Hume vs. Crank

Methylphenidate has been FDA-approved since 1955, and has been used to treat hyperactivity (the ADHD family of disorders) for over half a century now. But it's only since the 90s that it's been so frequently prescribed to school-aged children to get them to settle down.

Is it euvoluntary to stuff ornery brats full of Ritalin?

When I was in grade school, the convention was "no." Kids took prescription drugs for serious illnesses (and yes, right-tail ADHD is indeed a serious illness) only. If you were fidgety, the teacher told you to shut up and sit still. Recess was the time of day to burn off the jibblies. But now? Conventions have shifted. It is, evidently, no longer outrageous that the ADHD diagnosis threshold has become less rigorous (though, to be fair, the prescription rate of 5.4% of students is dwarfed by the nearly 18% of students who report having taken some sort of prescription drug without a prescription). Still, as a rough guideline, when I was in elementary school, I could expect to find maybe one student in the entire school taking psych medication. Now, I can expect one student in each classroom to be on something. That's a substantial change.

Consider each of the parties to a Ritalin exchange.

The majors:

• The teacher is better off, since having to deal with discipline problems the hard way takes valuable time away from preparing other students to meet standardized test requirements.
• The student is better off, obtaining higher marks, which increase the probability of elite college admission and attendant higher lifetime earnings.
• The parents are better off, what with the Instagram-ready little tykes dutifully doing their homework.
• The physicians are better off. A few minutes of their time to bill against a diagnosis? There might be a risk of being found negligent for over-prescription, but AFAIK, there's been no big class action for ADHD yet and even if there were, that's what malpractice insurance is for, right?
• Novartis (Mallinkrodt, Sandoz and Watson for generics) is better off. Particularly if their products are addictive.

The minors:

• The sovereign. Obedient students make for obedient citizens (and obedient Soldiers/Praetorians). 
• Employers. I found some observational studies, but long-term controlled experiments are harder to track down. Still, it appears that methylphenidate does affect brain development, producing adults with fewer ADHD symptoms, meaning that if you need to hire someone who can focus on repetitive tasks or work that demands attention, a history of taking meth lite might make a resume more attractive.
• Other citizens. Paying attention behind the wheel, in the checkout queue, or in the tiny galaxy of other small daily interactions makes life flow more smoothly. Easily-distracted passers-by can be infuriating, particularly for overstarched uptight types (like myself).

Of course, there could be a wide range of hidden costs. Attention is great for rote tasks, for memorizing the dates of history, of solving differential equations, of reciting great speeches. It's great for conformity. And like I pointed out up top, there are genuinely people with severe ADHD who need medication like this to just plain make it through the day. But one of the conditions of a euvoluntary exchange is regret. For some of the marginal cases, what are they giving up? What are their alternatives?

If we assume that legislation like NCLB and culture like "you must go to college or else you're a failure at the game of life" are fixed (at least in the short run), the alternatives are ugly: disruptive kids ruin classroom environments for everyone, and creative classes like art and music (and recess) really do  have to be cut to make room for test prep. That's simply the uncomfortable truth of time management budgeting. Congress cannot bang a gavel and slow the earth in its orbit.

If we relax that assumption, perhaps consider re-evaluating the underlying purpose of education, and instead of treating it an international contest, our elected representatives might conclude that the federal (and state, and often local as well) efforts to boost measured success are misguided post hoc ergo propter hoc fallacies of affirming the consequent. If that happens, perhaps the once-ordinary daily exuberance can be remedied on the monkeybars, or banged out on a drum kit, or poured onto a canvas. Perhaps in the tumult of childhood, a kid might discover how to harness a wild mind rather than force it to conform. 

This is, as are many questions of public interest, a matter of moral intuition. The median constituent has no real incentive to think carefully about the implications of the complex institutions, of the ecology of something as large as the entire education system, let alone the philosophical underpinnings of it. The median constituent is far more likely to adopt a standard status quo bias and quibble over marginal adjustments. And so we fill our kids up with low-dose amphetamines, slap 'em on the rump and sit them down for their learnin'. 

I guess that's one way to prepare kids for the exciting future they'll face. Hm.

Drugs and Negligence

It's okay to jail people for life on a 3-strikes charge for carrying around recreational drugs.

People who refuse to vaccinate their offspring against communicable disease walk free.

Something is askew in the moral intuitions underpinning popular jurisprudence.

At the very least, anti-vaxxers should be liable in tort (negligence, perhaps). At the most, drug "offenders" should be open to prosecution for selling adulterated goods (or maybe to minors).

In the twinkling of twilight, I try to tell myself that the US is not class- or race-conscious. These are the lies I whisper to help me fall asleep under the merry dance of the stars.

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.)

Excerpted:

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 http://www.fda.gov/cder/guidance/index.htm)).

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.

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.

Broken Windows at the Laundromat

F. Bastiat's That Which is Seen, and That Which is Unseen is a perennial classic among economists of a certain bent (including myself) for its clever lampooning of common economic sophistry. The first essay of the bunch The Broken Window illustrates the error in reasoning made when too-clever-for-anyone's-good commentators quest for a silver lining in the midst of destruction. In Limerick form, here is the fallacy he attacked:

There once was a boy from Kilpatter
A window he happened to shatter
     The papers all say
     We're richer this day
For the glazier and setter do matter

In the tale, a broken window precipitates a flurry of economic activity in its repair. This flurry of economic activity is gainful employment, therefore it is to be cherished as contributing to human flourishing. Hold your horses, says Bastiat. Think about the alternative uses of the replacement glass, think about the time the repairman gave up to install a new pane. Think about what else the window-owner might have spent his money on. These costs are real and relevant. These days we call them "opportunity costs" in economics, and depending on which economist you ask, all costs are opportunity costs.

And this is true too for money laundering. I caught a little bit of a report on Mexican drug cartels who use an elegantly simple money laundering tactic: convert cash from sales into clothes stateside (thereby boosting sales at Macy's, eg), transport the textiles across the border, then sell them for pesos. The naif might look at this scheme and say "whoa now, this is money laundering. It's illegal, unethical, and harmful." The wise sophisticate would respond: "take a moment to think about how this helps the beleaguered JC Penney stay afloat, and consider the good common folk of Mexico who now have access to high-quality fashion at reasonable prices." The student of Bastiat would reply: "it's more complicated than that."

It's more complicated than that, because the drug prohibition statutes create the laundering opportunity. Whatever gains enjoyed by American clothing retailers by selling extra volume to the cartel, whatever gains enjoyed by Mexican shoppers buying US fashion cheaply is offset by a corresponding loss in the cocaine market. Folks tooting nose candy have to pay higher prices to feed their habit, a money laundering premium if you will. The surplus of the American retailer and the Mexican clothes shopper is not profit, but rather a transfer. And the nasty shoggoth hounding the whole sordid affair is from the bloated appendix to this trade. All the law enforcement that could be better spent tracking down murderers and rapists are wasted in interdiction. All the legal proceedings take up scarce courtroom time and talent. All the time, treasure, and effort of the Army and Air National Guards, the DEA, and the Coast Guard could be better put towards actually defending the strands and lands of the nation against actual enemies, foreign and domestic instead of opportunistic merchants seeking to sell something an American citizen is willing to buy.

Money laundering is not euvoluntary, but the only reason it's not euvoluntary is because of the underlying public decisions that gave rise to the transaction. End prohibition and the wasteful knock-on markets will evaporate like dew in the Mojave morning.

A well regulated militia being necessary to the security of a free state

, the right of the people to keep and bear arms shall not be infringed.

In the tumult of 18th century politics, the men who ratified these sentiments understood that disarmed citizens were more easily cowed by an ambitious sovereign. They held that the weed of tyranny quicker chokes the garden of liberty when the gardeners have been stripped of the, uh... trowels of, uh... revolution, I guess.

Failed metaphors aside, the economics are straightforward. Armed citizens are marginally better able to kill than unarmed citizens.

I of course use "kill" here in a neutral sense. A hunk of fabricated metal has no sense of justice. A pistol in the hands of a street thug will perform the same function as a pistol in the hands of a taxpaying homeowner. A service revolver in the hands of a rightfully appointed deputy of the law will take a life as surely as a service revolver in the hands of a corrupt cop. A rifle in the hands of a dutiful Soldier defending the homeland against foreign aggressors kills the enemy as surely as a rifle in the hands of his counterpart on the other side of the firing line.

But as gun control proponents rightly point out, the right of the people to keep and bear arms is far from uncircumscribed. Why is it that the logic of prohibition does not apply to polonium or cyanide or white phosphorous or Claymore mines or Anthrax or uranium-235 or mustard gas? I reckon there's a bit of a black market in these things, but atropa belladonna is more likely to show up as part of a show garden than as the lethal poison that earned it the nickname of deadly nightshade. What's the difference? Why do drug cartels arm themselves with AK-47s rather than sarin gas? Why isn't there a more robust underground economy in the relatively easy-to-produce phosgene? If you're looking to kill, a corpse is a corpse regardless of whether it's riddled with bullets, dissolved in acid, or suffocated in gas. The economical approach is to maximize benefits while minimizing costs, yes? Law-abiding citizens have sensibly prohibited the use of indiscriminate weapons of death, and of poisons. Surprisingly, criminals have largely agreed. The ban on chemical, biological, and nuclear weapons is mostly effective! Why?

Some of it is probably because of ordinary persuasion. It's cowardly to poison someone; it always has been. Yet it isn't cowardly to shoot someone, even (evidently) from thousands of miles away in a metal box stuffed with electronics. Guns are honorable—more honorable than poison, anyway. Poison is dishonorable. Gun rights folks are keen enough to recognize that the logic of prohibition would apply to firearms: the bumper sticker version runs "if guns are outlawed, only outlaws will have guns," so imagine how great it would be if those same folks understood that the same precise line of thinking applies to narcotics.

In the case of banned agents of death, what the legislation has done is to encode the law. There's pretty much wide agreement that combat toxic agents have no legitimate place in a civilized world. There is substantial and meaningful disagreement about a similar role for recreational drugs and firearms. The disruption to the orderliness of civil society and the increased state-led oppression that accompanies the ban on the drug trade means that the voluntary exchange of narcotics would be more euvoluntary but for the statutes prohibiting their trade.

How is heroin not like aconitine? The power of rhetoric. Bans carry unintended consequences. Persuasion works exactly as it says on the tin.

The Logic of Prohibition, Dragonslaying Edition

via Rachel Davison, a cautionary fairy tale for Serious Men who Believe they Inhabit a Land of Unicorns.

In this case, the unicorn is the fanciful idea that merely because the sovereign so wills it, motivated humans with wills of their own will gladly refrain from pursuing their own happiness, however defined.

It Snowed in Ferguson: the Logic of Prohibition

Earlier this month, I argued the logic of prohibition. The gist of the economics is this: if a market exists, outlawing it rearranges the institutions supporting exchange, but does not necessarily eliminate trade.

Consider hydromorphone hydrocloride, aka dilaudid. Dilaudid is a powerful analgesic, stronger than morphine, and classified on schedule II in the US (Substances in this schedule have a high potential for abuse which may lead to severe psychological or physical dependence. [source]). Despite its potency and potential for abuse (just ask any med-surg RN), dilaudid seldom joins the pantheon of street drugs the way MDMA, peyote, LSD, and marijuana do. Or more importantly, the way its close cousins morphine and heroin do. And why is this the case? Price elasticity. Dilaudid is a semi-synthetic opioid—its manufacture is a delicate process requiring specialized equipment and knowledge. Morphine and heroin require no hydrogenation process, and are therefore (relatively) less capital-intensive. These differences are reflected in the relative prices and the attending quality control and legal institutions in each market. Consumers can still obtain the pleasant effects of their opioid of choice, the costs simply move margins between strike price and risk premium. The market itself is not destroyed by prohibition.

I've come to wonder lately if there isn't a similar market for racial animus. What would a world look like if the legal market for bigotry were thwarted? As with opioids, I expect there might still be some underlying demand and a creative entrepreneurial class to serve that demand. I expect that by forcibly denying bigots, no matter how loathsome their intentions, the freedom to refuse association that they may turn to less accountable institutions that serve similar purposes.

You may read this and say something like, "hey, this guy is claiming that the 1964 Civil Rights Act caused blue-on-black brutality in Missouri. What a jackass." Let me disagree with the first half of that statement. I am not claiming that an end to the oppression of minorities created hate in anyone's heart. I am claiming that given the existence of hate, the institutions meant to govern it matter a great deal. What we seem to have done is apply a liberal dose of wishful thinking to the dilemma of hate in America. You can legislate a market in bigotry away no more effectively than you can a market in opium. Product bans in alcohol put power in the hands of crooked mobsters. Product bans in narcotics put power in the hands of crooked cartels. Product bans in bigotry put power in the hands of crooked police. Bigotry is scandalous and obscene. If the constituency has an interest in reducing or eliminating its trade, an orderly wind-down in an open setting of voluntary exchange is far better than employing para-military state thugs to harass and murder with impunity and unaccountability.

As I mentioned to Sarah, good cops are good; good institutions are better.

Why Legalizing Heroin and Cocaine is More Urgent than Legalizing Marijuana

A surprisingly charitable Grey Lady piece on little-l libertarianism is making the rounds today (h/t The Jacket). #tlot

One passage in particular stood out on a quick scan. Here she be:

Virtually all libertarians enthusiastically favor marijuana legalization, but they become more subdued when the subject turns to cocaine and heroin.

Using the lower-case 'l', denoting the transformational demiurge rather than the big-L political party-cum-advocacy think-tank scene allows me the luxury of counting myself among this number. As such, I roundly and enthusiastically count myself as an exception to this sentiment. Here's why.

The least compelling argument in favor of why voters now favor marijuana legalization in greater numbers is self-interest. Public opinion surveys show again and again that voters almost never (with the emphasis on the "almost") support policies that are only in their narrow self-interest. There's something about voting that telescopes morality, cranks up the dial on civic-mindedness, if you will. Since I spend so much time in the General Social Survey, my prior belief is that some (but not much) of the support for weed legalization is because respondents want to get high without being harassed by the cops, some (but not much) support is from careful reasoning from first principles, and the remainder (probably most) is from relatively unreflective group bias (the elephant following the herd, if you're a fan of Kahneman). Part of the reason for my belief comes from the pro-legalization rhetoric I hear from time to time, especially the (true) claim that weed simply isn't as harmful as, say, alcohol.

From a public health perspective, this is precisely why marijuana should be a low priority in the push for legalization.

Harmful recreational drugs, particularly those that can be easily modified with adulterants are subject to greater relative efficiency gains by moving from black markets with no tort law (or yes, even prior restraint regulation) protection for reasons I illustrated here. Above-board heroin retailers with reputations to protect will be much less likely to dilute their product and will have proper market and legal incentives to accurately label product potency. Junkies will be more likely to seek medical attention in the event of an overdose. And perhaps anti-drug propaganda will stop being so obtusely and irrationally one-sided (a boy can hope, anyway).

Taking drugs is bad, mmm-kay? Taking drugs of unknown potency paid for with cash that remits to violent criminal organizations is far worse. Marijuana is just a plant, man. It is far more imperative to legalize hard drugs first. Non-euvoluntarity is the fig leaf under which violence, oppression, and terror swell*.


*nod to M.G. for the bon mot.

The Enigma of Ford

Rob Ford, the "disgraced" mayor of Toronto, still enjoys an order of magnitude more public approval than the US Congress (I know, I know, apples to oranges). This despite rock-solid evidence that he's smoked crack while in office.

There was, in Tudor England, a habit of old that on the Twelfth Night (as popularized by Shakespeare's eponymous play) of Christmas, the night before Epiphany, peasants and nobility would swap roles, the former dining on... well, I'll let Dan D'Amico explain:


If you get the baby (or the bean, or whatever local variant you like), you get to pretend to be a lord until sunup. @danarchism's right on the money; cultural, social... human capital is the name of the game. This festive celebration obliged feudal constituents to adopt some variant on the very sort of sympathy championed by Adam Smith in his Theory of Moral Sentiments. If only for a day, the (un?)lucky peasant would have to don the pantaloons of the lord of the manor and hear the petitions of the governed. It was a great, rollicking joke with a great rollicking punchline and a great rollicking serious message embedded within. Using my Pete Leeson spectacles, Twelfth Night was an institution that, as cheaply as contemporary political technology allowed, permitted greater social stability.

And then there's this guy:



The gentleman behind the wheel is Deadmau5. He is a musical whiz, a Giorgio Moroder for the opening act of the 21st century. And he puts up a 30 minute video of him tooling around with his crack-smoking mayor.

Rob Ford governs as if every night were Twelfth Night. AND THE WORLD IS A BETTER PLACE FOR IT.

Politics minus governance equals politainment (plus ζ, some residual). Three cheers for the City of Toronto to have the courage to admit that politainment is valuable. The grimmest moments in human history were characterized by politics taken too seriously.

I'm none too fond of transactional theories of the state. The analytical fiction of the social contract suffers from Arrovian impossibility problems, and no written constitution can ever hope to bind an active sovereign ruling a clamorous constituency. Despite my reserves, I do still believe that voters basically get what they ask for, within a standard deviation or so. And in Toronto, they've asked for some non-standard deviance. And it seems they've gotten exactly what they want.

Long live the king.

In EE terms, this tests Toronto's Ford on the Shughart/Thomas scale, and I think it finds in favor of euvoluntary institutions. If anything coercion flows in the opposite direction. Conventional morality, conventional politics would have this guy (or Marion Barry before him) out on his ear. Yet buoyed by popular support, he thrives in office. Huzzah!

IRB SchmaiRB

via The Peej, paying transients for Phase 3 (or earlier!) drug testing.

ATSRTWT

A slice:

The main ethical issues here, of course, are the competence and judgment of the prospective subjects. “When you say ‘money,’ everything else goes out the window,” said Hanif Jackson, a former program supervisor at the Ridge Avenue shelter in Philadelphia, which recently closed down. I heard the same thing from Harvey Bass, a chaplain who has worked at the Sunday Breakfast Rescue Mission shelter for 15 years. He said drug study recruiters often park outside the shelter and approach residents on the sidewalk. Although Bass didn’t think it was his place to warn residents away from the studies, it was clear that he was not exactly a fan. “These guys have no job, no home, and a habit,” he said. “You have people at their lowest state, and they’ll say yes to anything.”

Much of the piece is an indictment of the accuracy of tests involving indigent subjects. Many of them are schizophrenic and therefore resistant to anti-psychotic medication, but:

Volunteers are typically paid $40 to $50 per visit. “The payments are low enough to not be coercive, but they’re enough to supposedly compensate them for the time they’ve spent here, and give them an incentive to come back,” Sfera said. Still, Walters, who has since left South Coast, added that money is what motivates most subjects. “I’d say at least 85 to 90 percent of clients, that’s why they do studies.”

These subjects are cheaper than enlisting, say, college students, and considerably more ethical than, oh... say, exposing Soldiers to treatment without their knowledge or consent (to pick a totally off-the-wall hypothetical example). More subjects for the same price means more precision, following quite naturally from the statutory requirements imposed by the FDA.

Another good quote:

Concepts like “coercion” and “undue influence” are poorly suited for economic transactions, however. Offering desperate people money to take risks to their health may be wrong, but nobody is being coerced. No one is threatening to harm people if they refuse to become test subjects. One parallel would be sweatshop labor. The ethical problem is not that people are coerced into working in sweatshops—people are desperate to work there, under horrific conditions, for pennies. The ethical problem is whether it is acceptable to take advantage of their desperation.

Agreed. This is an ethical problem. Like most (all?) problems, there are no solutions, only tradeoffs. Should the legislature ban testing on transients? Would that make them better off? Is it even true that, "[o]ffering desperate people money to take risks to their health may be wrong," when the alternative is panhandling, exposure, or starvation? Does not their alternative situation already pose risks to their health?

And is the price wrong? Offer them too much money and it's taking advantage of their desperate situation. Offer them too little and it's... taking advantage of their desperate situation. Remove them from consideration at all, and it's forcing them to accept their next available alternative, which by their own economic calculus is worse.

But the real brine this pickle soaks in is one of compos mentis. Whatever the ethical dilemmas of sweatshop labor, at least folks who work in factories in less-developed countries aren't any more (or less) prone to mental illness than the general population. Homeless people have made it through a rather selective filter to land in a bin marked 4F, and are often characterized by debilitating mental disorders. Under the UCC, people with debilitating mental illness don't have capacity, which is legalese for you can't generally enforce a contract (over $500 yadda yadda) against them. In other words, the common law recognizes that mentally ill people aren't suited to make responsible decisions.

And that leaves alternative institutional arrangements still to be considered. For Phase 1 and 2 testing, the manufacturer is still trying to establish safety, which even if you're as skeptical as I am about the charter of the FDA, safety testing is still important prior to a general release. What other population would you target? The elderly? Children? College students? Housewives? Business executives? Longshoremen? Would you ban all testing in humans? Is there a superior path to getting drugs to market? Describe it.

It might be a tragedy that America's homeless population ends up being a collective pincushion for the pharmaceutical industry, but does that speak louder to the collusion of big pharma and the FDA or to the manifold tragedies that lead to homelessness in the first place? There are good ways to advocate on behalf of the indigent. Denying them opportunities is probably not as helpful as exposing the mundane corruptions that are ordinary transfer payments: massive bailouts to well-connected constituents, and payola by the truckload to middle class voters. Given the choice between helping vulnerable populations and securing votes in the next election, politicians tend to act in their own best interests.

I do sometimes wonder if it's ever ethically possible to hire an exceptionally poor person to do anything. Doesn't paying them to any kind of work, even ostensibly honest work, take advantage of their desperate situation? Is there any way to break the Catch-22?

Old and Busted: Tacocopter. New Hotness: 420drone

If the FAA comes through on strict measures to prevent commercial unmanned airborne air transport for small packages, we may have an opportunity to see the Allen-Alchian theorem in action.

The A-A theorem is one of those great blackboard theories in economics that tends to have contestable empirical support. It's pretty simple though: if you add a fixed cost (in this case, the cost of a criminal violation) to differently-priced substitutes, you tilt the relative prices in favor of the higher-priced good. In their textbook examples, that's why you should expect to see the best lobsters exported from Maine, the best apples exported from Washington, etc. Of course, this is holding everything else equal, which is really not the case in produce exporting, so that's why it's hard to find lots of evidence in support of the theorem.

But here, we've got a pair of well-timed exogenous treatment effects. Amazon and Taco Bell would (presumably) like to be able to deliver piping hot books and burritos straight to your door without all the tedious mucking about with roads and the like. But so would your neighborhood drug dealer. The difference is, Amazon and Taco Bell are already mostly compliant with statute law and the relevant regulations of their industries. The drug dealer is already in violation of a number of trafficking statutes, so one additional charge is far less likely to change their decision calculus. If a commercial drone can improve customer service or otherwise improve productivity, it is more likely that they will adopt the technology.

And for those property owners that wish to be unmolested by flyovers, there's much less legal recourse against smugglers than against above-the-board business owners.

The conclusion is clear. If we wish commercial drone operations to be legal and properly regulated in the US (whatever path to regulation is chosen, via tort search or FAA prior restraint), we absolutely must end the coercive, unjust war on drugs.

Tip of the hat to Eli Dourado and Ilya Somin for the idea.

Character

In Jacobellis v. Ohio (1964). Justice Potter Stewart famously uttered:

I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description ["hard-core pornography"]; and perhaps I could never succeed in intelligibly doing so. But I know it when I see it, and the motion picture involved in this case is not that.

Character is another of these walk-like-a-duck, know-it-when-you-see-it  pieces of the human existence that, like "hard-core pornography" or "quality" is captivating enough to pen volumes on. A shoot-from-the-hip definition might say that character is comorbid with integrity, with Aristotelian virtue, with a pointed lack of boorishness. A person of character is pleasant and accommodating without being saccharine or obsequious. A person of character is kind and generous without being indulgent or profligate. A person of character is temperate but not so much to be boring. Recall Winston Wolfe: "just because you are a character doesn't mean you have character."

I know it when I see it. I also know griping about it when I hear it. And I hear griping pretty frequently from hard-nosed paternalists. Welfare destroys character, it breeds dependency, it saps the will and weakens the spirit. I also hear it from folks with more tender affectations: big box stores rob the community of its character, corporations are soulless husks.

I know it when I see it. The problem with common gripes about character-destroying activities is that most griping is speculative, biased, blinkered, or selective. Loud people make brash claims without carefully reviewing the evidence (or when they do review the evidence, they fail to note its often severe shortcomings). Transfer payments strip recipients of character? How do you know that? Immigration ruins the character of the adoptive nation? Prove it. Far-mode bald assertion is methodologically weak. For that matter, most observational econometric analysis is pretty weak too.

What isn't weak is clear opportunity cost. Organizing to forcibly prevent Wal-Mart from opening a store clearly strips potential customers the chance to vote against incumbent firms with their feet. Regulatory organizations employ inspectors who might be otherwise productively employed.

Law enforcement agencies lob grenades at toddlers. Because drugs sap character.

I know it when I see it. Maybe I'm being selective in my judgement too, but it's hard to imagine how justice is upheld when the many millions of tax dollars spent on narcotics interdiction end up with the harassment, imprisonment, and assault of otherwise unremarkable citizens to slake the tsking of moral scolds. Building character is a fine, euvoluntary, eudaimonic endeavor. Punishing hapless people for failure to ascend Maslow's pyramid scorches the earth we share. End the drug war now.

Addiction

"Addiction" is one of those expansive words that mean different things to different disciplines. Here's how Psychology Today defines it:

Addiction is a condition that results when a person ingests a substance (alcohol, cocaine, nicotine) or engages in an activity (gambling) that can be pleasurable but the continued use of which becomes compulsive and interferes with ordinary life responsibilities, such as work or relationships, or health. Users may not be aware that their behavior is out of control and causing problems for themselves and others.

Economists tremble at the lack of relative prices in this description and would insist on a mismatch of utility and cost in downstream consumption events (Becker and Murphy wrote the flagship paper on the topic). We here at EE are awfully fond of the no ex post regret condition to purposely eliminate exchange in addictive substances as candidates for euvoluntary exchange.

But could there be too much tooth in that bite? Is it possible for someone to rationally (and I mean "rationally" in the colloquial sense, not merely in the strict economists' use of the word) choose to take the first step down the road to addiction? In other words, contrast ex ante regret expectations with ex post regret expression. In 21st century America, you'd have to have been raised in the middle of a swamp by manatees to not know that smoking cigarettes is addictive, and not particularly good for your health to boot. Yet, people still routinely pick up the habit, de novo, against all available public medical advice and common sense.

Nor is it the case that heroin's well-deserved reputation for shortening one's expected lifespan is a great secret kept well-hidden from the scrying eyes of would-be junkies. Yet, surprisingly, people still shoot up from time to time. It seems as if that, even with all available rational-mind information (Kahneman's rider, rather than the elephant), people still still choose the coffin nail, or the spike, or the bottle, or the pill.

So perhaps the important question is not "is addiction euvoluntary," but rather, "what institutions might make addictive behaviors more euvoluntary?" In the black markets that arise to feed addictions, merchants may not necessarily have good incentives to monitor the quality of their wares (there are exceptions to this rule, as Andrea noted in her podcast appearance). Under prohibition, the severity and frequency of ex post regret should be expected to increase. The salient question for euvoluntary exchangeurs is whether or not there is any change to the ex ante regret calculus under legalization, and whether or not the associated tradeoff is worth it.

Note here that the empirical literature helps only so far. The tradeoff question is ultimately a value judgement. And justice is a tricky virtue, even under the most favorable circumstances.

The Downside to Ending the War on Drugs

In 1975, Gordon Tullock described the "transitional gains trap." The theory is this: when the state makes people jump through hoops to start a business, or restricts how many participants (sellers usually, but similar arguments apply for buyers) can trade, the people lucky (or cunning, or diligent) enough to make the cut can charge higher prices than they'd be able to get away with in a more competitive setting. This extra-high price is valuable, so when the policy is still new, there's a scrum to see who gets it. If a state-generated rent is worth $100, you should be willing to pay just up to that without going over in order to secure the right. The bidding war that occurs for the special right to produce tends to dissipate its value. If five people each squander $99 to secure that $100 rent, society is out to the tune of $395. That money is simply squandered, never to return. It vanishes down a rabbit hole dug in Congress.

And from the point of view of the winning bidder? To her, that $100 comes in drips and drops over the life of the rent. For most policy, it's close enough to a perpetuity that it matters little for analytical purposes. So after the first year, she's paid out $99 for the rights to, I don't know, braid hair or something, but she's only gotten $5 in rent income (that is to say, income above and beyond what's available in an open-entry market) back. From her point of view, she's still out $94. And when those rents are threatened, she'll again fight tooth and nail (well, so long as the teeth and the nails cost less than $94) to protect them.

That's the transitional gains trap. State intervention destroys wealth both coming and going.

So what does this have to do with the drug war and euvoluntary exchange?

Well, wanton destruction of wealth is the opposite of euvoluntary exchange. Naturally, EEers should be wary of it. And yes, that should indeed apply to drug cartels too. Think about the ways in which they might choose to enforce their monopoly privileges. They could increase violence at the border, they could adulterate their product, they could quietly sift cash into the coffers of prohibitionist PACs. They have at least a few orders of magnitude of millions of dollars' worth of rents to protect. I'm sure they'll be a lot more clever and aggressive than I can even imagine.

So is this one surviving argument strong enough to persist with the War on Drugs?

Not a chance. The ongoing damage to poor (especially minority) communities is a grievous injustice, a set of Jim Crow institutions, the unconscionable, unconstitutional stop and frisk replacing segregation as today's tyranny of choice. The drug cartels (inter alia) will push back? If there's not enough political will to buy them out (and there isn't; I'm quite confident of that), then just get a good grip on that wax strip and tear it right out.

Dedicated to the 2014 PCS meeting, which I unfortunately could not attend.

Come Upstairs, and I'll Show You My BATNA

Wow.  Wonder drug.  It's not cheap.

When the Food and Drug Administration approved a medication called Sovaldi in December, it was hailed as a breakthrough in the fight against hepatitis C, a blood-borne disease that affects 3.2 million Americans and kills more people in the U.S. annually than AIDS.

Then California-based Gilead Sciences, the manufacturer, announced the price: $84,000 for a 12-week course, more than what many cancer treatments cost in a year.

The hefty price tag has rattled patient advocacy groups and insurance companies, who say most costly new treatments coming on the market are targeted for a smaller patient population. Putting such a premium on a drug that could help so many will be crushing, they say.

At least one prescription drug plan is encouraging doctors to delay prescribing Sovaldi for patients who can wait. One insurer has said it risks bankruptcy if it’s required to cover the drug for everyone who needs it this year. Advocates say Gilead has taken corporate greed to new levels.

The drug has also prompted a new round of hand-wringing over a larger issue: the escalating cost of specialty drugs, which are designed to treat chronic illnesses such as rheumatoid arthritis and multiple sclerosis and sometimes require special handling.

While these therapies are delivering body blows to some of the world’s most pernicious diseases, they also are testing the limits of what society is willing to pay for sought-after treatments or cures.

“The advancements that are coming in medicine are going to be stunning and amazing, both in terms of the kinds of things we can treat that we never could and what their cost is going to be,” said Matt Salo, executive director of the National Association of Medicaid Directors. “We’re going to need to think as a country about how do we value health and health care.”

So, all the Obama admin needs to do to go to "single payer" is to require that this therapy be covered in all plans.  All the insurance companies would go bankrupt, and we could enter the worker's paradise!

Thanks to Michael Cannon of CATO for the tip.  And make sure you check out Michael Tanner's piece on Obamacare, also from CATO.  Best thing I've read for a while on how things stand.

Against Regret

New Dub-MOE Forbes piece on CO, WA pot [marginal] legalization.

Remember what the Butthole Surfers had to say on regret:

"Daddy?"

"Yes, son?"

"What does regret mean?"

"Well, son, a funny thing about regret is that it's better to regret something you have done, than to regret something you haven't done. And by the way, if you see your mom this weekend, be sure to tell her SATAN, SATAN, SATAN!!!"

Drug prohibition is predicated on a regret prophylactic: protecting some people from imagined regrets is more important than the pleasure other people give up. And this mission is so vitally important that we turn police forces into de facto highway robbers and systematically violate the 4th Amendment in its pursuit.

The law is an ass. I'm glad to see the median voter in Washington and Colorado making at least some attempt to kick it.

Nutrients

Rather than offer comments at the outset, let me just offer this text for your consideration.

Here it is.  In particular:


...premature babies are suffering because they can't get access to the same nutrients that some celebrities are using to pretty-up before a photo shoot," says Robbins, who adds that people are also using the drugs for a hangover cure. 

Why are celebrities getting the drugs, and not the infants in critical condition? Robbins explains there is no centralized database to direct the nutrients to the people who need them the most. "(Hospital staff) are heartbroken. 

They can't believe this is going on, that they can't get access to these very basic nutrients," Robbins says. "Really everybody is just astounded that the government has let this go so far." And while the shortages are easy to identify, it is less easy to pinpoint the cause and who should take responsibility. 

Robbins explains it's a non-stop blame game between the FDA, Congress and the limited number of drug manufacturers. "Manufacturers blame the FDA, the FDA blames manufacturers, a congressional committee blames the FDA, but meanwhile none of these three entities have been able to solve this problem that's causing people to starve," says Robbins, whose article states that clinicians have reported at least 15 deaths attributable to drug shortages since 2010. 

Please discuss.  My own view is to compare this situation, where access to the needed material is controlled by the government, with the food situation more generally, where grocery stores are owned and operated privately.  If the government were in charge of food distribution, only the wealthy would get food.  And of course this was exactly the experience of the former Soviet bloc.

Regret Aversion by Proxy: Reefer Madness Edition

Via Emily Skarbek, we're treated to a lengthy screed on the perils of marijuana penned by Peter Hitchens. You can safely skip the front matter; the moral argument is wrapped up in the concluding paragraph:

I cannot answer these questions for you, though I know perfectly well what my answer is. I can only say that the conservative mind must surely be sympathetic to the use of law to protect the young from danger, even from themselves and from their own selfishness, which is always at its height during the perilous years of adolescence that so many of us come to regret so much. If it makes us new enemies, even on our own side, to say so, we should be blithely happy to take the burden. Which of the two sides, if it turns out to have been wrong about this great and pressing issue, will have more to regret 20 or 30 years from now?

Regret aversion by proxy, with no mention of externalities. Public policy for private risks. Weed isn't dangerous because you're likely to ram a bus into a crowded convent, but because, "unlike tobacco, its main threat is to the brain and the mind rather than to the heart or lungs."

I guess I don't own my brain. Attlee would be proud.

Dubbers Asks (Season 1, ep.2): Isn't It High Time We Legalized Marijuana?

Art Carden has yet another Forbes article questioning the wisdom of drug prohibition. One of my fondest memories of my Principles of Microeconomics class was hearing the economic arguments against prohibition for the very first time. In truth, the arguments are really not fundamentally different than anything else basic economics teaches: accounting of benefits while ignoring costs is aggressively dishonest. Skillfully including unseen costs* is the hallmark of an accomplished economist. In the case of the drug war, those hidden costs were never that well hidden and are increasingly wearing neon madras and waving glow-in-the-dark pennants. The violence, the disintegration of low-income families, the rise of civil asset forfeiture, the meth lab fires, these are all pretty hard to ignore.

It's encouraging that regular voters are starting to wise up to the damage that the drug war is causing**, but if a baseline for intervention into trade is that euvoluntary exchange is acceptable, it's worth asking whether or not drug use is euvoluntary. Also interesting might be production and distribution, both as-is and in a likely alternative regime. We can then follow up with an exploration of what changes might be directionally euvoluntary.

Drug use now: not especially euvoluntary, most notably because of potential regret. Some of that regret comes from the risk of adverse addiction, but some of it is from bad product quality. The basic economics of don't kill your customers still has some logic even the illicit drug trade, but if someone way up the production chain cuts the product with something poisonous, the end consumer has no legal recourse. It seems to me that conditional on use, prohibition might increase the risk of ex post regret.

What about uncompensated external costs? I seem to recall hearing an argument that widespread drug use will reduce productivity, thus harming GDP. Ignoring for a moment the uncomfortable anthropomorphism of a statistical artifact, note that if it weren't for state-sponsored social safety nets the costs of drug use wouldn't be borne by the taxpayers, but rather by users and their families. The uncompensated externality is created by institutional choices. A similar argument applies for more severe cases and the medical services they consume, again, occasionally at taxpayer expense. It occurs to me that since drug abuse and public service provision have joint production characteristics, it's misleading to judge one without considering the other. At any rate, conditional on the status quo provision of health care and basic income (recall that there may be better ways to provide basic income than through managed payments, see Munger (2011) and Wilson (working paper) for more details), legalization might increase taxpayer burden, though this isn't a slam-dunk case. It really depends on how many more people would end up on the dole or in overdose treatment and what other mitigation institutions might arise. This isn't the place for that sort of detailed analysis and this question is far from settled, even in the best academic literature. Suffice it to say that it's possible but not certain that relaxed or repealed drug laws might breed more problem addicts.

Now to the meat of the question: BATNA disparity. Incarceration for simple possession is linked very strongly to poverty. At my most charitable, I think you could make the following argument: drugs are bad for you and wealthy drug peddlers are exploiting poor people by getting them hooked on drugs. For their own good, we will prohibit drug consumption on penalty of imprisonment. If I were less charitable, I might allege that throwing users in prison is a reinvention of Jim Crow, but that's probably a more incendiary claim and one that I can't rigorously support, despite its intuitive plausibility. We can see that like with calls to shut down sweatshops, though once again, the cure is worse than the disease. I wonder what it would look like if we went around imprisoning people for their own good for other supposed offenses, like watching too much TV or forgetting to floss regularly. Prohibition itself makes BATNA less attractive and moves away from euvoluntary trade. I can't see how this is meant to be good for society.

So I then reiterate Carden's question: isn't it high time we legalized marijuana? If not for the obvious reason of refraining from punishing otherwise peaceful people for their choice of recreation, then for making the world a more euvoluntary place?



*good economic analysis should correctly identify transfers as well as costs and benefits, and good analysts must be able to clearly explain the difference between the two.

**recent Gallup polls have support for marijuana legalization around 50% and rising