Bo Cowgill on Prediction Markets

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"It's incentive, nonetheless."

Very good stuff.

Gee, never saw THAT one coming...

Pfizer said yesterday that it would stop selling Exubera, its inhaled insulin, less than two years after introducing the drug. Despite Pfizer’s heavy promotion, Exubera’s sales were minuscule, with prescriptions amounting to less than 1 percent of the insulin market.

Pfizer will take a charge of $2.8 billion for costs associated with Exubera, making it one of the most expensive failures in the history of the pharmaceutical industry.

Rarely does a pharmaceutical company actually feel such nasty repercussions for producing a more expensive product with little value added to the prior product. Needles may hurt, but so does interstitial lung disease. And you just look silly taking a hit of insulin from a bong.

Restore the Draft? What a Bad Idea

Steve Levitt, of Freakonomics fame, hits one out of the park:

If the problem is that not enough young people are volunteering to fight in Iraq, there are two reasonable solutions: 1) take the troops out of Iraq; or 2) compensate soldiers well enough that they are willing to enlist.

The idea that a draft presents a reasonable solution is completely backwards. First, it puts the “wrong” people in the military — people who are either uninterested in a military life, not well equipped for one, or who put a very high value on doing something else. From an economic perspective, those are all decent reasons for not wanting to be in the military. (I understand that there are other perspectives — for example, a sense of debt or duty to one’s country — but if a person feels that way, it will be factored into his or her interest in military life.)

One thing markets are good at is allocating people to tasks. They accomplish this through wages. As such, we should pay U.S. soldiers a fair wage to compensate them for the risks they take! A draft is essentially a large, very concentrated tax on those who are drafted. Economic theory tells us that is an extremely inefficient way to accomplish our goal.

Critics might argue that sending less economically-advantaged kids to die in Iraq is inherently unfair. While I wouldn’t disagree that it’s unfair that some people are born rich and others poor, given that income disparity exists in this country, you’d have to possess a low opinion of the decision-making ability of military enlistees to say that a draft makes more sense than a volunteer army. Given the options they face, the men and women joining the military are choosing that option over the others available to them. A draft may make sense as an attempt to reduce inequality; but in a world filled with inequality, letting people choose their own paths is better than dictating one for them.

Sounds evil, until you keep reading...

So there's this headline:

Johnson & Johnson Sues Red Cross Over Symbol

Sounds evil, right? I salivate at the opportunity to rip J&J for corporate greed and evil, picking on a little non-profit like that. But, then there's the rest of the article:

The two had shared the symbol amicably for more than 100 years — Johnson & Johnson on its commercial products and the American Red Cross as a symbol of its relief efforts on foreign battlefields and in disasters like floods and tornadoes.

From time to time, the American Red Cross sold products bearing the symbol as fund-raising efforts. Jeffrey J. Leebaw, a spokesman for Johnson & Johnson, said the company had no objection to that.

But in 2004, the American Red Cross began licensing the symbol to commercial partners selling products at retail establishments. According to the lawsuit, those products include humidifiers, medical examination gloves, nail clippers, combs and toothbrushes.

Sorry, J&J. And more:

Mr. Crisan said it was not clear how far the American Red Cross wanted to go in licensing the symbol for commercial purposes, noting that the red cross was a trademark of Johnson & Johnson before the American Red Cross was officially chartered. Mr. Crisan said that some of the items being sold under licensing agreements by the American Red Cross seemed to compete directly with products sold by J.& J.

What planet does the Red Cross live on that it thinks this is a legitimate practice? And Mark Emerson, president of the ARC says:

“The Red Cross products that J.& J. wants to take away from consumers and have destroyed are those that help Americans get prepared for life’s emergencies,” Mr. Everson said. “I hope that the courts and Congress will not allow Johnson & Johnson to bully the American Red Cross.”

Yes, Mr. Emerson. Nobody else makes disaster kits except for the companies to which you license J&J's commercial logo. Americans are gonna die because they can't buy products with your license. Right.

My Quality Adjusted Life Year may be different than your Quality Adjustment Life Year

Slate's Darshak Sanghavi discusses some of the problems with the way health care economists judge the cost-effectiveness of various health treatments, within our culture and across cultures. Paul Farmer's Partners-in-Health group is used as anecdotal evidence (as Sanghavi's critique is almost verbatim the one that Paul Farmer gives in his lectures), and Farmer's infamous "before-HAART" picture is included in the article. Farmer hates the QALY (quality adjusted life year) metric, mainly because the QALY assumptions break down the more unlike the treatments are in their target population, and easily damns treating anyone in an impoverished nation with anything more expensive than penicillin and a mosquito net. Despite being an excellent primer in global cost-effectiveness, the article does a great job exploring the extent to which the assumptions of economics, like any statistical science, greatly limit our ability to generalize the results it produces to real policy decisions.

Are white NBA refs really racist?

A coming paper by a University of Pennsylvania professor and a Cornell University graduate student says that, during the 13 seasons from 1991 through 2004, white referees called fouls at a greater rate against black players than against white players.

Except that it really doesn't say that at all. This isn't a bullshit study by any means. I've read that the authors do a great job of considering a multitude of potential confounders, and that the authors do mention alternative hypotheses that their data cannot distinguish between, and that's heartening.

But the paper (or at least those interpreting it in the media and blogosphere) seems to be making a fundamental ecological error of attributing community level behavior to individuals. The study suggests that having more white refs on a three-man referee team leads to more fouls on black players, but it has no means by which to imply that white referees call more fouls on black players.

While not as elegant an explanation, a black referee with two white referees in his group might be more likely to call a foul on a black player, and the white referees might make no distinction.

The proper conclusion of the study is that a community-level effect exists, and another study needs to be performed addressing which of the individuals makes the call to create strong evidence for any individual level bias hypothesis. As the NBA has that data and will not release it, and no grad student probably has the time to watch 1500 basketball games a year to generate the data, I doubt we're going to get an answer.

UofMichigan Sit-In for sweatshop labor

Back in my freshman year of college at the University of Kentucky, friends of mine holed themselves up in the administration building to protest the use of sweatshop labor by university vendors.

Now, there are kids at UofM doing the same thing.

I'm no economist (even if I sometimes play one in my fantasy life), and I'm ambivalent at best nowadays about globalization (which is a dramatic shift from my extreme anti-globalization views held as recently as just the past few years). The globalization debate is a fertile one, and one in which both sides can make extremely compelling arguments that their policy preferences best serve the interests of the citizens of the world, rich and poor, at least in a long haul. So, I guess I'm not de facto supporting the fact that these motivated kids are anti-globalization, but I will support their willingness to stick out their necks because they think the world can be a better and more equal place. Their message is that, in the globalization debate, we do have to consider the holistic impact of economic policy on both human dignity and the environment. Compelling arguments, albeit slightly counterintuitive ones, assure that both human dignity and the environment will eventually benefit from globalization, even if some short term lapses appear to occur. Those arguments might also be effective only in a theoretical universe, and may fall apart when weasel corporations are involved. Lots of mights and maybes, and I'm just not able to commit to any of them.

But, props to the kids at the UofM Sit-In. They're not doing anything wrong, and they just might be doing something right.

UPDATE: Surprise! They got arrested, as seems to happen at these things. At least they didn't get manhandled, or at least it wasn't reported as such.

Drugs Equal Benefits of Artery Stents

Was it for this my life I sought?
Maybe so and maybe not
-Phish, Stash

I don't really have anything to add to the New York Times article, which explores the study in remarkable detail impressive even for the NYT. Except that this, like any study, isn't the final say in the debate. It's just a really loud and integral portion of the debate.

But this has to be required reading for anyone in medicine or health policy and economics. Or anyone screwed with a load of Boston Scientific stock.

Abolishing the Middlemen Won’t Make Health Care a Free Lunch

Tyler Cowen takes a pot shot at the argument that Medicare's low overhead would still be a good thing in a Medicare-for-all scheme.

Not saying I buy it, or that I've had time to think about it, but Cowen's always at least smart and avoids partisan hackery.

Step 2 awaits Saturday, and I can't really think until after that. Not between Step 2, and Tubby going to Minnesota.

Kennedy vs Kennedy in pursuit of the ghost of Paul Wellstone

The NYT describes the competing versions of a mental health parity bill, the Paul Wellstone-inspired House bill sponsored by Kennedy Jr., and the surprisingly pro-business bill sponsored by Papa Kennedy in the Senate.

The American Psychiatric Association supports both bills, describing them as different approaches to the same goal. Mental Health America, an advocacy group for patients, also supports both bills. But Ralph J. Ibson, the chief lobbyist for Mental Health America, said, “The House bill has greater protections and is therefore a stronger bill.”

The House bill is named for Paul Wellstone, the senator from Minnesota who championed similar legislation before he died in a plane crash in 2002. Jeff Blodgett, executive director of Wellstone Action, a nonprofit group that is continuing the Democratic senator’s work, said, “The Senate bill is a step forward, but the House version is true to Paul Wellstone’s vision.”

On behalf of the senator’s sons, David and Mark Wellstone, Mr. Blodgett said, he asked the Senate sponsors not to put the Wellstone name on the Senate bill at this time.

One of the biggest differences between the House and Senate bills is that the House version defines the “minimum scope of coverage.” Under the House bill, if a group health plan provides any mental health benefits, then it must cover the same wide range of mental illnesses and addiction disorders covered by the health plan with the largest enrollment of federal employees.

By contrast, the Senate bill does not specify what mental conditions or diagnoses must be covered.

Given that even Bush has endorsed the notion of mental health parity, at least in principle, I don't quite understand the necessity of the watered-down Senate Bill. Of course, industry doesn't like things that could possibly cost them money. Several policy memos I've read suggest that mental health parity probably wouldn't cost all that much anyway, and that concerns that the worried well (a term I despise, but will use in the context of this debate, in which it is so often cited) will flock to therapists for self-actualization probably don't make much sense.

Having seen at least one case in which a severely depressed patient ran out of psychiatry visits for the year during March, I'll be the first to admit that I'm going to be biased towards mental health parity. Since my salary will most likely depend on NIH instead of insurance companies, I can't say I have too much personal financial incentive in the matter.

But at some point, it seems like a lack of mental health parity comes down to simple discrimination against those with mental illness. We'll pay for your sprained ankle treatment, but not for your bipolar disorder. I'm pretty sure the situation isn't much more complicated than that, though I've seen plenty of people try to make it more complicated by distorting the realities of mental illness.

Boutique hospitals suck

A recent study published in JAMA indicates that specialty cardiac hospitals might be cathing everyone, whether they need it or not. They found that in areas where new hospitals opened, there were more revascularization procedures (CABG, PCI) than in areas where new cardiac programs opened at regular hospitals (thus it's not just the "if you build it, they will come" issue of adding resources to an area). Given the fact that these specialty hospitals are also exempt from the requirement that they provide emergency services (thus they don't have ER's and don't really benefit the community) and tend to skim well reimbursed patients from general hospitals (who are left with the expensive, uninsured, patients and less funding to provide care for them), this merely adds to my general hatred for these hospitals. That being said, my partial ownership of the local bariatric center has been very lucrative.

Moving up in the world

It's nice reaching a point in your career when you can say something on a website that gets you a personal email reply from Steven D. Levitt, author of Freakonomics.

Steve has a controversial post at the Freakonomics blog: The editor of the Journal of Clinical Psychiatry needs to have his head examined. The post references a recent research report that suggests that smokers may have worse outcomes after traumatic events than non-smokers. Levitt appears to go after some low-hanging fruit in his criticism of the press release, and a portion of his criticism only holds given the information in the press release, but not in the actual article. Citing the original article, the research design appears fairly sound, although not perfect, just as no epidemiologic study is craziness-free.

A part of freakonomics is taking causal pathways assumed true based on correlational evidence and examining the plausibility of the opposite direction. Levitt and Dubner are making quite a popular career (in addition to an impressive academic career, in Levitt's case) of questioning assumptions that certainly deserve questioning. In this case, Levitt suggests that the folks who smoke are probably the ones that are helped the most by smoking in coping. He therefore finds no evidence to suggest that smoking cessation might be beneficial, and reasons that it might even be harmful.

Levitt's points make sense, but they assume that there's no significant difference in the biology of stress regulation between folks with psychiatric trauma symptoms and those who don't have them. Smoking may be a coping mechanism with calming properties in the short run, a potential effect in the long run of further dysregulating the HPA axis could plausibly account for the smoking causing worse symptoms in the smoking group.

Levitt's argument, in whole, seems to be one of biologic plausibility. It is more plausible, given the knowledge of psychology of the average well-educated person, that people who were worse off (or in this case, going to be worse off, as I would argue that effective controls are in place at the first assessment of smoking) were more likely to smoke.

But the biology of trauma, stress, and anxiety, a field outside the knowledge pool of even the average medical student, suggests that PTSD-like symptoms could certainly be modulated by smoking if smoking, a biologically stressful event in itself, modulates the HPA axis in an unhealthy way.

So in summary,
A) Press releases of medical research, in a paraphrase of one commenter, do little more than let you know which author you should be looking for on PubMed.
B) Freakonomics methodology is valuable, but it may be limited when examining fields for which specialist knowledge may be necessary. Biologic plausibility is an important aspect of epidemiologic research.
C) Steven Levitt is gracious in his emails.
D) I'm a total nerd, because I get all excited about getting an email from a University of Chicago economics professor.

SSRIs and suicide

Mankiw links a paper from the National Bureau of Economic Research on the cost effectiveness of SSRIs in decreasing mortality from suicidal behavior.

We find that an increase in SSRI sales of 1 pill per capita (about a 12 percent increase over 2000 sales levels) is associated with a decline in suicide mortality of around 5 percent. These estimates imply a cost per statistical life far below most other government interventions to improve health outcomes.

The paper doesn't do anything to distinguish who might be at risk for a personally increased risk of suicide, but it does help us keep SSRIs in perspective: they do a lot more good than they do harm. The question remains, of course, how to reduce that harm.

The Pain of Buying Stuff

John Tierney visited Stanford so an MRI could watch his brain make decisions about buying stuff. The result is an exceptionally well written article about the neuroscience of irrational consumer behavior.

I will not try to justify my need for the mood clock, the “Dodgeball” DVD, the desk-clip lamp and the smoothie maker. I would rather pin these choices on two culprits.

The first was my nucleus accumbens, a region of the brain with dopamine receptors that are activated when you experience or anticipate something pleasant, like making money or drinking something tasty. In the experimental subjects at Stanford, this region was activated when they first saw pictures of things they wanted to buy. My nucleus accumbens just happened to respond more strongly than the typical subject’s, so what else could I do? If it feels good, buy it.

The other culprit — the main villain, really — was my insula. This region of the brain is activated when you smell something bad, see a disgusting picture or anticipate a painful shock. It was typically activated in the brains of the other shoppers when they saw a price that seemed too high. I’d like to think of my insula as particularly stoic, the strong, silent type, but he’s probably just an oblivious slob.

The lazy insula is a rarer affliction than you’d guess by looking at Americans’ indebtedness. Tightwads slightly outnumber spendthrifts, according to surveys by George Loewenstein and his colleagues at Carnegie Mellon, Scott Rick and Cynthia Cryder. These behavioral economists think tightwads aren’t any more rational than spendthrifts, because neither group is carefully weighing the long-term benefits of a Foreman grill versus college tuition. Dr. Loewenstein says the brain scans demonstrate that both kinds of shoppers are guided by instant emotions.

“We developed this propensity to experience direct pain when we spend money,” Dr. Loewenstein said. “This explains why tightwads won’t spend money even when they should. It also helps to explain why we overspend on credit cards, and why people prefer all-you-can-eat buffets instead of paying for each item they order. We like schemes that remove the immediate pain of paying.”

Politics: Apologetics for Prediction Markets

Bo co-authored an article in TNR explaining how, despite popular lambasting of prediction markets after the midterm elections, their predictive power is as strong as ever.

For those of us with little disposable income and a need for a prediction market fix for mostly popular concerns, Inkling offers a little bit of fun. All my damn inklings are tied up right now though, so much that I can't even sell credit against Michigan to play Ohio State in a title rematch.