safety and side-effect claims, and other data not subject to rigorous analysis. According to Public Citizen’s Michael Carome this a much lower level of evidenced and proven usage.

No friend to the ACA, Michigan Representative Fred Upton sabotaged the ACA Rick Corridor Program and continues to weaken it by taking $3.5 billion or 30 percent of the funding from the Prevention and Public Health Fund to fund the 21st Century Cures Act, a continuation of the Republican attack on the ACA. Since 2000, Representative Fred Upton has received pharmaceutical contributions in excess of $1 million according to Open Secrets Org.

Besides weakening the testing of new pharmaceuticals, the 21st Century Cures does “nothing” to fight the rising cost of pharmaceuticals. Henry Azar’s took Eli Lilly’s Humalog diabetes drug and increased the cost of it from $2,657.88 per year to $9,172.80 per year. After acquiring Vimovo, Horizon Pharma increased the price of it from $138 to $2,979 per 60-pill bottle. This is not the end of the story with Horizon. They will sell to customers at a much lower price and bill insurance at the higher price. Turing Pharmaceuticals Martin Shkreli bought the rights to the 62 year old drug Daraprim and immediately increased the price for it from $13.50 to $750 a pill. The same as other drugs, EpiPens will also rise and fall in price at the discretion of its manufacturer with little regard for actual cost.

In the December 15, 2015 JAMA publication, an article (Industry-financed Clinical Trials on the Rise as the Number of NIH-funded Trials Falls) by Stephan Ehrhardt, MD, MPH1; Lawrence J. Appel, MD, MPH2; Curtis L. Meinert, PhD suggests a growing influence of clinical trials conducted by companies with a vested interest in the outcome and a dilution of the impact of government-funded trials. “The number of newly registered trials doubled from 9,321 in 2006 to 18,400 in 2014 (Table 1). The number of industry-funded trials increased by 1965 (43%). Concurrently, the number of NIH-funded trials decreased by 328 (24%).”

While results from NIH-funded clinical trials are more apt to provide the basis for prevention and treatment recommendations; industry-backed studies can produce biased results leading to an increased concern for patient safety. Such was the case with Johnson & Johnson and Bayer’s anticoagulant Xarelto. Data was withheld during its industry-sponsored trial that would have deemed it less safe than traditional warfarin. It was approved without an antidote to bleeding complications in 2011. Thousands of Xarelto lawsuits have been filed against the manufacturer because of the medication’s severe internal bleeding complications.

NIH trials are down by 24% and commercial trials are up 43% many (71%) of which were also foreign funded. Funding for the NIH has fallen 14% since 2006 when adjusted for inflation and will decrease more as adequate funding has not been provided for the 21st Century Cures Act.

In a letter to Democrats Reid and Pelosi from various organizations, it was asked the 21st Century Cure Act be delayed until such time as rising prescription prices are addressed. “ Moving forward with this legislation now would be a missed opportunity to address unaffordable prescription drug prices. There is no justification for moving forward with legislation providing substantial benefits to the drug industry without achieving something in return.”

Again, pharmaceutical company lobbying Congress plus efforts by people such as Michigan’s Representative Fred Upton, has helped the industry reap substantial government sponsored benefits with little reciprocation in lower pricing. Michigan Representative Fred Upton was also the recipient of $597,000 from the Pharmaceutical/Healthcare Industry from 2014 into 2018. The initial bill was started in 2014.

With the 21st Century Cures Act underfunding of the NIH, increased commercial funding of clinical trials, and the relaxing of the need for clinical trials; can the pharmaceutical industry be counted on to be diligent in its testing of new products using “a lower level of evidence than the gold standard, which is randomized controlled trials” (Public Citizen’s Michael Carome)?

It appears the provisions of the 21st Century Cures Act are another stepping stone leading to the erosion of the ability of the FDA to certify the safety of new drugs and their manufacture which began in 1992 with the Prescription Drug User Fee Act (PDUFA). This allowed pharmaceutical companies to pay user fees to the agency in exchange for speedier reviews of their products. The new fees comprise 42% of the FDA’s budget today having grown from 8.5% in 1997. Companies would not be paying these fees if there were not a return for the cost in the market.

One might not think this would increase the danger the safety of new drugs; however, the 10-month time limit assessed does have its negative results. “For every 10 month of reduced review time, there is a correlated 18% increase in serious adverse reactions, 11% increase in hospitalizations, and 7% increase in deaths related to an approved drug.”

How Pharma Avoids Following the Law and the Penalties

The cost of doing business in pharmaceuticals includes paying the fines resulting from getting caught promoting drugs improperly or illegally. There are many prescriptions being written for Opioids for which there are alternate treatment strategies. When challenged, the industry and spokes people are quick to react to any calling for different strategies or limitations of usage.

For example, in 2001 Pfizer’s was ready to put Bextra on the market as a new class of painkillers known as Cox-2 inhibitors, supposedly safer than generic drugs, many times more expensive as ibuprofen, and translating into higher profits. Late in 2001, the FDA placed a qualifier on the use of Bextra for patients with extreme pain. The FDA found it was not safe for people with a risk of heart attacks or strokes and limited the usage of Bextra to people with arthritis and menstrual cramps.

This did not stop Pfizer and its partner Pharmacia from marketing Bextra as safe to use up to a 40 mg dosage. The same as what many healthcare insurance companies do with using doctors for approval of prescription, the companies hired expert doctors. Except these doctors in sales were to call on and convince other doctors (customers) of the safety of Bextra. After all, who argues with a doctor of medicine? Pfizer and its soon to be owned partner pushed the envelope with their claims of safe usage.

In the end what prevented Pfizer from a severe punishment was its size and the many other Pfizer drugs sold to and used by Medicare, Medicaid, and more then likely the VA. “Any company convicted of a major health care fraud is automatically excluded from Medicare and Medicaid. Convicting Pfizer on Bextra would prevent the company from billing federal health programs for any of its products. It would be a corporate death sentence.” The punishment stopped at fines for the illegal selling of a dangerous drug with Pfizer, again a TBTF or Too Big To Ban scenario? To comply with the law; the newly incorporated Pfizer subsidiary Pharmacia & Upjohn Co. Inc., on the same day prosecutors and Pfizer agreed Pharmacia would plead guilty, was banned from billing Medicare or Medicaid. Pfizer continued to do business as normal. Pharmacia & Upjohn Co. Inc. took the fall not once for Pfizer but twice and Pfizer walked away unscathed except for a fine.

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Shorting China

Shorting China

I just saw “The China Hustle” as part of the Portland International Film Festival.  It’s a very (very) slick documentary about the listing of fraudulent Chinese companies on US exchanges during the post-financial crisis era.  The companies were mostly real, but their financial data were fictitious, although given the stamp of approval by the SEC, investment banks, specialty law firms and the big four accounting firms.  The movie might be called “The Medium Size Short” because it centers on several market players that have righteously fought this upwards-of-$50 billion fraud by shorting it.

I think it does a great job of explaining the financial mechanisms at work (especially the short itself), and it holds your attention with lots of jump-cutting, extreme facial closeups, brightly lit à la Errol Morris, and the other techniques of zingy video journalism.  It would make a great classroom enhancer in courses on finance or political economy, provided you’ve got a 90-minute block of time to spare.

I have two qualms with the content.  First, it makes the case that the victims of this crime are the millions of small investors and pension-savers, people like you and me.  And it’s true that many pension funds and ordinary folks were ripped off.  But the real indictment is this: the financial sector has doubled its share of the economy, and its ballooning profits are a major contributor to the rise in inequality.  What are we paying for?  As this film clearly shows, we are definitely not buying better information or a more productive allocation of capital, at least not in the sectors of the market it shines its light on.  On the contrary.  We are being fleeced by sharp operators whose only reason for existence is that they can stash away their cut of the loot before anyone learns enough to stop them.  That’s a pretty big lesson, in my book.

Also, the film ends by suggesting that the entire market capitalization of the major Chinese firms—they point to Alibaba in particular—may be fraudulent, and that we’re on the verge of another 2008-style market meltdown.  I’m not a specialist in Chinese equities, so I won’t take a position on this.  Nevertheless, it’s clear that there is a lot of genuine economic growth going on in China, and some of it must be serving to support asset values.  It is unlikely that the entire capitalization of Chinese firms will prove to be as flimsy as that of the smaller pseudo-firms exposed in the film.  Of course, between full current market value and zero there’s a lot of potential space for unpleasant surprises.

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Confessions of a Late to the Party Russiagate Non-Skeptic

I don’t think this is worth your time, but when I post only at rjwaldmann.blogspot.com Dan pulls the post over here so I might as well.

Like many many (too many) people I am irritated by this article by Blake Hounshell.

Hounshell claims to have “doubts about whether Donald Trump colluded with Russia” I have a couple of questions. One is: Which word in “Trump colluded with Russia” didn’t you understand ? The answer is “colluded” which is repeatedly redefined in the article so it can dodge a hail of facts and remain unproven. The other (which I actually asked him) is:if in 2014, I had described the Trump tower meeting & preceeding e-mails (without inventing names) and asked “would you call this ‘collusion'” what would you say ?

There would be a follow up question if his answer were “no”: OK now describe an imaginary scenario which you would call collusion.

I think it is not possible for a mainstream journalist to note that we know that Trump jr colluded with Russians. The rules of journalism can’t all be followed in the present case in which the President regularly asserts things which are demonstrably false. There has to be a debate about whether collusion will be detected, even though it has been detected.

I think Hounshell’s interest is in whether there is a story out there. The fact that the story has already been told right in here where we all heard it is irrelevant. The question is whether there is a big scoop to be made. Another important question (which Hounshell barely addresses) is whether the collusion constitutes the crime of conspiracy and whether the colluders will be prosecuted.

I decided to write this post to point out an amusing contradiction in the article. Hounshell argues that, if there had been collusion, Trump would have openly blabbed about it since he has no self control & also that Donald Trump’s open collusion on TV isn’t collusion because it was open blabbing. I quote

Then there’s the Trump factor to consider. Here’s a man who seems to share every thought that enters his head, almost as soon as he enters it. He loves nothing more than to brag about himself, and he’s proven remarkably indiscreet in the phone calls he makes with “friends” during his Executive Time—friends who promptly share the contents of those conversations with D.C. reporters. If Trump had cooked up a scheme to provide some favor to Putin in exchange for his election, wouldn’t he be tempted to boast about it to someone?

[Biiig skip]

There is, of course, plenty of public evidence that Trump was all too happy to collude with Putin. “Russia, if you’re listening, I hope you’re able to find the 30,000 emails that are missing,” springs to mind …

The fact (noted six (6) paragraphs later) burns Hounshell’s argument to the ground, scatters its ashes to the nameless howling winds and sows salt where once it stood.

(I am quoting Noah Smith quoting someone else).

Hounshell’s argument rests on Catch 22 — Trump can’t collude without discussing the collusion in public and public requests can’t be collusion themselves or correspond to private collusion because they are public.

It may be true that Trump couldn’t conspire with Russia without talking about it in public, but it is certainly true that he talked about it in public. Again the question, can Hounshell imagine a scenario less devastating for his argument. Hmm well collusion typically involves a quid pro quo not just a request. Lets run the tape

“Russia, if you’re listening, I hope you’re able to find the 30,000 emails that are missing. I think you will probably be rewarded mightily by our press.” He said this after Papadopoulos was informed by the Russians that they possessed Clinton-related emails.

Hmm “rewarded mightily”. Note the “by our press” makes no sense. Respectable newspapers don’t pay for stories and disreputable ones don’t have access to sums which would seem mighty to the Russian government. I think the “by our press” locked the door after the horse had escaped the horses mouth.

So what’s going on ?
1) Maybe Hounshell is Fukayaming
2) Someone suspects he is stuck in the pose of a cynical sophisticate who has seen worse before and is amused by how excited the non-cognoscenti are.
3) He is thinking of whether a journalist should invest in an effort to find another smoking gun. It would be very hard to top the two which have been smoking away for months. So there is no professional gain there — only crimes against democracy.

I think point 3 is the important one. There will be no dramatic proof that Trump is a crook for the same reason that there will be no dramatic proof that water is wet.

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A Review of A Review of Enlightenment 2.0

I am very glad I read Alex Tabbarok’s review of “ENLIGHTENMENT 2.0: Restoring Sanity to Our Politics, Our Economy, and Our Lives,” by Joseph Heath. Tabbarok is a leading ultra pro market libertarian and “Joseph Heath is a Canadian philosopher who is unusually conversant with economics and also unusually capable of writing sparkling prose for a popular audience. ”

I have some thoughts. I advise the reader to click the link, and recklessly attempt a very brief summary of the book and the review.

1) Heath says our intuition and heuristics are unreliable, so we should try to use reason and logic.

Tabbarok says Heath focuses to much on logic and too little on empirical investigation.

2) Heath notes that advertizers gain by exploiting heuristics and biases, that we are constantly bombarded with alleged information and that this is making things worse.

Tabbarok notes that capitalism rewards rational producers. He hints at a market selection argument (I think he is careful not to spell it out *again* because he has done so too often for one lifetime).

3) Heath notes that the GOP has become extremely dumb and crazy.

Tabbarok discusses collective action problems a lot.

OK my comments

Heath also glosses over the fact that in the modern era measured IQ scores have risen, not fallen. IQ scores have risen especially in tests of abstract reasoning ability. Just the kind of ability that German social philosopher Georg Simmel argued was promoted by capitalism. Simmel argued that increasing familiarity with money as an abstract, representative unit of value improved abstract reasoning and rational calculation in other spheres of life. This kind of abstract thinking is also what makes people capable of understanding the idea of universal human rights.

First I note that another German social philosopher Karl Marx made the same point (no cite — its an aside on the origin of Protestantism in the Communist Manifesto). Here money abstracts value from the particular characteristics of goods and services — it encourages us to think of goods & services in isolation and treated equally. It encourages a view of people as individuals shorn of clan, guild, and (after centuries) sex and race. This has its costs but does help peopl understand the idea of universal human rights. I think history tends to support Simmel’s hypothesis.

Another possibility is that markets are unstable and disruptive — some rich people become poor and some poor people become rich. That churn disrupts traditional hierarchies. Hereditary rank ceases to be almost perfectly correlated with economic power. I’d tend to guess it was wealth => power => new political institutions => new habits of thought and new ideologies designed to praise and defend the new establishment.

On IQ tests I have another concern. The old Otis IQ tests includes simple logic puzzles. Simple algorithms for solving them can and have been taught. The aim of the test is to detect general cognitive ability. Our scores depend on what we have been taught (I would not score very well on IQ tests where the questions were written in Chinese). IQ like SATs affect lives. The problem, as always, is we can’t tell whether test scores correspond to that which the test was designed to measure. They can be increased by teaching to test. The new knowledge and skills may be narrow — useful for the test but not generally useful. In the extreme, the knowledge can be “the correct answer to question 3 is b to 4 is d …”, that is there is a grey area between teaching to test and teachers cheating. The test is valid so long as people don’t have an incentive to score high.

Tabbarok has a crazy idea of using betting markets to make public choice decisions. First he notes a fact

When pollsters ask Democrats and Republicans factual questions such as did inflation fall during Reagan’s presidency or were weapons of mass destruction found in Iraq, they answer in a highly partisan manner. But partisan bias greatly diminishes when voters are told that they will be paid if they answer correctly. Betting is a more reliable guarantor of objectivity than voting. Or, as I once wrote, “A bet is a tax on bullshit.”

Then he discusses a proposal to base collective decisions on betting markets.

But once we decide on values, let us then bet on beliefs. Do we agree that lower unemployment would be a good thing? Ok, let’s then bet on whether fiscal policy or monetary policy would best achieve that goal and let’s then go with the betting favorite. Economist Robin Hanson terms this “rule by prediction markets,” or futarchy. Is betting on policy a crazy idea? Perhaps so

I think the proposal is somewhere along the spectrum, serious proposal-provocation-joke, but I will take it seriously.

Here notice Tabbarok has no problem with rich people having more power over public choice (he likes markets and doesn’t mind inequality). The proposal is based on ignoring (not clearly rational) actions of rich people who use their money to get the political results they want. Now it’s campaign contributions and such, but with a betting market it would be direct. If there were a market on “the affordable care act will cause a dramatic decline in the number of uninsured” the odds paid for guessing yes would have been huge, because the Kochs would have bet however much they had to to make no the odds on favorite.

Here again, a measure is reliable exactly because it isn’t important, because it isn’t used to make a decision.

Now it may be that there is a collective action problem in betting in a way such that there are expected losses in order to affect the market odds. But in the real world, people do act collectively and serve a cause beyond their narrow personal interests. Also the actual market is not populated with huge numbers of people each of whom has wealth trivial compared to the total amount of money in a specific market. There are big players and they throw their weight around.

OK I feel a bit like a fool for taking a joke seriously. Why go half way ? click more for my crazy suggestion

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A Critical Review of Jeffrey Miron’s Call to Slash Entitlements

A Critical Review of Jeffrey Miron’s Call to Slash Entitlements

I accused John Cochrane of incoherent babbling on the Federal deficit issue noting his update where he flip flopped:

He went from fiscal policy being sober to we are in dire straights just like that! Oh my the sky is falling. We have to take away those Social Security benefits that my generation have been paying into for 35 years. We cannot afford Federal health care spending. After all those tax cuts for the rich can never be reversed. Yes John Cochrane is part of the Starve the Beast crowd even if granny starves from these supposedly required reductions in transfer payments.

But let’s note why Cochrane flip flopped in his update:

Jeff Miron wrote to chide me gently for apparently implying the opposite, which is certainly not my intent. One graph from his excellent “US Fiscal Imbalance Over Time”.

Having read this Cato paper, it is time for my critical review that I promised. The review will start with the technical finance which in one way is a lot better than Cochrane’s rants but still troubling in certain ways. I will next turn to the policy if not political issues where this paper is even worse than Cochrane’s update. Beware – we will have to cover a fair amount of numbers but I hope to keep this within the context of my present value model:

Let g = the ratio of Federal expenditures excluding interest payments to GDP and t = the ratio of Federal taxes to GDP. If we assume a steady state model, the present value of future primary surplus is simply V = (t- g)/(r – n), where r = the real interest rate and n = the long-term growth rate. As long as V is at least as great as the debt/GDP ratio, we are not on the bankruptcy path that economists were talking about when Reagan initiated his 1981 fiscal fiasco. Tax rates were massively cut and defense spending spiked and had this fiscal stance continued forever, then the debt/GDP ratio would have exploded. Of course it didn’t as there were future tax increases and the peace dividend.

Miron is using the same basic model, which he expresses as:

Fiscal Imbalance = Present Value of Future Expenditure – Present Value of Future Revenue + Outstanding Debt

What I like about this equation is its focus on future spending and revenue not historical decisions which can be summarized as the current level of debt in terms of our model. Cochrane’s rant was a bit weak in this regard. May I suggest Cochrane rent the 1989 movie and check out this scene as the Joker gets basic finance! While I may quibble with Miron with respect to his forecasts, my big problem the use of nominal figures to draw his graph – which is far from “excellent”. Note his measure doubled in nominal terms since 2000 but so has nominal GDP (higher prices, more people, and higher income per person). Which is why this title and introduction is misleading:

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Polar Ice Is Lost at Sea

Via Naked Capitalism and published orinially at Grist  Polar Ice Is Lost at Sea:

Our planet reached another miserable milestone earlier this week: Sea ice fell to its lowest level since human civilization began more than 12,000 years ago.

That worrying development is just the latest sign that rising temperatures are inflicting lasting changes on the coldest corners of the globe. The new record low comes as the planet’s climate system shifts further from the relatively stable period that helped give rise to cities, commerce, and the way we live now.

So far, the new year has been remarkably warm on both poles. The past 30 days have averaged more than 21 degrees Fahrenheit warmer than normal in Svalbard, Norway — the northernmost permanently inhabited place in the world. Last month, a tanker ship completed the first wintertime crossing of the Arctic Ocean without the assistance of an icebreaker. Down south in the Antarctic, sea ice is all but gone for the third straight year as summer winds to a close.

The loss of Earth’s polar sea ice has long been considered one of the most important tipping points as the planet warms. That’s because as the bright white ice melts, it exposes less-reflective ocean water, which more easily absorbs heat. And that, sorry to say, kicks off a new cycle of further warming.

According to research published last fall, that cycle appears to be the primary driver of ice melt in the Arctic, effectively marking the beginning of the end of permanent ice cover there. The wide-ranging consequences of this transition, such as more extreme weather and ecosystem shifts, are already being felt far beyond the Arctic.

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Competition Is for Losers

The Wall St. Journal quoted Peter Thiel’s business plans. It is mostly behind a paywall.

Competition is for Losers

If you want to create and canpture lasting value, look to build a monopoly, writes Peter Thiel

What valuable company is nobody building? This question is harder than it looks, because your company could create a lot of value without becoming very valuable itself. Creating value isn’t enough—you also need to capture some of the value you create.

New Republic points us to the politics of Democrats of monopoly:

What drives monopolization is not business know-how or technological innovation, but public policy—a political environment that permits or even enables an investor like Jeff Bezos to engage in a massive accumulation of economic power. Not that long ago in America, no company as large and destructive as Amazon would have been allowed to exist. Preventing and breaking up such corporate behemoths, in fact, was at the very center of the Democratic Party’s agenda. “Private monopolies are indefensible and intolerable,” the party’s platform declared in 1900. “They are the most efficient means yet devised for appropriating the fruits of industry to the benefit of the few at the expense of the many.”

In the late 1970s, however, the Democrats began to abandon the idea that big is bad. Over the past four decades, the party has stood by as giant supermarket chains replaced local grocery stores and Too Big to Fail banks replaced local lenders. As monopolies broke up unions and drove down wages, Democrats increasingly came to rely on campaign contributions from the very corporations that were consolidating their control over the American economy. The Obama administration, like the Bush administration before it, declined to bring a single major monopolization suit against U.S. companies. Even The Washington Post, that exemplar of political opposition to Donald Trump, is now owned by Jeff Bezos. Dissent, brought to you by monopolists.

But with Republicans in control of all three branches of government, and with the big business ethos espoused by Hillary Clinton in tatters, Democrats may finally be returning to their anti-monopoly roots. Leaders within the party are once again looking to the aggressive antitrust movement launched during the Progressive era and extended through the New Deal, which propelled America into three of its greatest decades of rising prosperity and economic equality. The question now is: Can Democrats find a way to rechannel the popular outrage unleashed by Trump, and to repurpose the party’s traditional opposition to monopoly in the age of Amazon?

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Mueller et al Declared that there Was Collusion

The post entitled “Trump’s Claim Mueller Found ‘NO COLLUSION’ Is Literal Nonsense” is not up to Jon Chait’s usual standard. Trump’s claim is, of course, nonsense. Chait accurately described Trump’s typical pathetic rhetorical trick “One of President Trump’s favorite methods to defend his innocence in the Russia investigation is to claim that any piece of evidence that does not explicitly assert his guilt is in fact evidence of his innocence.” and added some high quality snark “It is exactly like saying Trump was cleared by the Warren Commission because the Warren Commission report makes no conclusion about Trump and Russia.” However, he misread the indictment.

Chait (and many many others) concedes that the indictment didn’t declare that collusion has been detected “this particular indictment probably has nothing to do with collusion. ” In fact the indictment declared that collusion has been detected. it didn’t name all of the conspirators, but the grand jury did definitely claim to know of conspirators who were not named in the indictment.

I quote (with a pdf warning and my emphasis)

From in or around 2014 to the present, Defendants knowingly and intentionally conspired with each other (and with persons known and unknown to the Grand Jury) to defraud the United States by impairing, obstructing, and defeating the lawful functions of the government through fraud and deceit for the purpose of interfering with the U.S. political and electoral processes, including the presidential election of 2016.

The indictment explicitly states that only some of the “known” conspirators have been indicted. It doesn’t say whether any of the unindicted conspirators worked for the Trump campaign, but it definitely also doesn’t say that no crimes Trump campaign workers have been detected in the investigation into internet trolling (let alone the broader investigation).

The indictment explicitly states that there are known unindicted co-conspirators. It does not address the question of whether one is, say, named Donald Trump, even within the narrow limits of the investigation of “INTERNET RESEARCH AGENCY LLC” and its employees.

I mean which word in “conspired with … persons known … to the grand jury” didn’t he understand ?

update: This post by Marcy Wheeler is incomparably better than my little post. Read it.

One point from Wheeler– a US citizen conspirator who was not indicted has been named. Richard Pinedo was not indcted because he pleaeded guilty on February 7th. The indictment can’t be construed as stating that the Grand Jury does not have probable cause to believe Americans were wittingly involved in the conspiracy. At least one definitely is known. He wasn’t indicted because he confessed.

Wheeler wrote

In the wake of that indictment, the court unsealed a February 7 plea agreement with Californian Richard Pinedo, for identity theft (basically, selling bank account numbers; the information doesn’t identify the users who purchased the bank account numbers as IRA personnel who used them to set up “American” identities, but that is clearly what happened).

update 2: I have a thought. Wheeler wrote

Plus, Mueller likely obtained cooperation from one IRA employee, the unnamed person who traveled to Atlanta in November 2014 for reconnaissance. Had that person not cooperated, he or she would have been named in the indictment.

This is probably true, but I think that I have thought of another possibility. It is possible that Atlanta traveller wasn’t indicted because he or she didn’t commit a crime. Two women were indicted for lying on their visa applications saying they were in the USA for tourism not reconnaissance. But reconnaissance isn’t a crime. It sometimes called journalism and sometimes called market research. If Atlanta traveller claimed to be a journalist, he or she is in the clear. The US government can’t decide who is and who isn’t a real journalist (just as it can’t decide who is a real clergyperson) because everyone has a first amendment right to claim to be a journalist (the first amendment doesn’t say anything about citizenship — foreigners have free press rights too). IRA wasn’t seeking classified information — they wanted to know what Americans were saying about the election. The reconnaissance was journalism which is legal except for people who lied claiming to be tourists.

So maybe someone did something totally legal, can’t be indicted and wasn’t named because he or she has a right to some privacy while observing us.

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All Economists Are Bastards — Except Us

All Economists Are Bastards — Except Us

Peter Frase has a very interesting post up about the role of popular culture in legitimizing the police.  Frase recounted a forum he attended with Alex Vitale  talking about his book, The End of Policing. In response to a question about why people believe that the function of policing is to maintain peace in the liberal order when its actual practice and history suggest otherwise, Vitale cited television cop shows like  as “a relentless machine for producing and reproducing the legitimacy of policing in the public mind.”

This is what called to Frase’s mind the perpetual plot line he calls “‘ACAB-EU’: All Cops Are Bastards, Except Us.”:

The trope works by consistently portraying its central characters as liberal fantasies of the good cop–whether it’s the pseudo-scientists of CSI, the workaday victim-protectors of SVU, or the magical profiler-geniuses of Criminal Minds. At the same time, it makes a seeming concession to concerns about police misconduct, by constantly putting its protagonists in conflict with “bad cops” and their enablers, whether it be a rapist Corrections Officer or a corrupt small town department whose cover-up leads all the way to the Governor.

Of course this trope works for politicians too. And economists.

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