November 25, 2015

Food labelling laws and craft brewing … not a match made in heaven

Filed under: Bureaucracy, Business, Health, USA — Tags: , — Nicholas @ 03:00

Eric Boehm on how well-intentioned laws can still have significant and unforeseen negative side-effects:

Brewers are facing the prospect of spending potentially thousands to determine calorie counts for every variety of beer produced. Unless they spend the money to provide the information, breweries may never get their products into chain restaurants, like Buffalo Wild Wings and Applebee’s.

As is often the case with regulations, smaller breweries stand to lose the most.

“A regional craft brewer or a major brewery can spread the cost over a much larger volume of sales and it’s not so unreasonable for them,” said Paul Gatza, a former brewer who now heads the Boulder, Colorado, based Brewers’ Association, an industry group.

“Smaller guys that are just trying to sell a keg or two here or there, they have a decision to make on whether it is worth the additional cost to try to get their beers into chain restaurants,” Gatza told Watchdog.

The Food and Drug Administration is in the process of finalizing menu labeling rules that were part of the Affordable Care Act. Intended to make Americans more aware of their dietary choices, the rules are subject to controversy on several fronts, and the FDA announced in September that implementation of the new rules would be pushed back one full year, until December 2016, as the feds try to work out the kinks.

My favourite local brewery isn’t even a micro-brewery (they’re somewhere between a pico- and a nano-brewery): every week when I drop in, there are three or four new batches ready to sample (and it’s rare that there’s anything left of last week’s offerings). If they had to spend hundreds or even thousands of dollars to comply with detailed labelling requirements for every small batch they brewed, they’d never stand a chance of making a profit. I understand the urge to ensure that people have a chance to avoid ingredients that might make them ill, but this is the sort of regulation that tilts very heavily toward the big companies that have regional or national markets. A thousand dollars per product isn’t even a drop in the bucket to them, while to a small local business, that might be more than their profit margin when you require it be done for everything they produce.

November 20, 2015

We’re in “a terrible, horrible, no good, very bad news cycle for Obamacare”

Filed under: Business, Health, USA — Tags: , — Nicholas @ 04:00

Megan McArdle on the plight of some health insurance companies as they try to offer healthcare policies and still make some sort of profit in the current American market:

… UnitedHealth abruptly said it expected to lose hundreds of millions of dollars on its exchange policies in 2015 and 2016, and would be assessing whether to pull out of the market altogether in the first half of next year.

This was part of a terrible, horrible, no good, very bad news cycle for Obamacare; as ProPublica journalist Charles Ornstein said on Twitter, “Not since 2013 have I seen such a disastrous stream of bad news headlines for Obamacare in one 24-hour stretch.” Stories included not just UnitedHealth’s dire warnings, but also updates in the ongoing saga of higher premiums, higher deductibles and smaller provider networks that have been coming out since open enrollment began.

It now looks pretty clear that insurers are having a very bad experience in these markets. The sizeable premium increases would have been even higher if insurers had not stepped up the deductibles and clamped down on provider networks. The future of Obamacare now looks like more money for less generous coverage than its architects had hoped in the first few years.

But of course, that doesn’t mean insurers need to leave the market. Insurance is priced based on expectations; if you expect to pay out more, you just raise the price. After all, people are required to buy the stuff, on pain of a hefty penalty. How hard can it be to make money in this market?

What UnitedHealth’s action suggests is that the company is not sure it can make money in this market at any price. Executives seem to be worried about our old enemy, the adverse selection death spiral, where prices go up and healthier customers drop out, which pushes insurers’ costs and customers’ prices up further, until all you’ve got is a handful of very sick people and a huge number of very expensive claims.

Some commentators, including me, worried a lot about death spirals in the early days of the disastrous exchange rollout. Some commentators, also including me, have eased off on those fears in recent years. Why the change? Because when the law was passed, I was mostly focused on whether the mandate penalty would be enough to encourage people to buy insurance. Over time, as the exchanges evolved, the subsidies, and the open enrollment limitations, started to look a lot more important than the penalty.


An earnings call like today’s can also be a bargaining tactic. Health insurers are engaged in a sort of perpetual negotiation with regulators over how much they’ll be allowed to charge, what sort of help they’ll get from the government if they lose money, and a thousand other things. Signaling that you’re willing to pull out of the market if you don’t get a better deal is a great way to improve your bargaining position with legislators and regulatory agencies.

That said, strategic positioning is obviously far from the whole story, or even the majority of it. UnitedHealth really is losing money on these policies right now. It really is seeing something that looks dangerously like adverse selection. And frankly, there’s not that much the company can get out of regulators at this point, because the Congressional Republicans have cut off the flow of funds. So while Obamacare certainly isn’t dead, or certain to spiral to its death, it’s got some very worrying symptoms.

November 19, 2015

Is a possible cure for old age now in sight?

Filed under: Health, Science — Tags: , , , — Nicholas @ 05:00

Matt Ridley on recent developments in the search for ways to ameliorate the effects of aging:

Squeezed between falling birth rates and better healthcare, the world population is getting rapidly older. Learning how to deal with that is one of the great challenges of this century. The World Health Organisation has just produced a report on the implications of an ageing population, which — inadvertently — reveals a dismal fatalism we share about the illnesses of old age: that they will always be inevitable.

This could soon be wrong. A new book, The Telomerase Revolution, published in America this week by the doctor and medical researcher Michael Fossel, argues that we now understand enough about the fundamental cause of ageing to be confident that we will eventually be able to reverse it. This would mean curing diseases such as Alzheimer’s, heart disease and osteoporosis, rather than coping with them or treating their symptoms.

Let me show you what I mean about fatalism. The WHO report on ageing and health, for all its talk of the need for “profound changes” to health care for the elderly, actually urges us to stop trying to cure the afflictions of old age and learn to live with them: “The societal response to population ageing will require a transformation of health systems that moves away from disease-based curative models and towards the provision of older-person-centred and integrated care.”

Yet it also subscribes to the somewhat magical hope that illnesses of old age can be “prevented or delayed by engaging in healthy behaviours” and that “physical activity and good nutrition can have powerful benefits for health and wellbeing.” This is largely wishful thinking. There is no evidence that, say, Alzheimer’s can be prevented by a certain diet or activity. A lack of activity and poor nutrition can worsen health at any age, but the underlying chronic diseases of old age are caused by age itself.

When I asked Dr Fossel what he thought of the WHO report, he replied: “In 1950 we could have talked (and did) about ‘active polio’ in the sense of keeping polio victims active rather than giving up, but the very phrase itself implies that one has already given up. I would prefer that we cure the fundamental problem. Why talk about ‘active ageing’, ‘successful ageing’, and ‘healthy ageing’ when we could talk about not ageing?”

November 8, 2015

Who are the drunkest NFL fans? Come on down, Buffalo Bills fans!

Filed under: Football, Health — Tags: , , — Nicholas @ 02:00

A breathalyzer company conducted a study to determine who are the drunkest fanbases in the NFL, and Buffalo turned in the highest overall score:

Click to see the full-size map at CBSSports.com

Click to see the full-size map at CBSSports.com

Apparently, losing does drive fans to drinking, at least according to a recent study done by BACtrack.

The Breathalyzer company spent the past six weeks anonymously collecting BAC samples and what they found is that Bills fans really, really, really like to drink.

According to the study, Bills fans had an average blood-alcohol level of .076 through the first seven weeks of the NFL season, which was the highest among all NFL fan bases.

If you’re wondering how BACtrack was able to hunt down the BAC level of random fans, they didn’t. The samples came to them.

The company used anonymous samples sent in by fans who were using the BACTrack app on their phone, an app that works as a Breathalyzer.

The company then collected data on Sundays between Sept. 13 and Oct. 25 to try and accurately gauge how much fans were drinking. Only samples sent in between 6 a.m. on Sunday and 5:59 a.m. on Monday counted toward the study.

The data was only collected from geographic locations that were hosting NFL games during the first seven weeks of the season.

There were probably plenty of flaws in the study, but based on what I’ve seen from Bills fans, it’s not surprising they’re No. 1.

I find it amusing that the NFC North’s drunk fan index exactly matches the teams’ relative standings right now, with Green Bay fans the most sober (at 0.042), followed by Vikings fans (0.046), then Bears fans (0.054), and finally Detroit fans (who definitely have reason to be drinking more this season) at 0.069.

November 5, 2015

The high-church organic movement is feeling under threat

Filed under: Business, Environment, Health, Media, Politics, USA — Tags: , , , , — Nicholas @ 02:00

Henry I. Miller & Julie Kelly on the less-than-certain future of the organic farming community:

The organic-products industry, which has been on a tear for the past decade, is running scared. Challenged by progress in modern genetic engineering and state-of-the-art pesticides — which are denied to organic farmers — the organic movement is ratcheting up its rhetoric and bolstering its anti-innovation agenda while trying to expand a consumer base that shows signs of hitting the wall.

Genetic-engineering-labeling referendums funded by the organic industry failed last year in Colorado and Oregon, following similar defeats in California and Washington. Even worse for the industry, a recent Supreme Court decision appears to proscribe on First Amendment grounds the kind of labeling they want. A June 2015 Supreme Court decision has cleared a judicial path to challenge the constitutionality of special labeling — “compelled commercial speech” — to identify foods that contain genetically engineered (sometimes called “genetically modified”) ingredients. The essence of the decision is the expansion of the range of regulations subject to “strict scrutiny,” the most rigorous standard of review for constitutionality, to include special labeling laws.


Organic agriculture has become a kind of Dr. Frankenstein’s monster, a far cry from what was intended: “Let me be clear about one thing, the organic label is a marketing tool,” said then secretary of agriculture Dan Glickman when organic certification was being considered. “It is not a statement about food safety. Nor is ‘organic’ a value judgment about nutrition or quality.” That quote from Secretary Glickman should have to be displayed prominently in every establishment that sells organic products.

The backstory here is that in spite of its “good vibes,” organic farming is an affront to the environment — hugely wasteful of arable land and water because of its low yields. Plant pathologist Dr. Steve Savage recently analyzed the data from USDA’s 2014 Organic Survey, which reports various measures of productivity from most of the certified-organic farms in the nation, and compared them to those at conventional farms, crop by crop, state by state. His findings are extraordinary. Of the 68 crops surveyed, there was a “yield gap” — poorer performance of organic farms — in 59. And many of those gaps, or shortfalls, were impressive: strawberries, 61 percent less than conventional; fresh tomatoes, 61 percent less; tangerines, 58 percent less; carrots, 49 percent less; cotton, 45 percent less; rice, 39 percent less; peanuts, 37 percent less.

October 28, 2015

The WHO’s lack of clarity leads to sensationalist newspaper headlines (again)

Filed under: Health, Media, Science — Tags: , , , , , — Nicholas @ 05:00

The World Health Organization appears to exist primarily to give newspaper editors the excuse to run senational headlines about the risk of cancer. This is not a repeat story from earlier years. Oh, wait. Yes it is. Here’s The Atlantic‘s Ed Yong to de-sensationalize the recent scary headlines:

The International Agency of Research into Cancer (IARC), an arm of the World Health Organization, is notable for two things. First, they’re meant to carefully assess whether things cause cancer, from pesticides to sunlight, and to provide the definitive word on those possible risks.

Second, they are terrible at communicating their findings.


Group 1 is billed as “carcinogenic to humans,” which means that we can be fairly sure that the things here have the potential to cause cancer. But the stark language, with no mention of risks or odds or any remotely conditional, invites people to assume that if they specifically partake of, say, smoking or processed meat, they will definitely get cancer.

Similarly, when Group 2A is described as “probably carcinogenic to humans,” it roughly translates to “there’s some evidence that these things could cause cancer, but we can’t be sure.” Again, the word “probably” conjures up the specter of individual risk, but the classification isn’t about individuals at all.

Group 2B, “possibly carcinogenic to humans,” may be the most confusing one of all. What does “possibly” even mean? Proving a negative is incredibly difficult, which is why Group 4 — “probably not carcinogenic to humans” — contains just one substance of the hundreds that IARC has assessed.

So, in practice, 2B becomes a giant dumping ground for all the risk factors that IARC has considered, and could neither confirm nor fully discount as carcinogens. Which is to say: most things. It’s a bloated category, essentially one big epidemiological shruggie. But try telling someone unfamiliar with this that, say, power lines are “possibly carcinogenic” and see what they take away from that.

Worse still, the practice of lumping risk factors into categories without accompanying description — or, preferably, visualization — of their respective risks practically invites people to view them as like-for-like. And that inevitably led to misleading headlines like this one in the Guardian: “Processed meats rank alongside smoking as cancer causes – WHO.”

Reducing the costs of regulation

Filed under: Bureaucracy, Government, Health, USA — Tags: , , — Nicholas @ 04:00

Henry I. Miller discusses a worthwhile regulatory change that would increase the availability of medicines in the US marketplace without reducing public safety:

The FDA would be a good place to start. Bringing a new drug to market now requires 10-15 years, and costs have skyrocketed to an average of more than $2.5 billion (including both out-of-pocket and opportunity costs) – largely because FDA requirements have increased the length and number of clinical trials per marketing application, and their complexity.

The detrimental effects of FDA delays in approving certain new drugs already available in other industrialized countries are well-documented and deserve as much attention as drugs’ high costs. An example is the three-year delay in the approval of misoprostol, a drug for the treatment of gastric bleeding, which is estimated to have cost between 8,000 and 15,000 lives per year.


A practical workaround to overcome regulators’ risk-aversion and capriciousness would be “reciprocity” of approvals with certain foreign “A-list” governments, so that an approval in one country would be reciprocated automatically by the others. That would make more drugs available sooner in all of the participating countries, increasing competition and putting downward pressure on prices.

Such an innovation would also help to alleviate another critical problem: The United States is experiencing shortages of certain critical pharmaceuticals, many of which have been essential in medical practice for decades. The majority are generic injectable medications commonly used in hospitals, including analgesics, cancer drugs, anesthetics, antipsychotics for psychiatric emergencies, and electrolytes needed for patients on IV supplementation. Hospitals are scrambling to assure adequate supplies of drugs that are in short supply, or to find substitutes for them. Reciprocal approvals would make numerous alternatives available.

As referenced yesterday, the FDA regulations also create temporary monopoly situations where only one company has the permit from the regulator to produce this or that medicine, so there’s nothing standing in the way of massive price increases if there are no close substitutes to provide price competition.

October 27, 2015

Update on that $750 pill and the regulatory system that made it inevitable

Filed under: Bureaucracy, Business, Health — Tags: , , — Nicholas @ 05:00

Tim Worstall follows up on all-world scumbag Martin Shkreli and his enabled-by-the-regulator insane price increases for a decades-old drug:

We have an interesting and important economic lesson for public policy here: markets, they work. More accurately, we don’t have to worry about someone attempting to exploit their possession of a contestable monopoly. We only have to worry, possibly take action, if someone has an uncontestable monopoly. And given that there’s very few of them that we don’t create ourselves for other reasons, this means that monopoly is just one of those things we can keep a wary eye upon but not worry over excessively.

Our example comes from Martin Shkreli. The basic background is that this entrepreneur thinks he’s found a pretty cool business model. There’s a number of pharmaceuticals out there that are well out of patent but still have small and useful markets. FDA regulations (no, we’ll not go into the details of how or why this happens) mean that it’s not as easy as one might think to produce generic versions of these out of patent drugs. So, as a business plan, buy up the rights to the permit-ed (as in, with a permit, not just those allowed, as in permitted) generics and as a result of the difficulty someone else will have in getting into the same market, some pricing power is available. You can then raise the price and start to bank your considerable profits.

This caused outrage when Shkreli announced that this was exactly what he was doing:

    Turing Pharmaceuticals, the company that last month raised the price of the decades-old drug Daraprim from $13.50 a pill to $750…

A 5,000% price rise certainly indicates that Turing thinks it has pricing power and thus that it has considerable monopoly power.


Markets, they work. As Mr. Shkreli is just finding out:

    Turing Pharmaceuticals, the company that last month raised the price of the decades-old drug Daraprim from $13.50 a pill to $750, now has a competitor.

    Imprimis Pharmaceuticals, Inc., a specialty pharmaceutical company based in San Diego, announced today that it has made an alternative to Daraprim that costs about a buck a pill — or $99 for a 100-pill supply.

This is not the same drug: it’s a slight variation, a close substitute. But it’s close enough that Turing isn’t going to be making much money from what it thought was monopoly pricing power. Because it was a contestable monopoly, not an absolute one.

October 26, 2015

Consumers of porn have more feminist attitudes

Filed under: Cancon, Health, Media — Tags: , , , — Nicholas @ 02:00

We’ve all heard the claim that pornography desensitizes those who view it and dehumanizes women … except that doesn’t seem to be the case, if a recent study is accurate:

The study, published in The Journal of Sex Research, was conducted by researchers at the University of Western Ontario. “According to radical feminist theory, pornography serves to further the subordination of women by training its users, males and females alike, to view women as little more than sex objects over whom men should have complete control,” they wrote in the study abstract.

Yet after comparing people who watch porn with those who don’t, researchers found those who had watched an adult film at least once in the past year held more egalitarian ideas about women in positions of power and women working outside the home, along with more positive views toward abortion. The two groups did not differ significantly in attitudes about “traditional” families or self-identification as feminist.

“Taken together, the results of this study fail to support the view that pornography is an efficient deliverer of ‘women-hating ideology,'” study authors concluded. “While unexpected from the perspective of radical feminist theory, these results are consistent with a small number of empirical studies that have also reported positive associations between pornography use and egalitarian attitudes.”

Researchers relied on data collected between 1975 and 2010 for the General Social Survey, which asks Americans about a wide range of social issues and personal views (including gender equality and personal pornography consumption). For both men and women, viewing porn was associated with more positive attitudes toward women holding positions of power, less negative views of abortion, and less negative attitudes toward women in the workplace.

October 22, 2015

QotD: The historical triumph of public health

Filed under: Bureaucracy, Government, Health, History, Quotations — Tags: , — Nicholas @ 01:00

… the great public health achievements between roughly 1850 and 1960. Doctors and public health experts were given extraordinarily broad powers by the government, and they used them to eliminate the scourges that had made cities into pestholes from time immemorial. They built gleaming sewers and water treatment plants to wipe out virulent water-borne pathogens that used to regularly claim thousands of lives. Contact-tracing and quarantine of airborne and sexually transmitted diseases turned former plagues like smallpox and syphilis into tragic but sporadic outbreaks. Changes in building codes helped beat back mass killers like tuberculosis. Poison control cut down on both accidental and deliberate deaths. The Pure Food and Drug Act, and similar ordinances in other countries, reduced foodborne illness, and also, the casual acquisition of opiate or cocaine addictions through patent medicines. Malarial swamps were drained. Environmental toxins were identified and banned. Then they went and invented antibiotics and vaccines and vaccination laws, and suddenly surgery was as safe as a long-haul flight, TB was curable, and childhood illnesses that used to kill hundreds of people every year were a quaint footnote in your 10th-grade history textbook.

Having seen public experts work these miracles through the heavy hand of the state, people understandably concluded we could use miracles in other areas. They had a metaphor, so to speak. The metaphor wasn’t very good, as is often the case, but it took a while to find out that you couldn’t solve a problem in your steel supply chain with the same system that was so good at tracing cholera outbreaks to tainted pumps.


This is an overreaction to a terrible failure, for two reasons. First, big bureaucracies fail all the time, especially in the face of novel threats. A large institution is like a battleship: hard to sink, but also hard to turn. Public health experts of earlier eras made grave mistakes, like dumping London’s untreated sewage into the Thames; public health experts of the future will too. The more important question is whether they correct themselves, as it seems to me the CDC is now doing.

The second is that this is not your grandfather’s public health system. Public health experts were, in a way, too successful; they beat back our infectious disease load to the point where most of us have never had anything more serious than Human papillomavirus or a bad case of the flu. This left them without that much to do. So they reinvented themselves as the overseers of everything that might make us unhealthy, from French Fries to work stress.

As with the steel mills, these problems are not necessarily amenable to the organizational tools used to tackle tuberculosis. The more the public and private health system are focused on these problems, the less optimized they will be for fighting the war against infectious disease. It is less surprising to find that they didn’t know how to respond to a novel infectious disease than it would have been to discover that they botched a new campaign against texting and driving.

Megan McArdle, “Will Ebola Be Good for the CDC?”, Bloomberg View, 2014-10-20.

October 16, 2015

QotD: This explains so much

Filed under: Health, Humour, Quotations, Science — Tags: , — Nicholas @ 01:00

The entire brain weighs three pounds (1.4 kg) and so is only a small percentage of an adult’s total body weight, typically 2%. But it consumes 20% of all the energy the body uses. Why? The perhaps oversimplified answer is that time is energy.

Neural communication is very rapid — it has to be — reaching speeds of over 300 miles per hour and with neurons communicating with one another hundreds of times per second. The voltage output of a single resting neuron is 70 millivolts, about the same as the line output of an iPod. If you could hook up a neuron to a pair of earbuds, you could actually hear its rhythmic output as a series of clicks.


Neurochemicals that control communication between neurons are manufactured in the brain itself. These include some relatively well-known ones such as serotonin, dopamine, oxytocin, and epinephrine, as well as acetylcholine, GABA, glutamate, and endocannabinoids. Chemicals are released in very specific locations and they act on specific synapses to change the flow of information in the brain. Manufacturing these chemicals, and dispersing them to regulate and modulate brain activity, requires energy — neurons are living cells with a metabolism, and they get that energy from glucose. No other tissue in the body relies solely on glucose for energy except the testes. (This is why men occasionally experience a battle for resources between their brains and their glands.)

Daniel J. Levitin, The Organized Mind, 2014.

October 15, 2015

Carbohydrates and fatty foods

Filed under: Health, Science, USA — Tags: , — Nicholas @ 04:00

Amy Alkon glories in her current dietary choices:

I spend my whole day eating fat — bacon fat, kale cooked in bacon fat, an omelet with cheese and pate, coffee made with half ‘n’ half; and steak, sausage, cheese, and green beans swimming in butter. Oh, also, a tablespoon of coconut oil warmed in half ‘n’ half a few times a day, whenever my brain feels like it’s on fire from intense activity.

I have never felt better.

And I’m never hungry the way I would get when I ate low-fat/high-carb — a hunger that made me feel like I could stop and devour a road sign (and anyone unlucky enough to be standing next to it at the time).

On the subject of hunger’s effect on diet maintenance, Gary Taubes has an op-ed in The New York Times that describes a study, taking place toward the end of World War Ii, that placed men on a starvation diet:

    For 24 weeks, these men were semi-starved, fed not quite 1,600 calories a day of foods chosen to represent the fare of European famine areas: “whole-wheat bread, potatoes, cereals and considerable amounts of turnips and cabbage” with “token amounts” of meat and dairy.

    As diets go, it was what nutritionists today would consider a low-calorie, and very low-fat diet, with only 17 percent of calories coming from fat.

There were horrible physical effects — and psychological ones. Two men had breakdowns. And then, when they were allowed to eat normally, they consumed “prodigious” amounts of food…eating themselves into “post-starvation obesity,” in the researchers’ words.


    Questions like these about the relationship between calories, macronutrients and hunger have haunted nutrition and obesity research since the late 1940s. But rarely are they asked. We believe so implicitly in the rationale of eat less, move more, that we (at least those of us who are lean) will implicitly fault the obese for their failures to sustain a calorie-restricted regimen, without ever apparently asking ourselves whether we could sustain it either. I have a colleague who spent his research career studying hunger. Asking people to eat less, he says, is like asking them to breathe less. It sounds reasonable, so long as you don’t expect them to keep it up for long.

October 13, 2015

Britain’s National Health Service runs up a “deficit of almost £1 billion in just three months”

Filed under: Britain, Government, Health — Tags: , — Nicholas @ 04:00

In the Telegraph a report on the dire financial straits of Britain’s NHS:

NHS trusts in England have racked up a deficit approaching £1 billion in the first three months of the financial year – the worst financial position “in a generation,” regulators have said.

The figure is more than the £820 million overspend for the entire previous year.

Experts warned of a looming winter crisis.

They said the “staggering” figures would result in widespread cutbacks to services, with lengthening waiting times and increased rationing of care.

The statistics for April to June show an overall deficit of £930m across England’s 241 NHS hospital trusts, with three in four trusts in the red.

The statistics show NHS Foundation Trusts had a deficit of £445 million. Other NHS trusts ended the first quarter of the year £485 million in deficit.

The foundation trust sector is under “massive pressure” and can no longer afford to go on as it is, the financial regulator Monitor said.

Regulators said an “over-reliance” on agency nurses and doctors to plug shortages of staff was fuelling the growing debt, which is forecast to reach a record high.

October 8, 2015

“[P]harmaceutical companies … make out like bandits from the existence of the patent system”

Filed under: Bureaucracy, Business, Health, Law, USA — Tags: , , , — Nicholas @ 05:00

The current US patent system is set up to create and maintain — for a limited time — monopolies that can be exploited by pharmaceutical companies:

The Wall Street Journal has a puzzling piece complaining about how the pharmaceutical companies seem to make out like bandits from the existence of the patent system. What puzzles is that the entire point and purpose of the patent system, in an economic sense, is so that inventors of things can make out like bandits. The background problem is that of public goods, something I’ll explain in a moment. That problem leads us to thinking that a pure free market in things which are public goods isn’t going to work as well as something a little different. So, we design something a little different. And the point and purpose of our design is so that people who innovate can make vast mountains of cash out of having done so.

It’s then more than a bit odd to point out that our system enables people who innovate to make vast mountains of cash.


Which brings us to the subtlety of those pricing decisions. With drugs, pharmaceuticals, close enough the cost of manufacturing a dose is zero. All of the costs go in the original research, the clinical testing (the lion’s share) and getting it through the FDA. Profit is therefore determined, since marginal production costs are zero (they’re not, accurately, but close enough for this comparison), by gross revenue. And we want to maximise the incentive for people to innovate, that’s the very reason we’ve got this patent system in the first place, and thus we would rather like the pharma companies to be maximising revenue.

And thus, from this economic point of view, we should be quite happy with people raising their prices. Demand does fall as they do so, yes, but as long as gross revenue increases, the price rises more than compensating for the fall in unit demand, then we should be happy with the way the system is working. Gross revenue is being maximised, profits are being maximised, incentives to innovate are being maximised. That’s what we want our system to do after all.

Far from being worried about this price gouging we should be welcoming it. Because, obviously, someone making bajillions out of having innovated a drug to cure a disease increases the incentives for many other people to go and invest bajillions of their own to cure other diseases. Far from complaining about it we should be celebrating the system working.

October 6, 2015

Your daily recommended minimum intake of water

Filed under: Health, Science — Tags: , — Nicholas @ 02:00

I’m sure you’ve heard variations on the notion that we’re all effectively dehydrated and should drink more water … where “more” is defined as a minimum of 64 ounces of water. It’s pseudo-scientific bullshit, as you may have already decided for yourself:

If there is one health myth that will not die, it is this: You should drink eight glasses of water a day.

It’s just not true. There is no science behind it.

And yet every summer we are inundated with news media reports warning that dehydration is dangerous and also ubiquitous.

These reports work up a fear that otherwise healthy adults and children are walking around dehydrated, even that dehydration has reached epidemic proportions.

Let’s put these claims under scrutiny.

I was a co-author of a paper back in 2007 in the BMJ on medical myths. The first myth was that people should drink at least eight 8-ounce glasses of water a day. This paper got more media attention (even in The Times) than pretty much any other research I’ve ever done.

It made no difference. When, two years later, we published a book on medical myths that once again debunked the idea that we need eight glasses of water a day, I thought it would persuade people to stop worrying. I was wrong again.

Many people believe that the source of this myth was a 1945 Food and Nutrition Board recommendation that said people need about 2.5 liters of water a day. But they ignored the sentence that followed closely behind. It read, “Most of this quantity is contained in prepared foods.”

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