The FBI Did Its Job?

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This story disturbed me.

Abell added that they thought the man was “very suspicious,” so they called the local FBI office in West Palm Beach and reported the incident. But they didn’t have the man’s name, since no sale was made, and the only surveillance footage they had was grainy.

So the gun dealer did not give the FBI the name of the guy who a few weeks later became the Orlando shooter. To me, that does not excuse the FBI. If you are called by a gun dealer, there ought to be procedures in place to make the issue a priority. And there ought to have been a way to go back and look at everyone else in the area who had been reported in recent years.

This guy says that the FBI did its job.

I disagree. I admit that it probably is hard to prevent a lot of killings. But this is one incident that was eminently preventable. If the FBI does not think it needs to change, that is wrong.

There were not just dots to be connected here. There were gigantic arrows pointing to the shooter, and the FBI missed those.

My $.02

Michael Cannon Goes for a Colonoscopy

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He writes,

no one has collected the information I consider most important. The literature review underlying the USPSTF’s updated recommendations concludes “there is no accepted risk-assessment tool to help tailor colorectal screening” to patients with above-average risk; we still do not know the significance of small polyps; and, most stunning, “no [colorectal cancer] screening modality has been shown to reduce all-cause mortality.”

Because of my medical history (Crohn’s disease), a family friend who is probably the best gastroenterologist I know recommended that I get a colonoscopy screening every year! I have not done so, but I have gone for screening, which I probably would not have done at all if I had no history.

In order to prevent death, a colonoscopy must detect and remove polyps that will evolve into cancer that worsens rapidly enough to kill you before something else does. What we know is that a doctor can use colonoscopy to detect and remove polyps. The rest is much harder to pin down.

Most colonoscopies do not detect polyps, presumably because many people do not have them. These “clean” colonoscopies are a relief to patients, but they greatly increase the cost per life saved from routine colonoscopy screening. And if “all-cause mortality” is unaffected by the procedure, then the cost per life saved is infinite.

John Goodman on a new Health Reform Proposal

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Summarized here. Twelve points, including

Health Status Insurance: For the first time, people with pre-existing conditions will have real protection against discrimination and against the “race to the bottom,” reflected in narrow networks and high drug costs for the chronically ill. Risk adjustment between health plans (similar to Medicare Advantage) will insure each plan receives an actuarially fair premium when receiving an enrollee from another plan. (Plans will not benefit by seeking the healthy or avoiding the sick.) Plans are free to voluntarily agree to better risk adjustments, so there will eventually be free market risk adjustment. We expect plans to eventually specialize, with some plans becoming focused on cancer care, others on heart care, etc.

…Grandfathering. To minimize potential disruption, self-insured employer plans and labor union plans may elect to remain in the current tax system. Individuals with insurance obtained from an (ObamaCare) exchange may elect to remain in that system.

The latter is this proposal’s version of “if you like your plan, you can keep your plan.”

I happened to run into John last week, and he was very enthusiastic about the plan. I expressed my doubts about something like this getting anywhere with a Trump candidacy, and he said that he was actually optimistic. But when I pressed him, John admitted that “Trump is hard to get to see.”

We’re all normative sociologists now

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Commenting on a paper that looked at clusters of citations in economics research and found evidence of ideological tribalism, Tyler Cowen writes,

Berkeley and MIT have the saltiest taste, while Minnesota and Rochester are the freshest of the fresh. Chicago has a more neutral set of citation practices than many economists (not I) might think. Chicago cites saltwater school papers at a higher rate than the general average, nonetheless Chicago ends up strongly in the freshwater camp because it is cited so much by other freshwater schools, and not so much by the saltwater schools. A cynic might wonder if the Chicago economists are more open-minded than their critics, and I must confess that is consistent with my own anecdotal experience.

Robert Nozick once wrote of

Normative sociology, the study of what the causes of problems ought to be

In my new book, without using the term normative sociology, I give the example of different views of the cause of lower average wages for women. Using Nozick’s formulation, sociologists study gender bias and power, which they believe should cause the problem. Economists study human capital and lifestyle choice, which they believe should cause the problem.

In the book, I claim that economics is not a science. The usual narrative for scientific progress is that someone observes a phenomenon, comes up with an insight to try to explain it, turns that insight into a testable hypothesis, and tests the hypothesis. The problem in the disciplines that study social phenomena is that hypothesis tests never seem to be definitive, for familiar reasons, some of which are stated in the book.

In the book, I say that economists create interpretive frameworks, and that we have a hard time choosing from among different frameworks. Thinking about it further, I would say that in the absence of definitive empirical testing, economists are tempted to champion frameworks that focus on what they think the cause of a problem ought to be. If you’re pro-market, you think that the cause of the crisis of 2008 ought to be Fed misbehavior or housing policy. If you’re pro-government, you think that the cause of the crisis ought to be deregulation.

Of course, the best thing to do would be to come up with something better than normative sociology. Meanwhile, however, I think it would be better if we were to admit that is what we are doing. I we did, then I think we would be better off than we are now, when we think that we are applying scientific standards. Believing that science is possible leads to a mindset that thinks, “I’m doing science. Those guys are just investigating what they think ought to be the causes of the problem.”

Rep. Hensarling on Risk-Based Capital

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He said,

Risk-weighting is simply not as effective. First, it is far too complex, requiring millions of calculations to measure capital adequacy. Second, it confers a competitive advantage on those large financial institutions that have the resources to navigate its mind-numbing complexity. Third, regulators have managed to get the risk weights tragically wrong, for example, treating toxic mortgage-backed securities and Greek sovereign debt as essentially risk-free. One myopic globally imposed view of risk is itself risky. Finally, risk-weighting places regulators in the position of micro-managing financial institutions, which politicizes credit allocation. Witness the World Bank recently advertising its zero risk rating under the Basel Accords for their “green bonds.”

Clearly, he understands what I call The Regulator’s Calculation Problem. Pointer from John Cochrane.

Read the rest of John’s post and weep. Weep because this could have been a year when a strong center-right Republican Presidential candidate, running on an agenda that includes these sorts of proposals, could have been so easy to support.

Timothy Taylor on Economic Epistemology

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He writes,

There’s a widespread quick-and-dirty version of the relationship between theory and empiricism in economics, which is that one first creates theories, tests those theories with data, and then iterates with new theories and empirical tests. But in the 21st century, I’m not sure anyone really believes this. It’s well-known that you can create an internally consistent theory to reach pretty much any conclusion you want, as long as you tinker with the underlying assumptions. Moreover, it’s well-known that when doing empirical work, one can try out a bunch of different statistical tests until you find one that reaches the conclusion you want. To make matters worse, there’s no particular reason to believe that if some particular economic theory is validated by some particular empirical estimate in one context that it will also hold true in all other times and places. These concerns prove the case that a social science is not a natural science, but it would be as severe overreaction to hype them up into a claim that social sciences can’t lead to meaningful knowledge.

In my new book, I argue that economics is not a science. I say that we deal primarily in non-falsifiable frameworks of interpretation, rather than non-falsifiable hypotheses. Taylor’s comments speak to some of the reasons that this is the case.

The problem becomes how to evaluate competing frameworks if scientific epistemology (i.e., falsificationism) does not apply. Taylor is discussing essays by Harrod and Keynes, who, each in his own way, seems to argue for an “I’ll know it when I see it” approach to evaluation. However, I think we should try harder to spell out the criteria that are most helpful.

Megan McArdle on the Climate Debate

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She writes,

It would be a lot better for everyone — including the planet — if we left off the tribalism and the excommunications and went back to actually talking about the science: messy, imprecise and always open for well-grounded debate.

Read the whole thing. I am, like McArdle, reminded of macroeconometrics when I see statements based on climate models. Which is why I am a skeptic.

Jason Furman’s Puzzle

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He writes,

In the absence of economic rents, the return on corporate capital should generally follow the path of interest rates, which reflect the prevailing return to capital in the economy. But over the past three decades, the return to productive capital generally has risen, despite the large decline in yields on government bonds.

Pointer from Mark Thoma.

For a moment, think that there is just one interest rate. If “the” interest rate is low, then the rate of return on new capital ought to be low. Otherwise, firms would borrow at the low interest rate in order to purchase new capital.

One possibility is that the marginal return on new capital is low, but the returns on existing capital are high. That would be true in an economy where there are economic rents available, due to monopoly power and/or government favoritism. I gather that this is the story that Furman thinks is right.

I would note that there is more than one interest rate. It could be that there is a high interest rate charged to firms that are trying to invest in new capital at the margin. Microsoft can borrow at a low interest rate, but when it buys Linked-In that is not new capital investment.

Despite that possibility, my inclination is to believe that Furman is onto something. Read his whole essay.

James Surowiecke on the Universal Basic Income

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He writes,

One striking thing about guaranteeing a basic income is that it’s always had support both on the left and on the right—albeit for different reasons. Martin Luther King embraced the idea, but so did the right-wing economist Milton Friedman, while the Nixon Administration even tried to get a basic-income guarantee through Congress. These days, among younger thinkers on the left, the U.B.I. is seen as a means to ending poverty, combatting rising inequality, and liberating workers from the burden of crappy jobs. For thinkers on the right, the U.B.I. seems like a simpler, and more libertarian, alternative to the thicket of anti-poverty and social-welfare programs.

Pointer from Mark Thoma. A few thoughts of mine:

1. The apparent left-right consensus breaks down if in the last sentence the left is thinking that the word “alternative” should instead be “in addition to.”

2. There is a question of how to finance the UBI. For those on the right, the answer is by getting rid of the other programs. For those on the left, it may be less clear. See (1).

3. The existing approach to anti-poverty programs fits with what in my forthcoming book I describe as real-world economic policy: stimulate demand, restrict supply. Food stamps stimulate demand for food. Housing subsidies stimulate demand for housing. Student loan subsidies stimulate demand for accredited colleges. Medicaid stimulates demand for medical services.

A UBI would allow the recipients to decide on their own priorities. It thus lacks the base of support that the other programs have.