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All Food Is Genetically Modified. Now We’re Just Better at It. – Article by Chelsea Follett

All Food Is Genetically Modified. Now We’re Just Better at It. – Article by Chelsea Follett

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The New Renaissance Hat
Chelsea Follett
September 11, 2015
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There is huge potential for progress in biotech.

A recent article in Business Insider showing what the ancestors of modern fruits and vegetables looked like painted a bleak picture. A carrot was indistinguishable from any skinny brown root yanked up from the earth at random. Corn looked nearly as thin and insubstantial as a blade of grass. Peaches were once tiny berries with more pit than flesh. Bananas were the least recognizable of all, lacking the best features associated with their modern counterparts: the convenient peel and the seedless interior. How did these barely edible plants transform into the appetizing fruits and vegetables we know today? The answer is human ingenuity and millennia of genetic modification.

Carrot_Comparison(Photo Credit: Genetic Literacy Project and Shutterstock via Business Insider).

Humanity is continuously innovating to produce more food with less land, less water, and fewer emissions. As a result, food is not only more plentiful, but it is also coming down in price.

Tech_Food_Cheaper

The pace of technological advancement can be, if you will pardon the pun, difficult to digest. Lab-grown meat created without the need to kill an animal is already a reality. The first lab-grown burger debuted in 2013, costing over $300,000, but the price of a lab-grown burger patty has since plummeted, and the innovation’s creator “expects to be able to produce the patties on a large enough scale to sell them for under $10 a piece in a matter of five years.”

People who eschew meat are a growing demographic, and lab-grown meat is great news for those who avoid meat solely for ethical reasons. It currently takes more land, energy, and water to produce a pound of beef than it does to produce equivalent calories in the form of chickens, but also grains. So, cultured meat could also lead to huge gains in food production efficiency.

Another beautiful example of human progress in the realm of food is golden rice. The World Health Organization estimates that between 250,000 and 500,000 children become blind every year as a result of vitamin A deficiency, and about half of them die within a year of losing their sight. Golden rice, largely a brainchild of the private Rockefeller Foundation, is genetically engineered to produce beta carotene, which the human body can convert into vitamin A. Golden rice holds the potential to protect hundreds of thousands of children in the developing world from vitamin A deficiency, preserving their sight and, in many cases, saving their lives.

Humans have been modifying food for millennia, and today we’re modifying it in many exciting ways, from cultured meat to golden rice. Sadly, it has become fashionable to fear modern genetically-modified organisms (GMOs), even though scientists overwhelmingly agree that GMOs are safe.

Anti-GMO hysteria motivated the popular restaurant chain Chipotle to proclaim itself “GMO-free” earlier this year (a dubious claim), prompted a political movement calling for the labeling of GM foods (a needless regulation implying to consumers that GMOs are hazardous), and even fueled opposition to golden rice. HumanProgress.org advisory board member Matt Ridley summarized the problem in his recent Wall Street Journal op-ed:

After 20 years and billions of meals, there is still no evidence that [GMOs] harm human health, and ample evidence of their environmental and humanitarian benefits. Vitamin-enhanced GM “golden rice” has been ready to save lives for years, but opposed at every step by Greenpeace. Bangladeshi eggplant growers spray their crops with insecticides up to 140 times in a season, risking their own health, because the insect-resistant GMO version of the plant is fiercely opposed by environmentalists. Opposition to GMOs has certainly cost lives.

Besides, what did GMOs replace? Before transgenic crop improvement was invented, the main way to breed new varieties was “mutation breeding”: to scramble a plant’s DNA randomly, using gamma rays or chemical mutagens, in the hope that some of the monsters thus produced would have better yields or novel characteristics. Golden Promise barley, for example, a favorite of organic brewers, was produced this way. This method still faces no special regulation, whereas precise transfer of single well known genes, which could not possibly be less safe, does.

Fortunately, while regulations motivated by anti-GMO sentiment may slow down progress, they probably cannot do so indefinitely. For those who wish to avoid modern GM foods, the market will always provide more traditional alternatives, and for the rest of us, human ingenuity will likely continue to increase agricultural efficiency and improve food in ways we cannot even imagine. Learn more about the progress we have already made by visiting HumanProgress.org and selecting the “Food” category under “Browse Data.”

Chelsea Follett (Chelsea German) works at the Cato Institute as a Researcher and Managing Editor of HumanProgress.org.
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Slogans or Science? – Article by Sanford Ikeda

Slogans or Science? – Article by Sanford Ikeda

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The New Renaissance Hat
Sanford Ikeda
May 20, 2014
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The debate over raising the legal minimum wage (LMW) to $10 an hour has people on both sides saying things they should know better than to say. For example, a friend recently posted the following meme (which isn’t the worst I’ve seen) on Facebook:

One year ago this week, San Jose decided to raise its minimum wage to $10/hour.

Any jobs disappear?

The number of minimum wage jobs has grown.

Any businesses collapse?

The number of businesses has grown.

Any questions?

Yes, several, but I’ll get to those in a bit.

Memes like these are just as silly and misleading as the simplistic arguments they’re probably attacking. In fact, the economic analysis of significantly raising the minimum wage says that, other things equal, it will reduce employment below the level where it would otherwise have been. It doesn’t say that that employment will fall absolutely or businesses will collapse.

A little thinking can go a long way

Have a look at this chart published in the Wall Street Journal. At first, it seems to support the simplistic slogans. But it’s important to compare similar periods, such as March–November 2012 (before the increase was passed) versus March–November 2013, (just after it went into effect). The LMW increase wasn’t a surprise, so in the months before it was passed, businesses would have been preparing for it, shaking things up. Comparing those two periods, which makes the strongest case for the meme’s assertions, the total percentage increase in employment (the area under the red line) looks pretty close, going just by my eyeballs and a calculator. In fact, the post-hike increase might actually be smaller, but you’d need more data to be sure. So if you compare similar periods, the rate of employment growth seems not to have been affected very much by the hike. So is the meme right?

According to that same chart and other sources, hiring in the rest of California and the country, where for the most part there was no dramatic increase in the LMW, was also on the rise at pretty much the same time. Why? Apparently, the growth rate of the U.S. economy jumped in 2012, especially in California. So the demand for inputs, including labor, probably also increased. I’m certainly not saying this correlation is conclusive, but you could infer that while hiring in San Jose was rising, it wasn’t rising as fast as it might have otherwise, given the generally improving economy.

That’s a more ambiguous result, and of course harder to flit into a meme.

You are stupid and evil and a liar!

Those strongly in favor of raising the LMW cast opponents as Republican apologists for big business. Take this post from DailyKos, which apparently is the source of the above meme. The author writes, “Empirically, there’s no clear negative effect that can be discerned. The concerns of Teahadists like Paul Ryan and Marco Rubio is [sic] rather unfounded in academic literature and in international assessments of natural experiments.”

Now, the overwhelming conclusion of years of economic research on the effects of a minimum wage on employment is that it tends to increase, not lower, unemployment. As this article from Forbes summarizes, “In a comprehensive, 182-page summary of the research on this subject from the last two decades, economists David Neumark (UC-Irvine) and William Wascher (Federal Reserve Board) determined that 85 percent of the best research points to a loss of jobs following a minimum wage increase.”

So, saying there is “no clear negative effect” is an outrageously ignorant claim. And there’s not one mention of the economic evidence that significantly raising the LMW will hurt the very people you wish to help: the relatively poor. But why address solid scientific research when there’s sloppy sloganeering by politicos to shoot down?

Attacking easy targets is understandable if you want to vilify your opponents or win an easy one for the cause. In that case, you take the dumbest statement by your rival as the basis of your attack. Such is the way of politics. In intellectual discourse, however, you may win the battle but you’ll lose the war. That is, if your goal is to learn from fruitful intellectual discussion, you must engage your opponent’s best arguments, not her weakest ones.

Let me use a counterexample. The sloganeering approach to attacking those who oppose raising the LMW is the equivalent of someone saying: “Well, this past winter was one of the coldest on record in the Midwest. So much then for global warming!” That may be “evidence” in a mud-slinging contest, but it’s not science.

What’s the theory?

While weather is complex and unpredictable, economic systems are even more so. Does that mean there are no principles of economics? Of course not. In fact, it’s because of such complexity that we need whatever help economic theory can offer to organize our thinking. And it doesn’t get any more basic than this: The demand curve for goods slopes downward.

That is, other things equal, the costlier something is, the less of it you’ll want to buy.

Note that the caveat—other things equal—is as important as the inverse relation between price and quantity demanded. That’s why my earlier back-of-the-envelope analysis had to be conditional on more data. Unfortunately, those data are often very hard to get. Does that mean we abandon the theory? Well, that would be like letting go of the rope you’re hanging on to for dear life because you’re afraid it might break.

So what exactly is the theory behind the idea that raising the LMW will increase hiring low-wage workers and boost business? If raising wages will actually increase employment and output, then why not also mandate a rise in interest rates, rents, electricity rates, oil prices, or the price of any of the other myriad factors of production that businesses ordinarily have to pay for? I would hope that this idea would give even the meme promoters pause.

As far as I know, the only situation in which forcing people to pay a higher wage rate will increase employment is when there is a dominant employer and there are barriers to competition. Economists term this “monopsony,” a situation that might occur in a so-called “factory town.” There, the dominant employer (of labor, capital, land, or whatever) can lower what she pays for inputs below the revenue that an additional unit of input earns the company. I would love to hear that argument and challenge it, because it’s the strongest one that standard economics can offer in favor of coercing businesses to raise wages. But so far I’ve not come across it, let alone any discussion of the economic literature on monopsony in the labor market, most of which questions its relevance. Some almost random examples are here and here.

Margins of analysis

Finally, economics teaches us that we can adjust to a particular change in different ways. In a thoughtful article on the effect of the LMW increase in San Jose that all sides of the debate should read, we get the following anecdote:

For his San Jose stores to make the same profit as before the wage increase, the same combo meal would be $6.75. “That would chase off a large percentage of my customers,” Mr. DeMayo said. He hasn’t laid off San Jose workers but has reduced their hours, along with some maintenance such as the drive-through lane’s daily hosing, and may close two unprofitable stores.

Employers can adjust to higher costs in one area by cutting back on spending in others. That might mean less unemployment than otherwise, but it doesn’t mean that raising the LMW has no negative employment effect at all. It means that the effects are harder to see. There’s that darn “other things being equal” again!

Slogans and memes are no substitute for science, or even clear thinking.

Sanford Ikeda is an associate professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism.
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This article was originally published by The Foundation for Economic Education.
A College Degree Does Not Make You a Million Dollars – Article by Andrew Syrios

A College Degree Does Not Make You a Million Dollars – Article by Andrew Syrios

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The New Renaissance Hat
Andrew Syrios
April 13, 2014
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It is becoming substantially less difficult these days to convince people that college is not a sure fire way to the good life. Even Paul Krugman has conceded that “it’s no longer true that having a college degree guarantees that you’ll get a good job.” You can say that again: 53 percent of recent graduates are either jobless or underemployed. Unfortunately, myths die hard. Many people still believe as Hillary Clinton once said, “Graduates from four-year colleges earn nearly an estimated one million dollars more [than high school graduates].” This may sound convincing, but this figure — based on a Census Bureau report — is about as true as it is relevant.

After all, isn’t it true that the most hard-working and intelligent people tend more to go to college? This is not a nature vs. nurture argument, the factors behind these qualities are unrelated to the discussion at hand. If one grants, however, that the more ambitious and talented go to college in greater proportion than their peers, Mrs. Clinton could have just said “the most hard-working and intelligent earn nearly an estimated one million dollars more than their peers.” I think the presses need not be stopped.

For one thing, the Census Bureau estimate includes super-earners such as CEO’s which skew the average upward. Although some, such as Mark Zuckerberg and Bill Gates, didn’t graduate college, most did. This is why it’s better to use the median (the middle number in the data set) than the mean or average. It’s also why Hillary Clinton and other repeaters of this factoid don’t.

Furthermore, just because most smart people go to college doesn’t mean they should. They may earn more money, but what they keep is more important than what they make. Financial columnist Jack Hough created a very illuminating hypothetical scenario with two people, one who chooses college and one who enters the labor force after high school. Hough then uses the average cost of college as well as U.S. Census Bureau data for the average income of college graduates and non-graduates, adjusted for age. He assumes both save and invest 5 percent of their income each year. By the age of 65, how does the net worth of each look?

  • College Graduate: $400,000
  • High School Graduate: $1,300,000

When one thinks about the common narrative of college vs. no college, it truly becomes absurd. Indeed, who exactly are we comparing? We’re not only comparing Jane-Lawyer to Joe-Carpenter, but we’re also comparing financial analysts with the mentally disabled, medical doctors with welfare dependents, building engineers with drug addicts, architects with pan handlers, marketing directors with immigrants who can barely speak English, and university professors with career criminals (whose earnings, by the way, are rarely reported). Many of these troubled people didn’t graduate high school, but it is shocking how they shuffle kids through the system these days. Some 50 percent of Detroit high school graduates are functionally illiterate and it isn’t that much better for the country on the whole. And something tells me that these particular non-graduates need something other than four years of drinking and studying Lockean (well, more likely Marxian) philosophy.

It certainly could be a good thing to earn a college degree. If one wants to be an accountant, engineer, or doctor, a degree is required. And those jobs have very high incomes. But can one really expect to make a killing with a degree in sociology or Medieval-African-Women’s-Military-Ethnic Studies? Pretty much the only jobs those degrees help one get, in any way other than the “hey, they got a college degree” sort of way, are jobs teaching sociology or Medieval-African-Women’s-Military-Ethnic Studies. And that requires an advanced degree as well (i.e., more money down the tube).

Furthermore, a college degree does not even guarantee a particularly high income. CBS News ran an article on the 20 worst-paying college degrees. The worst was Child and Family Studies with a starting average salary of $29,500 and a mid-career average of $38,400. Art History came in 20th with a starting average of $39,400 and a mid-career average of $57,100. Other degrees in between included elementary education, culinary arts, religious studies, nutrition, and music.

These are decent salaries, but are they worth the monetary and opportunity costs? With the wealth of information on the Internet, many skills can be attained on one’s own. Alternatives to college such as entrepreneurship and apprenticeship programs are often ignored. Indeed, apprentices typically get paid for their work while they are learning. The average yearly wage of a plumber and electrician are $52,950 and $53,030 respectively. That’s better than many college degrees and comes without the debt.

And that debt is getting bigger and bigger as college tuition continues to rise. In the last five years, tuition has gone up 24 percent more than inflation. Including books, supplies, transportation and other costs, in-state college students paid an average of $17,860 for one year in 2013 (out-of-state students paid substantially more). And despite all of that, many students don’t even finish. According to US News & World Report,

Studies have shown that nonselective colleges graduate, on average, 35 percent of their students, while the most competitive schools graduate 88 percent. Harvard’s 97 percent four-year graduation rate might not be that surprising … [but then] Texas Southern University’s rate was 12 percent.

12 percent is simply ridiculous, but the 35 percent for nonselective schools is extremely bad as well. Even the 88 percent for competitive schools leaves 12 percent of their students with no degree, but plenty of debt.

Given all of that, it can’t be surprising that the default rates on student loans (which cannot be wiped away in bankruptcy) appear to be much higher than is typically reported. According to The Chronicle,

[O]ne in every five government loans that entered repayment in 1995 has gone into default. The default rate is higher for loans made to students from two-year colleges, and higher still, reaching 40 percent, for those who attended for-profit institutions …

[T]he government’s official “cohort-default rate,” which measures the percentage of borrowers who default in the first two years of repayment and is used to penalize colleges with high rates, downplays the long-term cost of defaults, capturing only a sliver of the loans that eventually lapse …

College is good for some people. If you want to go into a field that has high earning potential (engineering, medicine, accounting, etc.) or you really like a certain subject and want to dedicate your career to it even if it may not be the best financial decision, go for it. But don’t go to college just because as Colin Hanks says in Orange County, “that’s what you do after high school!”

Andrew Syrios is a Kansas City-based real estate investor and partner with Stewardship Properties. He also blogs at Swifteconomics.com. See Andrew Syrios’s article archives.

This article was published on Mises.org and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

Advancing Pharmaceutical and Medical Technology Does Not Depend on Patents – Article by Nathan Nicolaisen

Advancing Pharmaceutical and Medical Technology Does Not Depend on Patents – Article by Nathan Nicolaisen

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Nathan Nicolaisen
January 1, 2014
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Pharmaceutical drug manufacturers are often regarded as the successes of the intellectual property regime. It is assumed that their willingness to take risks by investing heavily in R&D is justified by the awarding of patents over their lifesaving discoveries. Proponents of intellectual property claim that without patents many lifesaving drugs would not exist. They assert that generic drug manufacturers would diminish profit margins and dissipate the original manufacturer’s market share and innovation would come to a virtual standstill. Further, manufacturers once willing to create new drugs will no longer do so without sufficient returns on investment. Research into the matter suggests, however, that patent protection may not be required for medical advances.

Unpatented Medical Technologies

The notion that unpatented medical technologies are not feasible is historically false. Surveys of important medical breakthroughs provide insight into whether patents are absolutely necessary and conducive to innovation in medicine. In 2006, the British Medical Journal challenged its readership to submit a list of the most noteworthy medical and pharmaceutical inventions throughout history. The original list contained over 70 different discoveries before being narrowed down to 15. The list goes as follows in no particular order: penicillin, x-rays, tissue culture, ether anesthetic, chlorpromazine, public sanitation, germ theory, evidence-based medicine, vaccines, the pill, computers, oral rehydration therapy, DNA structure, monoclonal antibody technology, and smoking health risk. Of these discoveries, only two of them have remotely anything to do with patents, chlorpromazine and the pill.[1] In another survey conducted by the United States Centers for Disease Control the results are strikingly similar. Of the ten most important medical discoveries of the twentieth century, none of them had anything to do with patents.[2]

Natural Market Advantages and Trade Secrecy

Contrary to popular belief, large pharmaceutical companies may maintain significant market share advantages after the introduction of generics through the help of natural barriers to entry. Large pharmaceutical companies have a first-mover advantage and an established internal and external structure that competitors, large and small, do not. Regardless of how fast competitors can manufacture a generic drug (never mind the fact that they must hire new labor, train new employees, buy raw materials, establish suppliers, organize logistics, create a marketing and advertising plan, and set up competitive shelf space), it can be extremely difficult to make a dent in the market dominance of an already-established drug. Competition data from India suggests that it takes approximately four years for generic drugs to enter the market.[3] In addition, the Congressional Budget Office calculated that an original drug manufacturer could still maintain a market share of more than 20 percent after the introduction of generics. Expanding the scope of research beyond pharmaceutical drugs, a survey of R&D labs and company managers revealed that between 23 percent and 35 percent believe a patent is an effective way of getting a return on investment. At the same time 51 percent believe trade secrets to be an effective way of ensuring returns.[4]

The Truth about R&D Costs and Generic Drugs

Pharmaceutical drug manufacturers enjoy large margins in spite of large R&D. The claim that R&D for pharmaceuticals is high is not unfounded. The cost to bring a new drug to market varies between estimates of $402 million on the lower end and $800 million on the upper end.[5],[6] Regardless of high R&D costs, drug companies still command high margins. For the past two decades pharmaceutical drugs have been one of the most profitable industries in the United States, never dropping below third place.[7] The profitability of pharmaceuticals can be explained away under the assumption that people are living longer and consuming more pharmaceutical drugs. It may also be suggested that the human population is less healthy than in the past and the demand for pharmaceutical drugs is inelastic. But, analysis of the profit margin on pharmaceutical drugs and lack of any serious innovation suggests that this is not always the case.

The pharmaceutical industry globally maintains about a 25 percent operating margin as opposed to 15 percent for consumer goods. In the United States, this number achieved its zenith at almost 35 percent. The high margin on the drugs may not be due directly to high R&D costs, either. As of 2006, the ratio of R&D to sales revenue was about 0.19.[8] Further, the top 30 pharmaceutical firms in the world incur costs for promotions and advertising that are nearly double the costs of R&D. This is not to imply that there is a perfect amount of R&D spending each firm must do, rather it is to show that the inability to recoup R&D costs is greatly exaggerated.

Generic drugs are not just manufactured by small companies that seek to ride on the coattails of the giants. It is believed that generics add nothing innovative to the realm of lifesaving drugs, they merely manufacture competing drugs that are already in the public domain; the real innovation comes from the companies willing to invest in research and development. The National Institute of Health Care Management conducted a survey of drugs that received approval from the FDA from 1989 to 2000 with revealing results. Just over half the drugs in the survey, 54 percent, were using active ingredients that were already in use in the market. Of the drugs that were approved by the FDA, 23 percent were given a priority rating on the basis that they were a sufficient clinical improvement compared to existing alternatives. As a corollary, 77 percent of the approved drugs did not exhibit any kind of significant clinical improvement.[9] In other words, these drugs are functionally generic drugs, offering no kind of advantage over existing treatments. Large drug companies are ironically engaging in the kind of behavior they abhor by developing functionally generic drugs while wasting valuable R&D resources.

Conclusion

In a truly free market, whoever has the resources to manufacture an invention is permitted to do so, and the firms that enter the market first with a new drug enjoy a significant advantage. Moreover, the fact remains that the best way to protect an idea is to keep it a secret, which is why the trade-secret method remains effective. The federal government, however, has made it profitable to conclude that the best way to protect an idea is twisting the wrists and shoulders of one’s competitors with government force. Yet in spite of overwhelming federal-government intervention, innovation and ingenuity prevail, even if to a lesser degree.

Nathan Nicolaisen is a senior at Luther College in Decorah, Iowa studying business management and mathematics. 

This article was published on Mises.org and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

Notes

[1] This means that the inventions were not patented, due to some previous patent, or discovered out of desire to obtain a patent. Michele Boldrin and David K. Levine, Against Intellectual Monopoly, (Cambridge University Press, January 2010), 258, 259.

[2] ibid, 259.

[3] ibid, 266

[4] ibid, 186

[5] $402 million is in 2000 dollars. James Bessen and Michael J. Meurer, Of Patents and Property, Boston University Shool of Law, 2008), http://object.cato.org/sites/cato.org/files/serials/files/regulation/2008/11/v31n4-4.pdf

[6] $800 million is in 2000 dollars. Michele Boldrin and David K. Levine, Against Intellectual Monopoly, (Cambridge University Press, January 2010), 241.

[7] ibid, 256

[8] ibid, 255

[9] ibid, 261

Let Market Forces Solve Organ-Transplant Crisis – Article by Ron Paul

Let Market Forces Solve Organ-Transplant Crisis – Article by Ron Paul

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The New Renaissance Hat
Ron Paul
July 16, 2013
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Ten-year-old cystic fibrosis patient Sarah Murnaghan captured the nation’s attention when federal bureaucrats imposed a de facto death sentence on her by refusing to modify the rules governing organ transplants. The rules in question forbid children under 12 from receiving transplants of adult organs. Even though Sarah’s own physician said she was an excellent candidate to receive an adult organ transplant, federal government officials refused to even consider modifying their rules.

Fortunately, a federal judge intervened so Sarah received the lung transplant. But the welcome decision in this case does not change the need to end government control of organ donations and repeal the federal ban on compensating organ donors.

Supporters of the current system claim that organ donation is too important to be left to the marketplace. But this is nonsensical: if we trust the market to deliver food, shelter, and all other necessities, why should we not trust it to deliver healthcare—including organs?

It is also argued that it is “uncompassionate” or “immoral” to allow patients or insurance companies to provide compensation to donors. But one of the reasons the waiting lists for transplants is so long, with many Americans dying before receiving a transplant, is because of a shortage of organs. If organ donors, or their heirs, where compensated for donating, more people would have an incentive to become organ donors.

Those who oppose allowing patients to purchase organs should ask themselves how compassionate is it to allow those people to die on the transplant waiting list who might otherwise have lived if they were able to obtain organs though private contracts.

Some are concerned that if organ donations were supplied via the market instead of through government regulation, those with lower incomes would be effectively denied access to donated organs. This ignores our current two-tier system for allocating organs, as the wealthy can travel overseas for transplants if they cannot receive a transplant in America. Allowing the free market to alleviate the shortage of organs and reduce the costs of medial procedures like transplants would benefit the middle class and the poor, not the wealthy.

The costs of obtaining organs would likely be covered by most health insurance plans, thus reducing the costs directly borne by individual patients. Furthermore, if current federal laws distorting the health care market are repealed, procedures such as transplants would be much more affordable. Expanded access to health savings accounts and flexible savings accounts, combined with generous individual tax deductions and credits, would also make it easier for people to afford health care procedures such as transplants.

There is also some hypocrisy in the argument against allowing market forces in organ transplants. Everyone else involved in organ transplantation procedures, including doctors, nurses, and even the hospital janitor, receives compensation. Not even the most extreme proponent of government-provided health care advocates forcing medical professionals to provide care without compensation. Hospitals and other private intuitions provide compensation for blood and plasma donations, and men and women are compensated for donations to fertility clinics, so why not allow compensation for organ donation?

Sarah Murnaghan’s case shows the fallacy in thinking that a free-market system for organ donations is less moral or less effective than a government-controlled system. It is only the bureaucrats who put adherence to arbitrary rules ahead of the life of a ten-year old child. It is time for Congress to wake up and see that markets work better in all aspects of health care, including organ donation, just as they work better in providing all other goods and services.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission.

On Costs and Opportunity Costs of Aging – Article by Reason

On Costs and Opportunity Costs of Aging – Article by Reason

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Reason
April 7, 2013
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Originally published on the Fight Aging! website.

Few people seem terribly interested in noting the opportunity costs of aging, for all that a great deal of work goes into trying to build models for the direct costs. Insurers, government program administrators, and so forth, are all eager to put numbers to their potential future outlays – but they have fewer incentives to work on better numbers for the lost ability to earn that comes with advancing age. Here are some figures from a recent paper on dementia in the US, for example:

“The estimated prevalence of dementia among persons older than 70 years of age in the United States in 2010 was 14.7%. The yearly monetary cost per person that was attributable to dementia was either $56,290 (95% confidence interval [CI], $42,746 to $69,834) or $41,689 (95% CI, $31,017 to $52,362), depending on the method used to value informal care. These individual costs suggest that the total monetary cost of dementia in 2010 was between $157 billion and $215 billion. Dementia represents a substantial financial burden on society, one that is similar to the financial burden of heart disease and cancer.“

If you go digging around in US census data on income, or the quick summaries thereof, you’ll see that median income sits somewhere a little under $40,000/year in the prime earning years of life. It tapers off to a little more than half of that for surviving members of the 75 and older demographic. So while one of seven completely median older people incurs costs of roughly $40,000/year for dementia, all seven completely median older people suffer an opportunity cost of roughly $20,000/year as a result of becoming old. A range of income that might have been earned if still healthy and vigorous is no longer within reach.

These are very rough and ready comparisons, but you can see that even piling in a bunch of other direct medical costs for the rest of the population – cancer, diabetes, cardiovascular disease, and the other common foes – the opportunity costs of being old still look sizable in comparison. In another study that gives average medical costs over time for people in Japan aged between 40 and 80 followed over 13 years, the average yearly expenditure was in the ~$3,500 range, rising to more like ~$25,000 in the last year prior to death. The error bars for casual use of any of the numbers mentioned in this post are large – probably a factor of two, given all of the oddities and politics that goes into medical expenditures and recording of income, and especially when comparing data between different regions on the world. But you can still draw very rough conclusions about relative sizes.

Lastly, I should note that all of the above only considers the living. Once you get to the age 75 demographic in the US, half of the original population is dead, give or take. The dead accrue even higher opportunity costs than those mentioned above, as they have (for the most part) lost all ability to earn or contribute to building new things.

So aging causes a largely unseen cost to go along with what is seen, the cost of what might have been but for disability and death. As is often the case, the cost of research and development to build the means of rejuvenation is small in comparison to what is lost to aging – and also in comparison to what is spent in coping with the aftermath of loss rather than trying to prevent it.

Reason is the founder of The Longevity Meme (now Fight Aging!). He saw the need for The Longevity Meme in late 2000, after spending a number of years searching for the most useful contribution he could make to the future of healthy life extension. When not advancing the Longevity Meme or Fight Aging!, Reason works as a technologist in a variety of industries.  

This work is reproduced here in accord with a Creative Commons Attribution license.  It was originally published on FightAging.org.

Federal Student Aid and the Law of Unintended Consequences – Article by Richard Vedder

Federal Student Aid and the Law of Unintended Consequences – Article by Richard Vedder

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Richard Vedder
July 8, 2012
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RICHARD VEDDER is the Edwin and Ruth Kennedy Distinguished Professor of Economics at Ohio University and director of the Center for College Affordability and Productivity. He received his B.A. from Northwestern University and his M.A. and Ph.D. in economics from the University of Illinois. He has written for the Wall Street Journal, National Review, and Investor’s Business Daily, and is the author of several books, including The American Economy in Historical Perspective and Going Broke by Degree: Why College Costs Too Much.

The following is adapted from a speech delivered on May 10, 2012, at Hillsdale College’s Allan P. Kirby, Jr. Center for Constitutional Studies and Citizenship in Washington, D.C.

Reprinted by permission from Imprimis, a publication of Hillsdale College.

FEDERAL STUDENT financial assistance programs are costly, inefficient, byzantine, and fail to serve their desired objectives. In a word, they are dysfunctional, among the worst of many bad federal programs.

These programs are commonly rationalized on three grounds: on the grounds that assuring more young people a higher education has positive spillover effects for the country; on the grounds that higher education promotes equal economic opportunity (or, as the politicians say, that it is “a ticket to achieving the American Dream”); or on the grounds that too few students would go to college in the absence of federal loan programs, since private markets for loans to college students are defective.

All three of these arguments are dubious at best. The alleged positive spillover effects of sending more and more Americans to college are very difficult to measure. And as the late Milton Friedman suggested to me shortly before his death, they may be more than offset by negative spillover effects. Consider, for instance, the relationship between spending by state governments on higher education and their rate of economic growth. Controlling for other factors important in growth determination, the relationship between education spending and economic growth is negative or, at best, non-existent.

What about higher education being a vehicle for equal economic opportunity or income equality? Over the last four decades, a period in which the proportion of adults with four-year college degrees tripled, income equality has declined. (As a side note, I do not know the socially optimal level of economic inequality, and the tacit assumption that more such equality is always desirable is suspect; my point here is simply that, in reality, higher education today does not promote income equality.)

Finally, in regards to the argument that capital markets for student loans are defective, if financial institutions can lend to college students on credit cards and make car loans to college students in large numbers—which they do—there is no reason why they can’t also make student educational loans.

Despite the fact that the rationales for federal student financial assistance programs are very weak, these programs are growing rapidly. The Pell Grant program did much more than double in size between 2007 and 2010. Although it was designed to help poor people, it is now becoming a middle class entitlement. Student loans have been growing eight to ten percent a year for at least two decades, and, as is well publicized, now aggregate to one trillion dollars of debt outstanding—roughly $25,000 on average for the 40,000,000 holders of the debt. Astoundingly, student loan debt now exceeds credit card debt.

Nor is it correct to assume that most of this debt is held by young people in their twenties and early thirties. The median age of those with loan obligations today is around 33, and approximately 40 percent of the debt is held by people 40 years of age or older. So when politicians talk about maintaining low interest loans to help kids in college, more often than not the help is going to middle-aged individuals long gone from the halls of academia.

With this as an introduction, let me outline eight problems with federal student grant and loan programs. The list is not exclusive.

(1) Student loan interest rates are not set by the forces of supply and demand, but by the political process. Normally, interest rates are a price used to allocate scarce resources; but when that price is manipulated by politicians, it leads to distortions in the use of resources. Since student loan interest rates are always set at below-market rates, too much money is borrowed for college. Currently those interest rates are extremely low, with a key rate of 3.4 percent—which, after adjusting for inflation, is approximately zero. Moreover, both the president and Governor Romney say they want to continue that low interest rate after July 1, when it is supposed to double. This aggravates an already bad situation, and provides a perfect example of the fundamental problem facing our nation today: politicians pushing programs whose benefits are visible and immediate (even if illusory, as suggested above), while their extraordinarily high costs are less visible and more distant in time.

(2) In the real world, interest rates vary with the prospects that the borrower will repay the loan. In the surreal world of student loans, the brilliant student completing an electrical engineering degree at M.I.T. pays the same interest rate as the student majoring in ethnic studies at a state university who has a GPA below 2.0. The former student will almost certainly graduate and get a job paying $50,000 a year or more, whereas the odds are high the latter student will fail to graduate and will be lucky to make $30,000 a year.

Related to this problem, colleges themselves have no “skin in the game.” They are responsible for allowing loan commitments to occur, but they face no penalties or negative consequences when defaults are extremely high, imposing costs on taxpayers.

(3) Perhaps most importantly, federal student grant and loan programs have contributed to the tuition price explosion. When third parties pay a large part of the bill, at least temporarily, the customer’s demand for the service rises and he is not as sensitive to price as he would be if he were paying himself. Colleges and universities take advantage of that and raise their prices to capture the funds that ostensibly are designed to help students. This is what happened previously in health care, and is what is currently happening in higher education.

(4) The federal government now has a monopoly in providing student loans. Until recently, at least it farmed out the servicing of loans to a variety of private financial service firms, adding an element of competition in terms of quality of service, if not price. But the Obama administration, with its strong hostility to private enterprise, moved to establish a complete monopoly. One would think the example of the U.S. Postal Service today, losing taxpayer money hand over fist and incapable of making even the most obviously needed reforms, would be enough proof against the prudence of such a move. And remember: because of highly irresponsible fiscal policies, the federal government borrows 30 or 40 percent of the money it currently spends, much of that from overseas. Thus we are incurring long-term obligations to foreigners to finance loans to largely middle class Americans to go to college. This is not an appropriate use of public funds at a time of dangerously high federal budget deficits.

(5) Those applying for student loans or Pell Grants are compelled to complete the FAFSA form, which is extremely complex, involves more than 100 questions, and is used by colleges to administer scholarships (or, more accurately, tuition discounts). Thus colleges are given all sorts of highly personal and private information on incomes, wealth, debts, child support, and so forth. A car dealer who demanded such information so that he could see how badly he could gouge you would either be out of business or in jail within days or weeks. But it is commonplace in higher education because of federal student financial assistance programs.

(6) As federal programs have increased the number of students who enroll in college, the number of new college graduates now far exceeds the number of new managerial, technical and professional jobs—positions that college graduates have traditionally taken. A survey by Northeastern University estimates that 54 percent of recent college graduates are underemployed or unemployed. Thus we currently have 107,000 janitors and 16,000 parking lot attendants with bachelor’s degrees, not to mention bartenders, hair dressers, mail carriers, and so on. And many of those in these limited-income occupations are struggling to pay off student loan obligations.

Connected to this is the fact that more and more kids are going to college who lack the cognitive skills, the discipline, the academic preparation, or the ambition to succeed academically. They simply cannot or do not master well much of the rather complex materials that college students are expected to learn. As a result, many students either do not graduate or fail to graduate on time. I have estimated that only 40 percent or less of Pell Grant recipients get degrees within six years—an extremely high dropout or failure rate. No one has seriously questioned that statistic—a number, by the way, that the federal government does not publish, no doubt because it is embarrassingly low.

Also related is the fact that, in an attempt to minimize this problem, colleges have lowered standards, expecting students to read and write less while giving higher grades for lesser amounts of work. Surveys show that students spend on average less than 30 hours per week on academic work—less than they spend on recreation.  As Richard Arum and Josipa Roksa show in their book Academically Adrift: Limited Learning on College Campuses, critical thinking skills among college seniors on average are little more than among freshmen.

(7) As suggested to me a couple of days ago by a North Carolina judge, based on a case in his courtroom, with so many funds so readily available there is a temptation and opportunity for persons to acquire low interest student loans with the intention of dropping out of school quickly to use the proceeds for other purposes. (In the North Carolina student loan fraud case, it was to start up a t-shirt business.)

(8) Lazy or mediocre students can get greater subsidies than hard-working and industrious ones. Take Pell Grants. A student who works extra hard and graduates with top grades after three years will receive only half as much money as a student who flunks several courses and takes six years to finish or doesn’t obtain a degree at all. In other words, for recipients of federal aid there are disincentives to excel.

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If the Law of Unintended Consequences ever applied, it is in federal student financial assistance. Programs created with the noblest of intentions have failed to serve either their customers or the nation well. In the 1950s and 1960s, before these programs were large, American higher education enjoyed a Golden Age. Enrollments were rising, lower-income student access was growing, and American leadership in higher education was becoming well established. In other words, the system flourished without these programs. Subsequently, massive growth in federal spending and involvement in higher education has proved counterproductive.

With the ratio of debt to GDP rising nationally, and the federal government continuing to spend more and more taxpayer money on higher education at an unsustainable long-term pace, a re-thinking of federal student financial aid policies is a good place to start in meeting America’s economic crisis.

The Costs of War – Article by Ron Paul

The Costs of War – Article by Ron Paul

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The New Renaissance Hat
Ron Paul
May 2, 2012
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This month Veterans Affairs Secretary Eric K. Shinseki announced the addition of some 1,900 mental health nurses, psychiatrists, psychologists, and social workers to its existing workforce of 20,590 mental health staff in attempt to get a handle on the epidemic of suicides among combat veterans. Unfortunately, when presidents misuse our military on an unprecedented scale – and Congress lets them get away with it – the resulting stress causes military suicides to increase dramatically, both among active duty and retired service members.  In fact, military deaths from suicide far outnumber combat deaths. According to an article in the Air Force Times this month, suicides among airmen are up 40 percent over last year.

Considering the multiple deployments service members are forced to endure as the war in Afghanistan stretches into its second decade, these figures are sadly unsurprising.

Ironically, the same VA Secretary Eric Shinseki was forced to retire from the Army by President Bush for daring to suggest that an invasion and occupation of Iraq would not be the cakewalk that neoconservatives promised. Then Deputy Secretary of Defense Paul Wolfowitz, who is not a military veteran, claimed that General Shinseki was “wildly off the mark” for suggesting that several hundred thousand soldiers would be required to secure post-invasion Iraq. Now we see who was right on the costs of war.

In addition to the hidden human costs of our seemingly endless wars are the economic costs. In 2008, Nobel Prize winning economist Joseph Stiglitz wrote “The Three Trillion Dollar War: The True Cost of the Iraq Conflict.” Stiglitz illustrates that taking into account the total costs of the war, including replacing military equipment and caring for thousands of wounded veterans for the rest of their lives, the Iraq war will cost us orders of magnitude greater than the 50 billion dollars promised by the White House before the invasion. Add all the costs of Afghanistan into the mix, wrote Stiglitz, and the bill tops $7 trillion.

Is it any wonder why our infrastructure at home crumbles, healthcare is more expensive and harder to come by, and unemployment together with inflation continue their steady rise? Imagine the productive power of that seven trillion dollars in our private sector. What could it have done were it in private hands; what may have been discovered, what diseases might have been cured, what might have been built, how many productive jobs created?

With the bills coming due for our decade of reckless military action, the cuts rarely come from the well-connected military industrial complex with their lobbyists and powerful political allies. In President Obama’s 2013 budget, troop strength is to be cut significantly while enormously expensive and largely superfluous weapons systems emerge essentially unscathed. As defense analyst Winslow Wheeler wrote this month, costs of the “next generation” fighter, the F-35, will increase by another $289 million. This despite the fact that the fighter is badly designed and already outdated, a “virtual flying piano” writes Wheeler.

The military contractors building monstrosities like the F-35 are politically connected and thus protected. Unfortunately, returning military veterans are less so. In the same 2013 budget, the White House proposes to increase medical and pharmaceutical costs paid by veterans while reducing their cost of living increases. And how many years of increasingly alarming mental illness and suicide statistics has it taken for the modest increase in resources to be made available?

Those who predicted the real costs of our decade of global military conquest were ridiculed, scoffed at, and fired. History has now shown us that much of what they warned was correct. America is clearly less secure after a decade of unnecessary wars. It is more vulnerable and closer to economic collapse. Its military is nearly broken from years of abuse. Will we come back to our senses?

Representative Ron Paul (R – TX), MD, is a Republican candidate for U. S. President. See his Congressional webpage and his official campaign website. 

This article has been released by Dr. Paul into the public domain and may be republished by anyone in any manner.

The Death Penalty: Its Limitations, Costs, and Proper Application

The Death Penalty: Its Limitations, Costs, and Proper Application

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The New Renaissance Hat
G. Stolyarov II
March 24, 2012
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With regard to my recent advocacy of keeping the death-penalty option on the table when considering punishments for George Zimmerman, the killer of Trayvon Martin, I was asked to clarify my views on the death penalty, about which I had previously expressed ambivalence in my video “Life Extension, Crime, and Criminal Justice”.

I am indeed wary of most applications of the death penalty, where the commission of the act of killing by the individual being sentenced is in doubt. But I can see legitimate uses for it in cases where the identity of that individual is clear, and the crime was particularly egregious. (Serial killings, rape-murders, killings of children where the murderer is known would qualify, for instance, as would executions of brutal dictators whose human-rights abuses are extensively documented.)

There is a cost aspect to the death penalty, in that it actually costs a lot more to execute a person today than it would to maintain that person in prison for life. Thus, it should be reserved for only the most egregious crimes.

In George Zimmerman’s case, I think a clear message needs to be sent that vigilante killing of unarmed, peaceful individuals who have given no provocation is completely unacceptable and needs to be dealt with harshly. Setting that example could be worth the cost – but ultimately, this is for the court to decide. I do think this case warrants at least considering the option.