Wednesday, November 30, 2011

Obesity, Peer Review, and Questions

I had commented on a NEJM paper a while back which was said to determine a relationship between obesity and associated groups such as facebook friends. At the time I thought is nonsense.

A paper by Lyons debunks the paper and its sequallae quite well. As Russ Roberts states quite well:

Here is the summary:

We begin by summarizing the major problems with C&F’s studies:

1. The data are not available to others.
2. The unavailable data are sparse for friendships.
3. The models used to analyze the sparse data contradict the data and the conclusions.
4. The method used to estimate the dubious models does not apply.
5. The statistical significance tests from the questionable estimates do not show
the proposed differences.
6. The wrongly proposed differences do not distinguish among homophily, environment, and induction.
7. Associations at a distance are better explained by homophily than by induction.

Or in another words, bad paper, meaningless results. It’s not an easy article to follow (and neither was the original work by Christakis and Fowler.) The point on statistical significance is pretty clear though and pretty deadly.

However the paper also demonstrates the problems with Peer Review.

Lyons states:

Both of C&F’s first two papers were published in the world’s top medical journal, the New Engl. J. Med. Their third paper was published in BMJ, another very highly respected medical journal. Their fourth paper was published in the J. Pers. Soc. Psychol., a top journal and the flagship journal of the American Psychological Association. After we had completed our analysis of those four papers, two more based on the same data appeared: the fifth (Rosenquist, Murabito, Fowler, and Christakis, 2010) in Ann. Intern. Med., again a very highly respected journal, and the sixth (Rosenquist, Fowler, and Christakis, 2011) in Mol. Psychiatry, a top journal in psychiatry. We leave as an exercise to the reader to spot in these last two papers the same errors we have recounted here.

Given the fundamental errors we have described, what can we conclude about the process of peer review at these top journals? Altman (1998), currently the senior statistics editor at BMJ, gave a personal account as a statistical reviewer of submissions to medical journals, as well as a table summarizing some studies on the quality of statistics in published medical articles. His bleak assessment: “The main reason for the plethora of statistical errors is that the majority of statistical analyses are performed by people with an inadequate understanding of statistical methods. They are then peer reviewed by people who are generally no more knowledgeable. Sadly, much research may benefit researchers rather more than patients, especially when is carried out primarily as a ridiculous career necessity.”

Problems with peer review have long been known and several remedies have been proposed. One remedy has even been shown to fail (see Fidler, Thomason, Cumming, Finch, and Leeman, 2004). We propose a new solution below, based partly on our experiences in getting the present critique published. One can find several anecdotal reports on the web about the policies of top scientific journals regarding critiques, but we are not aware of any study of the issue. Our experiences matched the anecdotes we saw and seem informative.

We first submitted our critique to the New Engl. J. Med., but it was rejected without peer review. The journal declined to give a reason when asked. We next submitted to BMJ, but it was again rejected without peer review. This journal did, however, volunteer that “We decided your paper was probably better placed in a more specialist journal.” It is interesting to note that the same issue of BMJ that published Fowler and Christakis (2008a) also published the critique Cohen-Cole and Fletcher (2008a). The cover of that issue, in fact, was devoted to those two articles. In contrast to BMJ’s decision, the general-interest online newsmagazine Slate published an article by Johns (2010) on our critique the same month we submitted our paper. An delightful coda is that a few months later, BMJ published an editorial by Schriger and Altman (2010) called “Inadequate post-publication review of
medical research”.

After these rejections by the New Engl. J. Med. and BMJ, we approached three top journals who did not publish any of C&F’s studies, JAMA, Lancet, and Proc. Natl. Acad. Sci.. All were uninterested in our critique since they do not publish critiques of articles they did not originally publish. The section of J. Pers. Soc. Psychol. that published Cacioppo et al. (2009) does not publish critiques even of papers they have published, unless accompanied by new data.

Following on this educational venture, we submitted to a statistics journal that specializes in reviews, Stat. Sci. Five months later they had 3 referee reports. The first two recommended publication after revisions (e.g., “an important critique” and “well worth publishing”), while the third, though  agreeing with our critiques, said that C&F’s work was insufficiently important to warrant publication of a critique in Stat. Sci. Two months after getting these reports, the editor made his decision: rejection, allowing for resubmission if we made the tone more neutral and changed the focus, perhaps to “editorial decision making standards in medical journals”, as suggested by the third referee.

The above is one of the best arguments against Peer Review ever. It demonstrates the closing of ranks. It shows that Kuhn and his paradigm shift is a simplistic reason at times for scientific lack of integrity. I rarely include such a length reference but Lyons has done a service.

The Internet has dramatically changed the essence of peer review. It allows presentation of material and its evaluation as is. In my recent experience the peer reviewed journals are all too often a closed environment, closed for certain points of view. NEJM during the health care debate had in my opinion an undue balance in favor of the law. It published articles often from Administration advisers as if they were purely academic research analyses. They were in fact propaganda.

Thus a congratulations to Lyons for a superb piece of work and hopefully more of this can be delivered. I especially would like to see this applied to the less than reasonable analysis of PSA testing.

Wrong Premise

MIT hosted a conference on the loss of manufacturing in the US, a conference of a White House panel to understand what could be done. In the MIT report on the event they state:

AMP’s premise is that there exists a substantial “innovation gap,” as many forum participants called it, in which not enough of the country’s research discoveries move on to form the basis of viable businesses. Helping those innovations move into the marketplace could strengthen the nation’s manufacturing sector and reverse the sector’s long decline in employment.

Now one should explore that premise. Having headed R&D groups as well as having started a few companies the issue is not one of too few ideas becoming reality. That is the natural course of things. A viable business is based upon markets not good ideas or technology.

I am reminded of an early investment opportunity I rejected almost thirty years ago. The inventor had a great idea and he built a great prototype and he had a fantastic assembly line, yet he went bankrupt. His final comment to the Board was:

"If only there were customers I could have made millions of the units!"

Namely he was looking at the wrong thing, namely the good idea and his ability to execute on the manufacturing side. In surviving and growing companies they all have one thing in common, customers, and more customers. The challenge is in having the entrepreneur who finds that bridge between good technology and a customer demand.

That is why I always insist on having the customer first. That hopefully presents revenue but it also modifies the product so that it meets the need.

The article continues:

Indeed, as White House officials emphasized, the challenge of AMP is to identify and support new areas of manufacturing activity. Some of these areas may be in existing fields such as biotechnology, energy and robotics; others lie in evolving fields such as nanotechnology and advanced materials, where advances could create either specific products or new techniques that could apply to many industries.

Manufacturing is but one of several elements in the delivery of market demanded goods and services.  Manufacturing qua employing trained union labor is being pressed out of existence by the use of robots and other intelligent production means. Why use humans when the robot is cheaper. Yet the intelligence that goes into the robot is of substantial value. It is the next step on the evolutionary trail, not more manufacturing jobs.

They continue:

When it comes to commercializing research, one challenge for AMP is to figure out how best to help university scientists connect with manufacturers. “There is a discontinuity between academic research and industrial needs [that is] particularly pronounced in manufacturing,” said Andre Sharon, a mechanical engineering professor at Boston University. Speakers on one panel described a variety of emerging university-industry partnerships, from nanotechnology to stem-cell research, that aim to make applied research a more central part of their organizations.

Another set of challenges involves finding ways to help innovative small firms expand. Some of these concern funding: The credit crunch has made small-business loans harder to come by. But many speakers at AMP cited an additional problem: getting skilled technologists to stick with manufacturing firms and follow through with the often-arduous process of not just hitting on an innovation, but delivering it to customers.

“The big problem, and the one we really haven’t solved at all, is that while we’re quite good at supporting the efforts that lead to startups, we’re really very poor at supporting the research and education that would help startups to scale up,” said Suzanne Berger, the Raphael Dorman and Helen Starbuck Professor of Political Science at MIT, who is helping lead the Institute’s own study group on manufacturing, Production in the Innovation Economy (PIE). 

 University researchers connect to entrepreneurs NOT manufacturers. That is the food chain and shame on these folks for not understanding it. Or perhaps this is nothing but a political agenda. Yes MIT and Stanford and others are good at connecting with start ups, AKA then entrepreneur, yet they miss the manufacturer since that entity is well down the food chain. You do not manufacture until and unless there is a customer and it is the entrepreneur who starts that process.

As for scaling up, that is a normal Darwinian process well understood. If one makes progress with customers and generates cash then more cash will flow.

Sunday, November 27, 2011

And We Let Them Vote

I noticed a short piece by Gawker which included a plethora of "tweets" regarding the implausible endorsement of Newt by a "union leader". This came initially from DeLong.

Now having just returned from my home in New Hampshire, the northern Republican region to my New Jersey home, the Republican county of Morris and the most Republican town in the country, I was amazed of the general stupidity of twitter users. You see every town in northern New England has a Civil War memorial in the town center. A stature commemorating the survival of the Union, not the IBEW or Teamsters, but the real Union, like Lincoln and all that stuff about 150 years ago.

The idiots who tweeted though it was some New Hampshire labor union. That tells you a great deal of who made up the selection of the government which now rules, It is a terrifying fact, we have ignorant malcontents deciding who governs. It took much less to destroy Athens, in 400 BC that is.

Now for those who know little of New Hampshire one should be aware of Gov Meldrim Thomson who amongst his many claims sought to get nuclear weapons for the NH National Guard to protect us from those Canadians. Now I got to know the Gov when driving across Rt 25 over the hills past his farm. I often stopped and purchased a few vegetables and then passed the time on politics. Where else can one meet a Gov on a hill selling goods and who will share part of his day. Not in New Jersey, some of them are just trying to stay out of the local lock up. Same at times for New York.

But that is New Hampshire and that is why it is a good place to start. So for those twitter morons perhaps you may find that the union is the Union, the United States of America, and the Union Leader is the reflection of that concept.

Tuesday, November 22, 2011

Death of the Entrepreneur

I am in New Hampshire looking at opportunities and coming up I drove past Manchester where the current president spent time making another speech.

As reported by the Union Leader he said:

...a lot of the folks who have been down in New York and all across the country, in the Occupy movement, there is a profound sense of frustration -- (applause) -- there is a profound sense of frustration about the fact that the essence of the American Dream -- which is if you work hard, if you stick to it, that you can make it -- feels like that's slipping away. And it's not the way things are supposed to be. Not here. Not in America. (Applause.)

This is a place where your hard work and your responsibility is supposed to pay off. It's supposed to be a big, compassionate country where everybody who works hard should have a chance to get ahead -– not just the person who owns the factory, but the men and women who work on the factory floor. 

First, yes the applause was written into the speech. Second look at what is said in the last paragraph. The entrepreneur invented the product, spent their money, took substantial risks, sold the idea, raised capital, and lived at the precipice until the company was a success. The employees got a job, they show up, get paid for what they do, and go home. No risks, and the rewards are what they are paid.

Getting "ahead" is a matter not just of working hard, it is having a good idea, then implementing it, taking risks that are often extreme and then being a bit lucky. Clearly the current president seems clueless as to what an entrepreneur is. There is not equality between a worker and the entrepreneur. Let the worker leave their job, "burn the boats" and set out to create a new company on their own. Then they have the option of a substantial reward. They have no right to be compensated because they work hard, they are compensated, it is a paycheck, and that is all they deserve, at least until they do the same as the factory owner.

That single paragraph establishes the difference between the United States and the old Soviet Union. The American Dream is that you have the opportunity to do it on your own, to create wealth, to create value. You may work very hard digging ditches but your pay may be very little. In a factory you may work very hard but the owner is always thinking of how to replace you with a machine. Machines do not whine, machines have no sense of entitlement, machines do what they were built to do.

Just working hard was never the recipe for success. Working smart is better, but still not there. Taking risks, educated risks, are getting to the point. Compassion is a good emotion, it may be a religious one but it is not an essential part of a capitalist democracy. We do not have to be Scrooge types, we can be generous and helpful, but by choice not by law. There is no moral value to be obliged to be compassionate.

Monday, November 21, 2011

Obesity and Economists

I have argued from facts, the literature and experience that almost all obesity is self imposed. You see it is s fundamental law of physics:

Input - Output = Net Accumulation

Unlike Economics and their various assumptions regarding human demand and its impact on the economy, the above is almost a tautology, it is true by definition, almost.

Thus obesity is simple, at 3500 Kcal per pound, eating 100 Kcal per day, 6 oz of soda for example, half a small can, would in one month's time add a pound of weight, all other things being constant. Thus that corn muffin at work in the morning at 600 Kcal would add almost a pound per work week. It is a fact of nature. No AD or AS analysis, just an energy balance.

Now one of the many pontificating economists has taken up the challenge, I faced this a year ago by a Harvard type who said in effect that the added soda was infringing on his liberty and that we should ignore it, when in fact the tubby kids will cost me more even as I age, well this other economist states:

I was reading a book about genetic engineering ... and was struck when... (the author) claimed:
Research shows that obesity is consistently attributed to laziness and a lack of self-discipline.
In reality, the truth may be just the opposite.  Studies of identical twins reared together or apart indicate that much obesity may be caused by hereditary factors.  In technical terms, the heritability of obesity, the percentage of observed variation among people that is attributed to genes, is very high, somewhere between 50 and 80 percent.

Do you see the problem with Green’s assertion?  He asks us to believe that just because obesity is 80% genetic, it can’t also be 80% due to laziness.  But why?  What are those two hypotheses viewed as mutually exclusive?  Is it because genetic characteristics are viewed as “not one’s fault,” whereas laziness is viewed as a character flaw?  But why shouldn’t character flaws be genetic?

First of all, no matter what your genes if you adhere to the above equation you will not get fat. It would be physically impossible. No input, even with no output, is no accumulation. Period, simple. It is not the genes in the twins it is the twinkies.

Thus my argument is that economists were given a great opportunity to understand physics, not a complicate element of it but a simple one. Mass balance. But alas they get that wrong too. They can use massive equations that fail to reflect reality but when reality hits them in the face they reject it.

Is there a problem here?

A New Agenda

The current focus on the OWS effort, not clear that it is a movement, has resulted in some statements of goals that have at best been confusing if not outright incoherent.

A recent statement in the Washington Post represents one of the few attempts at coherency and is worth reiterating and analyzing:

And we will see clearly articulated demands emerging, among them a “Robin Hood tax” on all financial transactions and currency trades; a ban on high-frequency “flash” trading; the reinstatement of the Glass-Steagall Act to again separate investment banking from commercial banking; a constitutional amendment to revoke corporate personhood and overrule Citizens United ; a move toward a “true cost” market regime in which the price of every product reflects the ecological cost of its production, distribution and use; and with a bit of luck, perhaps even the birth of a new, left-right hybrid political party that moves America ...

Permit me to analyze the above:

1. Transaction Tax: Taxes are generally created to collect revenue, possibly to motivate behavior. In this case it is to penalize people who create markets. The function of many of the financial markets is to create liquidity. Money moves to where it is best put to use. Thus if I want to raise capital by debt or equity I need an efficient and reliable market. If the cost of doing this is too high in the US then it moves to Singapore, Luxembourg or Shanghai. Along with the move is the opportunity as well. Thus taxing transactions assumes inherently an immovable market, yet that is not the case. Dry up capital and you dry up the entrepreneur. Kill that and you kill this country. Thus the idea of an arbitrary tax is insane.

2. High Frequency Trading: Well there I would agree. As I have been saying for now forty years watch out for the instabilities. Look at LTCM back fifteen years ago, great minds but they got caught up in their own simplified assumptions. The market changes in ways to reverse attempts to maximize returns. It is inherently an unstable system, at best one can ride trends, at worst one can increase the unstable oscillations. Good idea but based upon total ignorance of cause and effect.

3. Glass Steagall: Good idea but remember it was Clinton and Summers and Rubin that gave you that one.

4. Corporate Personhood: Well why not unions as well. Frankly the more voices the better. Look at lobbyists, they write most of our legislation. Just look at SOPA, the Internet regulatory bill, and the mess it will create. It will cause a collapse of the Internet and will make China look like the free speech state par excellence!

5. "True Cost": Now here is a real dumb idea. Think Coase my friends. Who will determine the true cost. Anyone who has ever dabbled in calculating such ephemeral costs knows that it cannot be done. All that can be done is a Coasean cost balance, show me the harm and pay the remedy.

The problem is that some of these are fine and others make no sense. They are all half baked as is the movement.

Now the NY Times comments on this as well. They state:

Occupy Wall Street is animated by a central, galvanizing idea — that the distribution of wealth is unfair. That struck a very live nerve, grabbing something that was in the air and turning it into simple math: 1 percent should not live at the expense of the other 99 percent.  

However this leaves a significant question. If the 1% benefited at a cost to the 99% then one may have a basis for a claim. If, however, the 1% benefited and so did the 99%, albeit less so, then there is not only no basis for a claim but the claim is denied on face value. Now clearly banks and bankers benefited from public money and also the public has been devalued as a result. Thus the Government officials who created such deals did so in such a way to penalize the public. The benefit went solely to the 1% elements in banks. They in turn should have paid, but the horse has left the barn.

However, for the 1% who did not so benefit, say Steve Jobs and other entrepreneurs, who took risks, create wealth and jobs, then they should be rewarded not penalized.

What is the dividing line; wealth creation versus wealth transfer. Bankers just transfer wealth taking a piece for themselves. Wealth creation is what we should reward, the creation of new businesses, new technologies, new jobs.

Sunday, November 20, 2011

Lawyers vs Physicians

There is an interesting article in the NY Times regarding lawyers. Namely lawyers, those just out of school, first year associates, frankly know nothing. Yet the client often pays the $300 per hour to train that person. Now a physician straight out of medical school spends four more years in hands on training before they get the chance to do anything. The classic "Intern" is in many cases replaced by Resident and a first years Resident is often as deadly as some diseases. They do not know their way around the hospital etc but the system accounts for that by having layers of oversight. And the pay is horrible and you are billed for the Attending not the Resident.

Lawyers are different. You are billed for everything. Let's try writing a contract. Now many business people know more about contracts than attorneys, why, because they have lived through the bad ones. A first year associate would be clueless.

Take a will, in most cases a cut and paste. Yet some firms I have seen will spell the clients name different ways on the same page and get gender mixed even as often. If that is the case what else have they messed up on?

The Times states:

“The fundamental issue is that law schools are producing people who are not capable of being counselors,” says ...., the general counsel of FMC Technologies, a Houston company that makes oil drilling equipment. “They are lawyers in the sense that they have law degrees, but they aren’t ready to be a provider of services.” 

The simple task of filing a lawsuit, a will, of finding the right window in the Courthouse and getting the right form comes only from experience. Most often a law school grad is clueless of even where the Court House is no less understanding the difference between them.

Imagine a physician not knowing where to insert the needles to withdraw blood, it is at that level. Is that a bad thing, not really if the law firm takes upon itself the burden of training the apprentice. Low pay commensurate to say an Intern. But that has often not been the case, first year stars were getting almost $200,000 pa on Wall Street before the collapse.

Law often is learned by doing. Writing a contract, writing a brief, filing a law suit, deposing a witness, crossing a witness, and the reading of depositions. Done by doing, so does this mean that perhaps law school grads should go through a system akin to physicians, low pay for say four years, and not be charging clients. Perhaps it is worth considering, equity after all.

Friday, November 18, 2011

In Memory: Dave Staelin

MIT announced the passing of Dave Stalin. I knew Dave since 1965. In fact, I went to  his first class as a Faculty member which was Radio Astronomy. It was in the Fall of 1965 it was the first class I dropped into just out of curiosity and not because I was required to take it. Dave was always a bit of a polymath, and over the past 46 years our paths have crisscrossed many times. About ten months ago was the last I spoke with Dave at lunch in the Stata building, we sat for a couple of hours and discussed politics, and his views. I listened, he sent me his thoughts and we compared notes.

In between those years, Dave and I have bounced back and forth while in many varying worlds. While at Comsat he was good friends with my boss, Jack Harrington, and we bought a company Dave introduced us to called ERT, whose CEO John Gaut, I believe, was also one who I had interaction with. Dave and I discussed the future of environmental testing and monitoring, and ERT was then positioned to contribute and we had the satellites to do the monitoring. Yet we were a bit too early.
Then in the 80s I ran across Dave at PictureTel, one of his student founded companies, which morphed to Polycom, and lives on today. PictureTel was one of the first, if not the first, to compress real time video and send it over a data telephone line. It worked and it was the beginning of what we see today. It was Dave who saw the potential and Dave who held the vision aloft those many years.

Then in the 90s I met up with Dave again while he was at MIT Lincoln Lab, a former home to the two of us, and we tried to get Lincoln to act as a support for the US wireless industry. Good idea but wrong politics.

Then back at MIT for the past few years Dave and I met frequently. I reminded him that his book on electromagnetics got me through my FCC License exams with flying colors, it read like a great novel, now who else could do that to Maxwell Equations.

Dave was one of those rare individuals whose great insight and gentlemanly manner allowed great ideas to flourish. He will be missed.

Tuesday, November 15, 2011

AMA Stops ICD 10

The AMA today announced it was pulling support for ICD 10, which has been mandated by the new Health Care Law and HHS.

ICD 9 is the current version and is a coded list of diagnoses. ICD 10 would be an upgrade to that. The reason given is cost.

In their Press Release the AMA states:

The AMA House of Delegates voted today to work vigorously to stop implementation of ICD-10 (The International Classification of Diseases and Related Health Problems, 10th Revision), a new code set for medical diagnoses. ICD-10 has about 69,000 codes and will replace the 14,000 ICD-9 diagnosis codes currently in use. "The implementation of ICD-10 will create significant burdens on the practice of medicine with no direct benefit to individual patients' care," said Peter W. Carmel, M.D., AMA president. At a time when we are working to get the best value possible for our health care dollar, this massive and expensive undertaking will add administrative expense and create unnecessary workflow disruptions. The timing could not be worse as many physicians are working to implement electronic health records into their practices. We will continue working to help physicians keep their focus where it should be – on their patients." A 2008 study found that a small three-physician practice would need to spend $83,290 to implement ICD-10, and a 10-physician practice would spend $285,195 to make the coding change. 

This is a change from the AMA's recent support of the current administration in all their efforts. Hopefully we can see a continued set of efforts in this direction.

Monday, November 14, 2011

Have They No Shame?

I have argued on multiple occasions that economics, especially macroeconomics, is not a science, and no way an engineering discipline, but it is a cacophony of political thoughts embodied in equations, as if the equations give it a patina of respectability.

The latest flap seems to be in some discussions in Reuters. The first is a discussion which I would concur with which states:

As the power of the scientific method has encroached further than its applicability warrants into fields such as economics and business, its predictions of the future become ever more erroneous. In this list, we can include virtually every economic prognostication from the first half of 2008, and countless market research studies that misjudge consumer interest in the new product concepts that they test. Were he alive today, Charles Sanders Peirce, a turn-of-the-20th-century American pragmatist philosopher, would be unsurprised at the shoddy results of these analyses. A brilliant thinker, Peirce is less famous than his peers William James and John Dewey, mainly because he was an ornery and unpleasant character.  However, Peirce had an almost entirely overlooked yet extremely insightful theory applicable to modern scientific work. He concluded that no new idea was ever derived from the analysis of the past using inductive and deductive logic – the two forms of logic our modern scientific method utilize.

We can even include my favorite misstatements the now infamous predictions of Romer and what the result of the Stimulus would be. I have followed her errors for almost three years now. Their counter arguments are that things would have been worse if the money were not spent. That is not the issue, she said one thing and something else grossly different happened.

Now, in my opinion, one of the left wing economic theory followers responded to the above first posting. He states:

Incorporating rational expectations into macroeconomic models increases the level of complexity by an order of magnitude over what was already a difficult problem in the engineering literature, and much of what Lucas, Sargent, and others did was to find a way to forge forward despite the technical difficulties. That was an important contribution, but for our purposes it is the conceptual contribution — the loud, clear message that simple extrapolation from the past can lead to problems — that was important.

Frankly I resent the reference to the engineering world. We have very complex problems, has the author ever seen a bridge, perhaps a machine, a robot, and yes even a micro chip. It is not the difficulty or complexity of the problem,  it is that the answers are based on what if issues. What if elephants had wings, but they do not have them so why even discuss the issue.

The retort piece ends with:

Presently, there is no shortage of work trying to fix the problems with our models. I don’t know if we will succeed — the next model will work until it doesn’t — but we are certainly trying. And there is also no shortage within economics of “imagining things other than as they are,” a phrase the author uses repeatedly. From recommendations on how to fix markets, address pollution problems, stabilize the economy, put people back to work, to models of comparative economic systems that imagine societies with different institutional structures and societal relationships, economists are constantly imagining how to improve social conditions. In fact, for the most part we are charged with trying to do too much social engineering, not too little. In any case, we don’t think of the economy as an unchangeable “hunks of granite,” we understand that social relationships are at the heart of what we study and that those relationships are not etched in stone.

 This is where they get into trouble, the truth is their social engineering game. They like to get into the fight, use what they see as the way we as humans should live, tell us how we can do what we can with our very existence. They should be able to reach some agreement on monetary policy, but between gold and socialism there is not a bit of agreement.

Once you cross the line to social engineering you cross into belief, it lacks reason. No wonder Krugman is an Asimov fan, for Asimov was the one who articulated the social engineering of galactic civilizations, not just a country.

The Fallacy of Higher Education's Cost Rise

In the New Yorker there is an article purportedly explaining the high costs of college education. The author uses the Baumol argument which we discussed a few years ago regarding its application to health care. Simply in the services business such as health care, law and education there are no productivity increases so that justifies the cost rise.

The author states:

Instead, it stems from the peculiar economics of education, which have a lot in common with the economics of health care, another industry with a huge cost problem. (Indeed, in recent decades the cost of both college education and health care has risen sharply in most developed countries, not just the U.S.) Both industries suffer from an ailment called Baumol’s cost disease, which was diagnosed by the economist William Baumol, back in the sixties. Baumol recognized that some sectors of the economy, like manufacturing, have rising productivity—they regularly produce more with less, which leads to higher wages and rising living standards. But other sectors, like education, have a harder time increasing productivity. Ford, after all, can make more cars with fewer workers and in less time than it did in 1980. But the average student-teacher ratio in college is sixteen to one, just about what it was thirty years ago. In other words, teachers today aren’t any more productive than they were in 1980. The problem is that colleges can’t pay 1980 salaries, and the only way they can pay 2011 salaries is by raising prices. And the Baumol problem is exacerbated by the arms-race problem: colleges compete to lure students by investing in expensive things, like high-profile faculty members, fancy facilities, and a low student-to-teacher ratio. 

Now the fallacy of this argument is that faculty salaries have not increased at the rates of college tuition. The basis of the comment is missing and is wrong. The real reason is that universities have perforce of Government mandates added Deans of everything to the Administration. It is he Administration which has exploded. Highly competitive schools have seen their endowments explode at the same time, and one would think this would reduce tuition, but to the contrary. Instead we have explosions of new facilities. With new facilities come explosive maintenance costs. Then there are the costs to "feed" the Deans with more administrative help.

If the Presidents of colleges could say No once in a while then that would be much better, but there is always the new facility. Perhaps even simpler new facilities would help but the Administration always cajoles the givers into ever so more complex a structure at ever so greater a cost. Building the beast is cheap relative to feeding the beast.

Thus the Baumol argument is without merit. The true driver in a perverse way is the increasing endowment and its abuse in being used to construct more monuments with no regards to life cycle costs. When I was first teaching at MIT my office was in WW II wooden shacks. The largest cost of overhead was the steam heating, there was no AC and there were no computers. Now in its places is the Stata center, leaky windows, massive HVAC expenses, and even elevators. Feeding that beast is truly a heavy burden.

Thus do the increases in such infrastructure lead to better education? Oftentimes not. It would be helpful if people were to write articles of this type if they would first analyze the flow of funds into and out of the universities.

Sunday, November 13, 2011

The 1%, Whomever they Are

I have been reading the many folks writing on this 1% issue. I read Tyler Cowen's piece today which rambled around and about the issue. I wrote a few pieces a couple of years ago looking at income inequality and I came up with an interesting question.

"What percent of your friends, family and associates are in the 1%"

Now depending on that answer one can ask the next question:

"What is the probability that you are in the 1% given that x% of your friends etc are in the 1%"

One would suspect that say 5% of your friends etc are in the 1% that perhaps you are also. But not necessarily.

For example, there are people in the 1% who have few friends in the 1%. I would guess there are few of these people but they may exist. Then again if you have 50% of your friends in the 1% the chance that you were also could be quite high, really high, unless for some reason they just want to know you.

Thus the clustering of the 1% may be an interesting phenomenon to analyze. Perhaps the 2%, 5% and 50% as well, but I suspect it breaks down quickly. Also this could be an interesting mathematical problem.

But again, the 1% are also self segmented. Entrepreneurs cluster with entrepreneurs, look at Silicon Valley, Cambridge, and bankers cluster with bankers, ie Wall Street, and big CEOs all pall around together, look at well you know, and then there are the Sopranos,you see I live in New Jersey.

I would suspect that the 1% is itself inhomogeneous, spread out all over. So is the complaint about Wall Street, large company CEOs, sports figures, movie stars, entrepreneurs, Soprano types, just who?

The more one thinks of this issue the less focused it becomes.

Billing and Health Care Costs

When I was quite young back in the early to mid 40s, physicians made house calls. I remember when I had roseola and this wonderful blond pediatrician arrived, asked me to lift my shirt and then calmly told my mother that I had roseola. Let me rest and she said good bye. I believe we did this all in the entry way to the house. My mother paid her some cash, not a great deal, and off she went to the next house. All of this without any forms, no GPS in her car, no cell, but it all just worked. Now it did nothing more than give a name to what I had and assure my mother that I would not pass away that night. That was when I fell in love with medicine, or at least this beautiful physician, or both!

Now what does this have to do will billing. Dr. Emanuel in the NY Times today writes about Medical Billing costs. He states:

Imagine that repeated millions of times daily and you have one of the biggest money wasters in our health care system. Administration accounts for roughly 14 percent of what the United States spends on health care, or about $360 billion per year. About half of all administrative costs — $163 billion in 2009 — are borne by Medicare, Medicaid and insurance companies. The other half pays for the legions employed by doctors and hospitals to fill out billing forms, keep records, apply for credentials and perform the myriad other administrative functions associated with health care. The range of expert opinions on how much of this could be saved goes as high as $180 billion, or half of current expenditures. But a more conservative and reasonable estimate comes from David Cutler, an economist at Harvard, who calculates that for the whole system — for insurers as well as doctors and hospitals — electronic billing and credentialing could save $32 billion a year.

Now  there is a kernel of truth here but one must dig deeper. In the early 90s I ran a medical software billing company for a friend for a while. As in most cases I went out on sales calls, remember if all else fails listen to the customer. Now this was the most painful sales calls I ever performed. You see you do not speak to the physician, you speak to an office administrator, usually a very underpaid and overworked person who takes any suggestions as an affront to their performance. Not that one complains, but the billing and coding specialists have mastered an art lost somewhere in the 9th century by some monks in the Alps, namely medical billing.

The problem is really as follows:

1. The Government has HCFA forms, they demand the most complex and convolved data known to man, ICD 9 codes for the diagnosis and CPT codes describing what procedures were performed. So for example you may have a skin lesion and it may have been biopsied. It gets worse especially if you have multiple diagnoses and multiple procedures. They must be entered properly or the bill is rejected. Remember that 20% of all health care bills are Medicare. Thus this one payer controls a lot but not all. In addition they reject a great deal just to slow pay.

2. Private insurers are always looking for fraud and over practice and over payment. Thus they take the Government forms and personalize them for themselves, making for a plethora of different forms and multiple inputs.

3. The forms are now for the most part electronically filed, but remember that the patient also has to eventually pay something, either a co-pay at the time of the visit or a payment when all other payers have been taken care of. That may easily be a year or more after the service is rendered. There is no other business in the world where the payment cycle is stretched out so far and the physician must personally foot the money until the receivable is obtained as cash.

As Emanuel states:

But the real savings is in billing. There are at least six steps in the process: 1) determining a patient’s eligibility for services; 2) obtaining prior authorization for specialist visits, tests and treatments; 3) submitting claims by doctors and hospitals to insurers; 4) verifying whether a claim was received and where in the process it is; 5) adjudicating denials of claims; and 6) receiving payment.

That is correct, and the physician today must have a small finance department taking care of all of these elements. The physician is placed in the middle of this validation process and becomes a non-paid facilitator of the insurer. This is often the most painful part of the practice of medicine. Very painful. Lost claims, claims denied, claims rejected, all add up to a nasty number.

Emanuel alludes to the provision of a credit card type approach, where a patient has a card and the physician is pad and all is electronic.

The problem is that the system, the health care system, is NOT like the credit card business at all. It is a system where the entities paying whether Government or for profit are each trying to push costs down. They also do not trust physicians or patients. The means to control is delay. Remember delay is the deadliest form of denial. And ultimately they deny. Thus there is an inherent conflict, the conflict of not paying versus the conflict of lowering costs. By not paying or stretching out payments the costs as Emanuel say actually go up. He seems to imply a 10-15% costs to health care of billing and its allied issues. I would agree. Now how do we solve this problem.

You simply do what we did in cellular. When I took over our customer service people were told to deny any billing issues, delay and have the customer call back. The result was many more call backs and loss of customers to the competition. Loss of customers may not wok in the monopoly like environment but multiple call backs will drive up costs even more. The solution, trust but verify.

Trust but verify say that the payee pays out to the physician at the time the electronic invoice is submitted. But then like the credit card companies using sophisticated fraud management software ferret out the cheats and deal with them to the fullest degree of the law. There will always be cheats, physicians or patients, but for 99% of the patients and providers they will do the right thing. This will then cut down on costs and allow physician s to do what they do best, treat patients.

How to Do a Turn Around

The NY Times recounts the efforts of one of the current presidential candidates when he was performing turn arounds.

Now I spent a few years doing turn arounds. One must understand that these are often companies in some rather bad straits. They are burning money, have a management which may have become deer in head lights and are very close to their demise.

So here are the three rules of a turn around:

1. Fire half the people. Yes, half. How did I do this, easy, I have a Social Security number which ends in an odd number so I fired all those with even numbers. Nothing personal, and people actually understand that they just drew the wrong card. Even the lawyers accepted it. Why half, well it cuts costs and it makes a statement, namely we are really in bad shape. It is also fast. You do not get into the problem if making choices.

2. Raise the Prices. Why raise prices? Well simply you find out very quickly who are real customers who want your product or services and then you quickly get rid of those dragging you down. By this time you have actually become profitable, possibly still burning cash but profitable.

3. Find a buyer! This must be done quickly. You now have cleaned up problems, shown how to get the business functioning but you may very well have gutted it too much, so find someone who will keep it rolling and sees value.

Those three simple rules are rules of survival. Now the Times states:

But an examination of the Dade deal shows the unintended human costs and messy financial consequences behind the brand of capitalism that Mr. Romney practiced for 15 years. At Bain Capital’s direction, Dade quadrupled the money it owed creditors and vendors. It took steps that propelled the business toward bankruptcy. And in waves of layoffs, it cut loose 1,700 workers in the United States, including ...,  who lost their jobs at a plant in Westwood, Mass. Staggered, Mr. .... wondered, “How can the bean counters just come in here and say, Hey, it’s over?” Mr. Romney’s career at Bain Capital, which he owned and ran as chief executive, is a cornerstone of his campaign for the Republican presidential nomination — a credential, he argues, that showcases the management skills and business acumen that America needs to revive a stalled economy. Creating jobs, Mr. Romney says, is exactly what he knows how to do.

 The writer has no idea what a turn around is. It saves what is savable. The company was dying, you had to remove parts to save the remainder. I had done this many times, it is emotionally exhausting. I remember once in Memphis the above rule caught a man whose wife was dying of cancer. He came in to see me mad as hell. Did I make an exception, not exactly, but I did find him another job and we bridged health care costs. I was always willing to face those who I had cut, sometimes helpfully, sometimes as a cathartic.

The people at a dying company know what is happening. They all too often hang on in hope of someone saving them instead of recognizing that they should take it upon themselves to seek alternatives. Turn arounds are job preserving for some, and possibly job creating for others.

Thus the above article totally fails to understand what a turn around is. It demonstrates the gross and total ignorance and/or bias of our press. The "bean counters" are coming in after the company was near death, and if an employee did not recognize that then in my opinion and based upon my experience, they have a real problem.

I guess I just have the distinct disadvantage of experience!

Saturday, November 12, 2011

News Flash: Harvard Beats MIT

The Crimson splashed across its headlines the following:

In its season opener, the Harvard men’s basketball team downed cross-town rival MIT, 76-49, in front of a sold-out crowd at Lavietes Pavilion on Friday night.

Now why am I not surprised. MIT never had a varsity team, we played football against the Cambridge High Schools for good lord's sake.

Why I remember one time MIT was "playing" Rindge, I think, from Cambridge, you see it was MIT Seniors versus High School Sophomores and well MIT introduced Cheerleaders. Yes, MIT Cheerleaders. Now they were also students, some just outright brilliant, and they had assembled some "uniforms" and created some "cheers". Good try, but I have seen severe neurological defects which were coordinated better.But I must commend them for their enthusiasm. I even watched them for a bit. I think MIT lost to the High Schoolers.

So is this defeat something to moan about? Well it is not Penn State. Thank God for that.

Never Saw a Football Game

When I was young, my father was a police officer in New York City and, as such, instead of going into little league or the like, I was sent to the local Police Athletic Center, Rasmussen Center, to learn how to box. Boxing is a sport which is not really a team sport, it is survival, and as the only blue eyed heavy weight, I ended up with nose reformations and restructurings about three times until it was clear that I would not become the Great Irish Hope, or whatever.

Now I have never watched a football game, or basketball, and at best watch the Red Sox game only in World Series since my wonderful wife is from Boston. Thus, I have no interest in any spectator sports. So where is this going? Worthwhile Canadian Initiative had a piece regarding salary to sports figures which frankly blew my mind for its lack of understanding of the economics of the industry.

You see, I also ran a cable system, and have kept close to the industry's machinations. Now take sports channels. As I stated I have never watched any of them, never. Yet my $70.00 per month Basic Cable, you see I have Cablevision, pays the likes as ESPN and YES a cumulative of up to $20 per month per sub even if the customer never watches the channel! That is 100 million or more homes paying $250 per year, or $25 billion per year!

Now how does that relate to sports figures. Revenue less expense equals profit. The revenue here is as close to extortion as one can imagine, you want off the air TV then you must pay for stuff you never watch. The game then moves to the players and their unions and the games they play. If the game were paid for by attendees one suspects the players would be paid from the proceeds available. It is not paid that way. Everyone is taxed for these income transfer to these players. I pay despite the fact that I never benefit. It is income redistribution, but in this case from the less financially well off to the more so.

The article states: 

Just what is the difference between an athlete that ends up earning millions and one that never makes the big leagues? Luck is a part of it, but even if getting an extra hit in a given week may be a matter of chance, the law of large numbers says that you can't count on that kind of luck for long. But what this clip suggests is that the while the differences in skill between those playing in Yankee Stadium and those in the minor leagues may be small - one hit a week - they are at least measurable, and that's what counts.

To the extent that professional athletes' salaries can be explained by the tournament model, then those high salaries aren't so much a measure of the marginal product of top performers as an incentive dangled before everyone in the industry. Curiously enough, this is also the story that is often told to explain why CEOs' salaries are huge multiples of other executives.

So maybe we shouldn't be making the distinction between the millions that athletes earn and the millions earned by CEOs.

The actual point is to first understand how the revenue is generated. The CEO gets customers to buy the product made. The sports figure lives off the taxes collected from those who may have no interest in that they are doing or who frankly find their behavior reprehensible, such as Penn State and so many other sports figures. CEOs create value, sports stations redistribute incomes.

At least the movies types make money from people watching and paying. There is a one to one correspondence between what an actor gets and what is paid by a customer, akin to the CEO model. But sports figures get payments from people who have no interest, like me. Why should I pay $250 per year for nothing. And on top of it having some now over paid sports figure get involved in anti social activities resulting in negative externalities.

Perhaps it would help the economists to understand the true economic model rather than try to compare apples to mushrooms, or whatever.

Then Nick Rowe, tongue in cheek I suspect, responded: 

Baseball players are workers; CEO's are bosses, and therefore must be capitalists. Those who earn wages are poor and those who earn "profits" are rich. It's that old set of economic theories that conflate the distribution of managerial authority with the functional distribution of income with the personal distribution of income. Zombie ideas, that have been undead since 1871.

No, they are not workers, these figures are instruments, instruments of facilitation, like machines, since workers are transformers of raw materials to finished goods, well sports figures are the Gladiators and are necessary evils.The CEOs in this case have through the FCC and other Government agencies managed a taxation without representation scheme to get money for nothing. 

Another comment made was:

A classic example of not seeing the forest for the trees. What is more important is wealth inequality and the power inequality it breeds. While salaries are a factor in that, they aren't necessarily a major factor simply because many people who are paid high salaries don't often receive them long enough to accumulate a lot of wealth. Professional athletes are a perfect example of this. While a certain percentage do have lengthy careers at the top, the majority only last a couple of years.

 Where is John Galt when you really need him! Wealth inequality is due to the fact that some of us took substantial risks and were successful in those opportunities and created value for others and there was a return resulting therefrom. In what remains of a free society you have the opportunity to seek such a return. Instead whenever I hear this socialist retort I rebel. Since my grandmother was the head of the Socialist Party in New York a century ago, I understand better than most what that means, and it did not work then and will most certainly not work now. What power? There are many much less powerful people who are wealthy, they just want to continue to see their efforts prosper. Thus we in the State have fortunately put out capitol city outside of business cities.

Now for professional athletes, if someone gets $10 million a year then even at 3 to 5 years this is wealth creating. So the sop of it being for a short time is just that, a sop. 

Thus my argument is quite simple:

1. A CEO may become one of the 1% because he/she managed to create value by having products or services that people saw value in and thus purchased, aka Steve Jobs.

2. A sports figure gets rich because there is income transfer, mandatory and without the consent of the person whose income it is, to the sports figure. The sports figure creates nothing of value. 

3. An entertainment individual obtains wealth by having customers come a pay to see them perform.

4. The issue of how long one makes a certain income is irrelevant. A CEO may have his/her wealth tied up in options, and thus at risk. A sports figure can make extraordinary sums for as long as they can facilitate the creation of wealth for their owners.

Thus the posting mentioned above I believe misses the point totally. In fact, the old adage, follow the money, must be used in all such circumstances, and I believe that perhaps economists should keep that in mind.

Friday, November 11, 2011

New Elements Names

Science reports on the new official names for the three new elements:

The official monikers for elements 110, 111, and 112 are coming to a periodic table near you. On 4 November, the International Union of Pure and Applied Physics approved the fi nal names of these
three atoms: darmstadtium (Ds)—after Darmstadt, Germany, the site of its discovery— as well as roentgenium (Rg) and copernicium (Cn).

One wonders what use they may be put to.

Recession Statistics November 2011

We present the update of the Recession Statistics as compiled by The FED in St Louis. They tell a somewhat stark tale of where we seem not to be going.

Let me begin with the GDP and its components:

First the GDP growth. As seen above we are lagging well below the median in GDP recovery. There have been worse Recessions but not many.
Personal consumption is lagging at the lowest level and not recovering. The consumer is fearful of a further down turn combined with the loss of employed consumers.

In contrast private investment is on the average and it means that  companies are still investing in their infrastructure. This to a degree is bad news since it means further growth in productivity and lesser demand for labor. This we believe will be an increasing trend in our business cycle movements.

Despite the claims to the contrary the Government Expenditures are near bottom. This seems puzzling especially in light of the excess debt.

On the positive side we see strength in exports and in imports seen below.

Now as regards to Industrial Production we seem to be on average as seen below:

Yet the Income chart below is truly of concern. This is less of a 99% issue than the fact that income growth has staggered. Again our view if that this is driven by productivity changes.

Employment as above is as we expect at the bottom end. There is no sign of any recovery here and this should be a major concern of Government but in an election year and the current Administration we expect no changes.

Finally Retail Sales seems on average. One wonders where the source of income comes from to drive this. The upcoming Christmas Season will tell.

Veterans Day

The U.S.S. Albert W. Grant, DD-649, my father's ship, under repair at Manus after the Battle at Leyte Gulf, November 1944. The tanker U.S.S. Mount Hood (AE-11), in the distance, exploded within hours of this photo killing most aboard. In the memory of the men lost and in appreciation to all women and men in the military, present and past, many thanks.

Thursday, November 10, 2011

Technology and Health Care: Quo Vadis?

I am at my core an engineer. Engineers take technological advances and turn them into worthwhile things. Engineers are not at the core a researcher, seeking knowledge for knowledge's sake; but the engineer has a goal, and part of the goal is to have something that is reproducible, cost effective and satisfies the needs of people. Engineers succeed, if and only if, people appreciate and value what they create as a new process or thing. Engineering is an honorable profession.

Now where is this going? In the NY Times the former head of the MIT Media Lab has a piece where there is a discussion of technology and health care. Now a little history, back in the 70s I  shared a student with the early entity called Arch MAC, the predecessor of the Media Lab. In the 80s I as head of R&D at NYNEX, now Verizon, gave the Media lab several millions of equipment focusing on high resolution imaging and multimedia communications. In 89 I taught the first Multimedia Communications course at MIT, the book from that available for at this point historical reference. Now one thing I found out was the Media Lab is neither science or engineering, it is demo demo demo. It is an idea factory where the ideas are but a patina of a possible reality.

Thus in reading this article I was amazed to see that not much has changed. It states:

It would begin with a “digital nervous system”: inconspicuous wireless sensors worn on your body and placed in your home would continuously monitor your vital signs and track the daily activities that affect your health, counting the number of steps you take and the quantity and quality of food you eat. 

Wristbands would measure your levels of arousal, attention and anxiety. Bandages would monitor cuts for infection. Your bathroom mirror would calculate your heart rate, blood pressure and oxygen level.
Then you’d get automated advice. Software that could analyze and visually represent this data would enable you to truly understand the impact of your behavior on your health and suggest changes to help prevent illness — by far the most effective way to cut health care costs. 

Many situations would still call for professional medical attention, of course, but in most cases you wouldn’t need to make a costly trip to the doctor’s office. If you were not feeling well, a lifelike avatar on your smart phone would use natural-language processing to listen as you described your symptoms and then would translate them into medical jargon. After consulting a diagnostic supercomputer, the avatar would ask you to run a few quick medical tests at home. 

Now does any of this make sense? Frankly, in my opinion, little if any. Why? Well take measuring levels of arousal and anxiety. What do we measure and how often and what values are meaningful and at what costs? Just to begin asking.

I am a true believer that monitoring blood sugar is a good thing if it ca  be used to motivate weight loss and Type 2 Diabetes control. Does it work? We really do not know. At what cost? We do not know. Heart rates and the like may be useful for collection purposes but it is not clear that they will improve the life of the patient nor would they be cost effective. It requires engineering not demos.

What do physicians do. To paraphrase Osler, "if all else fails listen to the patient". That worked well at Hopkins a century ago and it is useful today as well. It is not a natural language processor that Osler had in mind. It is sitting there across from that seventy year old woman who has back problems and knee pain and find out that she has been gardening for the past month in her rock filled garden. Should we use an MRI for $2,000 a clip, and have the risk of finding things which we then must follow up on at exploding costs, or tell her in a comforting manner that some naproxen and come back in two weeks will be just fine.

All too often we do not need demos, we need competent family or general practice physicians who can handle the general day to day practice. Where can we get them, one source may be the very many foreign born and foreign educated physicians who could fill the gap. I have met many well educated physicians who could pass boards but would find it difficult to get into residency programs required for final licensing. Can we create another class, say between a Physician Assistant and a Board Certified Specialist. I believe the numbers are there and we just have to consider that option. Having more "demos" is not, in my opinion, productive in any manner.

FED Balance Sheet and M2 and Debt

First a look at the FED BS. Here we have a slow decrease from peak. Hopefully this will be a trend. Yet as Ron Paul notes the forced low interest rates frankly mean those elderly on fixed incomes are the ones being taxed by the large banks to help support their income. It is frankly a total disregard of those who were wise and saved. They now have 0% interest and thus must deplete their capital. A true free market rate would be more likely 4.5-5.5%. That would adjust all elements to reasonable levels. It would drive up US Government Debt costs as well. Thus we have a collusion of the FED and the current Administration living off the backs of the retired and furthermore now hitting their Medicare to the tune of $500B.

The FED's collection of US Treasuries has declined somewhat, a good trend, but one suspects a temporary one. It is a result of everyone else being worse. Thus a market for US Treasuries.

US Debt continues unabated. It well exceeds GDP and there appears to be no limit.

Finally I look at M2 from time to time and there has been volatility but now we see a flattening. Clearly the volatility will still be there but M2 shows a good 4-5% inflation, missing in the FEDs artificial control.

It is a shame that the old folks do not understand what is being done to them. The children will be loaded with long term debt unless we become Argentina and the older folks will just eat away principal. This is truly a third world governing milieu.

Well This Should Be Interesting

The Harvard Crimson has been following the occupation of Harvard Yard by the OWS contingent in Cambridge. As they state:

A tent city was hastily constructed in front of University Hall Wednesday night during a tense dialogue between “Occupy Harvard” protesters and Dean of Student Life Suzy M. Nelson.

The occupation followed a protest on campus involving more than roughly 350 participants sympathetic to the Occupy movement, during which Harvard Yard was shut down by Harvard University Police officers and Securitas guards.

The protest was intended to convey disapproval of the University’s perceived complicity in growing income inequality across the country. Participants included students, staff, faculty, and community members.

Around 7 p.m., protesters were met with increased security that would prevent Boston residents who were not Harvard affiliates from entering the Yard.

Now as one who lived through the 60s and tear gas in the Square this is a bit disorganized and in my opinion demonstrates the collapse of our educational system. As one student is quoted as saying:

“I’m here because I think this is one of the most important social uprisings in modern American history,” ..... said. “I believe deeply that this is a moment in America’s history that requires such a people’s movement. I’m happy to be part of it.”

Really, do they teach any real history at Harvard these days. Children of the Baby Boomers Revenge perhaps. Social uprising, at what? Yes perhaps Harvard had something to do with it, after all it was their economic types who both set up this mess and then made it worse, but they started at MIT. I can't wait till this migrates down Mass Ave.

I remember one night working late I believe in 69' in the old Building 20, the Rad Lab's wooden shacks, and we got a bomb scare since the SDS, I believe from Harvard, wanted to bomb the ROTC. Did any of us leave, no, did any of us join in, no, we just kept working, someone had to pay for all of this, thus we kept working to keep the economic engine working.

Also the students should note that at their head appears to be some "Dean of Student Life", one of the more than likely dozens if not hundreds of Deans of something or other. That and their staff drive up costs.

Now back to the student quote. What is the issue, what is your proposal, what are the anticipated results, how will you communicate than, how will you propose to implement it? Duh!

Revolutionaries, namely those seeking a fundamental change in a system, often have well thought out plans, for better or worse. "No Taxation without representation!", simple, not the abolition of taxes, it was understood that they played a necessary function, but let us have a say. Even Robespierre  had his views, the Revolution was for Equality, Liberty, and some form of Brotherhood, vague as they were, it opposed the monarchy. Then the Terror.

Even Lenin had a well thought out plan. He wanted a communist state and the elimination of the Czar, and communist aka Marx and his tomes.

But what do these people want? Where is their Rousseau, Voltaire, Marx, Paine? Where is the Jefferson to write a precis, a list of complaints? It is not as if there was not enough history, West and East, to show how to make a movement like this function.

Then one must ask, who created and leads this? All too often students are followers, and they often are the ones to complain. Be a leader, that is how one gets to the 1%. Followers are doomed to the 99%.

Wednesday, November 9, 2011

You Really Cannot Make This Up!

The USDA and the current Administration were ready to deliver the Christmas Tree Tax, says The Hill.

They state:

The Obama administration is delaying implementation of a new Christmas tree tax that has provoked conservative fury. 

A White House spokesman said the U.S. Department of Agriculture would revisit the issue after several Republican lawmakers criticized the proposed 15-cent-per-tree tax, which would have been paid by producers and importers of Christmas trees. 

The White House also pushed back at the idea it was proposing a Christmas tree tax.

Now how dumb does one have to become. Yes it is a $0.15 tax per tree but the cost to collect those taxes will be monumental. Forms, forms and more forms. This is the USDA for God's sake, do you have any clue how many forms they have, I do since I had gone through the USDA loan process, and then walked. If you do not fill in the forms you are out of business.

Now the people in DC want to put the Boy Scouts out of business, I knew they hated the Scouts but this is a bit too much.

Where is Robespierre when we really need him?

Tuesday, November 8, 2011

Some Thoughts from Hayek

In the biography by Ebensten of Hayek the authors makes several prescient comments. I would like to share a few here:

On Individualism:

He distinguished two types of individualism: true—stemming from England and Scotland, emphasizing the insignificance of individual reason; and false—having roots in Cartesian rationalism—stressing the importance of individual reason. Of true individualism, the "first thing that should be said," Hayek stated, "is that it is primarily a theory of society, an attempt to understand the forces which determine the social life of man, and only in the second instance a set of political maxims derived from this view of society. Its basic contention is that there is no other way of understanding social phenomena but through our understanding of individual actions. . . . The next step in the individualistic analysis of society is the contention that by tracing the combined effects of individual actions, we discover that many of the institutions on which human achievements rest have arisen and are functioning without a designing and directing mind

 And the second on Federal Debt:

He was greatly concerned about United States federal government budget deficits. In a letter to the Times, he wrote "Sir, you would do a public service if you displayed in capital letters the elementary truth that IF THE UNITED STATES GOVERNMENT BORROWS A LARGE PART OF THE WORLD'S SAVINGS TO FINANCE CURRENT EXPENDITURE, THE CAPITAL AVAILABLE ANYWHERE FOR INVESTMENT MUST BECOME SCARCE AND EXPENSIVE."This was not the first time he wrote to a newspaper recommending the use of capital letters. In 1978, he wrote a letter-to-the-editor to the Wall Street Journal, "Could you print in front of every issue in headline letters the simple truth that INFLATION IS MADE BY GOVERNMENT AND ITS AGENTS: NOBODY ELSE CAN DO ANYTHING ABOUT IT. It might do some good!" though he noted in his scrapbook that the letter was published only once and in small print.

In 1983, Hayek was asked by the news magazine the Economist to participate in a centenary critique on Keynes. His final word on his old Cambridge friend was contained in the June 11 edition. There he wrote that he was "claiming that perhaps the most impressive intellectual figure I have ever encountered and whose general intellectual superiority I have readily acknowl­edged was wholly wrong in the scientific work for which he is chiefly known." He was a bit kinder in an earlier newspaper interview, when he responded to the question, "Are there any similarities between your economic theory and that of Keynes?" "No. I think basically Keynes was also a free trader and an economic liberal. But with many qualifications and restrictions. He was never quite consistent. We were personal friends but we rarely agreed on economics."

Hayek saw the element of individualism along with the extravagance of debt as two key factors in the evolution of the United States. First preserving individualism in the sense of the Scottish Enlightenment and second tamping down the stupidity of explosive debt.

First the lack of a designing and directing mind is the lack of a Government in central control. Just look at what has been happening when that is tried.

Second, one wonders what Hayek would say of the explosive debt we now see. Yes, he thought highly of Keynes but:

the most impressive intellectual figure I have ever encountered and whose general intellectual superiority I have readily acknowl­edged was wholly wrong in the scientific work for which he is chiefly known

Seems to say it all.