2007-09-30

Poor hungry children in Africa don't want your help

James Shikwati of Kenya argues convincingly how western attempts to aid Africa are causing devastating economic damage, keeping African economies from developing and keeping them dependent on foreign aid.

(Link thanks to Ron Garret.)

2007-09-27

"The Truth About The Drug Companies"

Scott Aaronson discusses the book The Truth About The Drug Companies: How They Deceive Us and What To Do About It, by Marcia Angell:
Like many in the US, I once “knew” that drug companies have to charge such absurd prices here because otherwise they wouldn’t be able to fund their R&D. This book reveals the hilarious truth about what drug company R&D actually consists of. My favorite examples: coloring Prozac pink instead of green, marketing it for “premenstrual dysphoric disorder” instead of depression, and charging three times as much for it. Inventing new drugs for high blood pressure that are less effective than diuretics available since the 1950’s, but have the advantage of being patentable. Proving in clinical trials that a new drug works better than an old one, as long as you compare 40mg of the one to 20mg of the other.

The book paints a picture of the pharmaceutical industry as, basically, an organized crime syndicate that’s been successful in co-opting the government. It trumpets the free market but depends almost entirely for its existence on bad patent laws that it helped write; it bribes doctors to prescribe worse expensive drugs instead of better cheap ones; it waits for government-funded university researchers to discover new drugs, then bottles them up, makes billions of dollars, and demands credit for its life-saving innovations.
This is consistent with what I hear about the pharma business from my Slovenian colleagues who have entered the medicine and pharma industries.

We know that the U.S. patent system is utterly broken for software. It may be that it is utterly broken for pharmaceuticals as well, and we are just being persuaded how invaluable it is by people who grew rich exploiting the exclusivity it gives them while really not making much of a contribution to justify those privileges at all.

I'm strongly a libertarian, but I've argued before (in Slovenian) that basic research is most effectively done as a community effort, and not by individual companies. This is because the interest of individual companies is to find a local optimum in a given market, not to disrupt the market; but the greatest common good may well be found by disrupting the market and finding a global optimum.

Furthermore, companies are unmotivated to invest in basic research because when basic research yields results, it is often difficult to control who profits from it; the research may take so long and be so expensive and uncertain that it may well be beyond a single company's or manager's investment horizon and appetite for risk; and the revelations it uncovers may be so fundamental that it's difficult to keep it under wraps long enough for a single company to profit from it.

In my belief, evidence shows that the combined individual actions of companies and consumers are good at finding local optima, but because of the Nash equilibrium, they aren't effective at breaking out of a rut and discovering entirely new global optima.

This is why I think that the most basic of research - and now including perhaps research into drugs - is best financed by the community, and the results made public for any company to use.

Meanwhile, we should probably just abolish patents, which give an unfair leverage to people who generally seem not to have earned the privilege at all. At least in software, there seems to be hardly any use for patents other than as a way for:
  1. companies to muscle out potential rivals while they're small,
  2. patent trolls to extort money out of legitimate business, and
  3. large companies to practice mutually assured destruction.
There may yet be a benefit of patents for startups in the bio, physics and pharma worlds, but there is none in software; and the overall value of patents in the big pharma business seems to be questionable, too.

2007-09-26

How Bolsheviks ran the economy

Here's another excerpt from Amity Shlaes's book. This follows a paragraph that tells about how Herbert Hoover, then a mining engineer and not yet president of the U.S., was working on a mining estate in Kyshtim, Russia, which provided a livelihood for 100,000 and was rich in copper and other metals. Page 30:
The events in Russia had strengthened Hoover's conviction about the need for firm leadership in Europe and even the United States. In 1916 Bolsheviks began agitations at his own Kyshtim plants. In 1917 the Communists took power, throwing out the ownership and management at Kyshtim and giving themselves a 100 percent raise. The Americans on the project were sent off on trains to Vladivostok, but the Russian experts were brutalized or even killed. What made it worse was that without the experts the delicate Kyshtim furnaces broke down within a week; the Communists could not read the blueprints left behind that would have told them how to do repair work. "In a week the works were shut down, and 100,000 people were destitute," Hoover recalled, rightfully disgusted, in his memoir.

The Forgotten Man: A new history of the great depression

Thanks to internet bookstores and courier delivery, my existence on this beautiful little tropical island has today been enriched by three brand new books not otherwise available in local bookstores. I just opened Amity Shlaes's The Forgotten Man: A new history of the great depression, which begins with the following quote:
As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed to remedy the evil and help X. Their law always proposes to determine what C shall do for X, or in the better case, what A, B, and C shall do for X.

- William Graham Sumner, Yale University, 1881
C, not X, is the 'forgotten man' in the book's title. I'll see what the rest of the book brings.

2007-09-25

U.S. withholding Iraq chlorine in cholera outbreak

The death toll of 100,000 to a million not having been enough, the consequences of the U.S.-led invasion now also include a major cholera outbreak that has reached Baghdad. Previously, about 7,000 were infected in the Kurdish provinces. Mortality of cholera is 25-50% of cases moderate or worse if untreated. Untreated seems to be the likelihood given the current state of disarray in Iraq.

The twist? Iraq is now in dire need of chlorine to disinfect water, but the U.S. is holding up 100,000 tons at the border with Jordan. It seems like it was detected in some bombs where it was used as a booster - though apparently a not very effective one. But now Iraq does not get to use chlorine to disinfect its water.

2007-09-23

Democracy, the tale of the slave

Rok Spruk recently posted this article about fundamental negative aspects of democracy as currently practiced: majority coercion, interest groups and governmental creep.

At the end, Rok links to Robert Nozick's The Tale of the Slave, which illustrates with striking clarity how group coercion (as in democracy) is coercion nevertheless, and as such, how it is questionably justified.

2007-09-21

Deceased parrot had IQ of bushmen?

For those who find it convenient to cling onto beliefs that there's a magical distinction between the consciousness of an animal and that of a human - probably because this makes it easy to ignore the plight to which we subject animals - The Economist presents this obituary of Alex, a parrot, aged 31:
By the end, said Dr Pepperberg, Alex had the intelligence of a five-year-old child and had not reached his full potential. He had a vocabulary of 150 words. He knew the names of 50 objects and could, in addition, describe their colours, shapes and the materials they were made from. He could answer questions about objects' properties, even when he had not seen that particular combination of properties before. He could ask for things—and would reject a proffered item and ask again if it was not what he wanted. He understood, and could discuss, the concepts of “bigger”, “smaller”, “same” and “different”. And he could count up to six, including the number zero (and was grappling with the concept of “seven” when he died). He even knew when and how to apologise if he annoyed Dr Pepperberg or her collaborators.
A human comparison: in Richard Lynn's Race Differences in Intelligence, there is a page about how certain human languages (spoken by human races with the lowest IQs, such as bushmen and the Australian aborigines) can only express numbers with the words "one", "two", "few" and "many". In some of these languages, numbers more than 2 can be expressed by chaining multiple "two" and "one" together, e.g. "two two one" = 5. However, this works only up to about seven, at which point the chain of twos gets too complex for the listeners to understand.

These people have average IQs of about 50-60. That makes one wonder about a possible IQ overlap between the most intellectually challenged types of humans and the average Alex-like parrot.

And it also makes one wonder about lots of other things.

2007-09-20

Studies find teaching abstinence ineffective

And now for something obvious that religious policymakers don't get: studies and trials done on thousands of young people in the U.S. show that teaching teenagers abstinence is as effective in reducing their chances of unwanted pregnancies and disease as not at all talking about it:
Last month Dr Underhill published a review of 13 trials involving 16,000 young people in America. The trials compared the sexual behaviour of those given an abstinence-only education with that of those who were provided with no information at all or with whatever their schools normally taught. Pregnancies were as numerous in both groups. Sexually transmitted diseases were as widespread. The number of sexual partners was equally high and unprotected sex just as common.
In contrast, teaching kids about abstinence and condom use did have some impact:
This tuition—compared, as before, with whatever biology classes and playgrounds provide—reduced the number of pregnancies in three out of seven trials (the remaining four recorded no difference). Four out of 13 trials found that abstinence-plus-educated teenagers had fewer sexual partners, while the remainder showed no change. Fourteen studies reported that it increased condom use; 12 others reported no difference. Furthermore, in the vast majority of cases, abstinence-plus participants knew more about AIDS and HIV (the virus that causes the disease) than their peers did. And the tuition often reduced the frequency of anal sex (which brings a greater chance of passing on HIV than the vaginal option).
And no, contrary to religious arguments, talking to young people about condoms did not increase their propensity to sin:
In contrast to the fears of the protagonists of abstinence-only education, not one of the trials found that teenagers behaved in a riskier fashion in either the long or the short term after receiving abstinence-plus instruction.

2007-09-19

UK study finds: Internet has not increased problem gambling

A UK Gambling Commission study found that, contrary to their expectations, the internet has not led to an increase in the proportion of people gambling from the previous study in 1999.

Problem gambling remained at the same level as found in 1999, at about 0.6%, or about 250,000 people in the UK.

I wrote earlier about the absurdity of USA-style prohibitions of online gambling:
You cannot gamble online either. You used to be able to - but then, a Las Vegas representative introduced legislation that cracked down on online gambling. And playing poker, too. Ostensible reason? Poor children who gamble online and get their parents into enormous debt. That's what the TV said. Real reason? Las Vegas casinos feeling competition from the online gambling industry. So they lobby the federal government to prohibit you, and everyone else, from doing what you want with your money. And it considerably hurts freedom on the internet, because now, all of a sudden, it becomes more difficult to make online trasactions - there need to be all these checks to make sure none of it goes into gambling. And all of that, for what? The benefit of Las Vegas casinos?
This new study shows how groundless, pointless and useless these prohibitions against online gambling really are.

2007-09-17

EU court quashes Microsoft appeal

Sadly predictably, the EU's Court of First Instance ruled against Microsoft today in the company's appeal against an EUR 497 million fine imposed by the European Commission. The fine was imposed in 2004 ostensibly for two reasons:
  1. for Microsoft having increased the value of Windows by including Windows Media Player freely in the operating system, thus undercutting the malwarish, ad-ridden, privacy invading Real Player;
  2. for Microsoft refusing to "disclose to competitors interoperability information which would allow non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers" - i.e., for refusing to work with competitors to implement their own domain controllers for Windows domains.
In April's The Commission for Unfair Trade, I already wrote about how including the Windows Media Player with the operating system is a non-issue that calls for anything other than government punishment. If the Windows Media Player is free and is good, and if the competition (Real Player) is ad-ridden and crappy, then it is a service to consumers if Microsoft bundles the Media Player with Windows. Furthermore, it is Microsoft's right to do so, just as it is a car manufacturer's right to sell a car with a stereo. And if the customer is dissatisfied with the Windows Media Player, they are free to get Real Player; except that Real Player is ad-ridden, privacy invading, intrusive and crappy, so they don't. Hence, the publishers of Real Player seek refuge in the courts.

With regard to the second issue - opening Windows up to allow Linux-based domain controllers, for example - think about it this way. You create products which work well together. You optimize them to do so. As a result, your solution is successful.

Then along comes someone who wants to sell a cheaper replacement for one of the components of your solution. Since you are not disclosing the internal functioning of your system, they file a lawsuit requiring you to do so.

This is much like Volkswagen suing BMW to disclose the specifications of their engines so that Volkswagen can build engines for BMWs. Then the EU competition commissioner would require BMW to sell a version of its cars without an engine so that customers can get an engine from Volkswagen.

This is serious injustice taking place here. The only reason the EU can get away with it is that Microsoft is selling the various components of its solution as separate products (Windows desktop vs. Windows server) instead of as a single product (a car).

As long as the EU is calling for Microsoft to publish the domain controller protocols, why doesn't it call for Microsoft to disclose the internal protocols that are part of Windows as well? Hey, imagine the benefit to consumers if any company could implement their own Windows Client/Server Runtime Subsystem!

Hey, while we're at it, why not just require Microsoft to publish all of their source code?

Why not require Microsoft to give free licenses to students and home users?!

Hey, why not require Microsoft to give away all of its software for free?!

That would be good for consumers! Wouldn't it? Really?

2007-09-14

The doghouse: Hindu believers protest canal between India and Sri Lanka

As if to show that pointless and hurtful religious traditions are not solely the domain of Christians and Muslims, Hindu hardliners blocked roads in Delhi and elsewhere to protest a proposed canal project that would reduce travel time for ships and boost local economies by providing a navigable sea route between India and Sri Lanka. The object of dispute is Adam's Bridge, a 48-km long geological formation which Hindus believe was built by god Ram and an army of monkeys to enable him to cross into Sri Lanka.

I would understand a protest based on environmental grounds; a unique landmark like this may warrant preservation. But to block roads because the bridge was built by Lord Ram and his army of monkeys - that's another issue altogether.

2007-09-12

The doghouse: Italian consumer associations protest pasta prices

I have recently picked on the follies committed by the United States, Venezuela and Slovenia. Today, however, a new target presented itself: Italian consumer associations protesting recent increases in pasta prices.

Unless you've been living under a rock, you might have noticed that wheat has become more expensive this year. This is because, as a result of droughts in Australia and Canada, world stockpiles of wheat have reached a 26-year low. When this sort of thing happens - when resource X is less available than there are people interested in consuming it - then two things can be done:
  • One, resource X can be distributed to those people who are willing to trade the most other resources for it. In other words, each resource goes to people who most appreciate it, and are willing to demonstrate that by paying the most. This principle forms the foundation of our market economies and is the source of our economic well-being.
  • Two, resource X can be distributed to people according to some other principle. For example:
    • The government could have everyone queue for the resource. Everyone would stand in line for five, six hours. Then the first N people would get the wheat, and all the others would go without. People who don't get wheat would have to pay the people who got it in order to get some.
    • Or, everyone could get a "fair" fixed share of wheat, whether they want to have wheat or not. Then, those who want to trade wheat for other things could do so on the flea market.
It has been empirically shown that the first solution - letting the market do the distribution - is the efficient and superior one, whereas other solutions - such as queueing or rationing - create a distortion that removes economic incentive, encourages passivity and causes poverty. Therefore, when the world's reserves of wheat decline, it is only natural that the price of wheat will go up. When the price of wheat goes up, it is only natural that prices of all products made primarily of wheat will rise, too. Therefore bread becomes more expensive; chicken feed becomes more expensive; and pasta becomes more expensive, too. This is a natural consequence of world's wheat stockpiles declining, and the prices are a mechanism that ensures that the wheat that remains is directed to the places which are most entitled to receive it and which want it most.

Enter the Italian consumer associations. They propose that, in protest to rising wheat prices, Italians stop buying or eating pasta for a day. And then the government should intervene and reduce the growing pasta prices.

Economically, actually intervening to reduce the pasta prices would be one of the stupidest things the Italian government could possibly do. Intervening to reduce pasta prices wouldn't change the fact that there is a worldwide wheat stockpile shortage. Nor would it change the fact that prices of wheat worldwide are high as a result. Instead, what it would cause is that in Italy, pasta would simply have to stop being manufactured, imported and sold. If the government requires you to sell pasta at a price that doesn't allow you to pay for the wheat required, then the only thing you can do if you don't want to lose money is to not make any pasta at all.

2007-09-08

TIME Magazine champions communist youth programme

If you did not yet believe that Time, Inc. were a communist news outlet (see TIME Magazine publishes socialist hate speech), you can now be reassured that they are. The September 10 issue of TIME Magazine sports a cover and illustrations reminiscent of socialist propaganda, accompanied with the following cover text:
The case for national service

Millions of Americans want to help their community, their country, their world. Here's a plan to put those ideals into action
The article on page 48 starts out by abusively evoking the image of Benjamin Franklin ("Well, Doctor, what have we got, a republic or a monarchy?" - Franklin: "A republic, if you can keep it") - to suggest that the way to improve the health of the American republic (see Happy independence day! for more on that topic) is not to, say, introduce more political competition by devolving the power of the federal government back to the states, but by yet more strengthening of the federal government by introducing a cabinet-level programme of national service.

Of course, Time, Inc. is sensible enough to understand that a compulsory programme wouldn't fly in the States... yet; so what they are proposing is, for each child that is born, the government should confiscate $5,000 from the tax payers at the time of birth; then invest this money until the child reaches the age of 18-25; and then pay the resulting amount (they use a projection of $19,000) to the young adult, under the condition that they perform one year of national service. As a "rite of passage", they say.

So, here's what's happening. The Federal government has enacted regulations which have made it difficult for young people to find opportunistic ways to contribute. The minimum wage makes it illegal to employ someone as a half-volunteer. The income tax and other mandatory contributions further raise the cost of employing someone inexperienced for a potentially limited time. Unions make it difficult to get rid of people if they turn out to be of little use. The overall result of all of these policies is that employers have to be really careful about who they hire, because it is costly to make the wrong choice. So, guess what: smart employers do not hire people about whom they have any doubts:
Firing someone you hired by mistake can take months and be nightmarishly difficult, especially if they decide to be litigious about it. In some situations it may be completely impossible to fire anyone.
In true socialist tradition, TIME Magazine proposes that, in order to give opportunities back to young people, the best way is not to remove the regulatory burdens that have caused the opportunities to go away, but to invent an artificial opportunity programme that introduces yet more burden on society. The solution, they think, is to require tax payers to cough up $5,000 per child; hope that the next three successive governments are going to wisely manage the money, rather than steal from the fund; and then pay the money back only to those young adults who chose to spend one year in the program of national service, in a way as dictated by the government.

The mindset being propagated in various outlets published by Time, Inc. - including TIME Magazine, Fortune and Business Week - is already alarmingly socialist as far as I've seen. However, this is the most preposterously communist proposal I've seen published in mainstream American media in recent years.

Buy The Economist. Buy Forbes. Do not buy Business Week, Fortune or TIME Magazine.

2007-09-03

Robert J. Barro's Democracy & Growth

Thanks to Rok Spruk for providing this link to Robert J. Barro's paper on Democracy and Growth:
Growth and democracy (subjective indexes of political freedom) are analyzed for a panel of about 100 countries from 1960 to 1990. The favorable effects on growth include maintenance of the rule of law, free markets, small government consumption, and high human capital. Once these kinds of variables and the initial level of real per-capita GDP are held constant, the overall effect of democracy on growth is weakly negative. There is a suggestion of a nonlinear relationship in which democracy enhances growth at low levels of political freedom but depresses growth when a moderate level of freedom has already been attained. Improvements in the standard of living - measured by GDP, life expectancy, and education - substantially raise the probability that political freedoms will grow. These results allow for predictions about which countries will become more or less democratic in the future.
NBER normally sells access to the full paper for $5, but they will also make it available for free if, among other options, you have an email address in a developing country (Slovenia and St. Kitts & Nevis included).

Worthwhile reading!

Another excerpt:
Nevertheless, a common view - supported by many case studies - is that prosperity tends to inspire democracy. The overall cross-country evidence considered in this study supports this view; specifically, an increase in the standard of living tends to generate a gradual rise in democracy. In contrast, democracies that arise without prior economic development - sometimes because they are imposed from the outside - tend not to last.
This foretells the sad performance of democracy as externally imposed in Afghanistan and Iraq in recent years. It is prosperity that breeds democracy, and not the other way around! In fact - according to the paper's findings - the impact of democracy on prosperity is weakly negative...

2007-09-02

Chavez bulldozing over Venezuelan economy

If you're into schadenfreude, this article reads like a comedy. President Chavez seems to be effectively demolishing the Venezuelan economy and replacing it with a system where the only thing being produced in Venezuela is going to be the oil, most of which will be exported abroad, and all the other goods are going to be imported and distributed to citizens based on a voucher principle. With oil prices now around their all-time highs, he needs them still to grow in order to fund his government's deficit. The deficit is incurred because he's massively importing basic consumer goods from abroad, and the reason he's doing that is because he's already crippled the local economy to the extent that it cannot any more provide all of its citizens with the most basic local goods.

By the time he's done, Venezuela will have been sent back to the stone age economically. It seems like the nation is going to rely entirely on its oil revenues as the only means of its survival. But when eventually oil prices fall, so will the entire "economy". This will be fun to observe.

It is a comedy, of course, as long as you don't consider or identify with the plight of Chavez's hapless economic subjects. Once you begin to identify with a person stranded in this arising caricature of a state, it becomes more of a tragicomedy. And the way it seems to be going, it's on a good path to turn into a tragedy pretty soon. The saddest part is, even when the nation is completely ruined, Chavez will likely manage to stay in power - just like his friends Robert Mugabe (who sent Zimbabwe into the stone age over the past few decades), Kim Yong-Il and Fidel Castro (who are keeping their respective countries in the economic stone age as well).

Fun, fun, fun.

To the extent that misery is funny.

U.S. media fails to report Iran nuclear news?

Quoting GlobalResearch.ca (via Ron Garret):
The mainstream media has failed to report the agreement reached between the International Atomic Energy Agency (IAEA) and the Iranian government in regards to the Iranian nuclear energy program. An understanding has been reached between the two. The IAEA has given Iran's nuclear program a clean bill of health.

Why is the U.S. media not reporting on this matter? Why do the U.S. and its Western allies continue to threaten Iran with punitive bombings for its alleged non-compliance, when everything indicates that Iran has a bona fide nuclear energy program and does not have the capabilities of developing nuclear weapons?