Friday, March 29, 2013

Seeing the Gay Marriage Legal End Game Before Everyone Else

The US Supreme Court is currently considering arguments for and against gay marriage. In the prognosticating about what was going to happen, and given John Roberts' willingness to cave at the last minute on Obamacare, I think Pax Dickinson's view is probably a fair bet:
"My guess is that SCOTUS will arbitrarily legalize gay marriage in all 50 states. Cthulhu only swims left."
The latter part is a rather reliable prediction, especially in the long run, but it's a somewhat noisy predictor for any particular Supreme Court decision. Cthulhu swam right, at least temporarily, on the question of the Second Amendment. Maybe gay marriage will break the same way, although I wouldn't bet on it.

That said though, there's someone who called all this much earlier, saying that the Supreme Court was going to impose gay marriage on the country. They made this prediction way back in 2003, in fact.

See if you can guess who it was (answer below the fold).

Tuesday, March 26, 2013

The Evolution of Shylock Holmes on Democracy, Part 2

(...continued from Part 1)

The aftermath of the financial crisis saw the election of Obama, and the resulting stimulus bill was basically just the laundry list of every wasteful pork barrel project that was waiting for a crisis to ram it through. Predictably, this resulted in an increase in the size of government that was (as always) promised to be temporary, but which ended up being (as always) permanent. Obamacare saw the takeover of the US healthcare system with ever more regulation and deceptive hiding of costs (every ‘child’ insured until 26! ‘Free’ coverage of pre-existing conditions), resulting in something that was likely to be worse even than a fully socialised model. The ever-expanding bureaucracy of federal, state and local governments in the west was choking and relentless, showing no sign of stopping. The contraction of the private sector in the recession only served to highlight how the only expanding sector was government paper pushers, passing laws to burden private business.

Not only that, but the longer things went on, even the legislative achievements of Republicans became harder to see the benefit of. George Bush’s most impactful domestic policies were increasing seen to be another permanent expansion of the bloated entitlement state with Medicare Part D prescription drugs for seniors, the creation of the repulsive and loathsome TSA, and No Child Left Behind. The latter actually seemed like a good idea under standard conservative thought that the problem with bad schools was the teachers unions. The more you read, it seemed like the problem was really just bad students, and the whole idea was that standardized testing would make all students above average. Which, of course, didn’t happen. The 2012 Republican candidate had passed the same damn healthcare policy that conservatives were now complaining about. If this was the practical difference between the two parties, what was the point?

This was mostly just grumbling and disillusionment about domestic policy, but the view that Republicans probably wouldn't do much to reverse things was dispiriting  The election of Obama probably had a larger effect on the perception of the Iraq and Afghanistan wars, which was perhaps more central to the question. Once the administration of the wars was no longer being carried out by “our guys” (as increasingly tenuous as that label was becoming), conservatives, myself included, were able to view the whole affair without nearly as much instinctive partisan support of the decisions made up to now. You started to hear well-reasoned paleo-conservative  voices on the right making sound and persuasive arguments about the folly of trying to turn these places into Switzerland – what the hell were we still doing there, almost a decade on? Sure, it was important to attack Al Qaeda and maybe even send a message to third world dictators to deter them from acquiring weapons of mass destruction (though opinions on the last one varied). But why did that involve trying to run the places in a really half-assed way for years on end, resulting only in the deaths of the most honorable and courageous soldiers the US was producing? If we wanted to kill terrorists, why not just blow up the place and leave?

The Arab spring managed to destroy the last of my faith that democracy might have even neutral effects on third world countries, let alone that it was going to foster economic development and liberty. The cathartic satisfaction of seeing the architect of the Lockerbie bombings getting his just desserts made way for social chaos and the attack on the Benghazi embassy. Meanwhile, Mubarak, who was not nearly as bad as Gaddafi, got the boot and it was quickly apparent that he wasn’t going to be replaced being a western-leaning liberal like the Sandmonkey, but instead by the Muslim brotherhood. That may be the last time I let my optimism about getting rid of the devil you know cloud my better judgment.

And then came along Moldbug, to put a lot of this stuff in a new perspective. With a longer time frame, reactionaries were seen to have been losing slowly but inevitably for the last several hundred years. Not only that, but it was only when one was willing to remove the sentimental attachment to the idea of suffrage did it seem obvious that the rise of democracy and the rise of socialism were unlikely to be a coincidence. Rather, they were viewed as one of the likely (if not the only) stable Nash equilibria of the voting game: 51% will always get together to expropriate the remaining 49%. I’d always known that this was a possibility. These days, I tend to think that it’s probably an near-inevitable result of democratic systems – sometimes you get there slower, sometimes you get there faster, but socialism is where it ends up. At last, you had a very parsimonious explanation of both why conservatives kept losing and why they kept being surprised about this fact – they were wedded to a romance about universal suffrage that blinded them to the fact that this was the likely cause of the ruin of the things they valued. To say that the 49% deserve to be eaten because they’re not the 51% tends to undermine the ‘getting the government you deserve’ argument.

To the extent that democracy is thus the means by which you empower the many to expropriate the few, it is no longer a moral neutral, it is in fact a moral bad. In this setup, the west works despite democracy. It doesn’t work without regard to democracy, and it certainly doesn’t work because of it. Even democratic boosters must occasionally look at the story of Greece in recent years and wonder about the ability of western democracies to correct course, particularly if there isn’t some superior not-really-democratic body like the EU to force their hand.

All this raised the larger question : what if the same thing was true in the West that you’d previously identified in the Arab spring and the third world? That in the long run you could either be free to vote, or free in the other aspects of your life, but not both?

I’m not certain of this conclusion. An awful lot hinges upon what you think about the relationship between democracy and the widespread technological improvement and associated economic growth of the 20th century. If you think that this was tied to democratic systems of government, you’d very likely stick with it. But the evidence on this is hard to interpret. There’s a big time-series trend, for sure, and the US was probably the most innovative country of the 20th century. But the Soviets had a space program too, and the Nazis weren’t short on good physicists either. It’s hard to know what to think on this one.

The small-c conservative in me, however, is still skeptical of grand schemes for change. This is not based so much on the idea of needing to preserve the world as it is, but rather on the imperfectability of human knowledge. Most elaborate theories of government, including appealing ideas like neocameralism, may suffer from the same problem as No Child Left Behind – they sound great in theory, but the seductiveness of a given theory as being intellectually consistent nonetheless fails for reasons that you hadn’t thought about in advance. In other words, part of the problem of the communists was that they had an unrealistic view of human nature. The other part, however, was that they had excessive hubris about their ability to remake the world into some alternative utopia. To somewhat correct the first but retain the second may lead to disaster almost as surely, if your understanding of human nature turns out to be better but still incomplete.

So Shylock of 2013 is skeptical about our current governing arrangements, but unclear of what to replace them with. At a minimum, I’m much less certain that government in the west is carried out in anything like an optimal fashion. It’s striking how little experimentation there actually is in different methods of government. This makes me suspicious of claims that we’re at some kind of global maximum. Frankly, I’m not even sure we’re at a local maximum. You may think there’s a lot unresolved questions about something like a sovereign corporation. But honestly, what makes you so confident that it would work worse than the State of California? How about just less suffrage? If voting isn’t a moral right, would government work better if voting were limited to net taxpayers or property owners?

Moldbug once wrote that to not believe in democracy in the 21st century is a little like not believing in God in the 17th century. In this regard, I guess I’m a democratic agnostic, leaning skeptical. I find myself uncertain where most people are sure.

We’ll see what I think in 5 years time. Not many who lose their faith tend to regain it, however.

Monday, March 25, 2013

The Evolution of Shylock Holmes on Democracy, Part 1

Shylock circa 2003 was mainly a neo-conservative. By this, I mean that I tended to view democracy as both a moral good and an instrumental good. In the moral category, I tended to think that democracy was important as the only legitimate measure of the consent of the governed, and hence replacing authoritarian regimes like Saddam with some expression of the average Iraqi’s opinion was inherently an important increase in their freedom.

In terms of the importance of the invasion though, I was perhaps more sold by the idea of democracy as an instrumental good –that democracy tended to have a civilizing effect that would cause Iraqis to be less interested in starting wars with their neighbours and trying to develop weapons of mass destruction. At a minimum, it seemed like a better bet for the Middle East than the apparent previous policy of mostly non-engagement, which had brought September 11.

The longer the Iraq war went on, of course, the more it became apparent that neither Iraq nor Afghanistan was turning into a functioning government at any rapid rate. The new states were incredibly weak and riddled with violence. At the same time, democratic elections in the Palestinian territories produced government by Hamas, which seemed, if any anything, slightly worse than the terminally corrupt Palestinian Authority. It all started to call into question the idea of democracy as an instrumental good, as it wasn’t producing anything like decent governance in all these places.

More reading about the history of government in Singapore, Taiwan, South Korea and Chile cast the previously observed correlation between prosperity and democracy in a new light. These places tended to start out with authoritarian capitalism, and once this created prosperity, they were then able to transition to democracy. From this point of view, democracy was better understood as the symptom of a functioning society, rather than the cause. It seemed more that once a society had a culture that respected property rights and generally allowed individual freedom (at least in non-political matters), they were more likely to transition to democratic suffrage.

In this view, democracy is like a luxury good – it may have some positive treatment effects in a society that’s already peaceful and rich, but if it’s tried in a society that’s tribalist and doesn’t respect private property, the result is likely to be something like the disaster in Zimbabwe. At best, it’s a practical neutral overall, being maybe welfare-improving in some cases and harmful in others.

In moral terms, democracy was still a weak moral good, but the argument was more tied to the idea that you got the government you deserved. If you as a society voted for Hamas, you deserved to be governed by Hamas, for better or worse (in this case, worse). But it was at least a just outcome – as long as the vote was respected, the only way you got Hamas was if the median person supported it. This was the overall perspective of Shylock circa 2007/8.

( be continued)

Friday, March 22, 2013

End the Engagment Ring Arms Race

As they said in Wargames, the only winning move is not to play.

Over at Priceonomics, they had an excellent piece recently with the arresting title 'Diamonds Are Bulls***'.

I challenge you to read through the whole thing and come to the end asserting that diamonds aren't in fact bulls***, but are actually worthy demonstrations of love and investments of money. The reasons for the Priceonomics headline include, but are not limited to, the fact that:
-The whole thing was started by a marketing campaign in 1938 by DeBeers to get people to buy more diamonds
-We could make flawless diamonds industrially for very little money
-They lose tons of value immediately after purchase, and
-Even experts barely know exactly how to value them.

The point the article doesn't answer, of course, is how this practice persists given that most men already know, either instinctively or by reading this stuff before, that this whole thing is an outrageous con. No man is genuinely, honest-to-god happy about spending thousands of dollars on an engagement ring. They might do it because they love the woman, and know she's excited about it. But they'd sure as hell wish that the woman would be equally excited to accept by way of a substitute a really nice restaurant meal, an expensive watch, or a trip to the Bahamas. All of which in combination you could probably buy for less than a mid-level engagement ring.

So we all agree this is an egregious scam perpetrated on us by DeBeers.  These monopolist turdbags have managed to convince women and men that this is something that you have to do, Serious You Guys, to show your love for a woman. The reason this works is that marrying someone is an important decision that many men are nervous about. DeBeers has found a way to capitalise on this by creating a perception that society all agrees that we need to buy diamonds to show our love. Just like in a strip club, when you don't quite know what you need to do and are afraid to ask, you'll spend money to make the problem go away.

This problem is particularly strong because proposing to someone is something that men don't generally talk about a great deal beforehand - not to their friends, and even less so to the future bride. So they don't really know what they should be spending, and are thus ripe targets to be scammed by salesmen and their own nervousness. And it's difficult to boycott, because at the point you're proposing to someone, you're meant to be declaring your love. Proposing, while simultaneously explaining why there's no ring because that's stupid, is likely to come across somewhat awkwardly, to say the least.

The other macabre genius of the plan is that it's difficult for couples to agree ahead of time not to do it, because to plan in advance 'Oh, when I propose to you, I'll do it in this way' ruins the surprise. As a consequence, even men who are 90% sure that their fiancee doesn't care much for an expensive ring will probably err on the safe side and spend the cash anyway, just to be sure. If they could have a conversation and confirm their hunch, they'd just skip it. But they can't. So DeBeers wins again.

Frankly, I find this immensely unsatisfactory. Not only is this wasteful, zero-sum arms race spending, but it's a scam perpetrated by the most successful cartel in the history of the world.

If there's one thing I hate, it's monopolists jacking up prices. Boy, do I hate monopolists. Nothing would please me more than to see those clowns reduced to being insurance salesmen or something actually productive.

So, how do we destroy DeBeers? How do we stop the arms race?

Here's the Shylock three step plan for how, as a society, we can stop flushing money down the toilet on worthless trinkets.

Step 1. Tell all future dates, well in advance of any proposal date, that you think expensive diamonds are a crock and a fraud, and that you won't be buying one, regardless of whom you marry.

Step 2. Follow through on it.

Step 3. There is no step 3.

Step 1 is the key part. What you need to do is make the conversation about the principle of the ring in the abstract, divorced from any implication about the girl in question. In other words, make it known that this isn't about the girl you're with, it isn't because this is on your mind since you're thinking of proposing soon. No, just as a moral stand, you're refusing to enrich a price-fixing cartel to satisfy an arbitrary demand about how romance should be.

The girl may object that she likes diamonds and finds them pretty. The immediate answer is that she likes them because the DeBeers corporation decided that she should like them. Why else would society just magically start liking them all of a sudden in 1938? And if you just like sparkly things, why not a cubic zirconium? Why not an artificial diamond? What on earth is the difference, other than burning money?

More to the point, the receptiveness of the girl to this argument is a great screening mechanism. Just like women who don't pine after massive weddings, the women who don't pine after expensive engagement rings are also, on average, the ones you actually want to be marrying. A girlfriend who agrees that this whole thing is a con and are happy with a cheap ring, a fake ring, or no ring at all is, paradoxically, the one worthy of the expensive ring. But thankfully, that's not even needed!

The real question is, do you go the hardcore route and insist on no ring at all, or do you just buy a small artificial diamond for a few hundred bucks, or a cubic zirconium for ten bucks?

The answer to that depends on how tolerant the other party is, and how much you feel like contributing positive externalities. Taking a stand to not buy any engagement ring (and just having the wedding ring) is risky, but decreases ever so slightly the societal expectation of having to spend money like this. It's providing a true public good. You won't be thanked by many people, but you'll always be an honorary member in exemplary standing around this humble corner of the internet.

Buying a fake ring will cost you not much more, but is implicitly acknowledges that you're catering to the societal demand by pretending you bought an expensive ring. And pretending is all it is, because it's unlikely anyone else will be able to tell the damn difference.

I can see the argument for the second one, if only to make the fiancee's life easier so that she doesn't have to explain to everyone why there's no ring at all. That's perhaps too big an ask in the short term. But even being willing to have a small ring is an improvement. Like all social attitudes, they change slowly.

One thing is for sure. If I decided to get married, DeBeers isn't getting a red cent out of me.

This may seem like an extreme position, but frankly if you've put up with the rest of the somewhat outrageous things I say, is this one really much worse?

Monday, March 18, 2013

A Call To Arms For Tax Accountants

Accountancy  always suffers the reputation for being boring and dreary. "We pore through arcane pages of tax law to find out how to slightly alter the deductions on some or other special purpose entity! What could be more thrilling?"

Okay, so the day-to-day business of accounting might not be fun. But the purpose of it can be made much more exciting - I help free citizens cheat the government out of ill-deserved tax revenues! Pro-tax-avoidance types are often fond of quoting Judge Learned Hand on this point:
"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."
This is good, as far as it goes. It has some resemblance, although imprecise, to the standard defence of capitalism - sure, this whole greed thing is bad, but capitalism channels it towards socially beneficial purposes. Here, the equivalent is that everyone tries to pay less tax, and so you don't need to feel bad about that.

In other words, your desire to keep your own money is widespread, so obey the law, but otherwise feel free to keep your own cash. Sound advice, but not exactly uplifting. You wouldn't want to be trying to inspire people to man the barricades with that. The big missing piece is an explanation for why exactly 'all do right' by avoiding taxes. Judge Hand never really tells us why that is.

What you really want, rather, is the tax avoidance equivalent of the Ayn Rand argument for capitalism, which phrased it as a morally correct system, rather than as a morally fraught but practically effective system. Rand's argument, which is relevant here too, is essentially that all interactions between men either happen by voluntary contract, as epitomised by money, or at the point of a gun. Thus capitalism is in fact a morally uplifting system, rewarding men's ingenuity for satisfying the desires of other men, and providing value in exchange for value.

And to get the tax-avoidance version of that, you need the great Lysander Spooner:
All political power, so called, rests practically upon this matter of money. Any number of scoundrels, having money enough to start with, can establish themselves as a "government"; because, with money, they can hire soldiers, and with soldiers extort more money; and also compel general obedience to their will. It is with government, as Caesar said it was in war, that money and soldiers mutually supported each other; that with money he could hire soldiers, and with soldiers extort money. So these villains, who call themselves governments, well understand that their power rests primarily upon money. With money they can hire soldiers, and with soldiers extort money. And, when their authority is denied, the first use they always make of money, is to hire soldiers to kill or subdue all who refuse them more money.
For this reason, whoever desires liberty, should understand these vital facts, viz.: 1. That every man who puts money into the hands of a "government" (so called), puts into its hands a sword which will be used against him, to extort more money from him, and also to keep him in subjection to its arbitrary will. 2. That those who will take his money, without his consent, in the first place, will use it for his further robbery and enslavement, if he presumes to resist their demands in the future. 3. That it is a perfect absurdity to suppose that any body of men would ever take a man's money without his consent, for any such object as they profess to take it for, viz., that of protecting him; for why should they wish to protect him, if he does not wish them to do so? To suppose that they would do so, is just as absurd as it would be to suppose that they would take his money without his consent, for the purpose of buying food or clothing for him, when he did not want it. 4. If a man wants "protection," he is competent to make his own bargains for it; and nobody has any occasion to rob him, in order to "protect" him against his will. 5. That the only security men can have for their political liberty, consists in their keeping their money in their own pockets, until they have assurances, perfectly satisfactory to themselves, that it will be used as they wish it to be used, for their benefit, and not for their injury. 6. That no government, so called, can reasonably be trusted for a moment, or reasonably be supposed to have honest purposes in view, any longer than it depends wholly upon voluntary support.
Quite so.

Tomorrow, I'm off to my accountant to find out how to squeeze every possible deduction| out of my tax returns. Do your patriotic duty and take back every cent you can from the megatherion in Washington!

Wednesday, March 13, 2013

The Intrade End Game

The most useful source of information on US political events, Intrade, is shutting down:
With sincere regret we must inform you that due to circumstances recently discovered we must immediately cease trading activity on
These circumstances require immediate further investigation, and may include financial irregularities which in accordance with Irish law oblige the directors to take the following actions:
-Cease exchange trading on the website immediately.
-Settle all open positions and calculate the settled account value of all Member accounts immediately.
-Cease all banking transactions for all existing Company accounts immediately.During the upcoming weeks, we will investigate these circumstances further and determine the necessary course of action.
To mitigate any further risk to members’ accounts, we have closed and settled all open contracts at fair market value as of the close of business on March 10, 2013, in accordance with the Terms and Conditions of our customers’ use of the website. You may view your account details and settled account balances by logging into the website.
At this time and until further notice, it is not possible to make any payments to members in accordance with their settled account balance until the investigations have concluded.

The outcome of shutting down was bound to happen eventually. But it's hard to know what to make of this press release in particular.

Part of the backstory is this disgraceful attempt by the US Commodity Futures Trading Commission to sue them over the fact that US investors were using the markets. Imagine that! US citizens having a bet on the outcome of an election! How will the republic survive?

They did the same thing with the sports betting version, Tradesports a few years ago. Under the rubric of the standard 'Think of the Children!' argument, the US government had to work hard to stamp tradesports out for a much bigger sin - offering a better sports gambling product at a lower cost than Vegas was willing to offer. And hey presto! Out you go. Tradesports made the Superbowl actually fun (no mean feat), as you could watch each play and see how the price reacted, getting real-time information on the progress of the game.

Tradesports was taken out sooner, because Vegas makes decent money off sports betting. They were willing to let the political side linger a bit longer, because this is small potatoes. Seeing the writing on the wall, the company who originally ran both (Intrade and Tradesports) sensibly decided to split the two parts off into separate companies. This managed to stave off the crocodile a little longer. What they really needed to do was start bribing making donations to some US senators. That would have been more useful. The trouble with being incorporated in Ireland is that you're far enough away that you can't have political influence, but not so far away that you can escape prosecution. Then again Full Tilt Poker was incorporated in Ireland. Then again again, when the DOJ came looking for them, they ended up getting acquired by PokerStars, incorporated in The Isle of Man. I don't know how much the jurisdiction helps. If it were me, I'd try for Macau. You can bet the ChiComs wouldn't bother you. If you are going to do it, though, you need to learn the lesson that DeBeers executives figured out, but David Carruthers of didn't figure out - don't plan to set foot in the US.

As with all this stuff, the way they go after you is the Wikileaks trick - they make it illegal for credit card companies to transfer you money. He who controls Visa and Mastercard controls the world. At least until BitCoin gets big. Mencius Moldbug predicted that if BitCoin ever did look like it was getting big, the government would shut it down. Care to take the other side of that wager? I'll give you pretty good odds.

Whether the CFTC is motivated by the same considerations that make the government put the squeeze on Tradesports is unclear. Frankly, bureaucratic petty jealousy would be more than enough to motivate these pinheads. Look, someone somewhere is trading a financial product without our authority! Shut it down! Sue them into oblivion!

The real question is why Intrade decided to stop trading now. After all, the loathesome CFTC press release was from November. Why now?

As far as I can see, there seem to be two possibilities.

One is that the government is pulling a Conrad Black. This is where they charge you with a crime and then find some pretext to freeze your assets, thereby making it incredibly hard for you to raise the money to pay for decent lawyers. How freezing their members accounts will help them is unclear - I'd be quite surprised if under Irish law they're allowed to used member funds (which are likely in some kind of trust) to pay for legal bills.

The other is that they've figured out that the money simply isn't there. Corporate directors don't use the words 'financial irregularities' unless they really have to. In other words, the reason they can't pay out members is that they've figured out that someone has been skimming money off the top, and now there aren't enough funds there to pay out everyone in full. In which case, you can't pay out anyone until you find out what the hell is going on. This was the substance of the allegations against Full Tilt Poker. If you're skimming money off the top, you're effectively running a Ponzi scheme, although not one with explosive growth.

It's possible the two ideas actually interact. In other words, the member funds are held in trust, but the company has been forced to make some provision for losses under the CFTC action. If you think there's now a chance that you'll be insolvent when it's all finished, it's not clear exactly what steps you'd take as a company, but this may well be one of them. (Not remembering all of my trusts law so clearly, I tried getting some kind of answer for the US here, but it looked rather hard. Actual lawyers would probably know the answer). So even if there isn't anything untoward going on in the company accounts, it wouldn't surprise me if this had something to do with it.

So at last, the government gets their way! The prediction markets in the US get eviscerated, except for BetFair, which actually does make it hard for US investors to take part (which probably doesn't help the accuracy of US election predictions), and, more importantly, is large enough in the UK that they have political power and can't be pushed around so easily.

The government doesn't specifically want inaccurate predictions. It just doesn't want anyone other than Vegas  or Wall Street to make any money on contingent financial contracts, no matter how small the amount, no matter how trifling the event being predicted.

The real winner in all this is Nate Silver. If you want predictions for important events, don't look to markets to save you. The markets would be happy to oblige, of course, but too many important people stand to lose money if that happens. Nothing personal old chap, you know how it is.

Friday, March 8, 2013

Look upon my beauty, ye mighty, and despair!

From the New York Times magazine, a photo shoot of models with their mothers.

Japanese artwork often associates the female form with the motif of the cherry blossom. It captures not only the sense of idyllic natural beauty, but the fragile and fleeting nature of the springtime of one's life.

The modern ideal is that people should not be judged on anything as shallow as outward appearance. If you're beautiful on the inside, that's all that matters!

Of course, nobody acts like this in their own choices, neither men nor women. The modern world has not stopped fetishising beauty, of course - quite the contrary. It has simply stopped being honest about how much beauty is prized, and how brief it really is. Last season's supermodels are simply shuffled out of the limelight to make way for the new ones, and the old photos are all that anyone ever depicts.

What ends up being lost thereby is an understanding of the vanishingly small amount of time that one will be young and handsome, and the not much larger amount of time that one will be around at all.

As one much wiser put it:
“I inform you, great king, I announce to you, great king: aging and death are rolling in on you. When aging and death are rolling in on you, great king, what should be done?”
“As aging and death are rolling in on me, venerable sir, what else should be done but to live by the truth (Dhamma), to live righteously, and to do wholesome and meritorious deeds?”

Tuesday, March 5, 2013

Let's Eliminate Salmonella. No, wait, let's not.

Over at Hacker News, there was a link to this great Forbes article talking about the differences in regulation in the treatment of eggs. Apparently in the US, eggs are forced to be washed, while in the EU eggs are forced to not be washed. This also relates to the fact that US eggs are stored in the fridge, while EU eggs tend to be left at room temperature.

The whole thing is presented as a kind of 'duelling regulations' thing - in the end, it looks like there's odd biological reasons why being washed or not can impact how you choose to store them, and the chances of disease.

And then, buried at the end of page three, comes this gem:
Since the late 1990’s British farmers have been vaccinating hens against salmonella following a crisis that sickened thousands of people who had consumed infected eggs. Amazingly, this measure has virtually wiped out the health threat in Britain. In 1997, there were 14,771 reported cases of salmonella poisoning there, by 2009 this had dropped to just 581 cases. About 90 percent of British eggs now come from vaccinated hens – it’s required for producers who want to belong to the Lion scheme. The remaining 10 percent come from very small farmers who don’t sell to major retailers.
In contrast, there is no such requirement for commercial hens in the US. Consequently, according to FDA data, there are about 142,000 illnesses every year caused by consuming eggs contaminated by the most common strain of salmonella. Only about one-third of farmers here choose to inoculate their flocks. Farmers cite cost as the main reason not to opt for vaccination –FDA estimates say it would cost about 14 cents a bird. The average hen produces about 260 eggs over the course of her lifetime.
Wait, what? You mean that for 0.05 cents per egg, you can virtually eliminate salmonella poisoning? And this isn't being done in the US, because US farmers have correctly estimated that ignorant consumers aren't savvy enough to insist on this purchase?

Talk about burying the lead.

Wow. That sounds pretty outrageous. I read this piece, and my instinct was the think that the British policy of vaccinating hens sounds like a no-brainer.

But then again, we wouldn't be economists if we didn't shut up and multiply.

Let's assume that the entire reduction in salmonella comes from this policy:  14,771 - 581 = 14,190 cases of salmonella avoided by vaccinating hens.

The cost per egg as we noted is 0.05 cents (14 cents per hen, divided by 260 eggs per hen).

So how many eggs are consumed in Britain each year?

According to this estimate, almost 11 billion. That sounds ridiculously large, until you realise that with a population of 63.182 million, this amounts to a consumption of 174 eggs per person per year, or roughly one egg every two days.

Let's go with that number.

So the total cost of the policy each year is thus roughly 11,000,000,000 *$0.14/260 = $592 million.

This implies a shadow cost of each case of Salmonella equal to ($592 million / 14,190), or $41,741.

Put that way, it seems like more of an arguable proposition. Maybe we should cancel the policy?

Not so fast! Do you know how much weight I should place on your hunch about the value of salmonella? Zero! Shut up and keep multiplying!

According to this PubMed article there were 1316 salmonella-related deaths between 1990 and 2006. The paper abstract reports the mortality per person-year, but what we want to know is the mortality per salmonella case. According to the original article, there are about 142,000 salmonella cases per year in the US. Assuming a constant number of infections over the years, this gives us a probability of death conditional on salmonella poisoning of 1316/(142,000*17) = 0.000545. Using a statistical value of human life of about $7 million, this gives an expected mortality cost per salmonella case of $3816.

Do you value the pain and suffering of a non-fatal case of salmonella at $37,925? I sure don't. If you paid me 38 grand and guaranteed it wouldn't kill me, I'd be pretty keen to sign up for a case of salmonella.

Put differently, the implied cost of human life in the salmonella reduction program is ($41,741 / 0.000545) = $76.57 million, ignoring any value placed on pain and suffering for non-lethal cases.

In other words, despite the intuitive appeal of getting rid of salmonella just by vaccinating chickens, as a society we'd probably be better off spending the money on road safety, medical research, or something else with a lower cost of saving each life.

The interesting thing is that when I started out writing this blog post, my initial reaction was that it was amazing that the US wasn't requiring chicken vaccinations, and the hard numbers changed my mind.

Sometimes the best treatment is to do nothing. Long live NPV!

Friday, March 1, 2013

George Akerlof ain't got nothing on the Silk Road

There was this great piece on Hacker News a little while ago on the Silk Road. Apparently it's possible to buy drugs over the internet using BitCoins, and get them shipped to you in the mail.

No, really.

There are so many great aspects to this story.

It's hysterical that this guy is so confident in the completely shambolic level of drug enforcement that he's willing to post them to his own address in his own name. The standard defence is that you might be able to claim that the drugs were sent to you by some enemy or nasty ex-girlfriend.

I dunno. This strikes me as one of those cases where people confuse the statement 'I won't be able to be proved guilty beyond a reasonable doubt' with 'I can come up with some bizarre cock and bull story about how my enemy wanted to punish me by sending me a hundred ecstasy tablets'. Yeah, that'll teach him! Eat ecstasy, loser!

The forgotten part in all this is that you've got to stand up in front of a jury of 12 ordinary men and women and convince them that this is actually a serious possibility. You got sent a pound of marijuana by an enemy, you say? Which one? Which girlfriend? Let's get her on the stand! What's that? She's now testifying that you guys broke up because she got tired of the fact that you were always smoking marijuana? And she decided to punish you by shipping you some marijuana, not tipping off the police or the post office, and just waiting for a random drug screening dog to sniff out the package?

Yeeeaah. If I were your lawyer, I'd advise you to take the plea bargain.

In addition, the guy is willing to buy adderall online, under the assumption that they don't bother screening for this stuff anyway, and then write about his experiences and post it on the internet. That takes some stones. Given they lock up doctors for prescribing too many painkillers, I can't say I'd share the author's insouciance about the reasonableness of drug enforcement policies.

More importantly, what a remarkable market has sprung up that despite all the enormous potential market for lemons problems, the guy actually reliably got the drugs shipped to his house multiple times. By anonymous strangers. Say what you will, that's some impressive market design right there. Read the whole thing and find out how it works.

Remember this next time someone tells you that the information asymmetry problems in a market are so severe that we absolutely must have yet more government regulation.