Economics and Vaccination

It is important not to stretch the many uses to which knowledge of economics at any level is useful for policy design. However, as I read this NYT article by Sarah Klein and Phyllis Greenberger, it just occurred to me that economics is more useful and is surely not just about money and aggregates such as the Gross Domestic Product. In their argument, they posit the results of studies stating that there are reasons of biology which makes women and men to require different doses of vaccines in order to achieve the required effect. Because the studies that they cite show that women's bodies are more efficient at generating a protective response from vaccines as compared to men, then this factor should be employed in the analysis of demand for vaccines.

They authors of the article argue eloquently as people with an understanding of human biology and health research but they do make a subtle but interesting economic argument based on optimum use of resources. I see two clear arguments that a student of economics would be impressed by. First is that in light of the fear that the flu vaccine for the H1N1 virus may not be available in quantities to cover everyone who would be most vulnerable, the consideration of the differences in biology are essential in ensuring that the greatest effects emerge from use of a given quantity of vaccine. The second argument is that it may be useful for public health professionals to consider whether the same proportions of men and women should be receiving the vaccines. So given the loud protests from some people who are reluctant to take vaccination, it does matters whether it is a man or woman who opts not to be vaccinated.

McDonald's Pulling Out of Iceland

I have recently had an intense interest in learning to design and test small algorithms that act as predictors of certain events or phenomena. The reason for this is to attempt to see whether through modest number crunching, these models would predict sports, political or business outcomes with any degree of accuracy. Taking forward those assumption, I would have considered that the income levels of a country, the degree of urbanization and locations north of the equator and the structural composition of the GDP would be a crude but passable predictor of the existence of a McDonald's restaurant in any country today. And while trying to be clever, I would not consider the predisposition of a nation's citizens towards the consumption of beef in that model because as I posted here a while ago, there are several McDonald's restaurants in Indian cities where beef is neither easily available nor widely consumed.

I am most surprised by this story in the Guardian that the McDonald's restaurants in Iceland will be closing down in a few weeks in spite of the fact that the country meets most of the criteria that I have enumerated above. The stated reason only makes sense to me by hindsight. It's become far too costly to Icelandic consumers to buy burgers when the Icelandic Kronor has lost value in relation to the Euro. These consumers therefore feel that difference in the cost of their burgers while the franchise loses opportunity for profits.

So There's No Shortage of Engineers in the US

For quite some time now, the unquestioned view has been that the United States does not produce sufficient engineers to match the needs of its private sector. As a result, the reasoning goes, private sector in the US is losing the ability to compete favorably with firms based outside that country. at the same time, the freeze on working visas for professionals from south Asia and other parts of the world due to security concerns has been mentioned as an aggravating factor.

Much as it is with most other policy questions, a study with funding from the Alfred P. Sloan Foundation suggests that this contention is popular but largely untrue. As it is summarized in this here, the US does not suffer from an acute shortage in engineers. Instead, there are insufficient incentives within that country for its most qualified minds to go into science, technology and Mathematics (STEM) industry. Most of the best mathematicians are going to work in business consultancy and in the financial services industry.

My perusal of the report shows that STEM qualified graduates are being recruited into jobs that are not categorized as STEM. stated differently, the STEM industry is losing the competition to keep this pool of talent. So just because people are not working in the STEM does not mean that there are no qualified people, it is just that they have far more options and they are taking them. In a manner of speaking, STEM occupations cannot compete for the existing talent. That may still suggest that there is insufficient talent to serve all the purposes for which STEM graduates are in demand.

Finally, I have to read Paul Romer's paper once more to understand what this new information means. Paul Romer's contention then was that the government's technology policy appeared to be subsidizing demand for scientists by the private sector without questioning to what extent that was the most optimal approach. What Sloan study puts to rest is the assertion that US students are not sufficiently motivated to study science and mathematics. So this is one study that Thomas Friedman should review carefully before the 3.0 version of his best-selling book.

China's Ingenious Local Bosses

As a curious watcher of the development experiment going on in China, I have found the ingenuity of its public sector officials quite illuminating. I stated this here on the tendency to introduce rules and regulations without much forethought or careful design. The thought that came to my mind after reading this story in the NYT relates the immense power that local bureaucrats wield in that large country. As the story states, most of these rules are arbitrarily issued by local officials who bear substantial local power and often with very little oversight and external accountability. It is therefore not surprising that the a local official in Huangping has instructed pupils to salute all passing cars while on their way to school.

Notwithstanding the fact that it is possible to ensure traffic safety in other less intrusive ways, the officials who introduced this rule are defending it as a mechanism for instilling good etiquette and for road safety of the school children. I just wonder whether road signs, some speed bumps and training on road safety for kids is insufficient. As various instances of strange regulations show, this state of affairs merely manifest the extreme levels of discretionary powers that local party officials wield. It does not occur to them to consider equally effective and less risible ways for managing public affairs.

This state of affairs is largely consistent with claims stated in a book titled, "Will the Boat Sink the Water?", which I read a couple of months ago. Its metaphorical title aside, its authors have crafted a series of stories illustrating the level of exploitation and harassment of China's peasants in one of its provinces. In all, it tells the state of affairs that many people fail to see when they merely visit Beijing and the main industrial cities. And the poignant question in my mind is that despite the unprecedented successes that China has made, it shows that very tight and accountable authority undermines the development process. Such wide and unaccountable discretion leads to regulatory overreach and silly rules that school kids like to make fun of.

Measuring Absence in Ireland's Civil Service

One can guess that the revelation by the study discussed in this piece in the Irish Times would please the supporters of small government. The argument being that clerical officers in Ireland take an average of 16 days sick leave per year and that is evidence of lower efficiency and a slack attitude to work. Reading further, it is clear that there are variations in the total days taken up for leave. The one factor that I find worthy of examining further is the finding that up to 42% of all absences are not recommended by physicians and that most of the leave days are taken up by clerks in the Irish public service. In addition, the management would be concerned when up to 59% of all employees called in sick in a given year. In honesty, I am not sure what the right proportion should be because that number is probably important when dealing with human resources as the main cost factor.

Rightly, the report recommends that the recording of the absence is important in addition to other factors such as the grades of the employees. In this way then it will be possible to determine whether the rates of absence are too high or not. Still, I am concerned that with an economy that has been quite robust, the fact that the absence rate has moved from 3.3% towards 40% requires a proper answer. Only then would it be possible to make comparisons and determine why the clerical sections are more prone to illness or whether this reflects poor supervision.

Isaac Newton's Chair has New Occupant

I consider A Brief History of Time the one book that many bought, few read to completion and even fewer understood. In spite of all this, it is still a best selling book and one that made many people mildly aware of what black holes are. It was also a fascinating fact that the author held the chair that was occupied by Isaac Newton. His scientific accomplishments aside, Stephen Hawking's life is one to marvel at primarily because his life and the manner in which he has overcome his disability is itself worthy of proper study.

And now that prof Hawking has retired from the Lucasian Professorship of Mathematics at University of Cambridge, he is succeeded by Prof Michael Green. That the popular publications attempting to make an understanding of particle physics understandable will continue is probably not in doubt. I hope that professor Green will in time try to publish something that takes that tradition forward. My hope is based on my sensible conjecture that it is essential to produce publications that bridge the vast and growing gap between scientific thinkers and the interested laity.

Ambani Brothers Dispute Not For Courts

An article in the Times newspaper here covers the formal commencement of hearings in the legal battle between two brothers representing the most affluent of India's business families. In spite of this being described as a business dispute about the agreed price for sale of energy by one side of the firm to the other, I am skeptical that this is really a matter for the courts. The series of disputes between them that commenced after their father's demise suggests to me that this is more than a commercial matter.

Granted that there is a commercial interest for each of the brothers in the outcome of the case, to my mind, it is clear that this is a family feud related to inheritance that is being resolved in the courts. Notwithstanding the claim in the story that Mukesh and Anil Amabani are together managers of corporations that account for 5% of the Gross Domestic Product for India, I suspect that the feud between them cannot be resolved through the courts. Indeed, the proper arbiter here may still be their mother as she was the one who engineered the initial division of the property inherited from their father. Evidence that this is not entirely a commercial dispute would come in a subsequent court battle irrespective of the outcome of the present one. As a consequence therefore, the real arbiter for 5% of India's GDP is Kokilaben and she requires the wisdom of Solomon here.

Book Publishers Have Lost This Fight

In the arena of business, very few things are certain but I have been making written bets on this weblog about the arrival of Kindle and the possibility that it will change not only the delivery of books but also the economics of publishing. It is apparent to me that the arrival of the Internet led to successful distributors like Amazon and Barnes and Noble but these alone did not shake the economics of the book industry by a great deal. As it is, the same stores had to deal with the publishers and were merely trying to develop retail outlets with a wide number of titles.

That is why, the books publishing industry has been behind the curve even as the arrival of digital formats has required some degree of revision. They have failed to note that just because they have a trusted model that ensures their profitability off hard covered books does not mean that the market will continue to respect that. I argued here that it is particularly ill-advised that in spite of the clear difference in costs, they have insisted on selling digital copies at the same cost as the paper copies. Whatever the reasons given, they forgot that in the long term, the prices must draw closer towards the marginal costs.

Marion Maneker presents the best analysis I have seen following the recent price war on this year's best sellers between Amazon, Target and Walmart. In my view, a price war may not be ideal for the corporations but it is ideal for students of economics and especially for the book readers who purchase those titles. The article is incisive because it states that the economics of books publishing will change especially in the manner in which the pricing and royalties are paid. In my view, the sliding scale approach is more apt because it reduces the risk of failure for the publisher and rewards the authors in accordance with the real sales of the text. As Marion Manker argues, the publishers are more inured to the existing model and less inclined to reducing their profits per copy of the titles.

In conclusion, the publishing industry is already incrementally losing this battle and it is best to reconsider the model now than have to be supplanted completely by either Walmart, Amazon or Target. The longstanding model that worked for hard cover and which allowed a title that is published at US3 to sell for 8 times the amount will most probably survive for a large number of books. My bet is that it surely cannot be transplanted in whole as a pricing model for e-books.

3D Movie Glasses: Anthropologists to the Rescue

Business advise today is pretty sophisticated and is largely a spreadsheet dominated trade. However, one need not read many articles and analyses documenting the serious missteps that corporations have made while taking steps from business advisory firms and management consultants to wonder how some things get overlooked. This occurred to me as I read this piece describing how the 3D movie theatres and accompanying equipment is totally unsuited for children and younger audiences. This is unbelievable to me because to start with animated movies are particularly suited for 3D viewing hence are particularly dependent on an audience of children.

Steve Chamberlain of the Guardian presents his experience as a frustrated parent who realized that viewing glasses do not fit his children in spite of having spent a premium to provide the children with a fantastic viewing experience. This just leads me to ask whether the corporations developing 3D movies theatres and developing the content ever heard of anthropologists. It is such serious omissions that give business advisers and marketing people a deservedly bad name. I hope they lose sufficient business to recall that children's heads are of different circumferences. It looks like some of these guys have never heard of deviations from the mean.

How do Pacesetters Affect the Outcome of Races?

As a person who watches sports events and tries to put in some analysis about what it takes to win one event or another, I am still unable to understand fully how record breaking performances benefit from pace setters or not. For instance, Sammy Wanjiru is without doubt a phenomenon in the marathon. I first watched him run during last year's Olympics games in Beijing and was impressed with his control of the race and the calculation towards the ends of that race. My thinking then as he casually jogged into the stadium was that this was definitely a unique runner among elite athletes in an extremely difficult and painful event.

Apart from that performance, the same athlete handily won the Chicago Marathon a couple of days ago. Liz Robbins of the NYT reports on the race and mentions the progress in that race. The fascinating thing in my view is the versatility of the athlete here because the running conditions in Beijing last year where the temperatures were very high. Come Chicago a year later and in vastly different conditions, he still won impressively.

The lingering question in my mind though is that the races are also different because unlike the elite marathon events, the Olympics event does not allow for pace setters. I wonder what effect, if any, the pace setters really have on the outcome of a race and whether there may be a better device for pacing an athlete towards breaking the record without involving other runners. In my view, the use of pace setters involves the introduction of assistance during the race. Not that it would matter for Sammy Wanjiru who lowered the record in Beijing by three minutes despite the absence of a designated pace setter. And noting that pace setting is not possible for the sprints, are there conditions in which pace setters are most siutable?

Are Maestros Like Bankers?

Any reader of this obscure blog will most probably have read the Freakonomics weblog too and knows that one of the principal authors there argues that high-priced wine is largely indistinguishable from moderate or even cheaper ones. My conclusion from this demonstrated fact is that expensive wine is largely a matter of choice and communication of the ability to pay. So while I am not a connoisseur of wines in any way, I am in possession of a modest though diverse collection of classical music CDs and therefore find her questions relevant.

I have it in mind to one day attend a live opera performance or one of the major philharmonic orchestral performances. Reading this piece by Philippa Ibbotson of the Guardian just led to me to consider the economics of orchestra music. Judging from the story, there are two really important things to note. The first is that the most acclaimed orchestras pay their conductors extremely well. The second is that there's a substantial gap between the instrument players and the maestros. This leads Philippa to question whether these conductors add sufficient value to the performance to justify their pay. Indeed, she seems to conclude that there would probably be very little difference in performances if the conductors were not physically present.

I am new to the economics underlying orchestras but I think that what the most acclaimed conductors earn is explained by scarcity. Because there are much more regular players than there are conductors, the pay differential would be expected though I am unsure that it ought to be that large. Secondly, conductors like Lorin Maazel are themselves among the best composers and players and so bring to an orchestra a rare knowledge and ability that enables them to recruit and perhaps shape other musicians. The combination of the two points above would lead to recognition of the name and this has the added benefit of attracting music lovers to a particular orchestra.

Clearly labouring to explain the reason that orchestra conductors earn sums equivalent to top bankers, I still am not sure that these are sufficient to explain their income levels. It is not obvious to me that if we took separate recordings of orchestras playing with conductors and another without, the music lovers would notice that difference. The maestros themselves would then be asked in a blind test to judge the quality performance and guess which had a conductor. The results of that test would then allow me to state with confidence whether Philippa is right to ask my favourite conductor to take a pay cut.

Digital Books Piracy

An article in the NYT notes the fact that digital copies of books are gaining appreciable sales. Naturally, the copyright holders are worried about what this means for the possibility of piracy. The article by Randal Stross asks whether digitized copies of popular books will be Napsterized. By this the article seems to assume that the ability to copy is already a given and that what is to be questioned is whether a network for their distribution of digitized texts will be established.

Reading from the piece, it is clear that there is a limited ability at this time to receive the copies of the most popular material from a variety of sites. Still, it is important that most of these sites are peer exchange or file storage sites that do not overtly mean to ensure the unauthorized exchange of digitized books. As a representative of Rapidshare states, everything is just a file and implies that the exchange could take place.

And therein lies the answer for e-book sellers because to the extent that these products are reduced to digital files, they will almost certainly be copied and transferred irrespective of the wishes of the producers. To my mind then, the publishers are in a situation where they must study this market carefully because a law and order approach will not work. It is also clear that the pricing mechanism must change significantly to reflect the fact that digital copies are cheaper to produce. for most publishers, this will affect the profitability per copy but perhaps for the most dedicated readers, there may be higher purchases.

As argued in this blog here and here, the cumulative lessons from Napster should be studied keenly. it is also essential not to overstate the effects and degree of piracy. If indeed book purchases are shrinking, then it is essential to determine how any improvements in the quality of products for readers compares to more sophisticated digital rights management technology and law enforcement.

Russia's Population Problem

One thing that makes Russia comparable to Japan is that they both face an impending demographic crisis. True, the reduction in Russia's population is already evident while Japan's is at most a decade away. So it is more exact to state that Russia's is real and present, while Japan's population shrinkage is yet based on an extrapolation of present growth rates.

It is therefore interesting that while on one side of the world, there's the concern for high growth rates, these two countries face this unique kind of demographic pressure that man has not been experienced at this scale since the agrarian revolution a couple of centuries ago.

This article reported by the associated press in the NYT makes the profound claim that Russia's population has shrunk by 6.6 million souls since the year 1992. While the options available include immigration and pro-natalist policies, the relative homogeneity of Russia makes it unlikely that the latter will be considered a part of the solution. To my mind, Russia's leaders are faced with a difficult problem that would affect future growth but enlightened immigration should not be certainly off the table.

On the other hand, the high mortality rates of Russians is attributed to the tendency to consume higher amount of alcohol and there is a fix here too. A tax based on the alcoholic volume of beverages should assist in reducing early mortality and deaths. eve for a shrinking population, the attempts to ban alcohol consumption is not sensible. In a sense, there's no silver bullet solution but the reconsideration of the immigration policy should lead.