Economics and similar, for the sleep-deprived

A subtle change has been made to the comments links, so they no longer pop up. Does this in any way help with the problem about comments not appearing on permalinked posts, readers?

Update: seemingly not

Update: Oh yeah!

Tuesday, August 31, 2010

I've seen this film before

Time for another go at this piece of conventional wisdom, I think:

The time is fast approaching when we will have an inexpensive test that is capable of revealing a person’s genetic propensity to contract a broad array of chronic diseases. That means that we will be able to accurately assess the cost of medical treatment over their lifetime . . .

No. I am not going to definitively say that no such thing will ever be possible in any factual or science-fictional world, but the second sentence does not follow from the first. I will assert with truculence and jutted jaw that the derivation of commercially relevant and actionable insurance information from genetics is much, much more difficult than that, and furthermore, will tentatively and politely advance the possibility that to "accurately assess the cost of medical treatment over a lifetime" might end up being at least as much of a tough-nut as the socialist calculation problem.

As the rant linked above tries to point out, the big issue here is the "Titanic problem" (from Hitchcock's aphorism about it being possible to make a suspenseful film about the Titanic given that everyone knows that it sinks - they don't know when). Knowing genetic propensities to develop various conditions is just about one tiny baby step along the way to making a cost estimate of the sort described. Just reeling off the other forecasting fun from the top of my head:

1) How long will it take for the condition to develop? (ie, how many years' premiums will the punter have plugged in before he needs the disease)
2) How much will the condition cost to treat when he gets it?
3) How does your answer to 2) depend on your estimate of medical cost inflation?
4) How does your answer to 2) depend on your assumptions about technological progress in medicine - given that we are talking about thirty or forty year horizons at a minimum here?
5) How do your answers to 3) and 4) interact, given that technological progress can either facilitate the prolongation of late-stage care at massive expense, or make hugely debilitating conditions curable with a twenty-dollar appliance?
6) How do the genetic markers interact; what is the possibility that a marker for a profitable condition (ie, ideally, one that kills the insured stone dead with no warning after having paid a lifetime's premia) is correlated with an unprofitable one?
7) How will the customer's estimates of 1-6, plus your terms and premiums, affect his or her behaviour?

This looks totally impossible to me; 4) is the real killer I think. People who comment on this issue almost always do so on the basis of genuine progress by the doctors in diagnosis and prognosis, without usually considering the fact that medical risk to the insured has to be mapped onto financial risk to the insurer.

However, wonderful, wonderful mathematics provides an easy way on this one. The mathematics of risk pooling is the closest thing to a free lunch as you are ever going to get. Because, although the Titanic problem is massive, you can be sure close to certainty that the Grim Reaper is going to play that fuck-awful Celine Dion song to all of us, sooner or later. If you give up on price-discrimination, then what you are modelling is the average outcome for the average patient, and he's a much more tractable soul.

In general, standard terms and risk pooling are proven technology. They work, and they have worked for about 250 years, give or take. Risk pricing, risk management and discrimination have a much shorter history and have caused quite a few spectacular flameouts for their users in their short existence (note that this wasn't the case for the early days of life actuarial science - the compilation of the first mortality tables more or less did for the benefits-societies and became hegemonic precisely because they worked straight from the off).

I have a fairly deep respect for actuaries as a profession. They've had their scandals, their Equitable Lifes and so on, but consider this - for 250 years, they have been in charge of a very complicated and very important set of social institutions, and not once have they totally destroyed the thing they were put in charge of through intellectual arrogance and bad faith. Neither bankers nor socialists are able to make the same boast.

endnote: I think that a lot of people also get misled on this one by the observable fact that the insurance industry does in fact take a very strong interest in genetic markers and prognosis. In my opinion, this is not because they have some dream of hunting down the chimera of perfect price discrimination, but because they're worried about good old fashioned moral hazard; they're worrying about the patients having an information edge over them. If you have good information about the likelihood of something happening to you, you can load up on coverage and effectively use your insurance policy as a low-cost savings vehicle, to the considerable expense of your insurer. Genetic testing (and this ought to be obvious really given that the basis of insurance is risk-pooling) is a threat to health insurance, not an opportunity.
7 comments this item posted by the management 8/31/2010 09:04:00 AM

Friday, August 13, 2010

Advances in nuclear bombs design

This just came back onto my mind after reading about people freaking out over Iranian nukes, an article by Nate Silver earlier in the year, quoting a "renowned scholar", albeit not one that I'd ever heard of:

The renowned Harvard scholar Graham Allison has posited that there is greater than a 50% likelihood of a nuclear terrorist attack in the next decade, which he says could kill upward of 500,000 people. If we accept Mr. Allison's estimates—a 5% chance per year of a 500,000-fatality event in a Western country (25,000 causalities per year)—the risk from such incidents is some 150 times greater than that from conventional terrorist attacks. Other scholars consider the chance of a nuclear incident to be much lower. Even if Mr. Allison has overestimated the risk by fivefold, and the number of causalities by threefold, it would still represent 10 times the threat that conventional terrorism does.

Leaving aside the risk argument here, is there some reason why we are assuming that the terrorists have a bomb that would cause more than twice as many casualties as the combined Hiroshima and Nagasaki attacks (even on Nate's 3x overestimate, we still have the terrorists in possession of Big Boy)? Has technology (specifically, the kind of technology available to the common man) progressed so much? Anyone know anything? I thought that the Pakistani nuclear program had only got to a level of sophistication where its bombs were in the same 20 kiloton yield as the two dropped on Japan - obviously Iran doesn't have any nukes at all. Since one would presume that terrorists weren't going to be able to carry out much in the way of a testing program (something that's been absolutely essential for every current nuclear power), I don't see why we'd be assuming they would do much better in terms of yield, particularly as they would presumably be attacking somewhere that was less vulnerable to firestorms than a wood-built 1940s Japanese city.
15 comments this item posted by the management 8/13/2010 01:07:00 AM

Thursday, August 12, 2010

Thursday Music Link

In the matter of DJ Tim Westwood ... I don't think anyone can credibly make a case that he doesn't know a huge amount about the music he plays, or that he is very highly respected by the actual artists and has been for more than twenty years (he's mentioned in the liner notes to the Nation of Millions album). The only real charge against him appears to be that he adopts a silly fake voice for broadcasting purposes, to which one can only dimly object that John Peel impersonated a Beatle for his entire broadcasting career too.

Velocity of Hue

Alternatively, something a little more blues based
6 comments this item posted by the management 8/12/2010 06:16:00 AM

Friday, August 06, 2010

I just don't get invited to the right parties

Just something that struck me in the context of the Charles Taylor trial (and rilly, does anyone at all believe that the mysterious gift to a supermodel is the only piece of evidence connecting Taylor to the RUF?[1] Is this a bad movie?). Everyone's concentrating on Naomi Campbell, but what the fuck was Quincy Jones doing there? Why was Mia Farrow scoffing appetizers with Charles Taylor? Imran Khan, anyone? This was 1997, shortly after Taylor had been elected post-civil-war President of Liberia and at least three or four years after anyone might have had any excuse at all for not knowing what kind of a bastard he was.

More to the point, what was Nelson Mandela doing there? The presence of Campbell, Farrow, Jones and the other celebs is actually quite easy to understand; this was a promotional dinner for a luxury train service that had just been launched. The PR agency had, correctly, assessed that if they got Mandela in as the super-double-alpha-prime-A-list "anchor tenant", it would be child's play to get a bunch of merely A-list celebrities in to bask in the glamour, which would ensure sufficient publicity and attract the real targets of the dinner - various rich people and corporate cronies who they wanted to book seats on their train. It's a simple matter of topology; the purpose of having Naomi Campbell there is that not everyone can sit next to Nelson Mandela, and the purpose of having Mia Farrow there is that not everyone can sit next to Naomi Campbell. I presume that the celebrities present are under the impression that they're attending a salon to discuss world peace, but I know a lad who has a job organising similar events, and for brutal commercial cynicism, he makes me look like Vashti Bunyan.

I am not sure whether Taylor was invited in his capacity as a celebrity (any president of anywhere is someone that people will pay money to sit next to, especially in the land of natural resource curse), or in his personal capacity as a consumer of luxury goods. But it's pretty clear to me that the event basically revolved around the man who people who people pay money to sit next to will pay money to sit next to; Mandela himself, who was apparently giving the apostolic seal of approval to one of the last twenty years' worst people.[2]

I think that the underlying story here is one that South African journalists regularly write about - the fact that for the last ten to fifteen years, Mandela has suffered from an inability to say no to a crowd of hangers-on, particularly when one of his charities (who in my opinion really ought to have a lot more imagination in their fund raising than constantly relying on the personal star power of their patron) is involved. As a result of this, he has been spread out thinner than jam on a boarding-house scone.

[1] Or even that having given a bag of diamonds to a model is actually anything more than circumstantial evidence of gun running in any case. Quite apart from the fact that Liberia mines its own diamonds and so there's no way of telling that the presents were Leonean, the bad thing that Taylor is accused of is sending guns to Sierra Leone, not taking diamonds from it, per se. If you followed the press coverage of this trial you would conclude that it was a case that was all about "blood diamonds" and wonder if the Hague tribunal attached some religious significance to handling stones that had not been blessed by the De Beers corporation. I've written on "blood diamonds" before, but I honestly think some people writing about the Campbell appearance seem to believe that they are literally covered in blood.

[2] There is an off-chance that there's more to the Mandela/Taylor connection than meets the eye here, as they are both friends of Moammar Qadaffi. But the timing doesn't really match up here, and I don't see why the Mandela/Qadaffi relationship, which is based partly on Qadaffi's support for the ANC in the tough years, and partly on the fact that two regional superpowers ought to make an effort to get along, would translate into a relationship with one of Qadaffi's old proteges.
15 comments this item posted by the management 8/06/2010 12:00:00 AM

Thursday, August 05, 2010

Thursday Music Link

The trouble is, there's no such thing as a double-blind thought experiment.

Time for a bit of very metal

the bleepcore version is also curiously interesting
0 comments this item posted by the management 8/05/2010 08:45:00 AM

Tuesday, August 03, 2010

Ay oop, it's Selwyn Froggit Ahmad Chalabi!

Here he is, giving the bad news to al-Maliki and apparently repositioning himself as the acceptable face of the Sadrist movement (political version of; Moqtada has apparently been sipping tea in Damascus with Ayad Allawi, which is interesting). Looks like Sadrism is now a genuine political movement for sure (I seem to remember arguing the opposite with Alex once). Also, for an unpopular politician whose career is finished, Chalabi maintains quite a bit of relevance, doesn't he? I think what is going on here is that despite the war, being "seen as close to Iran" in Iraqi politics is a bit like "seen as close to the USA" in Canadian politics - ie, it's probably not really liked all that much, but if you were going to be implacably opposed to it, you'd rule out more or less your entire political class.
0 comments this item posted by the management 8/03/2010 04:24:00 AM
Around and about in Companies House Webcheck

Overdue CH return - Biteback Publishing Limited, due since 17 July. Biteback Publishing is an Iain Dale outfit which has the same registered office as Biteback Media Limited, which is the publisher of "Total Politics", Biteback Media has a different year end and is currently up to date; Publishing is a new company set up last year which doesn't seem to have filed its first return on time. While filing the CH return, perhaps somebody could take the trouble to update the Total Politics terms & conditions for the correct registered office address (or, if the CH registered one is wrong, they need to submit the form and change that). Update, 9 Aug: filing now current. Registered address on website still wrong.

Well done to: EISCA Ltd, which got it filed on time this year.

Holding our breath for: Respublica Policy Limited, due 25 August.

remember, as this has caused needless trouble before: Having an overdue CH return is a fairly minor administrative peccadillo in the grand scheme of things. They do matter, and they ought to be filed on time (that's why there is a criminal offence on the books if they're more than 28 days late, albeit one that's vanishingly rarely prosecuted), and in my personal opinion it really isn't much to ask of any organisation that they get their act together to make their required filings. But it isn't really all that sinister. I just put these up to tease people who screw up.

Update!: Note that although EISCA has filed its return for this year, it's not clear to me why they bothered. The most recent update on the front page of its website is the launch of its report last July (the only one it's ever produced), and the most recent update on its blog is from March. The page listing its Advisory Board and Patrons no longer displays any names. There doesn't appear to be much going on here. Denis Macshane is still commenting on issues in the general sphere of EISCA's interests, but newspapers no longer seem to be mentioning his chairmanship of this think tank and I can see why.
4 comments this item posted by the management 8/03/2010 03:05:00 AM

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