Political Economics of Drug Research

I think this post is going to sound remarkably similar to my previous post on multivitamins.  But this one has an economic dimension as well.  An interview on Science Friday described a meta-analysis of all the studies that have looked at the effectiveness of the flu vaccine.  What he found was that 2 out of three years, they create a flu vaccine that is effective, but one out of three the vaccine is not a match so it provides no protection.  In those 2 out of three years when it is a match, it is effective on about 60% of the people.  But only half the population would get the flu in any given year just by chance.  So the flu vaccine actually helps 67%*60%*50% or about one out of every five people who get the vaccine.  This is not that great.

But, it is very safe, cheap (even without insurance) and convenient (you can get them at Walgreens, CVS, your Drs’ office, at work, at school, everywhere). So most people get the vaccine.  Why not? When it is this easy and cheap, even 20% is better than nothing.  But this means that the drug companies that make and sell the vaccine already make the maximum profit they can get.  The researcher being interviewed thought it wouldn’t be that hard to invent a better vaccine.  But no one is willing to spend any money on it.  The drug companies wouldn’t gain anything, the government doesn’t care that much because everyone seems happy with the status quo and few people die from the flu, and drug research and approval is way too expensive for even a passionate scientist to fund him or herself. 

So, even though the current vaccine only helps one out of five people and it wouldn’t be that hard to make a better one, no one ever will.  That is the unfortunate reality of drug research in 2011.  But then again, I can always take a multi-vitamin !!!

Pigouvian replacement for carbon market

I heard a very interesting Pigouvian solution for a lot of auto regs and fuel subsidies.  Basically for each class of car (subcompact, sedan, SUV, sports coupe) there would be an average CAFÉ standard that every brand has to achieve (just like there is now), which would go up a little bit each year (which is much better for the automakers than passing a huge increase once a decade).   

But here is the Pigouvian part.  Let’s say you buy a car where the average for that type is 30 mpg but the model you buy is 20mpg.  You would pay a higher federal excise tax to cover all the costs of removing the extra pollution from the air that you are creating (and the more dependent you make us on middle east dictators).  But it would be revenue neutral.  If you buy the model that is 40 mpg (which must exist if the average is 30 and some are 20), you get a rebate for the same amount, to give you back the money you are saving the government on removing pollution from the air (and dependence on middle east dictators).  So it is not an added tax because it gets rebated to other drivers.  And it doesn’t favor one kind of fuel over another (high mileage coal would get the same rebate as solar, wind, or electric).  It’s all based on performance. And we would all still have free choice to buy whatever we prefer.

I like this.  What do you think?

The real reason they run for office. Scam artists from the beginning

Bloomberg had an excellent editorial this week about Herman Cain.   They call his policies simplistic, his candidacy a joke, and the only reason he is running is to promote his books and motivational speaking tour. 

But they also call him brilliant because it is working.  His 9-9-9 plan is just one example of why he is popular.  Everything sounds so simple.  The plan is simple (compared to Romney's 190 page plan) and passing it will be simple too - all he has to do is will it.  Afghanistan?  He will talk to the generals and win the conflict by wishing it so.

Some of his campaign staff quit because he doesn't seem willing to put in the hard work needed to win the Iowa
caucus.  Of course not.  He has no intention of winning.  Just like Sarah Palin is making millions off of her 15 minutes of fame during the last election, he is going to make tens of millions on his. 

Hmm, maybe I'll run for President next cycle.  My economic plan, health care plan, foreign policy plan, and trade policy will all be 1-page and be called "Make it so."

Panel on Income Inequality

Income inequality turns out to be much more important than aggregate national income (above a certain poverty level) in all of these:

• National aggregate levels of happiness (measured in a variety of different ways)
• Levels of physical and mental health (cancer, heart disease, anxiety, depression)
• Levels of child wellbeing (aggregate measure of learning, happiness, health, safety)
• Levels of community trust (we trust people equal to ourselves.  But not people poorer (blue collar crime) or richer (white collar crime)
• Quality of social relations (we get along better/stronger friendships with people of similar socio-economic status – moreso than of similar age, race, gender.  Unequal societies also have higher rates of divorce).
• Economic growth (inequality seems to cause more bubbles and crashes)

In each case, you are better off being equal than being rich.

It’s not about poverty.  In the unequal countries, the rich have lower levels of health, happiness, and social relations, not just the poor. 

When to fire a socially bizarre person.

There were two employee firings that made national attention recently.  I would like to share my take on why they are different and see if you agree. 

The first one was fired for being a Satan worshipper.  Apparently, she was good at her job, but was fired just for this.  The second was a District Attorney who had an excellent conviction rate.  But it was discovered that she was moonlighting as a dominatrix for hire (why is that not surprising for a DA?).  She was fired for this.

There are two things to think about.  First, were the firings legal?  If not, the rest of the post is moot.  We have certain protected classes in the US where it is illegal to use these factors as a basis for hiring and firing.  These include gender, race, religion, disability, and in some states a few others.  On the other hand, if you want to fire someone for wearing blue shirts, even if it is not work related, a private organization can legally do it.  So with our two cases, we have to decide if Satan worship is a religion or not.  I don’t think S&M is ever considered a religion or any other protected class.

If they are legal, the next thing to think about is whether these were smart firings.  If someone is really good at their job, but has a bizarre or socially unacceptable behavior outside of work, is that a smart reason to fire them?  Does awareness of this outside behavior hurt workplace performance overall because of gossip or poor teamwork?  This is a tough call and may not be the same in every case.  If I were the employer, I would be very hesitant to lose a competent, above average employee for such an unrelated reason.  Good workers are hard to find.