Wednesday, October 22, 2014

Pixellated Peace

At Popehat, Clark takes an orbital view of the recent dust-up over ethics and morality in the video game industry. His point: the scuffle is just the latest battleground between the two factions that have been duking it out since time immemorial. Call it blue vs red, freedom vs authority, or forager vs farmer if you want, but it's just more of the same. Meet the new boss, same as the old boss.

Curiously omitted is some pretty good news; as far as deep cultural conflicts go, this tempest-in-a-teakettle is remarkable for being so peaceful. Yes, there's a lot of hot rhetoric going around, and some threats of violence serious enough to inconvenience some people, but there is a pointed lack of the taking up of arms or indeed, much of anything that could rouse partisans to do much else besides lose a little sleep as they incessantly tweet he-said/she-said vitriol at each other.

Has the great increase in public luxury shifted the battlefield of deep social conflicts to Mountain Dew and Chee-to stained keyboards? Is this explosion of peace a happy result of the great bounty brought by a massive boost to the volume of trade available to the common man? If so, is it not in the interest of global peace to trade felicitously with members of all tribes on earth so that they might beat their swords into oculus rifts?

What could be more euvoluntary than to distract rowdy, otherwise murderous crowds of angry young men with 1080p boobs at 60 fps? Drop trade barriers, spread peace through commerce. We may not be able to quash discontent, but if GamerGate has shown us anything, it's shown us that discontent can be effectively neutered. Let that put a spring in your step, and a smile on your lips.

Tuesday, October 21, 2014

Mai Waifu

Great headlines write themselves.
Middlesbrough man creates legal history after being convicted of possessing illegal images of cartoon children
We happy few who take residence in Anglophone nations are fortunate enough to be heir to a proud legal tradition ground in common-sense jurisprudence. The common law with its juries and its precedents and its peer system strive for Aristotelean excellence by drawing on the wisdom of crowds at their most placid and reflective. It is true that law-by-tort can still err, but it does possess the distinctive feature of being able to correct errors through deliberation.

Dragging a dude before the court for the possession of hentai is a perversion of the common law. This is the substitution of matters of personal taste for matters of public interest. There is quite literally no victim, no crime being committed here apart from raising the bile of men with the authority to wield the truncheon of the state. I cannot press myself to identify the EE condition under violation apart from the shadow #7 I suggested some time back: "the transaction is not aesthetically offensive."

No other explanation can warrant this wanton disregard for the great tradition of English common law.

Monday, October 20, 2014

You Can Pop a Lot of Trouble with the Pop-o-Matic Bubble

In case you find yourself wondering why I find Munger's euvoluntary exchange project so compelling, I invite you to read this. It is an indictment of the growing higher education bubble, written almost entirely using the language of exploitation. Even small asides like "the notorious for-profit Everest College" [emphasis added] are underpinned by the very common justice-as-fairness heuristic. Wealthy residual claimants of university endowments reap unjust material gains while students are mired in decades-long debt obligations. It's not fair—it's not just.

If I were a conservative (I'm not), I'd make an argument appeal a little like this:

The student loan crisis is weakening the moral and economic character of America. Recent graduates with tens of thousands of dollars due in outstanding loans (whose interest rates are set by Washington bureaucrats) effectively put the nation's young people in indentured servitude to government organizations. The non-market price of education is so high that it threatens civil unrest, mass disobedience, and tax revolt. America's enemies are keeping a close eye on the sentiments of the young people, hoping for the Yankee version of Red October or the Storming of the Bastille. The last thing America needs with the many foreign threats it faces is domestic insurrection. The time to reform the university system based on the traditional model of separating state and education has come. &c &c.

If I were a libertarian (I'm not), I'd make an argument appeal a little like this:

Students and universities are not free to exchange with each other. Intermediaries like Sally Mae distort legitimate market signals. New students who typically learn very little in the way of practical economics in state-run primary schools are marginally more likely to enroll in marginally imprudent programs with little useful feedback to correct errors after graduation. Private lenders have a strong incentive to issue actuarially fair interest rates based on all available information (default rates associated with majors, & al), thereby better reflecting a truer measure of risk and providing honest prices to the student at matriculation. The time has come to reform the university system based on the free market principles of personal sovereignty and the freedom of contract &c &c.

"But Sam," you cry, "you arrive at the same conclusions no matter what your rhetoric! Your priors are showing."

Well, yes. But that's not the point. The point isn't that I think that collective decision-making has far-reaching unintended consequences for the student loan fiasco. The point is that whenever there's an instance of an exchange that isn't perfectly euvoluntary, the language we use, the rhetoric we deploy matters to our audience. You can take either of those two passages above, mess with them a little, and come to completely different conclusions. You want a stronger America? Well, let's only subsidize STEM fields. You want less exploitation? Remove the tax-exempt status from corporate or foundational grants. You want less coercion? Revoke the public charters of state schools (it's not like students are attending classes anyway).

The problems in higher ed are caused by a confusing mix of issues, ranging from Baumol's cost disease to the unfortunate lock-in of student athletics (incl. Title IX) to insufficient price discrimination of tuition to the outsized influence of teacher unions, and on and on and on. If you're interested in isolating one cause, you're faced with the choice of feeding red meat to your ideological friends or attempting to win converts from your enemies. Write accordingly.

h/t The Peej

Friday, October 17, 2014

Breaking Stupid

Robust political institutions protect constituents from venal, stupid, craven, or amoral elites. Constitutional constraints on the limits of political authority achieve this, as long as the constraints bind effectively. When loosening these shackles for transient gains, I urge you to remember that constitutional constraints exist to guard against mayhem wrought by men like these.

Political speech is more akin to the kayfabe of professional wrestling than to anything else I can imagine. When politicians break kayfabe, as in this instance, the corruption that suffuses the entire system is laid bare.

Politics is exchange, but it is almost never euvoluntary exchange. Use precautions.

h/t Double D

Thursday, October 16, 2014

Prices are Information, 21 CFR Part 312 Edition

Prices perform a dual function. They inform buyers of the relative scarcity of goods, and they let producers know the relative value their customers place on their wares. Prices eliminate dissembling, as they make explicit opportunity costs: to obtain X, I have to give up exactly this many Y.

For IND, the FDA has gazed upon the visage of the price function and rendered its Yelp review: "did not meet my expectations 2/5 would not use except in an emergency." (viz.)

First, charging should be allowed only to facilitate development of a promising new drug or indication that might not otherwise be developed, or to obtain important safety information that might not otherwise be obtained. The preamble to the 1987 charging rule made clear that there should be compelling justification for taking the unusual step of allowing charging for unproven therapy during its development, stating that ‘‘cost recovery is justified in clinical trials only when necessary to further the study and development of promising drugs that might otherwise be lost to the medical armamentarium.’’ (52 FR 19466 at 19472). FDA believes that philosophy should continue to apply to charging in a clinical trial in this final rule. Accordingly, § 312.8(b)(1)(i) requires that a sponsor wishing to charge for its investigational drug in a clinical trial provide some evidence of potential clinical benefit that, if demonstrated in clinical investigations, would provide a significant advantage over available products in the diagnosis, treatment, mitigation, or prevention of a disease or condition. Products that are likely to meet this criterion are also likely to be eligible for fast track development programs and priority review (see FDA’s guidance for industry on ‘‘Fast Track Drug Development Programs— Designation, Development, and Application Review’’ (January 2006) including the priority review policies for the Centers for Drug Evaluation and Research and Biologics Evaluation and Research in Appendix 3 of that guidance (available on the Internet at
Short version: prices can be used as a last resort to get pharma firms to make a drug. Apart from that, unproven remedies are snake oil until proven otherwise. It's unjust to charge for potentially useless treatments.

Is that true? Rather, it is true from afar? Assume that the patient knows that the drug is risky and that it might not work as advertised. Shouldn't she still be free to try, even if trying means that she should compensate the apothecary for the trouble? The moral intuition behind this seems like the same one that seeks to prohibit gambling: ex-post regret aversion. Not only could you still be sick, but you'll be poorer for your trouble. I suppose the corresponding risk that the drug never gets developed in the first place rests secure in Bastiat's unseen. Out of sight, out of mind.
Second, charging should be permitted only for a trial that is necessary for the development of the drug. Therefore, § 312.8(b)(1)(ii) requires that the sponsor demonstrate that the data to be obtained from the clinical trial would be essential to establishing that the drug is effective or safe for the purpose of obtaining initial marketing approval of the drug, or that it would support a significant change in the labeling of the sponsor’s approved drug. For example, the trial could be designed to provide data that would support approval of a new indication or generate important comparative safety information.
IOW, information is valuable. If the administration of the drug produces no clinically useful information, then the treatment is not valuable. I suppose if your name is "FDA", your attention is directed to the objects of your charter: pharmaceutical firms, rather than to patients. This is cold comfort if you're a patient.
Third, charging must be necessary to the conduct of the clinical trial. Under § 312.8(b)(1)(iii), a sponsor is required to demonstrate that clinical development of the drug could not be continued without charging because the cost of the drug is extraordinary. The cost of the drug may be extraordinary because of manufacturing complexity, scarcity of a natural resource, the large quantity of drug needed (e.g., due to the size or duration of the trial) or some combination of these or other circumstances. In response to comments, this extraordinary cost criterion for charging for the sponsor’s drug in a clinical trial has been revised to clarify that the resources of an individual sponsor are considered in determining whether cost is extraordinary.
Well that explains it. The FDA has 0 economists on staff. Or at least none with any meaningful input into the justification for rules such as these. Only a bureaucrat could look at the value of the alternatives uses of ingredients to determine the value of a product.

Good grief.

Wednesday, October 15, 2014

I Want a Investigational New Drug

Do you like Huey Lewis & The News? Their early work was a little too 'new-wave' for my taste, but when Sports came out in '83, I think they really came into their own - both commercially and artistically. The whole album has a clear, crisp sound, and a new sheen of consummate professionalism that really gives the songs a big boost. He's been compared to Elvis Costello, but I think Huey has a far more bitter, cynical sense of humour. In '87, Huey released this, Fore, their most accomplished album. I think their undisputed masterpiece is 'Hip To Be Square', a song so catchy most people probably don't listen to the lyrics - but they should! Because it's not just about the pleasures of conformity, and the importance of trends, it's also a personal statement about the band itself! Hey Paul!
The Food and Drug Administration has protocols for the limited use of not-yet-approved pharmaceuticals. It's called an Investigational New Drug (IND) application, and the most recent changes listed on the FDA website are from 2009. I've heard some rumbling (CNN) that the Ebola incidents in the US could be just the incentive the FDA needs to liberalize its approach to IND protocols, making it easier for patients to gain rapid access to life-saving medication ahead of the approval process.

You can see in the errata how this is of interest to folks concerned about justice in exchange here, a DHHS document demanding doctors provide a written explanation of their justification for charging patients for the use of IND. Patients with severe or fatal illnesses face desperate alternatives, so it would be unjust to take from them great sums of money in exchange for a promise of extra life. Put another way, patients whose life is threatened cannot reliably negotiate fair terms of trade, as the costs of failing to exchange are unacceptably high. INDs by their very nature are easily prone to exploitation.

Then again, the failure to develop and release drugs promptly obliges the terminally ill to either accept legacy treatments or just die. The media hysteria surrounding Ebola, for all its balderdash, might well help shine a light on the life-threatening hurdles the FDA places in the way of drug development.

The efficacy rule intends to make all pharmaceutical exchanges euvoluntary at the cost of fatal delays. It's past time to retire this rule and start saving lives.

Monday, October 13, 2014

Pareto's Apology

I often think about the Coasian bargaining problem of theft.  Theft is for the most part an extremely socially inefficient way to acquire wealth.

In this example, two guys stole three newspaper machines, which likely cost $250 or more to make, each.  They got a handful of change, maybe $20, tops, and tossed the machines away where they could not be found.

So....the cost is 3x$250 + $20.  The yield is $20.  The owners of the machines would clearly have paid at least $200 not to have them stolen. whom?  Everyone who agrees not to steal the machines?  Of course not, because then the payments would dwarf the benefit.  It was nice of the guy in the example to pay back, not the amount of money he stole ($20) but something closer to the damage that he caused by being a knucklehead.

This was why Tullock included "theft" in the title of his famous paper.  But we don't recognize often enough just how important that is for the study of "voluntary" exchange.  It's a brilliant insight.  Credit to Tullock, even without the Nobel Prize.