The Squirrel's Nest

What is in a Word

2012-01-28T14:48:00.000-08:00

It is interesting to see economists talk about taxes in the private equity world. Perhaps they will pose theories of astrophysics next.

The problem is that "it all depends". In the simplistic sense if a company pays a dividend and it is taxed at 15% and the company pays 35% tax then indeed the total was taxed at 50%. The problem is no private equity works quite that way. Especially for the general partner types who have really little at risk.

For example, consider a general partner who puts nothing at risk, and a company which has massive tax loss carry forwards which is sold for say $100 million. The funds get distributed to say the PE company. It is a capital gain at 15% depending on what is returned. No 35% was ever paid, just a greater fool found to buy it. That by the way is the PE game. But without the PE player the company may most likely have collapsed.

So how should we view this? Well it is really very complicated and all these economists are apparently clueless finding one scenario after another to justify their conclusion, ad hoc propiter hoc.

How should we look at it? Well each case is separate. It is not simple and it cannot be simply explained by some smart Prof trying to make their point. Details count, welcome to the real world folks!

Words Mean Something, Sometimes

2012-01-26T08:02:00.000-08:00

Level Playing Field, Fairness, Quality, Ethics, Integrity etc. What do they mean?

From Through the Looking Glass we have:

Humpty Dumpty took the book, and looked at it carefully.'That seems to be done right--' he began.

'You're holding it upside down!' Alice interrupted.

'To be sure I was!' Humpty Dumpty said gaily, as she turnedit round for him. 'I thought it looked a little queer. As I was saying, thatSEEMS to be done right--though I haven't time to look it over

thoroughly just now--and that shows that there are threehundred and sixty-four days when you might get un-birthday presents--'

'Certainly,' said Alice.

'And only ONE for birthday presents, you know. There's gloryfor you!'

'I don't know what you mean by "glory,"' Alicesaid.

Humpty Dumpty smiled contemptuously. 'Of course you don't--till I tell you. I meant "there's a nice knock-down argument foryou!"'

'But "glory" doesn't mean "a nice knock-downargument,"' Alice objected.

'When I use a word,' Humpty Dumpty said in rather ascornful tone, 'it means just what I choose it to mean--neither more nor less.'

'The question is,' said Alice, 'whether you CAN make wordsmean so many different things.'

'The question is,' said Humpty Dumpty, 'which is to bemaster-- that's all.'

Alice was too much puzzled to say anything, so after aminute Humpty Dumpty began again.

'They've a temper, some of them-- particularly verbs,they're the proudest--adjectives you can

do anything with, but not verbs--however, I can manage thewhole lot of them! Impenetrability!

That's what I say!'

'Would you tell me, please,' said Alice 'what that means?'

'Now you talk like a reasonable child,' said Humpty Dumpty,looking very much pleased. 'I meant by "impenetrability" that we'vehad enough of that subject, and it would be just as well if you'd mention whatyou mean to do next, as I suppose you don't mean to stop here all the rest ofyour life.'

'That's a great deal to make one word mean,' Alice said in athoughtful tone.

'When I make a word do a lot of work like that,' said HumptyDumpty, 'I always pay it extra.'

That is what they mean. Welcome to Washington!

Taxing The Wrong Thing

2012-01-21T18:57:00.000-08:00

They are at it again, and they call themselves Republicans. They being in the NY Times, and they state:

Consider the tax on gasoline. Driving your car is associated with various adverse side effects, which economists call externalities. These include traffic congestion, accidents, local pollution and global climate change. If the tax on gasoline were higher, people would alter their behavior to drive less. They would be more likely to take public transportation, use car pools or live closer to work. The incentives they face when deciding how much to drive would more closely match the true social costs and benefits. Economists who have added up all the externalities associated with driving conclude that a tax exceeding $2 a gallon makes sense. That would provide substantial revenue that could be used to reduce other taxes. By taxing bad things more, we could tax good things less.

Let us again reconsider:

1. The middle and lower classes drive to work, not for pleasure. They often have no alternative. They may live in New Hampshire and drive to Cambridge. They drive say 100 miles a day at 20 mpg for 5 gallons. This Professor then will tax them an additional $10 per day or $3000 per year! That is an additional tax. If we look at China we see the opposite. You see the poor guy in New Hampshire has no other realistic alternative, to get a home he must drive that distance and he must work long hours and he must have a car. In NYC you pay $25 in tolls, $50 for parking and then gas! However you can take public transport for a mere $30 plus a day. Only the self proclaimed elite would deny that person such access. It is a cost of production hidden in a reduction of compensation for the employee. Not everyone can own a mansion on Brattle Street.

2. Live closer to work, like say Newton, or perhaps Lincoln, and at what price? Perhaps South Boston. Somehow the upper reaches have lost touch with those who clean the streets.

3. Now as for bad things, one can truly argue as to these alleged costs. Congestion is due often to timing, accidents were pandemic in Boston because of the insurance system and yes drivers, and local pollution is dominated by other factors such as factories, and as for global warming, well I will not go there.

4. Real bad things are obesity. Just look at the recent JAMA articles. Currently 15% of annual health care costs growing at 15-18% pa, well outgrowing all others. That is a measurable and manageable problem, tax pounds or calories. Not gasoline.

However and whatever one should think through the details. Facts count, even in economics.

Somehow Missing the Point

2012-01-21T15:34:00.000-08:00

In the NY Times there is a long piece on Apple and manufacturing in the US. Also why China is getting so much of the work. Now this is hardly new. When I was at Warner in the early 80s we had Pioneer in Japan manufacture our cable converters. Quality, price and performance. That was not even new then. We saw disk drives being made in Asia, then in Mexico, business finds the lowest cost place to do this with possibly a quid pro quo. That gives the American consumer the best price and they then buy more which means ultimately higher profits. It is called business.

Now that is not the way the current administration sees it. The most absurd quote I have ever seen is:

“Companies once felt an obligation to support American workers, even when it wasn’t the best financial choice,” said Betsey Stevenson, the chief economist at the Labor Department until last September. “That’s disappeared. Profits and efficiency have trumped generosity.”

Nonsense. Total and complete and utter nonsense. One must look to the credentials of the source to see why.

Under our legal system, and under our economic system, at least as understood before the current administration, Companies have a fiduciary duty to make money, and the way they manufacture is a reflection of this. In my opinion the very statement is a demonstration of a gross disconnect with reality, but a reason why we are in the mess we are in. If those in Government believe that a business has a first duty to support American workers over growth and profit then they are just wrong, business does not work that way.

I moved a company from New Jersey to Prague because of lower costs, reliable electrical supply, and good workers. The burdens of the US overhead, poor infrastructure and high taxes, plus regulation on everything, made moving the only alternative. Perhaps Washington should get some people with some real experience.

Career Planning

2012-01-21T08:56:00.000-08:00

In 1959 when I was trying to determine what I wanted to do, I dismissed being a pure mathematician, most likely a great idea since I may be good on the applied side the pure stuff can become a bore and I was ultimately not good at it. But what I did was to sit down with the Sunday NY Times and look at the job section and determined that EE and Chem E was where the action was at. It was a rational decision process. There never was a question as to "what would I like to be when I grew up", it was "where are the jobs and how do I get there".

Now I read a report in C&EN, the American Chemical Society news organ and it appears that chemists are falling off a cliff. They state:

The U.S. chemical industry lost 15,000 jobs in 2008, down 1.7% from the end of 2007. That decline, to 847,000 jobs, was almost as bad as the 1.9% decline in jobs for the overall economy, which shed 2.6 million workers. Economists expect the situation to get worse in 2009.

They continue:

Chemical employment peaked at 1.1 million jobs in 1981, and has trended downward since, Swift notes. He attributes the decline to productivity gains, outsourcing, and jobs lost to overseas competitors. The one bright spot had been the pharmaceutical industry, a statistical subset of chemicals, which saw steady job increases over the decade through the end of 2007. However, available data show that pharmaceutical makers cut about 4,700 jobs, down 1.6%, through the end of November 2008.

So from 1981 to now the jobs for chemists has dropped from 1.1 million to 840K, almost 300K jobs while the economy has been growing more than two fold despite the recent downturn. That means this is not a field one wants to enter.

Thus one wonders why anyone would go into chemistry. It is not that chemists are not valuable, they are indeed, but unlike EEs who have a strong entrepreneurial streak the chemists has gone to industry, academia or the government. What is amazing is the growing demand in biotech and especially now in informatics on biotech systems, and the lack of flow in that direction. It is not that the chemist training is out of touch, it may be more mindset rather than any competence deficiency.

The bottom line is now that students are determining what to major in, art history, social work, chemist, why not just look where the future jobs are, for today there is a wealth of information to help you, more than just the Sunday Times. I believe that this idea of doing what you want to do may be at the heart of many of our job problems. There are many in the younger generation who feel they are empowered to get a job they want, not what the economy needs or can provide. Carriage makers were put out by the auto, and auto factory workers by robots and off shore production. Nothing remains constant, one must assess the flow of the economy and then be prepared to change as it does. Creative Destruction is real, it is ongoing, and it is at the heart of a free economy. Trying to prevent it is akin to trying to hold back a broken dam with one's hands.

Pathways, Crosstalk and Melanoma

2012-01-19T12:59:00.000-08:00

NEJM has published an interesting article on what can be called cross talk amongst pathways. As is well known now the BRAF mutation found in certain melanomas can be somewhat controlled via the use of vemurafenib. However and possibly surprisingly there is an increase in other cancers.

The authors conclude:

Mutations in RAS, particularly HRAS, are frequent in cutaneous squamous-cell carcinomas and keratoacanthomas that develop in patients treated with vemurafenib. The molecular mechanism is consistent with the paradoxical activation of MAPK signaling and leads to accelerated growth of these lesions.

Pathways have cross talk, and when one pulls one string another may also be pulled. The authors further note:

The t→a transversion at position 1799 of BRAF (BRAF V600E) is present in approximately 50% of patients with metastatic melanoma.1,2 BRAF V600E induces constitutive signaling through the mitogen-activated protein kinase (MAPK) pathway, stimulating cancer-cell proliferation and survival.2 The clinical development of inhibitors of oncogenic BRAF, termed type I BRAF inhibitors, which block the active conformation of the BRAF kinase, has led to a high rate of objective tumor responses and improvement in overall survival, as compared with standard chemotherapy.3-5 However, nonmelanoma skin cancers — well-differentiated cutaneous squamous-cell carcinomas and keratoacanthomas — have developed in approximately 15 to 30% of patients treated with type I BRAF inhibitors such as vemurafenib and dabrafenib.

This may open a door to several new approaches. First understanding pathways better and deducing the effects on blocking one of the paths, and multi-drug analysis.

A Deal Is Not a Deal Until the Money is in the Bank

2012-01-15T14:13:00.000-08:00

I should not be amazed but the commentary by self proclaimed "experts" is amazing. Some writer for the Washington Post under the headline "Bain's Dishonest Deals" and becomes "When Romney ran Bain Capital, his word was not his bond", states:

Here’s how it worked. Private-equity firms are always eager to find companies to buy, allowing them to invest chunks of the billions of dollars entrusted to them and from which they earn hundreds of millions in fees. One ready source of these businesses is Wall Street bankers hired to sell companies through private auctions. The good news is that when a banker puts together a detailed selling memorandum about a company, chances are very high that company will be sold; the bad news is that these private auctions tend to be very competitive, and the winning bidder, by definition, is most often the one willing to pay the most. By paying the highest price, you win the company, but you also may reduce the returns you can generate for your investors.

But for anyone who has ever really done a deal we all know that "A deal is not a deal until the money is in the bank, for a week!" Deal get renegotiated all the time, the fail to reach completion for hundreds of reasons, agreements are abandoned for frustration of purpose, material adverse changes occur and so forth.

One always finds problems, and often they are fatal. Thus the assumption that a deal is done on a hand shake is naive at best. Negotiations are just that, negotiations. In some places a contract is considered just the start of negotiations, I had found that out the hard way in Asia.

Thus as my daughter tells her fourth grade class, "A deal is not a deal ...", even they know, and these children may be better prepared to deal with reality than some opinion writers. But after all it is just the Post!

Genes, Genes, Too Many Genes

2012-01-13T14:28:00.000-08:00

The Scientist has written about a simple same day, $1,000, full genome sequencing system becoming available at about $750,000 per machine. The question is what will you do with all the data.

We know of say a few thousand germ line genes which may relate to their potential for disorders, BRCA and HOX B 13 being two we have discussed recently.

The challenge will be to develop sophisticated testing for prognostic profiles. But this may be a chicken and egg issue. It does however present a threat to the gene testing companies out there, because now the value added is analyzing the complex genetic structure and saying something about it.

The article gives costs as:

The Illumina HiSeq 2500 will allow researchers to generate 120 gigabases of data—40X coverage, or repeated sequencing, of a single 3 gigabase human genome—in 27 hours, the company announced. It is a significant increase in speed over the previous model, the popular HiSeq2000 machine, which sequences up to 5 human genomes (about 600 gigabases of data) simultaneously over 10 days. But the snappy new model comes with a hefty price tag of $740,000, Forbes reported.

The Life Technologies Ion Proton Sequencer, on the other hand, is priced significantly lower at $149,000 and will sequence an entire human genome with 20 to 30X coverage in a day for just $1,000, said company spokesperson Mauricio Minotta. Illumina declined to disclose a cost per genome for the HiSeq 2500.

Thus low costs may turn this into a PC type revolution allowing many people to develop APPS!

What Is Wrong With Academia

2012-01-13T09:30:00.000-08:00

There is an article in Forbes by some Professor somewhere wherein he articulates his philosophy. Having taught at MIT, Columbia, George Washington, Polytechnic University and a few other places, and now taking Organic Chemistry, for the second time, at County College of Morris, a community college, I bring a somewhat different perspective. Also as one who has created a few jobs in 20 countries, I have a modicum of knowledge concerning people, some that work and some that don't.

Let me summarize this dictum from on high just a a bit:

First, I do not “take off” points. You earn them. The difference is not merely rhetorical, nor is it trivial. In other words, you start with zero points and earn your way to a grade.

Yes I would agree with that. But there are faculty who do "take off", for spelling for example, on a technical exam. I never did but I experience it now. Thus the issue is what is the content of the course and what is not. Some folks just cannot spell, I am one, perhaps it is the family dyslexia or not. But the function of a good faculty member is to also seek to understand why the student got something wrong. I did that frequently, from an undiscovered illness to severe family problems. Arrogant faculty are the bane of Academia.

Second, this means that the burden of proof is on you to demonstrate that you have mastered the material. It is not on me to demonstrate that you have not. My assumption at the beginning of each class is that you know somewhere between nothing and very little about basic economics unless you were lucky enough to have an exceptional high school economics course. Otherwise, why are you here? You might say that the course is a prerequisite for other things you want to do, but if that it is the case and you know the material, you’re more than welcome to simply show up for the exams, ace them, and be on your way.

This is difficult sometimes. Perhaps my exams were too difficult, were wrong, etc. I remember that in December 1970 I gave out a take home exam that required that the students prove A > B. Well oops, I typed the inequality the wrong way, and the exam went out just before Christmas holiday and due Jan 3rd. Funny, all but one student "proved" the inequality the wrong way, one student just said I got the inequality wrong. He got an A the others I gave a pass. I apologized to all. Yet there were a few nooses prepared.

Now as to the assumption that the student comes to class ignorant, well I NEVER assumed that at MIT in EECS. One never knew. In my current Organic class the Instructor assumes we are all ignorant, well there are three MDs and a few other who have come back to refresh. As a Professor I never assumed anything other than we were peers in learning. The game was that the students would always try to find where I made an error, and my counter was to know it so well I never needed a note and I finished my 50 min lecture on the second.

Otherwise, why are you here?

Good question, but perhaps one should not be so presumptive, perhaps you should find out why the student is there. That one phrase is what prompted this response.

Finally, I’m here to be a mentor and instructor. This means that our relationship differs from the relationships that you have with your friends and family. Please don’t infer from this that I don’t care about you, because I do. A lot. I want to see you make good choices. I want to see you understand basic economics because I hope it will rock your world as it continues to rock mine and because the human consequences of lousy economic policy are enormous. That said, you should never take grades personally.

One of the things I learned early on at MIT once I started as an Instructor in 1969 was the care and attention to understanding each student. We were not necessarily friends, but one of my students became my best man, another an investor, and the list goes on, but that we understood why the student got what they did. We would list every grade for every student and then with the Teaching Assistants go through them one by one during the grading session. Each student grade was personally looked at in light of everything we knew. In a way we were more than a friend or family, we became forgiving of situations, and understanding of what they accomplished. We "knew" each student as a person, not just a grade.

Did I still have them come and ask why, yes, but when I explained why, which I owed them, then they became true believers also.

Thus I have reason to differ with the good professor, hopefully for good reason.

Happy Friday 13th

2012-01-13T04:33:00.001-08:00

It is Friday the 13th, and especially January and Friday. Watch for cracks in the sidewalk!

Homeobox and Prostate Cancer

2012-01-12T17:30:00.000-08:00

The Homeobox and its related genes have played aninteresting but challenging role in developmental biology and now in cancerpathways. The genes related to this 180 base pair section of DNA are the geneswhich control the development or organs and the time at which these developmentoccur. Furthermore the structure of this gene collection is preserved across andramatically large number of species, the human included. Thus it wasinteresting to see a paper in NEJM discussing the mutation of a specific Homeoboxgene, HOX B 13, as relates to prostate cancer.

In the recent NEJM paper by Ewing et al the conclusion ofthe authors is stated as:

The novel HOXB13G84E variant is associatedwith a significantly increased risk of hereditary prostate cancer. Although thevariant accounts for a small fraction of all prostate cancers, this finding hasimplications for prostate-cancer risk assessment and may provide newmechanistic insights into this common cancer.

Now this appears as a significant new finding and we wouldlike to examine this a bit. The HOX genes are quite unique in theirfunctioning. They are built about a core Homeobox segment, which is preservedacross chromosomes and species, and is hen connected with variable regions ondiffering chromosomes to generate some 4X13 possible genes (HOX (A,B,C,D) (1…13)).These genes are core to the morphological and embryological development of abroad range of species.

Now HOX B 13 is one of many Homeobox based genes. Thesegenes are distributed across 4 chromosomes and have a fixed part called thehomeobox part and a variable part. In a sense it is similar to the fixed and variable regions we see in the immune system. The gene is created as below:

Homeobox genes are clustered in thechromosomes and are expressed in the body in the same order in which they occurin the chromosomal DNA. The HOX genes, the concatenation of the respective Homeobox and itsvariable part are named by chromosome location as A,B, C, D, and then by number 1 through 13 at present. The number reflects whatmakes the Homeobox genes of interest, namely the genescontrol the development of the embryos, namely they control what cells do as apart of the development of an entity. The process goes from head to tail, andthe numbering goes from the earliest or anterior to the latest or posteriorelements in the development process. Thus HOX A 1relates to an early development and HOX B 13would refer to a later development of the embryo. The sequencing is shown below.

Retinoic acid activates the Homeobox genes sequentially indevelopment.

Now the Ewing study examined patients with specific changes:

Given the consistentevidence of prostate-cancer linkage to 17q21-22 markers in our multiplex familieswith hereditary prostate cancer, we designed a targeted sequencing strategy toanalyze 2009 exons of 202 genes contained in the most likely genomic intervaldefined by our fine-mapping studies. … Probands from four families wereobserved to have the same nonsynonymous mutation in HOXB13,a change of adenosine forguanine (transition, c.251G→A) in the second position of codon 84(GGA→GAA),resulting in a nonconservative substitution of glutamic acid for glycine (G84E)

The question is perhaps where does the term Homeobox comefrom. From Gehring and Hiromi we have the definition:

The term"homeosis" (originally spelled "homoeosis") was proposed byBateson (8) to describe the transformation of one structure of the body intothe homologous structure of another body segment. Homeotic transformation can result,for example, from abnormal regeneration of amputated structures (epigenetically)or from germ-line mutations

Thus the Homeobox genes are key to the development ofembryos. They also lead to the discussions

Scott states:

Homeotic genes controlcell fates during the development of all animals, as was first revealed by studiesof the Drosophila homeotic gene complexes … Many of these genes contain a homeobox, a 180 bp sequenceof DNA which encodes an evolutionarily conserved DNA bindingdomain, the homeodomain … A plethora of mammalian homeobox genes have been reported, amongwhich 38 are located in four clusters. A new nomenclature for the mammalian Hoxgenes, approved … The new names take advantage of the elegant arrangementof the genes to provide a logical nomenclature systemrather than the names given when the genes were discovered. The new system is initiallydesigned only for vertebrate genes, although it is to be hoped thatsimilar systems will be useful, and adopted, for other animals. In order to preserveas muchclarityin the literature as possible, it has been agreed by a large number of workers in thefield and by the nomenclature committees that homeobox genes not locatedwithin the Hox complexes should not be given names containing the word 'Hox'.

There are fourclusters of Hox genes … now to be known as A, B, C, and D. Based on sequence similarity thegenes canbe sorted into 13 'paralog' groups, each group having, inmost cases,a representativein each complex. The order of paralogs alongthe chromosome is preserved in the four complexes. The geneswithin acomplexaretranscribed in the same direction and are numbered according to theirparaloggroup from 1 at the 3' end to 13 at the 5' end. In severalcasesa representativeof a paralog group is absent from a complex, in which case the corresponding gene number isomitted …

HOX genes are key to the development of the embryo, itcreates the head to tail and sets up the control of the development of theorgans. As Lohmann and McGinnis report:

Hox genesplay a major role in the morphological diversification of the anteroposteriorbody axis of animal embryos by switching the fates of segments betweenalternative developmental pathways . In their role of controlling segmentdiversity, Hox proteins are responsible for many different morphological structuresand cell types within a given segment. But it is still largely a mystery how asingle Hox genecan determine a morphological trait at a specific location within a segment,and why that trait does not appear elsewhere in the same segment or in othersegments.

… morphological andtranscriptional responses to Hox genescan be highly local, sometimes only in a single cell, allowingone Hox gene to control acavalcade of different traits within one segment and between differentsegments, depending on the information present. Another important lesson thatwe can learn from the papers of Rozowski and Akam and Brodu et al. is that, during development, Hox genes act at all levels in thedevelopmental hierarchy.

If they act very far down in the hierarchy, as inthese two cases, then the output is subtle, with Hox genes acting as cell-type switches rather than as majordevelopmental pathway switches. If they are acting (apparently) far up in thehierarchy, then the fate switch is more dramatic, which is most beautifullydemonstrated in the famous four-winged fly. But even at this general level,context is still crucial: loss of Ubx inthe haltere does not generate a leg, but a wing.

There are many debates still raging regarding Homeobox andRobert presents an interesting report summarizing some of them. His paper isworth the reading. It builds on the evo-devo issue, evolution and development,the ontogeny recapitulates ontogeny. Namely if the same HOX genes are present acrossmany species, and preserved in structure, then is there really an underlyingcommonality across species.

We provide the details on the various HOX genes below. Theyall have the form as we had shown earlier and they are all numbered in asequence consistent with what we have shown earlier.

Note all HOX B are from Chromosome 17. In particular HOX B13 is 17q21-22 region ( see http://www.ncbi.nlm.nih.gov/sites/entrez?db=gene&cmd=retrieve&dopt=default&rn=1&list_uids=10481)

We now show from Kim et al the development of the pathwayfor the HOX B 13 that we have been discussing. It inhibits CDK and that in turninhibits the activation via E2F of the cell cycle. It is the inhibition of thecell cycle that is of the most concern.

As Kim et al demonstrate the HOXB 13 blocks p21 and in turn CDK2 keeping the RB pathway from entering the cellinto cell cycle reproduction. They state:

Taken together, theresults of this study demonstrated the presence of a novel pathway that helps understandandrogen-independent survival of prostate cancer cells. These findings suggestthat upregulation of HOXB13 is associated with an additive growth advantage ofprostate cancer cells in the absence of or low androgen concentrations, by theregulation of p21-mediated E2F signaling.

Now Ewing at al conclude as follows:

In summary, we haveused linkage analysis in combination with targeted massively parallelsequencing to identify a recurrent mutation in HOXB13that is associated withearly-onset and hereditary prostate cancer. From a clinical perspective, testingfor germline mutations in BRCA1/2 is recommended in some families, since mutationsin these breast-cancer–susceptibility genes are associatedwith elevations in the risk of prostate cancer, particularly for BRCA2 However, neither of these genes has beenshown to contribute to hereditary prostate cancer. HOXB13G84E is associated with asignificantly increased risk of hereditary prostate cancer.

This work suggeststhat future DNA sequencing studies using next-generation technology and study populationsenriched for genetic influence (as evidenced by an early age at onset andpositive family history) may identify additional rare variants that willcontribute to familial clustering of prostate cancer. Although HOXB13mutations will be identifiedin a minority of men with prostate cancer, rare genetic lesions can identifypathways that are found to be abnormal in more common, sporadic cases.

This leaves one to somewhat guess as to how prevalent thismutation is. The rough numbers given in the Weing paper is about 1.5%. It also begs the question of why as a mutation which is apparentlyinherited the progression of the cancer is so slow. Ewing at al show that theodds ration can be as high as 32.5:1 when the mutation is present. The age atdiagnosis is lower with an odds ratio of 2:1 but with the problem one sees inpathway control one wonders why the cancer does not appear much earlier as seenin BRCA.

Thus this paper raises several questions:

1. The Homeobox mutation is a predisposing genetic risk factor.If tested and found positive for the factor what should be done next.Mastectomy is often what BRCA patients undergo, does this mean prophylacticprostatectomy?

2. The pathway seems to be somewhat understood. The E2Ffamily control the pathway and HOX B 13 controls that pathway. It blocks it tosome degree. What can happen to HOX B 13 to cause this change in non-mutatedindividuals.

3. Can the disease propensity be regulated by geneticpathway control, is this possible as an alternative prophylactic measure.

4. What other pathway elements should be considered. Specifically, if we have a mutation on HOX B 13 then must we have other genes also altered to up surge cell replication. If so which ones. Is HOX B 13 merely a predisposing element. Also is there a HOX B 13 type change in other PCa?

5. Most importantly, why does it take so long for the cancerto develop, are there precursor hits somewhere and this this just eliminatesother hits?

Ewing et al have an interesting slide showing normal versusHOX B 13 prostate cells and we replicate it below from the paper.

Inthe top slide we see well-structured prostate cells with basal and luminallayers not showing and aberrant growth, no PIN. In the slide below from a HOX B13 patient with a mutation of the form: GGA to GAA Glycine Glutamic acid (SeeEwing et al).

References:

Ewing, C., et al, Germline Mutations in HOX B 13and Prostate Cancer Risk, NEJM, Jan 2012 V 366 N 2 pp 141-149.
Jung, C., et al, HOX B 13 Homeodomain ProteinSuppresses the Growth of Prostate Cancer, Can Res 2004 V 64 pp 3046-3051.
Kim Y, et al, HOX B 13 promotes AndrogenIndependent Growth, Molecular Cancer, 2010 Vol 9-124.
Lohman, I., W. McGinnis, HOX Genes, CurrentBiology, 2002, V 12 pp 514-516.
Robert, J., Interpreting the Homeobox; Metaphorsof Gene Action and Activation in Development and Evolution, Evo & Dev, 2001V 3:4 pp 287-295.
Schwartz, J., Homeobox Genes, Fossils, and theOrigin of the Species, Anat Rec 1999 V 257 pp 15-31.
Scott, M., A Rational Nomenclature forVertebrate Homeobox, Nu Acid Res 1993 V 21 No 8 pp 1687-1688.
Gehring, W., Y. Hiromi, Homeotic Genes and the Homeobox, Ann Rev Gen 1986 V 20 pp 147-173.

Health Care Costs

2012-01-12T11:16:00.000-08:00

Yesterday the NY Times Editorial praised the low rate of health care costs this year.

They stated:

The data show that total health care spending by public and private sources, including households, rose by 3.8 percent in 2009 and 3.9 percent in 2010. Spending slowed for hospital care, physician services, nursing homes, home care and especially prescription drugs, as consumers increasingly chose cheaper generics. Growth in spending by both Medicare and Medicaid actually slowed in 2010 compared with 2009, even though the federal government ramped up its share of the nation’s total health care spending while private businesses reduced their share.

Yet today HHS touts its use of the new act to dampen excessive Health Care costs. It states:

Health insurance premium increases in five states have been deemed “unreasonable” by the U.S. Department of Health and Human Services, ...After independent expert review, HHS determined that Trustmark Life Insurance Company has proposed unreasonable health insurance premium increases in five states—Alabama, Arizona, Pennsylvania, Virginia, and Wyoming. The excessive rate hikes would affect nearly 10,000 residents across these five states. In these five states, Trustmark has raised rates by 13 percent. For small businesses in Alabama and Arizona, when combined with other rate hikes made over the last 12 months, rates have increased by 27.2 percent and 18.1 percent, respectively. In addition to the review of rate increases, many states have the authority to reject unreasonable premium increases. Since the passage of the health care reform law, the number of states with this authority increased from 30 to 37, with several states extending existing “prior authority” to new markets. Examples of how states have used this authority include:

In New Mexico, the state insurance division denied a request from Presbyterian Healthcare for a 9.7 percent rate hike, lowering it to 4.7 percent;
In Connecticut, the state stopped Anthem Blue Cross Blue Shield, the state’s largest insurer, from hiking rates by a proposed 12.9 percent, instead limiting it to a 3.9 percent increase;
In Oregon, the state denied a proposed 22.1 percent rate hike by Regence, limiting it to 12.8 percent.
In New York, the state denied rate increases from Emblem, Oxford, and Aetna that averaged 12.7 percent, instead holding them to an 8.2 percent increase.
In Rhode Island, the state denied rate hikes from United Healthcare of New England ranging from 18 to 20.1 percent, instead seeing them cut to 9.6 to 10.6 percent.
In Pennsylvania, the state held Highmark to rate hikes ranging from 4.9 to 8.3 percent, down from 9.9 percent.

So which of the two comments is true. And a better question is why the difference.

Free Will, Predestination, Augustine and Obesity

2012-01-11T12:12:00.000-08:00

Augustine of Hippo in his attack on Pelagius, the Britishmonk who alleged that man has free will and thus can do good acts and achievesalvation, restructured the concept of free will and introduced the concept ofgrace and perforce led the way to predestination. Simply man cannot achievesalvation unless God grants him individually grace and then his salvation ispreordained since he cannot do anything which would then mitigate that endresult.

What is the will and what do we mean by free will? Both havesignificant philosophical and theological facets and understandings.

Augustine fought Pelagius and to do so he had need ofclarifying two elements; free will and grace. Now the will was well discussedin philosophical literature with Aristotle expanding upon it in NicomacheanEthics. The concept of grace as a facilitator was a residual from Paul and hiswritings. The interaction of the two became a major factor in Augustine’sthought.

Let me first begin with the concept of free will, or thewill. In broad terms the will is the human element which allows the individualto make a choice, and in an sense as used by Augustine a moral choice. Incontrast the ideas of Schopenhauer allows the will to be expansive and becomean integral part of every human action. We will not look at the conjoined willof Schopenhauer but the more dualist will of Augustine. In our particularexample the will to say no to a piece of cake or a serving of French fries.

Stump makes the following assessments regarding free willand Augustine (Stump, p 124, Augustine, Cambridge) which I shall paraphrasesomewhat. She argues that there are at least two schools of thought regardingfree will and they can be characterized as follows:

Compatibilism: The world can be causally determined yet aperson can commit free acts with full moral responsibility.

Libertarianism: Consists of two claims:

(i) a person acts with free will only if the act is notcausally determined by some exogenous agent, or:

(ii) a person acts with free will only if the person couldhave acted otherwise.

Stump adds a third form of a “Modified Libertarianism”, itis defined as:

(iii) A person acts with free will only if their intellectand will are the sole determinants of the act.

In all of these cases the will is in many ways a dualisticforced, within the person, whereby the act they take is one amongst many yetthis force allows the person to make a choice. The choice presented forselection one could argue have relatively equal compelling arguments, apossibly poor term but reasonable under the selection of having the intellectinvolved, for their selection.

Thus one may ask does a person who is “addicted” to sayheroin have the free will to say no and eliminate that dependence? This wouldbe problematic under many of the above definitions. However we know byexperience that people can and do choose to stop drug use, tobacco use, evencaffeine use. People stop consuming certain types of food, by choice. Thus isthis not a clear example of free will. Yet we know that physiologically thedrug addict finds the cessation a painful experience, the cessation of eatingcan also be physically painful and socially difficult.

Thus free will is part of the equation for Augustine. Theother element is Grace, the “gift of God” to assist the will and the intellectin making the correct moral choice. Grace is needed according to Augustinebecause without it man is all too often prone to make the bad choice, read itevil or sinful. One must wonder whether this would apply to all things that theAugustinian will would be involved in, say eating a date versus a fig. But it isthe need for this Grace that allows the will to act in a correct and moralmanner. If God gives you grace then you can act accordingly, if God withholdsgrace then you cannot do the right thing, and for Augustine that would meanever do the right thing.

Thus in the Augustine context one has a duality of body andwill, a will which is fee, and a need for Grace to facilitate right choices.For Pelagius man could perforce of his fee will make those choices, and in anatural extension it would be via that free will per say that many passes orfails the acid test of living a moral life. To Augustine man needed Grace andthus God, by himself, with free will, he was still lost. Thus the Augustinianview of Grace is that being God given you need it to do truly good works,devoid of such good works one is lost, and God grants grace on his own choicesand thus one has the Augustinian basis for predestination, and the resultantCalvinistic views.

Now to obesity and genes. Instead of Grace we have genes,and instead of the free will to do right and wrong in a simply moral manner wehave the will, assumed to be free, to eat or not eat. The current world view bymany is in a sense an Augustinian extension of predestination, if you have theright genes you are fine and if not it is not your fault, the genes made you doit. Namely the strength of will alone is useless.

We need a Pelagius, we need the anti-Augustine to state thatindeed man has free will, and that it is the will, in what may be a dualistmanner, which can save us, genes notwithstanding. Pelagius may have had apoint, albeit pushed to an extreme at the time. Pelagius recognized the powerof the will for good and evil, the power of the will to select between what isgood for one, albeit uncomfortable, and what is bad. Choosing is what makeshumans somewhat unique. Understanding that was Pelagius’ contribution. Weshould dismiss the Augustinian crutch of some exogenous factor which lets ourfree will take a back seat.

Frustration of Purpose and the EPA

2012-01-10T19:22:00.000-08:00

The NY Times has posted an article indicating that the EPA is fining oil companies for failure to include a bio fuel in gasoline when the bio fuel does not exist.

The article states:

When the companies that supply motor fuel close the books on 2011, they will pay about $6.8 million in penalties to the Treasury because they failed to mix a special type of biofuel into their gasoline and diesel as required by law. But there was none to be had. Outside a handful of laboratories and workshops, the ingredient, cellulosic biofuel, does not exist.

One wonders why the citizens have no faith or trust in their Government. Under standard contract law a contract is deemed null and void if there is a frustration of purpose, namely if for reasons beyond the control of the parties the agreement under the contract cannot be met. Classic English Law holds this principle to be a key element. One could see it evolving even from the Magna Carta and even Salic Law! But not in Washington.

Just wait until these characters get a hold of health care! Perhaps one should just die early and avoid the mess.

Proton Therapy

2012-01-10T12:41:00.000-08:00

A recent posting commented on the Emanuel piece which somewhat denounced the efficacy of the proton means of therapy for prostate cancer. Although proton therapy is less damaging than classic X ray therapy it has been problematic in prostate cancer, for a variety of reasons.

A recent study by Hoppe et al concludes:

Although the benefits to patients of reduced radiation-dose exposure with PT are quite obvious, concerns still exist regarding whether these dosimetric benefits are cost-effective. In a study by Konski et al,... the cost-effectiveness of PT was compared to that of IMRT with the assumption that PT could deliver a 10-Gy higher dose than IMRT, resulting in a 10% improvement in 5-year BFFS compared with IMRT. However, despite the improvement in BFFS, the resulting cost of PT for a 60-year-old man was $65,000, compared with $40,000 for IMRT, which would result in a cost-effectiveness of $56,000 per quality-adjusted life year (QALY). When compared to the commonly accepted standard of $50,000 per QALY, the value for PT indicated that it was not cost-effective. Although this study reaches some intriguing conclusions, the results are based on models and do not take into consideration a number of critical factors. First, Peeters et al... have predicted that PT may allow for hypofractionation, which would reduce the treatment costs of this therapy. Studies currently investigating hypofractionation with PT are ongoing at both Loma Linda University and the University of Florida Proton Therapy Institute. Second, a reduction in significant rectal and urinary toxicity afforded by PT will have a positive impact on overall costs of care in prostate cancer patients. Finally, the dose escalation and dose intensification via hypofractionation permitted by PT may result in increased cure rates, particularly in intermediate and high-risk prostate cancer patients,... which may also translate into reduced costs of care.

Namely it is a costly procedure. This has always been a concern. Proton machines are tens of millions, approaching in excess of 100 million, and thus are often prohibitive. They work well for certain childhood malignancies and in uveal melanomas of the eye. However there are still major clinical concerns.

The clinical conclusions of the paper state:

With a minimum follow-up of 2 years, the grade > 3 GU toxicity rate was 1.9% and the grade > 3 GI toxicity rate was <0.5%. Two studies out of Japan have also published early outcomes for PT for prostate cancer. Mayahara et al reported on 287 patients treated to 74 CGE with 190- to 230-MeV protons using opposed lateral fields; the rate of grade > 3 GU toxicity in this study was 1%, and the rate of grade > 3 GI toxicity was 0%. Nihei et al[30] reported on a multi-institutional phase II study from Japan in which 74 CGE was delivered in 37 fractions in 151 patients. With a median follow-up of 43 months, only 1% of patients developed grade > 3 GU toxicity, and 0% developed late grade > 3 GI toxicity. These studies, which are reported in the Table, confirm the safety of PT for prostate cancer over the first 4 years following treatment; however, longer follow-up is needed to confirm the low rate of late toxicity and long-term efficacy of the treatment (and the high rate of BFFS). Interestingly, Massachusetts General Hospital and Loma Linda University have reported a smaller series of patients treated with PT alone to 82 CGE, with a slightly higher rate of toxicity than observed in the University of Florida Proton Therapy Institute series with the same dose and dose per fraction.

It appears as if there is still an open issue here. More clinical trials are needed. Yet the clinical progress seems to be moving forward.

College, For Whom?

2012-01-10T10:00:00.000-08:00

There has been a great deal of discussion regarding the usefulness of college. Now from a personal perspective let me comment:

In June 1971 I got awarded a few doctoral degrees, in real stuff. However in the spring of 1971, for example, there were no job interviews at MIT and Harvard Med were sending grads still into the military. It was Vietnam. Furthermore there was no money for anything near research and Nixon just took us off the gold standard. So today is wonderful compared to June 1971.

But alas I had a plan B. I was thanks to my father an electrician. I could work with my hands, install circuits, switches, motors, etc. I had a skill and moreover my father now had a company that did electrical work on explosive sites, BU Gas and Exxon. Thus I had a job! Not in EE, medical research, just working with my hands, and yes head, and with a salary.

But upon telling the MIT faculty of my career movement I found myself back on campus teaching, I believe at $8,000 pa! I was making at the time, I believe, $50 per hour on my non-union electrician job. But back I went, remembering that if all else failed I could go back again, thanks to dad. The two rules he instilled in me were: (i) always have your own company and (ii) always have a skill which can be monetized, namely people are willing to pay you because you can do something of value. Plumbing, carpentry, electrician.

Thus this need for college for everyone is a total waste. There are more than 10 times the number of PhDs at MIT now than when I was there. Are there 10Xs the number of competent people, doubtful but there are clearly NOT 10X the number of jobs. And not one electrician in the bunch!

Business and Economics

2012-01-10T07:52:00.000-08:00

Krugman has written a piece asking why anyone would think a person who is successful in business has any skills as an economist.

He pontificates as usual:

For the fact is that running a business is nothing at all like making macro policy. The key point about macroeconomics is the pervasiveness of feedback loops due to the fact that workers are also consumers. No business sells a large fraction of its output to its own workers; even very small countries sell around two-thirds of their output to themselves, because that much is non-tradable services.

For years I had a sign:

"If all else fails listen to the customer!"

Talk of feedback! No matter how good you are customers must buy the stuff you make. As a business man you see the effects of your policy real time and you understand feedback better than any economist!

Ever hear of a Board dumping an economist! Just look at the overload at universities and the government. Just look at Romer, she stated that the Stimulus would do X and it did A. Fired, not really, writes on economic policy at the times.

I am a Darwinian and Spenserian at heart, survival of the fittest. Business does that, it tests the market and ones ability to respond to it. Now I do not include bankers here, in fact after the past few years I exclude them. The only thing that can get a banker fired it appears is saying the wrong thing about the administration, or really being away from the switch.

Krugman does not seem to understand business. It is not some Asmovian world, it is a market, a place where one can succeed or fail, depending on both your performance and the response to the market in toto.

Would I want some MIT Aero Prof who may understand the theory at the stick of a supersonic fighter in a dog fight, not likely, unless they flew for the Israeli Air Force perhaps, and I have met a few, but at least the Aero Prof knows how to design a plane. It appears that there is no such ability or consensus amongst economists. Thus the Krugman argument is without any merit. As usual it appears.

The Cost of the Academy

2012-01-10T06:29:00.000-08:00

TNR has an article suggesting ways to reduce the burden of college costs.

In the midst of the article the author states:

This is essentially the story of public higher education over the last thirty years. Diplomas are, of course, not apples. But they are more like apples than colleges like to pretend. In particular, highly-profitable lower division courses in common subjects like Economics, Calculus, and Psychology have similar curricula at most colleges and rely on many of the same nationally-marketed textbooks. They are often taught by people with no formal training in teaching. These courses are, in the education context, commodities.

The last statement is typical of the union backing left wing of the Democrat Party. Namely that only by being trained to "teach", aka being in a union, can you teach. Nonsense! Universities often use their best faculty to teach the under graduates, at least the top universities. Yes they have TAs and Instructors who are PhD candidates but hospitals also have residents.

A hospital resident is a licensed physician, albeit one still in training, who is legally allowed by the state to practice, not by a union. A TA may very well be a PhD candidate, one who has a Master's Degree and has passed doctoral Board exams demonstrating exceptional competence.

Now a union high school teacher has allegedly learned teaching methods but may very well be clueless as to the subject matter. And worse is in a union. Imagine Harvard becoming GM! It may also go bankrupt. In more ways than one.

The Rejection of the Will and the Creation of the Victim

2012-01-08T07:48:00.000-08:00

The victim, the creation of our current society, is the person who through their own overt actions has found themselves in a bad situation and demands the rest of us bail them out. Drugs, bad school choices, homes they cannot afford, and of course obesity.

The NY Times epitomizes this today with an article on childhood surgery for obesity. They state:

There was no question, at 5-foot-1 and more than 250 pounds, she was overweight. But she resisted, saying she could diet. “I’ll lose weight,” (the patient) assured her doctor. (The doctor) said, prophetically, “It’s not your fault, but you’re not going to be able to do it.”Along with the obesity epidemic in America has come an explosion in weight-loss surgery, with about 220,000 operations a year — a sevenfold leap in a decade, according to industry figures — costing more than $6 billion a year.

The article continues:

The operation took about 25 minutes. Child Health Plus, a state insurance plan for low-income families, covered the $21,369 cost. Medicaid in almost every state and many private health plans now cover bariatric surgery, often more readily than diet or exercise plans. On many days, (the surgeon) performs three or four operations in a row.

The cost is not Medicaid, it is the taxpayer, that 50% of the working force who pays for the rest of the workers and those not working.

The above two statements; (i) it is not your fault, (ii) Medicaid pays ... $21,369, reflect the problem as it is posed. No responsibility and not understanding who really pays.

The irony is that in Mankiw's blog today he refers to his Pigou tax as as a way of saving lives with regard to drinking and driving. Yet a year ago he rejected the same out of hand regarding a carb type tax. Mankiw highlights:

A conservative estimate is that the federal tax reduced injury deaths by 4.7%, or almost 7,000, in 1991.

When the above highlights $6 B in costs due to an ever increasing tax burden. One could argue about the analysis referred by Mankiw as possibly flawed, it regresses on the amount of alcohol consumed but there clearly are multiple other factors as well, but with obesity the number are clear.

Obesity is the driving factor in health care costs. Stories as the above clearly demonstrate that we would rather pay exorbitant costs to solve it afterwards than prevent it. Here is a clear and direct case of a Pigou tax, one of the few I can believe in. Ironically the proponents of such taxes place them more freely on gasoline and alcohol, ones where it in my opinion are much more specious.

Finally the success of this surgery is highly erratic. Oftentimes the patient regresses back to the original state, after all they were told it was not their fault and there is no disincentive to reduce caloric consumption.

Happy Birthday NEJM

2012-01-06T07:02:00.000-08:00

The New England Journal of Medicine celebrates its 200th anniversary this year. It is in many ways a main stay of American Medicine, and also from time to time a sounding board for health care policy, for better or worse.

The above is a copy of the first article in that first issue from NEJM. It is interesting to think that heart problems were the first to be discussed. Nabel and Braunwald have an interesting article detailing cardiology over this period. What is compelling about the article is Figure 1 which depicts an almost 80% reduction in heart death over this period. Yet the cost of achieving this has been substantial. In light of the current debates on health care costs one should look at this and consider progress versus costs.

As the authors state:

Until 1961, patients with acute myocardial infarction — if fortunate enough to survive until they reached a hospital — were placed in beds located throughout the hospital and far enough away from nurses’ stations that their rest would not be disturbed. Patients were commonly found dead in their beds, presumably from a fatal tachyarrhythmia. Indeed, the risk of death occurring in the hospital was approximately 30%. The development of the coronary care unit, which provided continuous monitoring of the electrocardiogram, closed-chest cardiac resuscitation, and external defibrillation, reduced in-hospital mortality by half among patients admitted with acute myocardial infarction.

Was it better in 1961, for the costs were lower, or are we better off today. I would argue the latter, but there are some who believe the costs are excessive, until perhaps they become that 30%.

Employment Data End 2011

2012-01-06T06:25:00.000-08:00

The BLS released its December 2011 employment data and their bottom line is 8.5%. However as always it is worth looking a bit deeper.

The curve above is the Romer curve. Now three years after she published her now infamous projections we can still see how far they are from reality. That is the problem of showing how little one knows as compared to reality.

The above shows the variances from what she predicted with and without the Stimulus. Clearly the data shows that the Stimulus failed to do what she and the current Administration predicted. We show this again in detail below:

We now show below the unemployment as stated by BLS versus the unemployment as based upon July 2006 employment base.

The above shows we are still at 12% plus unemployment because we have lost so many from the base. In fact if one looks at the base line it has been flat for a year at 12% plus. The problem is that BLS seems to assume that all new people based on population entering the employment pool are never counted. In reality the population does grow.

The above shows the population growth and the pool employed. The pool employed is growing but not at the same as the population!

The above demonstrates what we have been saying in some detail.

Water is Wet! Eating Too Much Makes You Fat!

2012-01-05T12:47:00.000-08:00

In a new paper in JAMA the authors conclude:

Among persons living in a controlled setting, calories alone account for the increase in fat; protein affected energy expenditure and storage of lean body mass, but not body fat storage.

Holy Flying Cows, Batman! Calories have always been the determinant. This was funded as follows:

This study was supported in part by the US Department of Agriculture grant... and by funding from Louisiana State University.

We have observed that for generations. I am amazed that someone would fund this again and again, but it is the Federal Government and Agriculture at that. We all knew the conclusion. Is it any wonder that people are frustrated over Government and Health Care.

Pathway Classification of Melanoma

2012-01-04T07:41:00.000-08:00

There is an almost daily set of markers for a variety ofcancers which are announced often with great fanfare. However the markers mayor may not have any true meaning. We have discussed this in a prior posting andthere we discussed the work by Venet et al as summarized by DeTours:

The signatures’ prognostic potentialcan then be tested instantly in genome-wide compendia of expression profilesfor hundreds of human tumors, all available for free in the public domain.Besides stem cells markers, signatures linked to all sorts of biologicalmechanisms or states have been shown to be associated with human canceroutcome. Indeed, several new signatures are published every month in prominentjournals.

But such correlations are not all thatthey seem. The accumulation of signatures with all sorts of biological meaning,but nearly identical prognostic values, already looked suspicious to us andothers back in 2007. It seemed that every newly discovered signature wasprognostic. We collected from the literature some signatures with as littleconnection to cancer as possible. We found, for example, a signature of theblood cells of Japanese patients who were told jokes after lunch, and asignature derived from the microarray analysis of the brains from mice thatsuffered social defeat. Both of these signatures were associated with breastcancer outcome by any statistical standards.

Namely DeTours andhis co-authors seem to say that it is all too easy to get markers for almostanything. In the context of Dougherty and his work, one must have an underlyingverifiable model for the process and then from that verifiable model one can attemptto ascertain what elements may have failed. Then and only then can one obtaintruly prognostic determinants which in turn may lead to means and methods toreduce the disease state.

For example in just the recent past we have papers whichhave identified the following for melanoma:

1. MAP2K1 and MAP2K2 mutations (Nature Genetics,2011)

2. MAP3K5 and MAP3K9 mutations (Nature Genetics2011)

3. ACP5 (Cancer Cell 2011)

4. Thefollowing complex (Cell Oct 2011):

a. A Sleeping Beauty screen followed byMuTaME analysis discovered putative PTEN ceRNAs

b. The PTEN ceRNA ZEB2 regulates PTEN in amiRNA-dependent manner

c. ZEB2 loss activates PI3K/AKT signalingand promotes cell transformation

d. AttenuatedZEB2 expression is found in melanoma and other human cancers

5. SNPs as reported at (Nature Genetics, 2011):

a. an SNP in ATM

b. an SNP in MX2 and

c. an SNP adjacent to CASP8 .

d. A fourth locus near CCND1 remains of potential interest,

And the list goes on. As DeTours states, it may be all tooeasy to find aberrant genes, and even more so SNPs, independent of specificpathway models. And as I have argued, just within a pathway one may have a concernbecause it is also the intercellular signalling that is a concern as well. Evenmore so is the understanding of the process. Specifically:

1. A melanocyte may be normal until somethinghappens. What is it that happens, does a SNP occur, why, when, and then whathappens after that?

2. If a SNP occurs is that during the developmentof a DNA reading for protein generation or during cell replication. The openingof DNA for transcription may be the event which places the melanocyte at risk.If so then what is the risk process. Could it be radiation as suspected, or isit the next step in a Vogelstein like progression. Namely there may havealready been SNP damages and this one could be the final straw. Is it a microRNA problem? The dynamics of this are essential.

3. Knowing pathways, is it possible to workbackward and determine what the aberrant change or changes were? Pathwaychanges are reflected by their products.

4. What of the stem cell theory, must we look forthe melanoma stem cell alone, and if so how can we identify it. The stem cellcommunicates, and that is a powerful mechanism to spread the cancer. How doesit communicate and how is that related to the pathway.

Thus we look to understanding cancers in the context ofpathways and then in the context of their intercellular pathways as well.

Understanding the pathway dynamics of melanoma has beenprogressing fairly well over the past few years. In a recent paper by Vidwanset al, the authors develop an interesting classification of melanoma based uponthe specific pathway elements which may go awry. This is one of the first suchclassifications which goes beyond the classic morphological approach and eventhose using cell surface markers, This methods now looks at the cell dynamicsand examines the malignancy based upon what specific pathway elements havefailed. We show the pathway model used in the Vidwans paper above.

The now somewhat well understood B-RAF mutation, namely theV600E and discussed in the paper by Chapman et al:

Approximately 40 to60% of cutaneous melanomas carry mutations in BRAFthat lead to constitutiveactivation of downstream signaling through the MAPK pathway.10,11Approximately 90% of these mutations result in the substitution of glutamicacid for valine at codon 600 (BRAF V600E), although other activating mutationsare known (e.g., BRAF V600K and BRAF V600R).

As Chapman et al state they have an inhibitor of the mutatedB-RAF as follows:

Vemurafenib (PLX4032)is a potent inhibitor of mutated BRAF. It has marked antitumor effects againstmelanoma cell lines with the BRAF V600E mutation but not against cells withwild-type BRAF. A phase 1trial established the maximum tolerated dose to be 960 mg twice daily andshowed frequent tumor responses. A phase 2 trial involving patients who hadreceived previous treatment for melanoma with the BRAF V600E mutation showed aconfirmed response rate of 53%, with a median duration of response of 6.7months.16We conducted a randomized phase 3 trial to determine whether vemurafenibwould prolong the rate of overall or progression-free survival, as comparedwith dacarbazine.

As Bankhead states:

Patients withmetastatic melanoma had an "astounding" 63% reduction in the risk ofdeath when treated with an investigational agent that targets a mutation foundin about half of the tumors, data from a large international trial showed.

Treatment with theBRAF inhibitor vemurafenib improved progression-free survival (PFS) by 74%.Analysis of six-month overall survival (OS) showed a 20% absolute differencebetween patients treated with vemurafenib versus dacarbazine.

Though follow-up isbrief, the results already make a case for vemurafenib as the comparator forfuture trials of new agents for advanced melanoma, Paul. B. Chapman, MD, ofMemorial Sloan-Kettering Cancer Center in New York City, said at the AmericanSociety of Clinical Oncology meeting.

"The medianfollow-up was only three months, yet the hazard ratio for death was 0.37 infavor of vemurafenib," Chapman said in an interview with MedPageToday. "That's an astounding difference that is almost neverseen in oncology trials."

From 40% to 60% ofcutaneous melanomas have BRAF mutations that activate downstream signalingthrough the MAP kinase pathway. About 90% of the mutations involve a specificsubstitution at codon 600 (BRAF V600E), Chapman and co-authors wrote…

The above demonstrates how understanding pathways we cantarget pathway drugs to mitigate the progression of the disease. Howeverprogression free survival is of limited duration. The cancer cell findsalternative paths to mutate. Thus the question is does one target one pathafter another as they progress or try a multi mix cocktail in hopes ofpreventing the development of any new paths. Is it possible, for example, tostop the transcription of melanocytes all together, and thus stop any and allexpression so as to silence say all pathways.

In another piece Bankhead states the cost issues:

Vemurafenib has anestimated cost of $56,000 for a six-month course of therapy, and ipilimumabcosts about $120,000 for four weeks of treatment. Both drugs also havepotentially serious adverse effects. In approving ipilimumab, the FDA cautionedthat the drug has been associated with severe adverse effects that have included"severe to fatal autoimmune reactions."

The problem is that although the results are highlyfavorable for the short term, approximately six months, the long term is stillquestionable. It may be like imatinib and CML, namely there is a change in thecancer stem cells allowing a work-around of the blockage. Thus the costs wouldbe considerable. Also the use of multiple drugs may as in leukemias result in“cures”. However the above costs, which may be at $20,000 per month of lifeextended, are excessive. The quality of life extended may not be the best andthe drug while providing a “benefit” has not truly changed the end state,namely death of the patient. It has merely delayed the inevitable.

The issue of drugs, pathways, and targeting a sustainableremission is more than likely the target. As one has seen in many childhoodcancers the goal of a sustainable remission is achieveable with cocktails ofdrugs and perhaps such may be the case here as well. Vidwans et al refer totheir web site ( see http://mmdm.cancercommons.org/ml/index.php/A_Melanoma_Molecular_Disease_Model) which provides a superb interactive asset for linking pathway elements,disease stage, trials and specific modalities for possible mitigation and control.The Table below is a modified version of the Vidwans table taken from theirpaper.

Now in contrast we have seen, as previously indicated, manypapers where we have been presented with prognostic markers for melanoma andits development. Yet none seem to develop and verify them in the context of anunderlying system model. The above mentioned work of Vidwans et al seems to beone of the first to commence that effort.

References:

1. Bankhead, C, Melanoma Drug Still on a Roll, http://www.medpagetoday.com/Oncology/SkinCancer/30412

2. Bankhead, C, Melanoma Survival Benefit Called'Astounding' MedPage; http://www.medpagetoday.com/Oncology/SkinCancer/30413

3. Chapman et al, Improved Survival withVemurafenib in Melanoma with BRAF V600E Mutation, NEJM, N Engl J Med2011;364:2507-16.. http://www.nejm.org/doi/pdf/10.1056/NEJMoa1103782

4. Murphy, M., Diagnostic and Prognostic Biomarkersand Theraputic Targets in Melanoma, Humana (New York) 2012.

5. Vidwans, S. et al, A Melanoma Molecular DiseaseModel, PLOS ONE March 2011 V 6 No 3. http://www.plosone.org/article/info%3Adoi%2F10.1371%2Fjournal.pone.0018257.

6. Venet et al, Most Random Gene ExpressionSignatures Are Significantly Associated with Breast Cancer Outcome, PLOS, http://www.ploscompbiol.org/article/info%3Adoi%2F10.1371%2Fjournal.pcbi.1002240

7. Detours, V., Opinion: Confounded Cancer Markers,http://the-scientist.com/2011/12/07/opinion-confounded-cancer-markers/

8. Dougherty, E., W. Bittner, Epistemology of theCell: A Systems Perspective on Biological Knowledge, Wiley, 2011.

New Therapies: And Their Costs

2012-01-03T12:46:00.000-08:00

Again the brother of the former White House Chief of Staff writes on health care and how it should be rationed, in his opinion. The discussion this time is on proton beam treatment of prostate cancer. He has a point worth considering but presents a conundrum as well.

In the NY Times he states:

The most promising option is a new approach called dynamic pricing. Medicare would pay more for proton beam therapy, but only for diseases that are proven to be treated more effectively by the therapy than by other forms of radiation. For cancers like prostate, it would pay only what it pays for the cheaper alternatives. But if studies were done showing that proton beam therapy was better than other treatments, the payment would go up. If no studies were done, or the new evidence demonstrated no advantages, then coverage would continue, but at the lower reimbursement.

Now this is a somewhat rational approach. Namely a new therapy comes along and it is expensive yet unproven clinically. However clinical tests to "prove" its effectiveness would require many years and many patients, depending on the desired end point. For example if death is the end point then one may have to test for say 10 years or more and then look at survival, especially when looking at prostate cancer.

This proposal may hit a brick wall when we start to look at many of the new genetically developed pharmaceuticals treating cancers. These have passed clinical three phase trials where efficacy has been proven but their costs are often monumental and the effectiveness may prolong life but a small amount. Thus will he then deal with these as the Brits, namely the QALY approach, and pay on some similar pari passu basis?

As they say, paraphrasing, the cost we will always have with us.

Obesity, Fat, Taste and Missing the Point

2012-01-03T09:04:00.000-08:00

The Scientist had an article on fat, taste, an why we are seeing more obesity. Now one must always remember two things:

Input-Output = Net Accumulation

and

3500 cal = 1 pound

These are constants of nature. Eat too much and you get fat. Will power exists, especially in humans, delayed gratification has been around for years, forgoing the candy bar has been a cornerstone of good health, at least until now. Finding some exogenous factor other than ourselves to blame for the problem has become the status quo. It is the environment, genes, a disease, whatever. It never is our own weakness.

The Scientist states:

People the world over are getting fatter. Today more than one-third of adults in the United States are obese, and the rates in other industrialized countries are catching up. Obesity is no longer considered a condition particular to affluent societies—it has now spread to developing nations such as China and India, resulting in a global health crisis. According to the World Health Organization, 500 million adults worldwide are now obese, and this number is expected to climb well into the foreseeable future. Obesity is so problematic because it poses serious threats to personal health and well-being. Obese people are at an increased risk of chronic and potentially debilitating diseases such as cardiovascular disease and stroke, certain forms of cancer, type 2 diabetes, osteoarthritis, and asthma, among others. And the impact of obesity on an individual’s work and family life can be far-reaching, affecting a person’s employability, work productivity, and ability to pursue interests and activities of daily life.

All true, but, they continue:

A great deal of progress has been made in identifying the genes that may contribute to obesity. According to recent estimates, 135 different candidate genes have been linked with obesity and the eating patterns associated with it. Except for a handful of single-gene mutations that produce extreme obesity, the common, everyday form that we typically encounter on a city street probably reflects very modest contributions from each of a large number of individual genes.

It is NOT the genes fault. It is lack of will power period. Blame not the gene, blame the person. The gene approach is another excuse generating solution which results in more medication for a problem which really does not exist. They are just fat, so stop eating. A human can survive 90 days with water and no food, just burning their stores. So as a New Year's resolution, shut the mouth now.

Health Care and Comics

2012-01-03T08:32:00.000-08:00

Perhaps this tells more than was intended. Gruber from MIT has published a comic book explaining the new health care law of which he was allegedly a part of as advisor to the current administration. It may very well be the first hardcover $30.00 comic book ever.

The praise comes from the as expected corners of progressives and left wing elements from Massachusetts.

For a Bill exceeding several thousand pages being reduced to a comic book one wonders what has happened. After all we were told that one had to pass it to see what was in it, and alas it is a comic book after all.

I wonder if the rest of the MIT campus is doing the same, I retire and we get this, pity.

Ethics and the Practice of Medicine

2012-01-03T05:29:00.000-08:00

In an editorial by Ezekiel Emanuel, the, in my opinion, erstwhile proponent of medical care limiting and rationing, in the Annals of Internal Medicine the author states regarding the recently released Ethics Manual for the members of American College of Physicians (ACP):

But then the ACP Committee elaborates a very significant obligation:

Physicians have a responsibility to practice effective and efficient health care and to use health care resources responsibly. Parsimonious care that utilizes the most efficient means to effectively diagnose a condition and treat a patient respects the need to use resources wisely. . . .

Most physicians were inculcated that ideal physicians are thorough, comprehensive, and exhaustive in their workups and treatments—and ignore costs in the process. Here is an authoritative medical body using such words as “efficient” and “parsimonious”—and without “qualifications”—to describe the ideal physician’s practices. And to be sure it is not missed, this statement is placed in a “call-out” box. This is truly remarkable.

The issue here is the use of parsimony. Now one can interpret that in many ways. For example for lower back pain an MRI may not be the first step in determining the problem. Fifty years ago there was no MRI and the physician used their knowledge of anatomy to isolate the problem and recommend a course of treatment. And of course all too often an MRI finds what may require additional investigation which in turn is oftentimes costly and of no benefit. Parsimony in treatment may mean focus, focus, focus, but it could in the author's words mean cheap, cheap, cheap.

This may be the next step in the current health care debate.

Guest Blogger

2012-01-02T08:53:00.000-08:00

Braeden Bottner has been a guest blogger today.

Observations on Income

2012-01-02T07:20:00.000-08:00

The above is a plot of per capita income by state, including DC. Talk of income disparity, look at DC, it is well above $70,000 per capita making it over $200,000 per HH! The now infamous 1%. Now one wonders why DC is worth this when at the bottom is Mississippi at $30,000 and near the bottom the next door state of West Virginia.

The above is the annualized rate of change averaged over ten years. Note again DC is well above 9% pa! Michigan is below 3%. The rate of income gap change with those growth rates is fantastic. Again the creation of the 1%.

Finally a year by year snapshot of the change, and again DC comes out ahead. Is there something wrong with this picture.

Merry Christmas To All

2011-12-25T04:33:00.001-08:00

1. factum est autem in diebus illis exiitedictum a Caesare Augusto ut describeretur universus orbis

2. haec descriptio prima facta est praesideSyriae Cyrino

3. et ibant omnes ut profiterentur singuliin suam civitatem

4. ascendit autem et Ioseph a Galilaea decivitate Nazareth in Iudaeam civitatem David quae vocaturBethleem eo quod esset de domo et familia David

5. ut profiteretur cum Maria desponsata sibiuxore praegnate

6. factum est autem cum essent ibi impletisunt dies ut pareret

7. et peperit filium suum primogenitum etpannis eum involvit et reclinavit eum in praesepio quia nonerat eis locus in diversorio

8. et pastores erant in regione eademvigilantes et custodientes vigilias noctis supragregem suum

9. et ecce angelus Domini stetit iuxta illoset claritas Dei circumfulsit illos et timuerunt timoremagno

10. et dixit illis angelus nolite timere ecceenim evangelizo vobis gaudium magnum quod erit omnipopulo

11. quia natus est vobis hodie salvator quiest Christus Dominus in civitate David

12. et hoc vobis signum invenietis infantempannis involutum et positum in praesepio

13. et subito facta est cum angelo multitudomilitiae caelestis laudantium Deum et dicentium

14. gloria in altissimis Deo et in terra paxin hominibus bonae voluntatis

15. et factum est ut discesserunt ab eisangeli in caelum pastores loquebantur ad invicemtranseamus usque Bethleem et videamus hoc verbum quod factum est quod fecitDominus et ostendit nobis

16. et venerunt festinantes et invenerunt Mariamet Ioseph et infantem positum in praesepio

17. videntes autem cognoverunt de verbo quoddictum erat illis de puero hoc

18. et omnes qui audierunt mirati sunt et dehis quae dicta erant a pastoribus ad ipsos

19. Maria autem conservabat omnia verba haecconferens in corde suo

20. et reversi sunt pastores glorificantes etlaudantes Deum in omnibus quae audierant et viderant sicutdictum est ad illos

1 And itcame to pass in those days that a decree went out from Caesar Augustusthat all the world should be registered.

2 Thiscensus first took place while Quirinius was governing Syria.

3 So allwent to be registered, everyone to his own city.

4 Josephalso went up from Galilee, out of the city of Nazareth,into Judea, to the city of David, which iscalled Bethlehem,because he was of the house and lineage of David,

5 to beregistered with Mary, his betrothed wife, who was with child.

6 So itwas, that while they were there, the days were completed for her to bedelivered.

7 And shebrought forth her firstborn Son, and wrapped Him in swaddling cloths, and laidHim in a manger, because there was no room for them in the inn.

8 Nowthere were in the same country shepherds living out in the fields, keepingwatch over their flock by night.

9 Andbehold, an angel of the Lord stood before them, and the glory of the Lord shonearound them, and they were greatly afraid.

10 Thenthe angel said to them, “Do not be afraid, for behold, I bring you good tidingsof great joy which will be to all people.

11 Forthere is born to you this day in the city of David a Savior, who is Christ the Lord.

12 Andthis will be the sign to you: You will find a Babe wrapped in swaddlingcloths, lying in a manger.”

13 Andsuddenly there was with the angel a multitude of the heavenly host praising Godand saying:

14 “ Gloryto God in the highest, And on earth peace, goodwill toward men!

15 So itwas, when the angels had gone away from them into heaven, that the shepherdssaid to one another, “Let us now go to Bethlehemand see this thing that has come to pass, which the Lord has made known to us.”

16 Andthey came with haste and found Mary and Joseph, and the Babe lying in a manger.

17 Nowwhen they had seen Him, they made widely^[^d^] known the saying which was told them concerning thisChild.

18 And allthose who heard it marveled at those things which were told them by theshepherds.

19 ButMary kept all these things and pondered them in her heart.

20 Thenthe shepherds returned, glorifying and praising God for all the things thatthey had heard and seen, as it was told them.

Weber's Law

2011-12-22T11:39:00.000-08:00

Weber's Law is an interesting Law" observed in various fields. It states that to observe some phenomenon in a background the ratio of the smallest perceptual change in a stimulus that can be observed is given by:

Delta S = k S ( Background)

Namely that there exists some constant k for which on can observe a change from an average Background stimulus level.

For example we as humans if we are used to say 70F room temperature may be able to recognize a 3.5F change, so that k is 20. This "law" may extend over some region with the same k.

Now we can think of using Weber's Law in such diverse areas as Economics, namely what level of improvement in say unemployment would be perceived as goo if the total were 10%. Does it hold at a background of 5%. In global warming what change in F would be ascertainable at a background of say 70F?

Apparently cells function this way at the gene product level as well. See the paper by Ferrell. Worth a thought.

Microarrays and Too Much Data

2011-12-20T12:28:00.000-08:00

In a recent article by Spector at Stanford the author tells how for little money one can develop their owntests for genetic markers. She states:

So it takes years ofhard work and serious cash to create one of these “simple” tests, right? Notanymore. “All you really needis a computer browser and Excel,” says computer scientist Purvesh Khatri, PhD,who, working with Atul Butte, MD, PhD, associate professor of systems medicinein pediatrics, identified telltale chemicals (aka biomarkers) for three typesof cancer all in the span of one year. How was this possible?By analyzing some of the vast amount of genetic information from tumor cellsamples that has been amassed over the past decade in free, publicly accessibledatabases, and by outsourcing the lab work. “We say ‘outsourceeverything except the genius,’” says Butte. “You come up with the question andthe target, and let everyone else do the work.” As Khatri walked methrough the discovery process, I learned there’s a little more to it than that.Some work and cash is involved, not to mention high-school level biology. Andbasic statistics will be a big help. But with those tools, skills and aboutfive days’ work, plus $4,000 to confirm through blood tests, you’re on yourway.

Yes, for just a few dollars anda few hours of time you too can develop a genetic profile. In contrast a set ofpapers by Detours and colleagues raises some doubts about this.

The problem is that it is all too easy to get correlations of almost anything with anything. They are not markers unless we have a system with verifiable causality. This was discussed in the work of Dougherty. What Dougherty has observed is that one must have a system underlying the process, with causality, and that what one then looks for are the coefficients which define that system. From that we can ascertain if the result is true and consistent.

Recently Detours has addressed this issue in PLOS and he and his co-authors have demonstrated that the plethora of markers for say breast cancer can be shown to be nothing more than almost random choices, my words not theirs. Namely one may be able to find correlates almost anywhere.

From the Detours note in The Scientist we have:

Ethic guidelinesdrastically limit experiments onhuman subjects. Hence, the fundamental mechanisms of human diseases are mostlystudied in vitro or in animal models. These are only substitutes forunderstanding human physiology and disease. Proving that a mechanismresponsible for disease progression in a model system is also relevant to humandiseases—not to mention then translating it into a new therapeutic—is a major bottleneck in biomedicine. Inthe end, only clinical interventions on human will bridge models and humandisease.

One approach is tolook for correlations. If you can showthat patients with tumors expressing, for example, stem cell markers have amuch worse prognosis than those without them, that would suggest that stemcells are involved in human disease progression.This line of thinking has long been popular in oncology because you need onlyaccess surgical specimens, some mRNA or proteinmarker, and a follow up of patients.And with the recent advent of efficient microarray screens, this approach has become all the rage, reducing thediscovery of signatures, i.e. multi genes markers, to a nearly automaticprocedure.

In their PLOS paper Venet et al state:

Hundreds of studies in oncology have suggested the biologicalrelevance to human of putativecancer-driving mechanisms with the following three steps:1) characterize the mechanism in amodel system, 2) derive from the model system a marker whose expression changes when the mechanism is altered, and 3) show that marker expression correlates with disease outcome in patients—the last figure of suchpaper is typically a Kaplan-Meier plot illustrating this correlation.

Detours continues:

The signatures’ prognostic potential can then be tested instantly in genome-wide compendia ofexpression profiles for hundreds of human tumors, all available for free in the public domain. Besides stem cellsmarkers, signatures linked to all sortsof biological mechanisms or states have been shown to be associated with humancancer outcome. Indeed, several new signatures are published every month in prominent journals.

But such correlationsare not all that they seem. The accumulationof signatures with all sorts ofbiological meaning, but nearly identical prognostic values, already looked suspicious to us and others back in 2007.It seemed that every newly discovered signature was prognostic. We collected from the literature somesignatures with as little connection to cancer as possible. We found, for example, a signature of theblood cells of Japanese patients who were told jokes after lunch, and asignature derived from the microarray analysis of the brains from mice that suffered social defeat. Both of thesesignatures were associated with breast cancer outcome by any statisticalstandards.

In PLOS they state:

Our study questions the biological interpretation of the prognostic value of publishedbreast cancer signatures, but hasno bearing on their usefulnessin the clinic: a marker may be accurate without yieldinginteresting biological insight regarding the mechanism of diseaseprogression. Nevertheless, the prominence of proliferation should be taken into account in future clinical research.Are there transcriptional signals in breast cancerthat are prognostic, but independent of proliferation?

And they conclude:

In conclusion, we have shown that 1) random single- and multiple-genes expression markers have a high probability to be associated with breast cancer outcome; 2) most published signatures are not significantly more associated with outcome than random predictors; 3) the meta-PCNA metagene integrates most of the outcome-related information contained in the breastcancer transcriptome; 4) this information is present in over 50% of the transcriptome and cannot be removed by purging known cell-cycle genes from a signature.

As Detours concludes in his short piece in The Scientist:

It took us four years and six rejections to get this work finally published in a computational
biology journal (PLoS Comput Biol, 2011)—not the most efficient venue to reach the oncology community. Meanwhile, a steady stream of studies confounded by proliferation rates has appeared. This has to be said, one can no longer stay silent about the rather limited self-correction capability of the top tier publishing system (Cell, Nature Genetics, PNAS, etc.), which promoted these studies in the first place. The oncogenomic-based literature has forgotten the pitfalls of non-specific effects and the value of negative controls. It is not enough to show that a signature is prognostic; biological conclusions may be drawn only if its prognostic value is specifically driven by the mechanism/state under investigation. Importantly, we question prognostic signatures as specific research tools, not as clinical guides: smoke does not drive fire, yet it is powerful indicator of when and where a fire is burning.

His point is well taken. The challenge is to determine the intra-cellular and inter-cellular pathways as defined as dynamic distributed systems, and to do what Dougherty and others suggest, namely understand what is happening and why and then seek to identify the system. Failure to have a viable a provable model of the system will lead to volumes of data which are far from prognostic. In fact they may be very well deadly to the patient.

Intelligence Failure?

2011-12-20T05:44:00.000-08:00

The NY Times has a piece saying that the failure to publicize the death of the North Korean Head of State was somehow an intelligence failure is rather off. As they state:

Asian and American intelligence services have failed before to pick up significant developments in North Korea. Pyongyang built a sprawling plant to enrich uranium that went undetected for about a year and a half until North Korean officials showed it off in late 2010 to an American nuclear scientist. The North also helped build a complete nuclear reactor in Syria without tipping off Western intelligence.

Now good intel is not shared. This is so for several reasons and let me list two:

First, by keeping intel secret one sees what the other side says and does. There is great value in that.

Second, by keeping it quiet one protects one's own sources. By revealing it one may reveal a source. That may result in compromising the source.

Simply good intel is never published. It sits quietly and is used accordingly. Perhaps the authors should consider that alternative as well.

Mandatory Health Insurance

2011-12-20T04:43:00.000-08:00

There is a continuing argument regarding mandatory universal health care. A recent posting in the WSJ makes a rather convolved argument for and against it ultimately suggesting some tax policy to make it work.

The author makes the following argument:

The most common case for an individual mandate is the free-rider argument. Imagine a community in which everyone dutifully pays monthly health-insurance premiums, except Joe. Then one day Joe gets sick and finds he cannot pay the full costs of his medical care. So the rest of us chip in and pay for the remainder of Joe's care. The upshot: When he was healthy, Joe got to consume all his income instead of paying premiums, and after he got sick he managed to "free ride" on everyone else's generosity.

Ethically, Joe is getting an undeserved benefit paid for by others, who bear an undeserved cost. Economically, he is imposing an external cost on others. If we let him get away with this, others might emulate his example and the cost for the rest of us could grow.

So is the solution to mandate that everyone have health insurance? On average, people without health insurance consume only about half as much health care as everyone else. Of the amount of care they consume, they pay for about half. Thus the "free ride" for the average uninsured person is about one-fourth of what everyone else spends on health care.

Forcing Joe to buy insurance that pays for the same amount of care everyone else gets would be neither fair nor equitable. To get Joe to pay his own way, we need to take from him an amount of money equal to about one-fourth of the average health-care spending of insured people and either distribute it to everyone else or put it in a fund to pay for the care eventually required by Joe and others like him.

It is worth reflecting again on some of the issues:

1. As a society we have gotten to the point that is someone is ill then we take care of them and if they do not have insurance they are "free riders" on the system, it is akin to the auto insurance issue of having an uninsured motorist pool. Namely we assume that there will always be some few individuals without auto insurance and that the risk of them getting in an accident is higher than most so we tax all law abiding folks for the risks presented by those not abiding by the law. In fact we generally do not even penalizes those breaking the law.

2. As we have argued many times there is no reason the government should be in the middle of this in any way and that includes tax breaks. Frankly paying for anything should be without a tax advantage but at lower rates. One should pay for health care after tax to fully understand the costs. Costs are the modulator of demand. It is demand we want to modulate.

3. There are free riders who smoke and are obese, now amounting to some 60% of the population. They cost $360B in 2011 and it grows at 40% per annum and yet we allow them the same rates, as we do with drug users, to some degree with smokers, and those with STDs.

4. Thus the "only" logical solution is that we should and "must" individually purchase health care, not through a company plan, but akin to auto and home insurance with no tax benefit. We get auto and property insurance by our lonesome and without any tax advantage. We can choose what plan we want.

5. If you do not buy health insurance, and there should be an opt out with a cost however, then when you become ill and if it costs the people one cent you are then penalized n cents for every cent of costs, then it becomes an immediate mandate. If however you can pay on your own then you have a free ride on your pennies

6. Mandated coverage should be at most catastrophic, like having liability only on a car, collision or comprehensive is not mandatory. The problem with the current Government Plan is that some obese GS 12 dictates what you should have and the result is a massive increase in costs! There should be at most a mandate for catastrophic coverage.

Yes, demand would decrease and costs would go down.

Pigou and Potato Chips

2011-12-20T04:24:00.000-08:00

Frances Woolley has presented an interesting question which we have examined in depth before. She has presented an exam question regarding the externalities of obesity framed in terms of a potato chip tax.

Frances states:

"Pigouvian taxes" are imposed to make people take into account the full impacts of their actions. The classic example is a carbon tax. Whenever people produce or consume carbon-based fuels they harm other people, from those who breathe in exhaust fumes to future generations affected by climate change. A carbon tax makes people recognize the full cost of their consumption and production choices, thus creates incentives for people to change their behaviour.

The potato chip example, however, is different: the chip eater in the exam question isn't harming other people. The bad skin, weight gain, and depression is experienced by the chip eater himself. It is not obvious that a Pigouvian tax is needed to make chip eaters take into account the harms that they causing - why not just tell people that potato chips cause bad skin, and if people think the chips are worth the zits, let them munch away? They're only harming themselves.

Now let me rephrase her issues a bit. Perhaps as in the US we may have a slightly different economic framework than Canada but I believe we have a parallel.

First, as we have demonstrated many times, obesity in the US will cost us $350B this year alone of our $2.5T health care costs. How is this paid for, well Medicare, Medicaid, and insurance. Namely we are all taxed equally for the costs of a few.

Second, we have a country where over 60% have a BMI in excess of 25 and well over 40% are outright obese. Frankly I wonder who is "hungry" with all these fat people but I leave that question to the side.

Third, we know that obesity is the prime driver for Type 2 Diabetes, well in excess of 95% is a result of weight, and Type 2 Diabetes causes many sequellae from neuropathy, nephropathy, retinopathy, cardiomyopathy and the like. We can draw a straight line from caloric consumption to costs. This is unlike the carbon claim of Woolley where I would argue the nexus is tenuous at best.

Thus as to her assumptions as above:

1) I disagree with the first regarding carbon. The line is broken by hypothesis and not fact connecting cause and effect.

2) The line between a calories and a cost is well established. We can actually say what every excess calorie costs. Not bad for an engineer! But that is nothing more than what Chem Es do for a living. We know what the cost of every 0.1 above 25.0 costs society. The issue then is do we tax the input or the output to cover their externalities, namely their added costs. Namely, do we tax the food or the person's weight?

I believe that Frances may have missed an interesting example if she had carried it a bit further. We have substantial data on disease incidence by BMI level and we have costs with each disease. I have gone through this analysis a few years ago in the large regarding health care costs. Perhaps the "devil is in the details" but that is where economists perhaps should seek truth if not just the facts.

Perhaps also this may just be one of my hot buttons. Frances has an interesting point but I believe that it requires more depth. This was a point which I had a strong disagreement with Greg Mankiw for he is a proponent of a Pigou tax on gasoline but opposes a Pigou tax on carbs. My opposition of the Pigou tax on gasoline is driven by the fact that demand is inelastic. Namely if workers have to drive to their place of employment the tax is not a disincentive but merely another way for the Government to take funds out of the economy. On the other hand a carb tax is used in a much more elastic environment, just look at cigarette taxes, and the funds become not only a disincentive but a cost balancing means.

Thus my argument with Frances is that this is an interesting but complex problem with the data available to actually perform a detailed analysis. In addition it is a pressing problem for many countries, for it is not just acne but the development of one of the most pandemic disease epidemics known. In fact the main problem with Type 2 Diabetes and the sequellae is that they can be managed for a long time per patient but at an ever growing cost per patient per year. In contrast lung cancer just kills you off before you become too much of a burden!

Third Birthday

2011-12-20T03:08:00.000-08:00

It has been three years since I started this and about eight months since I counted countries. This Blog has managed to get 59% from the US and remainder from around the world, 101 countries since April alone. I want to thank the readers for dropping by and hope they have gained some insight. The last three years have been exciting and as many may have observed the Blog has been idiosyncratic, a bit of everything.

If anyone ever has any questions or issues please feel free to email me your concerns. I made the decision early on not to have comments and I am glad I have done so seeing other blogs.

The upcoming year should present a wealth of new thoughts. Merry Christmas and Happy New Year to all.

Hitchens: Some Thoughts

2011-12-17T18:03:00.000-08:00

On the death of Hitchens I am reminded of several facts. First many of my European friends ended early their lives as a result of self inflicted hard lives. Second when asked what his favorite poem was he remarked If by Kipling:

If you can keep yourhead when all about you

Are losing theirsand blaming it on you;

If you can trustyourself when all men doubt you,

But make allowancefor their doubting too;

If you can wait andnot be tired by waiting,

Or being lied about,don't deal in lies,

Or being hated,don't give way to hating,

And yet don't looktoo good, nor talk too wise:

If you can dream --and not make dreams your master;

If you can think --and not make thoughts your aim;

If you can meet withTriumph and Disaster

And treat those twoimposters just the same;

If you can bear tohear the truth you've spoken

Twisted by knaves tomake a trap for fools,

Or watch the thingsyou gave your life to, broken,

And stoop and build'em up with worn-out tools;

If you can make oneheap of all your winnings

And risk it on oneturn of pitch-and-toss,

And lose, and startagain at your beginnings

And never breathe aword about your loss;

If you can forceyour heart and nerve and sinew

To serve your turnlong after they are gone,

And so hold on whenthere is nothing in you

Except the Willwhich says to them: "Hold on!"

If you can talk withcrowds and keep your virtue,

Or walk with kings-- nor lose the common touch,

If neither foes norloving friends can hurt you,

If all men countwith you, but none too much;

If you can fill theunforgiving minute

With sixty seconds'worth of distance run --

Yours is the Earthand everything that's in it,

And -- which is more-- you'll be a Man, my son!

Employment Factors

2011-12-15T12:10:00.001-08:00

It is worth a review of some of the recent economic data regarding employment. First the chart above looks at the actual data to the Romer projections. It is clear that no matter how much we may have improved we are still way off from where the projections said we would be. This should be a continuing concern especially as regards to what any economist says about anything.

The above is a measure of the errors and we see the growth in what we should have seen with the recovery. The problem is that the variance from the projected recovery is widening.

This is the difference in percent from what was projected and we see a 30-35% difference. Not surprising despite the trillions spent. In fact one should understand that the payroll tax cut is simply not charging working folks for their Social Security, a loss in some $300 billion in revenue! Consider the almost $300 billion in unemployment insurance and we see almost all of the trillion we are off.

The above is the difference in employment from 2005 to the present. Growth is in Government and Medical/Education, essential Government, with some in professional. Construction and manufacturing are all down.

The above is the growth rates for those slower segments. They are at best about 1-2% pa, well below any reasonable level.

The above is the growth for construction as well. There is some growth in mining.

The above shows the percent of the population employed, and we see it remaining well below what we had before the recession. It demonstrates no material change in employment. In fact the unemployment using the 2006 base is still above 12% not the 8.6% stated by the Government.

This chart above is thus the essential one to watch and it still shows a sustained unemployment.

Community Colleges

2011-12-10T14:48:00.001-08:00

There was an interesting piece this week in the Harvard Crimson on Community Colleges. They state:

Student attendance at community colleges has surged during the last decade. Enrollment now stands at 8.2 million, a 2.2 million hike in the last two years. In Texas, 79 percent of students who enroll in a public university begin at a community college. Even during the recession, the national rate of enrollment at community colleges leapt forward at a pace three or four times greater than that of four year institutions.

For all our Nobel Prizes, it’s increasingly clear that investment in higher education gets the most bang for the buck when it’s put into community colleges, not Ivies. There are two reasons why community colleges should be a top priority for anyone who cares about higher education.

It continues:

Granted, community colleges often don’t provide a great education. Their graduates are less likely to occupy top spots in the nation or world. But one lesson of American history is that sometimes mass education is more important than elite education. In the 19th century, European countries offered first-rate schools for the upper class but scrimped on education for all. In contrast, the United States promoted mass education—first, widespread literacy and primary education, and then in the 20th century high school education for the great majority of children, and finally higher education for a large share of the public. America’s best schools were often inferior to Europe’s best schools, but what turned out to matter most was that mass education was better in America than in Europe—and that gave us the jump on economic productivity and technological innovation.

Now I have first hand knowledge of the community college. I spent the past semester taking Organic Chemistry at County College of Morris, a nice place on a hill west of New York City some fifty miles or so. Now I did not go to an Ivy League university, MIT never considered itself so endowed as say Harvard, but on the same hand I have unlike the author never found a non-American university on a par with any top ranked American one.

Now to Community Colleges. I tracked the MIT course and indeed we kept pace. The exams were comparable. What was different was how the faculty treated the students. At MIT we were treated as potential peers, and expected to perform and excel in such a manner. At CCM we are treated as High School middle of the roaders. Now the top 20% are comparable to many MIT students, but they have little money, are first generation immigrants, and recent immigrants, and are returnees. In effect they are what can and should become our entrepreneurial class. Yet the role of the Community College appears to be "training" not education. The administration focuses on taking attendance so as to ensure that if the drop out rate is too high they do not get blamed. They do not push the students, there is no research path to show the way, there is no networking, and in fact the administration seems to be o par with any public high school.

Thus the students in many ways could I believe compete on par with many at MIT, but the fire to excel has been crushed despite the fact that they keep pushing ahead. Thus the challenge is not more money per se but a better attitude, a respect for the student and a linking of the student with their potential.

It always helps to be part of the system to understand it.

Teddy and New Nationalism

2011-12-06T15:20:00.001-08:00

But remember that Teddy lost in 1912 to a Governor from New Jersey!

THE NEW NATIONALISM

Teddy Roosevelt

Osawatomie, Kansas

August 31, 1910.

We come here to-day to commemorate one of theepoch making events of the long struggle for the rights of man - the longstruggle for the uplift of humanity. Our country - this great Republic - meansnothing unless it means the triumph of a real democracy, the triumph of populargovernment, and, in the long run, of an economic system under which each manshall be guaranteed the opportunity to show the best that there is in him. Thatis why the history of America is now the central feature of the history of theworld; for the world has set its face hopefully toward our democracy; and, O myfellow citizens, each one of you carries on your shoulders not only the burdenof doing well for the sake of your own country, but the burden of doing welland of seeing that this nation does well for the sake of mankind.…

Of thatgeneration of men to whom we owe so much, the man to whom we owe most is, ofcourse, Lincoln. Part of our debt to him is because he forecast our presentstruggle and saw the way out. He said:

"I hold that while man exists it is hisduty to improve not only his own condition, but to assist in amelioratingmankind."

And again:

"Labor is prior to, and independent of,capital. Capital is only the fruit of labor, and could never have existed iflabor had not first existed. Labor is the superior of capital, and deservesmuch the higher consideration."…

"Capital has its rights, which are asworthy of protection as any other rights.... Nor should this lead to a war uponthe owners of property. Property is the fruit of labor; . . . property isdesirable; is a positive good in the world."…

"Let not him who is houseless pull downthe house of another, but let him work diligently and build one for himself,thus by example assuring that his own shall be safe from violence whenbuilt."…

At many stages in the advance of humanity, thisconflict between the men who possess more than they have earned and the men whohave earned more than they possess is the central condition of progress. In ourday it appears as the struggle of freemen to gain and hold the right ofself-government as against the special interests, who twist the methods of freegovernment into machinery for defeating the popular will. At every stage, andunder all circumstances, the essence of the struggle is to equalizeopportunity, destroy privilege, and give to the life and citizenship of everyindividual the highest possible value both to himself and to the commonwealth.That is nothing new. …

Practical equality of opportunity for allcitizens, when we achieve it, will have two great results. First, every manwill have a fair chance to make of himself all that in him lies; to reach thehighest point to which his capacities, unassisted by special privilege of hisown and unhampered by the special privilege of others, can carry him, and toget for himself and his family substantially what he has earned. Second,equality of opportunity means that the commonwealth will get from every citizenthe highest service of which he is capable. No man who carries the burden ofthe special privileges of another can give to the commonwealth that service to whichit is fairly entitled.

I stand for the square deal. But when I saythat I am for the square deal, I mean not merely that I stand for fair playunder the present rules of the games, but that I stand for having those ruleschanged so as to work for a more substantial equality of opportunity and ofreward for equally good service. … When I say I want a square deal for the poorman, I do not mean that I want a square deal for the man who remains poorbecause he has not got the energy to work for himself. If a man who has had achance will not make good, then he has got to quit. … For every specialinterest is entitled to justice, but not one is entitled to a vote in Congress,to a voice on the bench, or to representation in any public office. TheConstitution guarantees protections to property, and we must make that promisegood But it does not give the right of suffrage to any corporation. The truefriend of property, the true conservative, is he who insists that propertyshall be the servant and not the master of the commonwealth; who insists thatthe creature of man's making shall be the servant and not the master of the manwho made it. The citizens of the United States must effectively control themighty commercial forces which they have themselves called into being.

There can be no effective control ofcorporations while their political activity remains. To put an end to it willbe neither a short nor an easy task, but it can be done.…

I believe that the officers, and, especially,the directors, of corporations should be held personally responsible when anycorporation breaks the law.

Combinations in industry are the result of animperative economic law which cannot be repealed by political legislation. Theeffort at prohibiting all combination has substantially failed. The way outlies, not in attempting to prevent such combinations, but in completelycontrolling them in the interest of the public welfare. For that purpose theFederal Bureau of Corporations is an agency of first importance. Its powers,and, therefore, its efficiency, as well as that of the Interstate CommerceCommission, should be largely increased. We have a right to expect from theBureau of Corporations and from the Interstate Commerce Commission a very highgrade of public service. We should be as sure of the proper conduct of theinterstate railways and the proper management of interstate business as we arenow sure of the conduct and management of the national banks, and we shouldhave as effective supervision in one case as in the other. The Hepburn Act, andthe amendment to the act in the shape in which it finally passed Congress atthe last session, represent a long step in advance, and we must go yet further.…

The absence of effective State, and,especially, national, restraint upon unfair money-getting has tended to createa small class of enormously wealthy and economically powerful men, whose chiefobject is to hold and increase their power. The prime need is to change theconditions which enable these men to accumulate power which is not for thegeneral welfare that they should hold or exercise. We grudge no man a fortunewhich represents his own power and sagacity, when exercised with entire regardto the welfare of his fellows. …

No man should receive a dollar unless thatdollar has been fairly earned. Every dollar received should represent adollar's worth of service rendered - not gambling in stocks, but servicerendered. The really big fortune, the swollen fortune, by the mere fact of itssize acquires qualities which differentiate it in kind as well as in degreefrom what is possessed by men of relatively small means. Therefore, I believein a graduated income tax on big fortunes, and in another tax which is far moreeasily collected and far more effective - a graduated inheritance tax on bigfortunes, properly safeguarded against evasion and increasing rapidly in amountwith the size of the estate.

The people of the United States suffer fromperiodical financial panics to a degree substantially unknown among the othernations which approach us in financial strength. There is no reason why weshould suffer what they escape. It is of profound importance that our financialsystem should be promptly investigated, and so thoroughly and effectivelyrevised as to make it certain that hereafter our currency will no longer failat critical times to meet our needs.…

But I think we may go still further. The rightto regulate the use of wealth in the public interest is universally admitted.Let us admit also the right to regulate the terms and conditions of labor,which is the chief element of wealth, directly in the interest of the commongood. The fundamental thing to do for every man is to give him a chance toreach a place in which he will make the greatest possible contribution to thepublic welfare. Understand what I say there. Give him a chance, not push him upif he will not be pushed. Help any man who stumbles; if he lies down, it is apoor job to try to carry him; but if he is a worthy man, try your best to seethat he gets a chance to show the worth that is in him. No man can be a goodcitizen unless he has a wage more than sufficient to cover the bare cost ofliving, and hours of labor short enough so that after his day's work is done hewill have time and energy to bear his share in the management of the community,to help in carrying the general load.

… The national government belongs to the wholeAmerican people, and where the whole American people are interested, thatinterest can be guarded effectively only by the national government. Thebetterment which we seek must be accomplished, I believe, mainly through thenational government.

The American people are right in demanding thatNew Nationalism, without which we cannot hope to deal with new problems.

The New Nationalism puts the national needbefore sectional or personal advantage. It is impatient of the utter confusionthat results from local legislatures attempting to treat national issues aslocal issues. It is still more impatient of the impotence which springs fromover division of governmental powers, the impotence which makes it possible forlocal selfishness or for legal cunning, hired by wealthy special interests, tobring national activities to a deadlock. This New Nationalism regards theexecutive power as the steward of the public welfare. It demands of thejudiciary that it shall be interested primarily in human welfare rather than inproperty, just as it demands that the representative body shall represent allthe people rather than any one class or section of the people...One of the fundamental necessities in arepresentative government such as ours is to make certain that the men to whomthe people delegate their power shall serve the people by whom they areelected, and not the special interests. …

The object of government is the welfare of thepeople. The material progress and prosperity of a nation are desirable chieflyso far as they lead to the moral and material welfare of all good citizens.Just in proportion as the average man and woman are honest, capable of soundjudgment and high ideals, active in public affairs - but, first of all, soundin their home life, and the father and mother of healthy children whom theybring up well - just so far, and no farther, we may count our civilization asuccess. We must have - I believe we have already - a genuine and permanentmoral awakening, without which no wisdom of legislation or administrationreally means anything; and, on the other hand, we must try to secure the socialand economic legislation without which any improvement due to purely moralagitation is necessarily evanescent. …You must have that, and, then, inaddition, you must have the kind of law and the kind of administration of thelaw which will give to those qualities in the private citizen the best possiblechance for development. The prime problem of our nation is to get the righttype of good citizenship, and, to get it, we must have progress, and our publicmen must be genuinely progressive.

Again on Peer Review

2011-12-02T14:03:00.001-08:00

The WSJ published a piece today on the non reproducible results of peer reviewed papers. As I had indicated yesterday this is one of the problems of peer reviewed articles. The most serious one and the one all too often not recognized.

As the article states:

This is one of medicine's dirty secrets: Most results, including those that appear in top-flight peer-reviewed journals, can't be reproduced....

Reproducibility is the foundation of all modern research, the standard by which scientific claims are evaluated. In the U.S. alone, biomedical research is a $100-billion-year enterprise. So when published medical findings can't be validated by others, there are major consequences. Drug manufacturers rely heavily on early-stage academic research and can waste millions of dollars on products if the original results are later shown to be unreliable. Patients may enroll in clinical trials based on conflicting data, and sometimes see no benefits or suffer harmful side effects.

Thus the issue of peer review being the sine qua non is somewhat baseless. One can assume the best of intents on the part of the researchers but in the final count the work all too often fails in the most critical step of scientific discovery, repeatability. Furthermore the works seem rarely to be retracted.

The piece continues:

In September, Bayer published a study describing how it had halted nearly two-thirds of its early drug target projects because in-house experiments failed to match claims made in the literature.

The German pharmaceutical company says that none of the claims it attempted to validate were in papers that had been retracted or were suspected of being flawed. Yet, even the data in the most prestigious journals couldn't be confirmed, Bayer said.

One thus wonders if it would be better to demonstrate repeatability in the presentation of the results. All too often there is a race to publish without a care of the result having the ability of standing the most critical of tests. One experiment, with results, may have limited value.

More on Peer Review

2011-12-01T08:42:00.001-08:00

Yesterday I discussed the problems with Peer Review regarding the papers on obesity and social networking. There is an interesting set of articles in The Scientist which addresses this in more detail.

They list the problems and solutions as follows:

Problem #1: Reviewers are biased by personal motives;Solution: Eliminate anonymous peer review ( Biology Direct, BMJ, BMC); run open peer review alongside traditional review

Problem #2: Peer review is too slow, affecting public health, grants, and credit for ideas; Solution: Shorten publication time to a few days (PLoS Currents Influenza); bypass subsequent reviews (Journal of Biology); publish first drafts

Problem # 3: Too many papers to review; Solution: Recycle reviews from journals that have rejected the manuscript (Neuroscience Peer Review Consortium); wait for volunteers (Chemical Physics Letters); reward reviewer efforts.

The real problem is often the fact that reviewing a paper falls into three categories:

1. Just Plain Junk: Namely the paper is poorly written, is outright wrong, or is incomplete.

2. Duplication: The work may already have been done.

3. Falsification: Namely that the results are fraudulent.

Typically the second should be the easiest. You show what and where and note the result. However all too often the reviewer will say it has been done elsewhere but never state where. The Editor takes it as gospel and the author is left hanging. This is both unprofessional and unethical but I have seen it many times.

The first issue is sometimes difference in style. Although some reviewers want to see it written the way they dictate to their students, style should not be the selector. True errors should be noted and either corrected or rejected. Style on the other hand should no be a basis. Even if it makes the paper less readable.

The third issues is quite difficult. As we have seen again and again fraudulent results often take time to uncover and in the review process there is a presumption of integrity of the data.

The Scientist also discusses new biological journal trying to meet this challenge:

Although there are many specialist journals headed by scientists, the top tier publications are often run by professional editors who do not work in a lab, and who do not moderate the peer-review process. Many researchers have complained that their manuscripts are rejected on the opinion of one reviewer, even when the remaining two reviews are glowing. To stem this problem Schekman plans to have referees discuss their opinions in a private online forum and come to a consensus—a process mediated by the senior editor—ideally within a month of the paper’s submission.

It will be interesting to see if this makes progress.

The whole process of peer review will change as we see more and more on-line drafts. The old stodgy types will refrain from placing anything on line until peer reviewed bu frankly the sooner a result is available the sooner the usefulness can be maximized.

Obesity, Peer Review, and Questions

2011-11-30T12:45:00.001-08:00

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

2011-11-30T10:53:00.001-08:00

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.

And We Let Them Vote

2011-11-27T13:46:00.001-08:00

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.

Death of the Entrepreneur

2011-11-22T14:42:00.001-08:00

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.

Obesity and Economists

2011-11-21T11:55:00.001-08:00

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

2011-11-21T07:05:00.001-08:00

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.

Lawyers vs Physicians

2011-11-20T04:59:00.001-08:00

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.

In Memory: Dave Staelin

2011-11-18T08:15:00.001-08:00

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.

AMA Stops ICD 10

2011-11-15T09:42:00.001-08:00

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.

Have They No Shame?

2011-11-14T16:36:00.001-08:00

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-20^th-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

2011-11-14T10:33:00.001-08:00

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.

The 1%, Whomever they Are

2011-11-13T17:31:00.001-08:00

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

2011-11-13T15:35:00.001-08:00

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

2011-11-13T07:43:00.001-08:00

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!

News Flash: Harvard Beats MIT

2011-11-12T08:58:00.001-08:00

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

2011-11-12T06:34:00.001-08:00

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.

New Elements Names

2011-11-11T13:31:00.001-08:00

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

2011-11-11T11:36:00.001-08:00

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

2011-11-11T02:45:00.001-08:00

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.

Technology and Health Care: Quo Vadis?

2011-11-10T17:00:00.001-08:00

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

2011-11-10T09:45:00.000-08:00

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

2011-11-10T05:27:00.000-08:00

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%.

You Really Cannot Make This Up!

2011-11-09T12:41:00.000-08:00

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?

Some Thoughts from Hayek

2011-11-08T14:14:00.000-08:00

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 theimportance of individual reason. Of true individualism, the "first thingthat should be said," Hayek stated, "is that it is primarily a theory of society, an attempt tounderstand the forces which determine the social life of man, and only in the second instance a set ofpolitical maxims derived from this view of society. Its basic contention isthat there is no other way of understanding social phenomena but through ourunderstanding of individual actions. . . . Thenext step in the individualistic analysis of societyis the contention that by tracing the combined effects ofindividual actions, we discover that many of the institutions on which humanachievements rest have arisen and are functioning withouta designing and directing mind.

And the second on Federal Debt:

He was greatly concerned aboutUnited States federal government budget deficits. In a letter to the Times,he wrote "Sir, you would do a publicservice if you displayed in capital letters the elementary truth that IF THEUNITED STATES GOVERNMENT BORROWS A LARGE PART OF THEWORLD'S SAVINGS TO FINANCE CURRENT EXPENDITURE, THE CAPITAL AVAILABLE ANYWHEREFOR INVESTMENT MUST BECOME SCARCE AND EXPENSIVE."Thiswas not the first time he wrote to a newspaper recommending the use of capitalletters. In 1978, he wrote a letter-to-the-editor to the WallStreet Journal, "Could you print in front ofevery issue in headline letters the simple truth that INFLATION IS MADE BYGOVERNMENT AND ITS AGENTS: NOBODY ELSE CAN DO ANYTHING ABOUT IT. It might do some good!" though he noted in his scrapbook that the letter waspublished only once and in small print.

In 1983, Hayek was asked by thenews magazine the Economist toparticipate in a centenary critique on Keynes. His final word on his oldCambridge friend was contained in the June 11edition. There he wrote that he was "claiming that perhaps the mostimpressive intellectual figure I have ever encountered and whose generalintellectual superiority I have readily acknowledgedwas wholly wrong in the scientific work for which he ischiefly known."Hewas a bit kinder in an earlier newspaper interview, when he responded to thequestion, "Are there any similarities between your economic theory andthat of Keynes?" "No. I think basically Keynes was also a free trader and an economic liberal. But with many qualifications andrestrictions. He was never quite consistent. We were personal friends but werarely 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 mostimpressive intellectual figure I have ever encountered and whose generalintellectual superiority I have readily acknowledgedwas wholly wrong in the scientific work for which he ischiefly known

Seems to say it all.

Why MIT?

2011-11-07T13:56:00.000-08:00

Grafton at the NY Review of Books uses MIT as the intro to his analysis of the failure of US Universities. Why?

He states:

Yet American universities also attract ferocious criticism, much of it from professors and from journalists who know them well, and that’s entirely reasonable too. Every coin has its other side, every virtue its corresponding vice—and practically every university its festering sores. At the most prestigious medical schools, professors publish the work of paid flacks for pharmaceutical companies under their own names. At many state universities and more than a few private ones, head football and basketball coaches earn millions and their assistants hundreds of thousands for running semiprofessional teams. Few of these teams earn much money for the universities that sponsor them, and some brutally exploit their players.

At competitive private colleges and universities, admissions directors reserve places in each class for the children of alumni and potential donors; for athletes, many of whom will make less use of their academic opportunities than their classmates do; and simply for those who can pay. And at universities that boast of their commitment to undergraduate teaching, too many professors gabble through PowerPoint slides twice a week and entrust the face-to-face teaching of actual students to underpaid graduate students and Ph.D.s on short-term contracts, who do their best to impart basic skills in writing and quantitative analysis while earning only a few thousand dollars a course.

Frankly this does not play at all at MIT. Perhaps Princeton or Yale, but MIT? really. Why do we have so many from China, tuition free, and then they return because we fail to get them resident visas. They are creative, productive and not chose from alumni children, in fact the alumni offspring are limited at best.

MIT produces some of the best, if not often the best. One wonders who chose the photo for this article?

We have no short term PhDs, we have senior faculty teaching Freshman, more than one can say about many other institutions. Shame on the Review.

Perhaps he should investigate the alleged NYU student and puppet user who complains as noted in the piece which states:

Here’s an astounding illustration of my argument that “American students are not studying the fields with the greatest economic potential.”

The Nation: A few years ago, Joe Therrien, a graduate of the NYC Teaching Fellows program, was working as a full-time drama teacher at a public elementary school in New York City. Frustrated by huge class sizes, sparse resources and a disorganized bureaucracy, he set off to the University of Connecticut to get an MFA in his passion—puppetry. Three years and $35,000 in student loans later, he emerged with degree in hand, and because puppeteers aren’t exactly in high demand…he’s working at his old school as a full-time “substitute”…[earning less than he did before].
…Like a lot of the young protesters who have flocked to Occupy Wall Street, Joe had thought that hard work and education would bring, if not class mobility, at least a measure of security…But the past decade of stagnant wages for the 99 percent and million-dollar bonuses for the 1 percent has awakened the kids of the middle class to a national nightmare: the dream that coaxed their parents to meet the demands of work, school, mortgage payments and tuition bills is shattered.

What astounds me is not that someone could amass $35,000 in student loans pursuing a dream of puppetry, everyone has their dreams and I do not fault Joe for his. What astounds me is that Richard Kim, the executive editor of The Nation and the author of this article, thinks that the failure of a puppeteer to find a job he loves is a good way to illustrate the “national nightmare” of the job market. Even in a wealthy society it’s a privilege to have the kind of job that Kim thinks are the entitlement of the middle class. And, as Tyler says, we are not as wealthy as we thought we were.

In considering the plight of the puppeteer lets also remember that millions of the unemployed would be grateful to have a job that they don’t like.

When I entered MIT I did so by looking at the NY Times, 1959, and seeing what jobs were available. I really wanted "pure math" but frankly there were no jobs for pure mathematicians. Thank God MIT had EE, it was close enough to being an electrician just in case! And when I finished I had no debt!

Changing Unemployment

2011-11-07T08:11:00.000-08:00

Again on the Mankiw blog is a comment regarding his discussion on employment and the understanding that technology has played a role.

Let me review four of my prior postings:

1. Wiener some sixty years ago in Cybernetics and The Human Use of Human Beings laid out just what is happening. It was no surprise then nor should it be now. Namely we have "machines" which make humans more productive and thus decrease the demand for human labor as relates to what a machine can do. Simply, I have not had a need for a secretary in over 20 some years. In fact they get in the way. I type, I electronically file, I email, I use my mobile phone, and thus why get some intermediary unless there is value added.

2. Economists have made one mistake after another, a la Romer. So frankly why do we need them. Unlike say physicians who can do more and are forced to do so, economists really do not accomplish anything, just churn up the water. Perhaps when that is fully recognized we can reduce that overhead.

3. We, not me but "academics", try to make learning science and engineering easier and more learner friendly. That is the core of what I call the "iPhone" generation, namely give someone an iPhone and let them play with it and we assume that they are technically astute. In fact they could never design such a device nor construct it. The poor student who found mechanics "too hard" was probably never really challenged. One can get 800 on the math part of the SATs but frankly that does not mean anything in terms of solving a mechanics problem, that requires understanding geometry and how to fit F=ma into that geometry, that is all, and you do NOT do that by memorizing.

4. Finally good schools are good "fishing, drinking, and smoking clubs", namely watering holes where smart people gather and learn from each other. The learning is what topics are hot, what techniques work, where things are going, and most importantly getting a feeling for one's own measure. Egos can be destroyed or built in such an environment and it the very ego which is a core to the success of the entrepreneur.

Thus growth requires an entrepreneur, one trained in the area of expertise, but one secure in their own vision of moving forward. It is the "individual" who makes progress.

As the contributor to the blog states:

We attribute this in part to the fact that tech. progress is driving productivity even has it leaves many types of workers behind. In fact, a large group has been made worse off, even as those with education and talent have gained immensely, and opportunities for entrepreneurs are better than ever. In my judgment, the underlying trends are on track to accelerating in coming years.

Technical progress has always been driving productivity, just think of the wheel, the steam engine and of course the PC. Education qua schooling is useless unless one is independently well off. I selected Engineering because there were jobs when I started, there were none ten years later, but welcome to the luck of the draw. But one makes do, not complain. The problem as I understand it is that there is a view of entitlement, entitlement of success, if one finishes some form of college, whether that is a productive path or not. That is not true. A History or Philosophy major may be well educated but the demand for that skill in the work force is nil.

No matter what Deans of Liberal Arts say. The Chinese students focus on that productivity factor, thus engineering. But also if one looks at the authors of the new biotech and genomics papers they come from the new Chinese generation, and if we think we have problems now just wait a decade! Frankly it is easy to be an engineer compared to the total uncertainty of the biotech world. Yet the challenge is being met by what we call our economic competitors.

Equestrian: First Time Winner

2011-11-06T12:36:00.000-08:00

Just a note, my Grand Daughter on her first time competing on her horse got two firsts and a second, not bad for six months effort so far, Congrats Bella! West Virginia horse country has a new star, wait till she crosses over to Virginia! Upperville, here comes a Mountaineer!

Wiener and the Changing Industrial Estate

2011-11-06T10:15:00.000-08:00

In the early 1950s Norbert Wiener wrote a readable version of what Cybernetics may bring forth. For those not in the know cybernetics is what has happened to manufacturing, robots, computers, and little need for people as workers.

Wiener said:

Let us remember that the automaticmachine, whatever we think of any feelings it may haveor may not have, is the precise economic equivalent of slave labor. Any laborwhich competes with slave labor must accept the economic conditions ofslave labor. It is perfectlyclear that this will produce an unemployment situation, in comparison withwhich the present recession and even the depression of thethirties will seem a pleasant joke. This depression will ruin many industries, possibly even the industries which have taken advantage of the new potentialities. However, thereis nothing in the industrialtradition which forbids an industrialist to make a sure andquick profit, and to get out before the crash touches him personally.

Thus the new industrial revolution is a two-edged sword. It may be used for the benefit ofhumanity, but only if humanity survives long enough to enter a period in whichsuch a benefit is possible. It may also be used to destroy humanity, and if itis not used intelligently it can go very far in that direction.There are, however, hopeful signs on the horizon. Since the publication of thefirst edition of this book, I have participated in two big meetings withrepresentatives of business management, and I have been delighted tosee that awareness on the part of a great many of those present of thesocial dangers of our new technology and the social obligations of thoseresponsible for management to see that the new modalities are used for thebenefit of man, for increasing his leisure and enriching his spirituallife, rather than merely for profits and the worship of the machine as a newbrazen calf. There are many dangers still ahead, but the roots of good will arethere, and I do not feel as thoroughly pessimistic as I did at the time of the publication of the first edition of this book.

Wiener was quite prescient at the time. He saw machines replacing humans in factories. I have had conversations with many who say the US is declining because we no longer "make" anything. Frankly in a Wienerian sense no one else is also, despite the Chinese.

The Cybernetic threat poses a difficult conundrum. We have had a society where we could put people to work on farms and then factories. Now the best we seem to do is get them iPhones and iPads, the soma of our current society.

What is needed in a Cybernetic Age is creativity and productivity, developing value added elements with intelligent workforces not just bodies.

Unemployment and Romer

2011-11-06T06:56:00.000-08:00

The chart above shows the unemployment situation and again compares it to what Romer predicted with and without the Stimulus on January 11, 2009. It is stuck in high and Romer said no mater what it would be dropping almost like a brick.

I often wonder how some "professional" is so wrong yet continues to tell us what to do. To paraphrase the McCarthy hearings, "Have you no shame!" But this indicates a much larger issue the general lack of reality in economics as a whole. Imagine what has happened to medicine in the past fifty years, we have considerable more certainty. The Romans knew how to build bridges, they still are standing, that is engineering. But economics is a conundrum.

The above details her errors a bit differently, it shows a continual and growing bias of error. Why one wonders. Was it wishful thinking or are there fundamental flaws in the Keynes type analysis. It was the use of multipliers she had studied which she applied and they just did not work. Government spending has had no effect. They say it would have been worse but her "worse" is better than reality.

The above percent errors are especially telling. They are almost 50%. They are slowly getting there. Again one must ask why? The economists just will not. The left wing just wants to do more. Based upon what? You have no evidence.

I had thought I would have left this curve behind months ago, but it just festers now almost 3 years later. I had said it would not work then and well, it is tough being an engineer in a world of economists.

Or to quote Crystal Gayle:

Mad is the captain of Alpha Centauri
We must be out of our minds
Still we are shipmates bound for tomorrow
And everyone here's flying blind
Oh, we must believe in magic
We must believe in the guiding hand
If you believe in magic
You'll have the universe at your command