Prostate Cancer and Ancient Egypt

There is an interesting article in Science Now regarding the diagnosis of prostate cancer in a mummy some 2250 years old.

They state:

Now an international research team has diagnosed what ailed M1: the oldest known case of prostate cancer in ancient Egypt and the second oldest case in the world. (The earliest diagnosis of prostate cancer came from the 2700-year-old skeleton of a Scythian king in Russia.) Moreover, the new study now in press in the International Journal of Paleopathology, suggests that earlier investigators may have underestimated the prevalence of cancer in ancient populations because high-resolution computerized tomography (CT) scanners capable of finding tumors measuring just 1 to 2 millimeters in diameter only became available in 2005. "I think earlier researchers probably missed a lot without this technology," says team leader Carlos Prates, a radiologist in private practice at Imagens Médicas Integradas in Lisbon.

Interesting to see what the did and the now revised view of prevalence. Also the age given the now indolent view the Government has.

How About Giving Me Money for My New Car!

Anyone who  buys a new car knows that once they drive it out of the showroom and around the block they lost 10% of the value. Less than 1,000 feet, and wham, it is underwater! Then there is underwear, just buy it, wear it for just one day, and think you will get your money back, they are underwater. How about that pizza, buy it at 8 PM, just a few bites, and wham, underwater.

But when someone buys a house, and it goes under water we want the Government to make them whole again, whatever that means.

Now the fundamental idea was that when you bought the house and agreed to the payment terms, the value of the house became relatively irrelevant. Who cares what the house is worth, you owe the money back.

But not any more, some how in the entitled generation if you make a dumb mistake, even if you committed fraud, well we expect the Government to make us whole.

That is just another element of the victim and welfare state, take from those who paid and give it to those who will not. The old adage of reward success and punish failure is gone. But someone mus eventually pay. The Government really does not exist as a payer, it is a fund transferer. It takes from the rich and gives to the poor. But the rich, whoever they may be, got that way for many by creating and working hard, and yes many had gotten burned, that is the way you learn.

Survival of the fittest, Spenser and Social Darwinism, yes it has some merit.

Pigou, Coal, Coase, and What Next?

I am not a fan of Pigou and his tax. Frankly it just is another way for the Government to take money under false pretenses. It will not do what the promoters intend especially when it comes to reducing energy use.

My standard argument is that if it is cold we just heat the house. We must drive to work so we use the car. Will doubling the cost of energy by taxing it exorbitantly change much, never really did. Perhaps a few may die from freezing, that will reduce demand, and more will be unemployed which is another decrease. Simple logic dictates that demand is just not that flexible. Will it force Harvard economics faculty to drive from Newton to Cambridge in a car pool, no way, take the T, unlikely.

There is a review in the NY Review of Books of a few recent additions to this nonsense:

... a tax specialist, and his chapter on energy taxation is especially interesting. Environmental economists have emphasized the use of externality taxes (sometimes called Pigovian taxes after their first important advocate, English economist Alfred Pigou). The idea is to levy a tax on “bads” that have negative externalities, where the tax is equal to the size of the external costs. In the case of coal, the “bad” is largely sulfur dioxide. If the pollution from coal were currently taxed proportionally to its damages, the price of coal-fired electricity would increase from 9.0 cents to 15.2 cents per kilowatt-hour (kwh).

]

If we were to calculate the externality taxes implied by the costs shown in the table (on sulfur, carbon dioxide, and other harmful pollutants), these would raise over $300 billion per year in revenues. Somewhat more than half of this would be taxes on the global warming externality, while somewhat less would be charges on the conventional pollutants.

A second point is that environmental taxes can play a central role in reducing the fiscal gap in the years to come. These are efficient taxes because they tax “bads” rather than “goods.” Environmental taxes have the unique feature of raising revenues, increasing economic efficiency, and improving the public health.

Now let me return to my argument. If global warming exists, no I do not believe in it, it either exists or does not and if it does it is either man made or not, and those are matters of science and not belief, so I leave the answer to science and the scientific method, not the political or religious method. But in a strange was if we get warmer up here in the north then we will have more trees and warmer winters thus using less energy and absorbing more CO2. Perhaps a negative feedback loop, perhaps a boon for Canada.

Yet back to Pigou. The increase in taxes as stated in the review will raise $300 billion in tax, so why not just call it a tax. It will not make the drive from Manchester NH to Cambridge any shorter, just more expensive. So the more well off with move there driving up real estate and driving the poor folks farther north at greater distances. The Government ill get more taxes and overspend even on those.

Now to the externalities. Let me use the oft quoted Coase example, the railroad and the farmer. A railroad has a right of way through a farmers field. The farmer grows wheat and the train kicks sparks onto the wheat field. A fire starts and burns the farmer's wheat. The farmer can sue the railroad for damages, and if one assume zero transaction costs the railroad will most likely lose. The railroad can then either continue to pay farmers or fix the train. The costs of this externality, fires in farmers fields, can be mitigated either way.

Moreover the farmer can attach a cost to the damage. Wheat yields some many bushels per acre, the price of wheat is so much a bushel, the fire covered so many acres. Plain and simple, just do the arithmetic. The key to Coasean damages is the ability to define value, and value is the estimation of future cash flows.

The problem with the Pigou tax is several fold. First that it really does little. Second is that the Government just ups the tax ante, and third the concept of externalities fails. What is the cost, like that field of wheat, there we have a good measure, with CO2 we have academics and Government hacks coming up with nonsense, been there done that. There is no simple calculation, there is not clear person harmed and the harm is highly contingent and speculative at best.

Thus despite the wonderful world of Harvard economists and their schemes, this one still stands wanting.

Cloud Computing and Being a Spy

Now one may wonder what cloud computing and the business of spying have to do with one another. The answer is "words to live by".

What motivated this was an article by Friedman in the NY Times. He states:

The latest phase in the I.T. revolution is being driven by the convergence of social media — Facebook, Twitter, LinkedIn, Groupon, Zynga — with the proliferation of cheap wireless connectivity and Web-enabled smartphones and “the cloud” — those enormous server farms that hold and constantly update thousands of software applications, which are then downloaded (as if from a cloud) by users on their smartphones, making them into incredibly powerful devices that can perform myriad tasks.

The emergence of the cloud, explained Alan Cohen, a vice president of Nicira, a new networking company, “means than anyone can have the computing resources of Google and rent it by the hour.” This is speeding up everything — innovation, product cycles and competition. 

 Now I am reminded the Gilder a decade or so ago who espoused all the wonders of wireless, I wrote a piece about the "Gilder Conjecture" and its less than on target analysis. But this one is dangerous.

Exuberance is always fun, exciting and has the potential for danger, just look at the collapse of our recent financial engine.

Now to spy craft. There are three rules a good spy should live by:

1. Trust no one, not even your father.

2. Never put it in writing, namely do not leave a trail or evidence.

3. Always have a second exit.

Cloud computing violates each of these rules. Is that bad? Well if there is an enemy who wants to do you harm, say like what a spy does. Is this the case in cloud computing world? Think China, think of all those computer science students we educate in the US with DoD money and then ship back to China because unions do not want those types here. If they can be unionized it is fine but if they think, get rid of them.

So what is wrong with Friedman, well simply he, like Gilder, seems to have little to  no technical understanding of what he speaks, in my opinion, namely in the technical areas most critical to security, and second, he takes what he is told almost at face value.

One must remember there is a dark side. In the 1970s with Soviet threats we worried about secure kernelized operating systems in red and black environments. Secure to the nth degree, limited access, tickets, and the list went on. Since 9/11 we are sharing everything with everybody, thus Wikileaks.

The risk of the cloud is that it is easy to compromise and worse. Remember the three rules of spying and beware the cloud.

Rowe and Bygones: What is Real Estate Worth?

As I have noted from time to time I am a fan of all Canadian economists, at least all that I know. And especially Nick Row who comes up with some of the best and most thoughtful ideas, and he is still undoubtedly the best economist on the planet. Now he has an interesting discussion on whether God over-invested in land. Now I view this a bit differently but first Rowe: 

Question. "What is the economic difference between capital and land?" If you answered: "People made capital and God made land", you are wrong.

Economists have known that answer is wrong since 1871, when we discovered that bygones are forever bygones, and switched to the forward-looking marginalist theory of value. In 1871 we stopped saying that the value of goods is determined by what they cost to produce in the past. Instead we said the value of goods is determined by their marginal utility in the present and expected future. (OK, there are two blades of the Marshallian scissors, demand and supply, but both blades are made of the same stuff (Mark Blaug?), because marginal costs are really opportunity costs, and are the foregone marginal utility of the other goods we could make with the same resources.)

It doesn't matter whether people or God made stuff in the past, and what it cost to produce it. The only things that matter are: the present; and present expectations about the future. If archaeologists discovered that Prince Edward Island was an artificial island, rather than a geological formation, it shouldn't matter at all for the allocation of resources going forward. (OK, some geologists would have extra work to do, to revise their theories.)

Now I have never been to PEI but we have family a bit south in Nova Scotia, Breir Island, out there in the GM.

Now as an investor, I guess that is a good description now that I am almost 70 since no one wants an old guy really running a company, unless you are a Murdoch, and besides I do not want to do it anyway, I almost every day have to give an answer to "what is it worth?" and place personal capital at risk.

So how do I do it. Simple, discounted cash flow. I look at future cash flows, discount them and then that is what it is worth. Does it work? Sometimes. I looked at real estate once, 1987, before it crashed, in fact just before t crashed, and I used a 10% pa increase in value.Well I was underwater for a while, no Government bail outs then, just ride the curve.

Now I looked at other investments in similar manners for the next decades, namely DCF and NPV. There is always the question of good projections, discount factors and terminal values. Never really got it prefect but did get it better.

So what to me is the difference between capital and land. As a DCF freak it is as follows:

1. Land has value based on the demand at some future time and the discount factor. What will someone pay for it at a later date. Land is one of those things that are in limited supply, and some land more limited than others. Location is the key phrase we always hear and yes that is a good part of the value. Will it look better to others at some future time, and better by an amount that exceeds the discount?

2. Capital, well cash qua cash does not increase, in fact holding just dollars depreciates over time in its ability to buy some milk was $3.00 a gallon a year ago and now it is $4.80, gasoline the same. Despite Krugmann we do have inflation. Perhaps he never went shopping, they never do down there in Princeton. Thus unlike real property capital is worth what it is worth when you have it, and like a new car it just is worth less when you hold onto it.

But Nick continues:

And firms find their capital stocks seem to be far too small, so they do a lot of investing to get them back up to normal. And households find they are crammed into houses that are smaller than they need be, because there are a lot of houses sitting empty, but they soon sort that one out. And are driving old cars, and wearing old underwear, and so start investing in a lot of new stuff.

I missed the point here. But wearing old underwear sounds quite common, as is crammed into houses. I forget who may have said it, George Carlin I believe,  but the reason we get new and bigger houses is because we get more "stuff". "Stuff" is the driver of getting more "stuff". Perhaps there is some irrational subliminal driver to getting "stuff" that is really at the root of all this, not any rational theory of economics.

For the proof of that I look at the chipmunk. You see we have dozens and even more in New Hampshire. The chipmunk has one primary goal in life, find food and bring it back to the nest. They have those pouches on the sides of their mouths to accumulate food, not consume it, accumulate it. Chipmunks accumulates tens of times more than they consume in their lifetime. What is the food worth? I leave that question to Rowe.

Children of Rawls

There is an article in the NY Times arguing the Rawslain nature of the Ant Capitalism Demonstrators who have taken up residence in public spaces around the country. They state:

Rawls’s boldest claim — that inequality in society is only justified if its least well-off members fare better than they would under any other scheme — could provide a lodestar for the protests. Rawls was no Marxist: this “difference principle” acknowledges that a productive, free society will be home to at least some degree of inequality. But the principle insists that if the rich get richer while wages and social capital of the poor and middle class are stagnant or falling, there is something seriously wrong.

Now the above is somewhat slight from the mark. Rawls was a redistributionist and his view was to maximize the social and economic benefits to all by taking from the producers and given to the consumers, my words.  In my work on Individualism and Neo Progressivism I discussed this in detail. This country was for years a bastion of individualism. This was recognized by de Tocqueville, and most likely was a direct reult of the fact that the immigrants perforce of the vacantness and isolation of the country were forced to be that way, and the result was the strength of this country.

The counter to Rawls was his Harvard colleague Robert Nozick who looked towards individualism.

Nozick establishes his "entitlement" rules for the Lockean distribution of property by the individual.

Specifically Nozick states them as:

1. An individual acquires property via the principle of justice in acquisition is then entitled to that property;
2. An individual who acquires property via the principle of justice in transfer is then entitled to that property;
3. An individual who acquires property via the principle of justice in retribution is then entitled to that property.

These were true elements of individualism. Now the Times continues:

Inequality becomes injustice when the cooperative nature of society breaks down and a significant segment of the population finds itself unable to thrive, despite its best efforts. Rawls does not prescribe particular policies to heal the divide, but structural changes in campaign financing, the banking system and the tax code are natural places to begin the discussion. Whatever platform Occupy Wall Street adopts, Rawlsian principles might help clarify the values of the movement and navigate it away from divisive or intellectually bankrupt rhetoric.

"Unable to survive", it hardly looks as if these people are unable to survive, for one wonders who is supporting them now. What significant percent of the population? In many ways the people appear and lost but bound together by a rhetoric that is divisive, lacking focus, and perhaps a metaphor for their own lives, lives without positive self direction, lives rejecting the challenge of individualism. They are children of Rawls, as Rawls was of Marx.