It's always been a bit of a puzzle to me that the government has pharmaceutical companies conduct clinical trials for new drugs.  Oh, it's not really that puzzling--clinical trials are very expensive, and having the companies do it keeps the cost of the trials off the government's books.  But this seems like false economy.  No matter how ethical the pharmaceutical companies are--and I, for one, do not think that they are comic book supervillians eagerly poisoning their customers--the incentives are skewed.  Pharmaceutical companies have a strong personal interest in not finding out that their drugs don't work, or don't work as well as competitors.  That's not their fault; it's just the hard fact of human nature.

One of the biggest complaints that critics have is that companies have an incentive to selectively publish data.  Say you commission a head-to-head trial of your drug against an older generic.  If the trial shows that your drug does better, smashing--publish away!  And if your drug doesn't do so well?  Just file that study away in a locked filing cabinet stuck in a disused lavatory with a sign on the door reading "beware of the leopard".  

A group of researchers is attempting to tackle this problem head one.  Here's their plan:  

Endorsed by both the BMJ and PLOS Medicine, the Restoring Invisible and Abandoned Trials (RIAT) initiative is the brainchild of Peter Doshi, a postdoc in comparative-effective research at Johns Hopkins University (JHU), who wanted to do something about the fact that only half of all clinical trials are published. Doshi and his colleagues have already gathered 178,000 pages of previously confidential trial data on several drugs that came into the public domain thanks to legal battles or the policies of the European Medicines Agency, which has been releasing trial data in response to requests since 2010.

Last Friday, I wrote a piece about When Work Disappears.  On twitter, by email, and in the comments, I got pushback.  Wasn't I committing the Lump of Labor Fallacy, assuming that the jobs that were disappearing meant permanent unemployment?

No, but I can see why people were worried.  Let me explain.  

For starters, let me define the Lump of Labor Fallacy for those who don't fill their spare hours by reading classical economics texts. Or rather, let me let The Economist define it for you.  From their excellent Economics A to Z, also available on the web:

One of the best-known fallacies in ECONOMICS is the notion that there is a fixed amount of work to be done - a lump of LABOUR - which can be shared out in different ways to create fewer or more jobs. For instance, suppose that everybody worked 10% fewer hours. FIRMS would need to hire more workers. Hey presto, UNEMPLOYMENT would shrink.

Paul Krugman has a column today on a topic you don't normally get much of from economists:  sympathy for the Luddites.  Back in 2001, when I sat in on my last formal economics class, this was about as daring a proposition as "Sympathy for the Devil" was as an album title.  

A dozen years on, I don't think it's quite so edgy.  I'd guess that Paul Krugman of 2000 would probably have given short shrift to the idea that we should listen to Luddite complaints.  So would Megan McArdle of 2000.  Both the later versions, much to my surprise, seem to have changed their minds.  

What's happened in the intervening ten years?  Some of my more dour readers suggest it's the fact that I've moved to Washington.  But I moved to Washington from Manhattan, hardly a bastion of free market sentiment.  And besides, I haven't stopped thinking that markets are the best way to handle voluntary cooperation.  

But I have started worrying about what's taking place at the bottom of the economy.  In much of the industrial world, it seems to be increasingly difficult for people to earn a decent living without a fairly elite set of skills--or an elite set of credentials that mimic skills, like a BA in English Literature from an Ivy League institution. The ability to earn a decent living, either yourself or as part of a family, is one of the basic criteria for a decent life.  (And yes, before you ask: I think trust funds can be just as toxic as lifetime welfare benefits.)

Kaiser Permanente is one of the places that always gets cited as a model by health care reformers.  It's the biggest insurer in California, using a model that ended up being the basis for the HMO revolution.  Kaiser owns its own hospitals, pays its doctors a salary, and provides the "continuum of care" that everyone says they want from our fragmented health care system--and does it at a reasonable price.  So it's a bit surprising to see the LA Times report that this model citizen submitted some of the highest bids for California's health care exchanges.  

What's going on here?  There are two rival explanations.  The first is that the other companies on California's exchanges responded to pricing pressure from the state by slashing access to their networks.  Blue Shield, for example, submitted a plan to Covered California which offers access to only 36% of their physician network.  Kaiser can't do this so easily, because they don't have a group of primary care physicians, a group of gastroenterologists, and so forth, from which they can choose the cheapest bidders for their exchange plan.  Kaiser's system is a densely woven web; you can either have access to all of it, or none of it.  And giving folks access to all of it costs money.  

The other explanation is that Kaiser is doing a fine bit of cherry picking.  Poverty is associated with poor health.  And if you're one of the highest priced plans on the exchanges, you're not very likely to pick up a lot of poor customers.  

These theories aren't mutually exclusive, of course; Kaiser executives may have fretted about the problems of splitting up their network, and then stopped trying when they realized that all this would do would add a lot of very expensive and hard to treat new customers to their rolls.  

This morning the Supreme Court handed down a big ruling in the biotech world: companies can patent synthetic DNA, but they cannot patent genes that they've identified from natural human chromosomes. This has big implications for how biotech research will fare in the future.  

The case centers around Myriad, which has patents on BRCA1 and BRCA2, genes that are linked to a very high risk of breast cancer. This has been in the news a great deal recently because of Angelina Jolie’s decision to have a double mastectomy after testing revealed that she carried the BRCA1 variant. Myriad’s patents make this testing more expensive than it would be if the information were in the public domain.

As a matter of law, the Supreme Court justices seem to me to have gotten it right. You can’t patent the law of gravity, no matter how long it took you to puzzle out the math. Identifying patterns in human genes seems very similar to identifying natural laws, which can’t be patented. Myriad's argument—that its patent was on the copies of human DNA that it made in order to test them—is rather thin.

The economics, however, are trickier.  

My friend Conor Friedersdorf had a typically thoughtful essay last week in which he argued that we are giving up too much liberty to fight terrorism.  Terrorism is a tiny threat compared to many more ordinary causes of death:  

Of course we should dedicate significant resources and effort to stopping terrorism. But consider some hard facts. In 2001, the year when America suffered an unprecedented terrorist attack -- by far the biggest in its history -- roughly 3,000 people died from terrorism in the U.S. Let’s put that in context. That same year in the United States: 71,372 died of diabetes. 29,573 were killed by guns. 13,290 were killed in drunk driving accidents

I am broadly in agreement with Conor that we are giving up far too much liberty to fight terrorism, with the NSA's incredibly broad data-collection programs being only the latest example.  To add insult to injury, much of what we're doing isn't very effective--Americans are still taking off their shoes in every airport line because of a failed attempt to use shoe bombs ten years ago.  X-raying and partially undressing its citizens millions and millions of times a year in order to foil a plot that was foiled not by the TSA, but by passengers who wondered why this guy was trying to set his shoes on fire, is beneath the dignity of a great nation.

Jeffrey Goldberg, however, pushes back on the common libertarian tactic of comparing terrorism deaths to ordinary risks, and arguing from there that we basically shouldn't try to do much about terrorism:

Young workers are fleeing Europe's periphery for the richer countries in the center.  A lot of analysts are worried about what this means for European welfare states, but Karl Smith tells them no to worry; eventually, those young people will be back:  

I am not that worried – at least about the fundamentals. The danger I see is that “deficit hawks” will use the exodus of young workers to push painful but unnecessary benefit cuts. In the short run this is likely to cause some ugly accounting but in the long run chances are better than fair that the young people will be back. Though it may be difficult to envision now, this is setting up a situation where wages and profits will be especially attractive in the periphery in the years to come.

There are a couple of ways to get to this result but I think the following will be the easiest for most folks to swallow. Lots of old Spaniards are going to mean a relatively high demand for things old Spaniards like to buy, like Spanish doctors. This increases the demand for doctors and raises their wages. That, in turn, increases the demand for things that well-to-do Spanish doctors like to buy, like fancy restaurant meals. That increases the demand for Spanish chefs, waiters, busboys etc. The process reverberates through the whole economy, making Spain an especially attractive place to live and work.

I love counterintuitive economics, but I am unconvinced.  And the reason I am unconvinced is that we can actually observe what this looks like right here in the United States, where labor mobility is high, and as a result, you have fairly substantial segments of the country which basically consist of old people, poor people, and a thin middle class of government workers sandwiched between them.  They look like my mother's hometown, Newark, New York.  

We've heard that the targeting of conservative groups by the IRS was necessary because there was a big spike in applications from conservative groups.  I've explained why I think this is a lousy excuse.  Among other reasons, if you  you look at the Inspector General's report, you'll see that applications for new 501(c)(4) groups didn't really start to rise until 2011, long after the targeting started. But looking over the IG's report, I just saw something else interesting:  the number of 501(c)(5) organizations, which is the IRS code designation for labor groups, really exploded in 2012.  The number of new applications nearly doubled from its 2009 level.  

I can think of no good explanation for this.  Yes, 501(c)(5) groups, like 501(c)(4)s, got a lot more freedom to engage in political activity after the Supreme Court's free speech decision in Citizens United.  But why found a labor group rather than a 501(c)(4)?  The requirements are more onerous, and post Citizens, the advantages are not great.  I mean, yes, you can take payroll deductions, but only if you actually manage to organize a company.  And organizing drives are not exactly going gangbusters these days.

This could signify a lot of things: a renewed drive by labor, or some wrinkle in the tax code that I'm not aware of.  Any way you look at it, though, an interesting tidbit to chew on. And of course, one would like to know if any BOLOs were issued for new labor groups.

In case you were wondering whether the IRS was prone to using peoples' political views as criteria for assessing their eligibility for tax-exempt status, listen to this phone call that a pro-life group recorded with an IRS agent.  The agent, Sherry Wan, clearly does not speak English as her first language, so you may want to follow along with the transcript.  

You could speak to your value. OK. So that’s why, that’s why this is kind of
like you know, kind of, you started from the beginning, I feel that when you’re talking to the [unintelligible] my religion, my religion [unintelligible]. And like I said, you have the right to believe. You have the right to do, your religion told you what’s right. You have a right to, you know, outreach to other people. But meanwhile, you have to know your boundaries. You have to know your limits. You have to respect other people’s beliefs. You have somebody else come to your door and know you don’t like them. When they come to you, how do you feel? [unintelligible]

Sherry Wan does not seem to be worried about whether this group is conducting illegal protests (an activity which is not allowed for tax exempt groups, or indeed, anyone else.)  Rather, she's telling them that activities outside of abortion clinics will disqualify them, because they can't force their views on people who disagree with them.  This will surely come as a surprise to 501(c)(3) Greenpeace.  

I've seen a number of criticisms of this on the grounds that what Pro-Life Revolution was doing was constitutionally protected speech.  This is neither here nor there.  Asking my congressman to pass a law against neighbors who let their crab grass get out of control is constitutionally protected speech, but a 501(c)(3) cannot engage in it while also keeping their tax exemption.

A reader sends in this notice from their local parks department:  

The text:  

The "Affordable Healthcare Act" a.k.a "Obamacare" dictates that beginning January 1, 2014 employers with fifty or more employees that average 30 or more hours per week for a one year period beginning on October 15, 2012 and ending October 14, 2013 and avery year thereafter must provide health insurance to those employees.  If there is a violation of just one employee than the employer must pay a fine of $2,000.00 for every employee employed (not just the one violation).  This could result in a fine of over $2,000,000.00 to the City of Livonia.

Last night I saw a few tweets from people I respect noting that in coming days, NSA whistleblower Edward Snowden may not look as noble as we now think him.  (I hope I'm wrong, one added.)  In some ways, this seems inevitable.  Whistleblowers are almost definitionally not normal people.  When the spotlight shines on their lives, the glare makes every irregularity evident.  

What whistleblowers do is usually moral.  A free society depends on people who are willing to go public when they see wrongdoing.  But there are good reasons that whistleblowing behavior is actually pretty rare.  

When you read that, you're probably thinking of the financial dangers, and you're not wrong.  Most people who blow the whistle on an employer end up losing their jobs.  I don't know how much Edward Snowden has managed to save on his reported $200,000 annual salary, but it's unlikely to be enough to live on for the rest of his life.  Yet even those who admire him may have second thoughts about hiring him.  If he will betray one employer . . .

Just in case you weren't anxious enough about your cell phone, yesterday, the Guardian and the Washington Post dropped news that the NSA is also collecting data from multiple internet providers: Microsoft, Yahoo, Google, Facebook, PalTalk, AOL, Skype, YouTube, Apple.  Dropbox is allegedly coming soon.

Yet the companies appear to be offering flat denials:

An Apple spokesman said: "We have never heard of PRISM. We do not provide any government agency with direct access to our servers and any agency requesting customer data must get a court order," he said.

Two people who are (trying) to use individual insurance as a substitute for employer insurance:

I'm married with a kid on the way, and I'm cautiously optimistic about what my family's options will be next year. I started working for a healthcare company a few months ago, and my job transition happened during my wife's pregnancy. The new company has a somewhat generous health insurance policy, but steers employees to its own hospitals to the point that you basically don't have coverage anywhere else except for emergency room visits. Since my wife and I already had plans for delivery at another hospital, we decided to keep her on COBRA and I would shop for an individual policy. To my surprise, I was unable to get past underwriting, despite my good health, because my wife was pregnant and the insurance company would have been required to cover the new baby if they had issued me a policy, regardless of the baby's health after birth. I'm sucking it up this year on the new company's group plan, even though I don't much care for being told that I can't have surgery at the hospital of my choice. Hopefully the rates on the exchanges for a whole family will make it worth buying (although we wouldn't qualify for subsidies because we are eligible for a group plan).

One thing to keep in mind is that, at least in California, companies going into the exchanges are apparently keeping costs down by . . . restricting your choice of hospitals and doctors.  Given that you'll be paying for that insurance with after tax dollars, I'd look carefully at the options on the exchange before you give up your employer sponsored insurance.

And then a reader from Nevada:

A letter from a grad student who is looking forward to Obamacare:  

I'm currently a grad student and pretty psyched about Obamacare for myself. I currently get completely free insurance through my school (or, really, the state of Texas - I'm at a public school here) as a graduate TA, but even many people who eventually secure full-time work in academia spend a year or two as adjuncts.

I have savings and can survive a year or two with the extremely low pay of adjuncting, but what I can't do is insure myself under the old system. The last time I looked into buying health insurance, which was over 10 years ago, when I was in my 20's and thinner than now, the only plan I was able to buy for any amount of money (because of my high weight) was a high-deductible plan that was explicitly non-renewable (in other words, it would only last for a year no matter what). That worked for my needs at the time, and I'm fine with high-deductible plans, but I'm not sure I could have gotten insurance the next year.

And the thing is, if/when I graduate from here, I'll be at least 40, so I am really uncomfortable with the idea of not having health insurance. I could go get a job in some industry instead of adjuncting, and then I would be insured, but it's nice to have options.

An email from someone who isn't planning to buy insurance under the new exchanges:  

I'm a 32-year-old, male, married IT consultant in Nevada with a child. My wife and son have insurance through her work. I am presently uninsured and will remain so for the foreseeable future. Why? Well, I work for a small business with limited ability to contribute for health insurance (50% at the moment, though that might decrease) and several of my coworkers have health issues - consequently, to get insured, it would run me $250/month today for a "catastrophic" plan and premiums are expected to go up next year. On top of that, the insurance coverage is too weak for it to do any good - the difference between covering 80% of a $1 million hospital stay and none of it is financially identical for me - I don't have $200,000 lying around, much less $1 million, so we'd have to file for bankruptcy either way - and even if the hospital was willing to let me pay it off for 30 years, why would I want to if I can make it "go away" or get reduced substantially in bankruptcy court? Since doctors here are increasingly comfortable accepting cash payments, I don't even get the purchasing power available from having insurance - it's about the same anyway.

So, to recap, my options are to pay $250 a month (and rising) to pay for an insurance package that won't cover what I need covered anyway, or just pay the IRS and put the difference in savings and loan repayment (I have student loans, but nothing headline-worthy).

If I'm missing something, feel free to fill me in - I'm open to suggestion.