All posts for the month January, 2005

Secretary of State Rice said on yesterday’s Face the Nation:

I’m quite certain that all Iraqis want to defeat this insurgency and get on with building a democratic Iraq.

I’m curious as to who she wants us to think make up this “insurgency”, if it isn’t Muslim jihadists, many of whom happen to be Iraqis. If they were all coming from outside Iraq’s borders, wouldn’t the administration be putting more effort into sealing the borders than in fighting them in cities?


Last week’s issue of Nature has a review of a recent Michael Crichton book (dismissed as “Viagra for climate sceptics”) which contains an interesting claim about the reaction to the movie The Day After Tomorrow:

Surveys of public opinion conducted before and after the film was released found that it made people think climate change is less likely

Apparently its obvious lack of realism caused people to associate the more respectable claims about global warming with Hollywood escapism.
I wonder if this is the tip of a much larger iceberg. It seems to me that a wide variety of political movements tend to promote the most alarmist versions of their ideas in order to get respect and/or money from their strongest supporters. I don’t find it hard to imagine that it is common for activist groups to hurt the causes they claim to be fighting for by sounding unrealistic to swing voters.

Iraqi Elections

In today’s press conference, someone asked Bush about how the turnout in the Iraqi elections would affect their legitimacy. The questioner seemed think that a very high turnout (such as elections in the Soviet Union produced) would make the results legitimate, but low turnout (such as typical local elections here in Silicon Valley produce?) would raise questions about the election’s legitimacy. Why do suggestions such as that not produce ridicule? Is it due to a preference for easily quantified criteria?
A few minutes later, Bush took great care to avoid supporting free speech for Muslims who hate the U.S (he was asked about Jordan, but could easily have talked about other parts of the mideast). This hints at a willingness to prevent jihadists who seem to have support from a nontrivial fraction of the Iraqi population from campaigning, which might lend some plausibility to their boycott of the elections.
Another issue that is important in determining whether the elections are legitimate is whether there is any reason for one part of Iraq to be subject to the ideology of the majority within Iraq. Iraq is hardly a nation in the normal sense of that word – it contains several cultures, not fond of the idea of nation-states, who were made into a country by British decree.
If I had somehow become U.S. president around the time that Saddam was captured, I would have dispensed with recreating a national Iraqi government, and simply held hasty elections for ruling councils in each town/city, then I would have withdrawn U.S. troops.

Book Review: Entrepreneurial Economics: Bright Ideas from the Dismal Science, edited by Alexander Tabarrok

This collection of papers has a bunch of very good ideas.
The patent buyouts chapter shows how most patents could be put into the public domain (fixing some problems associated with monopoly) while also increasing the incentives for innovation (at least in areas such as drugs where the patent system works moderately well). Two minor weaknesses in the paper: it ought to explain why this is a better use of money than funding research directly (I expect this could be done by analyzing the incentives and track record of small startup drug companies versus nonprofit/government researchers). The joint randomization for substitutes works well if there’s unlimited money to buy patents, but if a patentholder can make joint patents too expensive to buy by falsely claiming that its patent is a substitute, then it’s hard to analyze whether problems result (although I’m fairly sure they could be dealt with).
The chapter on decision markets (aka idea futures) provides some hints on how many of the problems with democracy could be fixed. Hopefully this will encourage readers to seek out his more thorough argument.
The time-consistent health insurance proposal describes a good free-market alternative solution to many of the problems that government-run insurance proposals claim to address.
The chapter on gene insurance would address additional problems with people born with genes that scare insurers, but only if it were possible to require buying this insurance prior before an infants genes get tested for defects. But it’s unclear how such a requirement can be enforced – it seems possible that a mother will often be able to get a fetus tested secretly before the government realizes it’s time for the child to get insured.
The section on organ shortages provides some interesting arguments that the medical establishment profits from the shortage of organs created by laws against the sale of organs.
The chapter on securities regulation is too longwinded but contains good evidence that competition between securities regulators will help investors.

Book Review: Catastrophe: Risk And Response by Richard A. Posner

This book does a very good job of arguing that humans are doing an inadequate job of minimizing the expected harm associated with improbable but major disasters such as asteroid strikes and sudden climate changes. He provides a rather thorough and unbiased summary of civilization-threatening risks, and a good set of references to the relevant literature.
I am disappointed that he gave little attention to the risks of AI. Probably his reason is that his expertise in law and economics will do little to address what is more of an engineering problem that is unlikely to be solved by better laws.
I suspect he’s overly concerned about biodiversity loss. He tries to justify his concern by noting risks to our food chain that seem to depend on our food supply being less diverse than it is.
His solutions do little to fix the bad incentives which have prevented adequate preparations. The closest he comes to fixing them is his proposal for a center for catastrophic-risk assessment and response, which would presumably have some incentive to convince people of risks in order to justify its existence.
His criticisms of information markets (aka idea futures) ignore the best arguments on this subject. He attacks the straw man of using them to predict particular terrorist attacks, and ignores possibilities such as using them to predict whether invading Iraq would reduce or increase deaths due to terrorism over many years. And his claim that scientists need no monetary incentives naively ignores their bias to dismiss concerns about harm resulting from their research (bias which he notes elsewhere as a cause of recklessness). See Robin Hanson’s Idea Futures web pages for arguments suggesting that this is a major mistake on Posner’s part.
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Foreign Aid

Posner makes some good arguments against foreign aid, but his implication that the U.S. should do nothing to make AIDS treatments available to backward countries is misleading. Much of the cost of the treatments is the R and D cost of designing the drugs rather than the marginal cost of additional doses. The patent buyout scheme proposed by Michael Kremer (see the book Entrepreneurial Economics) provides a way to significantly reduce those costs, while probably benefiting wealthy countries. A government or charity would buy many patents and put them in the public domain. The price would be set by auctions which would be kept honest by sometimes selling the patent to bidders instead of making the patent free. Ideally the price would be a bit higher than the private value of the patents, to reflect the fact that the social benefits exceed the value that the patentholder would get from enforcing the patent, resulting in improved incentives for drug development and in the drugs being available to people who can’t afford the patent holders’ prices. The most likely downside is the cost associated with using taxes to finance the buyouts (can someone show that private charity would be able to handle this?).

It is unclear whether the simpler approach of making exceptions to patent laws for backward countries would work well. It would depend on how hard it is to smuggle drugs from those countries to wealthy countries (which would harm the incentives to develop new drugs).

I returned home from a weeks vacation and discovered on Friday morning that one of my investments (Phazar Corp, symbol ANTP) had doubled since I had last looked at it. While there is a slight chance that this was due in part to buyers with inside information that it’s likely to sell equipment used in new tsunami warning systems, it looks like most or more likely all of the buying came from momentum players whose connection with reality is more tenuous than normal. So if I had been following the stock instead of snowboarding, I would almost certainly have sold before Friday at a lower price. As it happened, I had the patience to postpone my sale until Monday morning, getting what I expect will prove to be an unreasonably good price, and also delaying taxes on the profits. This is not the first time I’ve seen evidence that slightly slower reactions to price changes would be profitable, but it’s certainly the most dramatic.