Thought for the day(s)

Here’s where we are – by Henry Farrell

There is a great deal of ruin in a country, and a great deal of capacity to make disaster look like someone else’s fault, as we should know well from recent experience.

Not so Nobel after all

A Nobel for the big big questions – by Noah Smith

On top of that, I also have some additional criticisms of the Econ Nobel.The science prizes rely very heavily on external validity to determine who gets the prize — your theory or your invention has to work, basically. If it doesn’t, you can be the biggest genius in the world, but you’ll never get a Nobel. The physicist Ed Witten won a Fields Medal, which is even harder to get than a Nobel, for the math he invented for string theory. But he’ll almost certainly never get a Physics Nobel, because string theory can’t be empirically tested.

The Econ Nobel is different. Traditionally, it’s given to economists whose ideas are most influential within the economics profession. If a whole bunch of other economists do research that follows up on your research, or which uses theoretical or empirical techniques you pioneered, you get an Econ Nobel. Your theory doesn’t have to be validated, your specific empirical findings can already have been overturned by the time the prize is awarded, but if you were influential, you get the prize.

Which takes you back to Keynes: it’s all about thinking about what other people are thinking which in turn…

On being paid by two masters

Cross with what I took at humbug I fired off a response to the Guardian. They ran with it.

The argument is made by some that MPs working in second jobs is a good thing because such professional expertise enriches parliament (Geoffrey Cox missed winter fuel votes while working abroad in second job, 11 October). There is a simple solution. When I was a clinical professor at a UK university, I was allowed to engage in private practice on the condition that I donated all such earnings to my principal employer (the university). I suggest Geoffrey Cox does likewise.

The State we are in

James Butler · ‘This much evidence, still no charges’: On the Grenfell inquiry

James Butler on the Grenfell inquiry in the London Review of Books.

The fire​ at Grenfell tower on 14 June 2017 killed 72 people, 18 of them children. Most died from asphyxiation after inhaling toxic smoke from the cladding on the block, which acted like a coat of petrol on the walls. Some died leaping from the building. Families died together, huddled under beds, having been told to stay where they were. Disabled residents died waiting for a rescue that never came. Every death was avoidable. Every death was the result of choices – acts of negligence, carelessness, contempt, incompetence and deliberate deceit – made by individuals, corporations and elected officials. The residents had the right to expect their landlord, in this case a subsidiary of local government, to ensure their homes were safe. They had the right to expect their government to enforce safety rules and to identify and combat fraud and malpractice by suppliers and fitters. Instead, those in power at every level abdicated their responsibilities.

Resilience (past tense)

All in the last couple of weeks: I read that it is quite possible that one or more universities may go bankrupt, and students may have to transfer to another city (think of the practicalities of that); I learn that a large 300,000 patient GP service went bankrupt with only a day’s notice given to any of its patients, nor a clear plan for what was going to happen to them; and I experienced my own corporate Edinburgh dental practice closing with ten days notice (only in many cases, I was one of them, the email didn’t get sent out). The suggested alternative practice is not even in Edinburgh.

All of these things were, I think, unimaginable a generation ago. Finance, and in particular, short term finance, destroys all before it.

We may have passed peak obesity

John Burn-Murdoch in the FT.

We have known for several years from clinical trials that Ozempic, Wegovy and the new generation of diabetes and weight loss drugs produce large and sustained reductions in body weight. Now with mass public usage taking off — one in eight US adults have used the drugs, with 6 per cent current users — the results may be showing up at the population level.

While we can’t be certain that the new generation of drugs are behind this reversal, it is highly likely. For one, the decline is steepest among college graduates, the group most likely to be using them.

There has been a tendency in some quarters to view taking drugs to lose weight as cheating, not virtuous, not the way it’s meant to be done. But here’s the thing: it works. And I suspect that when we look back at charts of obesity rates in generations to come, there will be inflection points in the 2020s to prove it.

Time will tell.

Just not enough sick people

Eli Lilly considers testing weight-loss drugs on people who are not overweight

Eli Lilly is considering testing its blockbuster weight-loss drugs in people who are not overweight but are at risk of weight gain, in an early sign that the drugmaker may look to broaden the rollout of the medications beyond obese patients.

Dave Ricks, Eli Lilly’s chief executive, told the Financial Times that the drugmaker behind Mounjaro and Zepbound was drawing up plans to study its anti-obesity medications among people with a body mass index (BMI) that does not classify as overweight.

He said: “Maybe the cut-off point of [a BMI of] 27 we use in northern Europe and the US for entry into the studies isn’t appropriate. Maybe we should use [a BMI of] 25. Long term, should we look at health maintenance? Maybe we will.”

This is the standard pharma playbook. You have to treat the well as the pool of sick people is not large enough for quarterly earnings reports. Interesting to see if they will fund the studies with hard endpoints (i.e death) over several decades — when the patents have long expired. Of course not.

Money for nothing

John Lanchester · For Every Winner a Loser: What is finance for?

In his indispensable guide to the current condition of the financial industry, Other People’s Money, published in 2015, John Kay talks about the state of the UK banking sector, whose assets then were about £7 trillion, four times the aggregate income of everyone in the country. But the assets of British banks ‘mostly consist of claims on other banks. Their liabilities are mainly obligations to other financial institutions. Lending to firms and individuals engaged in the production of goods and services – which most people would imagine was the principal business of a bank – amounts to about 3 per cent of that total.’

That’s finance. The total value of all the economic activity in the world is estimated at $105 trillion. That’s the mangoes. The value of the financial derivatives which arise from this activity – that’s the subsequent trading – is $667 trillion. That makes it the biggest business in the world. And in terms of the things it produces, that business is useless. It does nothing and adds no value. It is just one speculator betting against another and for every winner, on every single transaction, there is an exactly equivalent loser.

The point bears repeating. There are other ways of getting rich, and in our society the classic three ways of making a fortune still apply: inherit it, marry it, or steal it. But for an ordinary citizen who wants to become rich through working at a salaried job, finance is by an enormous margin the most likely path. And yet, the thing they’re doing in finance is useless. I mean that in a strong sense: this activity produces nothing and creates no benefit for society in aggregate, because every gain is matched by an identical loss. It all sums to zero. The only benefit to wider society is the tax paid by the winners; though we need to remember that the losers will have their losses offset against tax, so the net tax benefit is not as clear as it might at first seem.

The sad state of UK higher education

The next five years will be worse for English universities than the past five years have been. And the five after that could be worse still. 

The above is a quote from Alison Wolf (Baroness Wolf of Dulwich) writing in the Times Higher Education in 2015. The title was revealing: Can higher education’s golden age of plenty continue? For me 2015 did not seem an age of plenty. I took up a permanent post in 1990 in Newcastle, and over the successive decades became inured to year-on-year reductions in funding that directly supported student teaching. Research relied on external grant money without any funds for pilot or left field ideas. Core academic infrastructure was stripped, and less money flowed to the shop floor. Class sizes went up, and universities became increasingly impersonal — not just for students but for staff. Clinical academics felt like unwanted guests in the wider university and few now would recommend anybody following in their footsteps unless they had private incomes or they were both extraordinary and lucky. Fibs became more and more common.

University academic leasers have been dealt a poor hand by successive governments, but with notable exceptions — think Louise Richardson at St Andrews and then Oxford— they have been a dull bunch who have played fast and loose with the categorical imperative that for many of us provided the fundamental justification for publicly funded higher education.

So not a fair test then?

John Lanchester · For Every Winner a Loser: What is finance for?

Digression: a highly satisfying, bizarre and under-reported finding published on arxiv.org last year showed that this is exactly the same probability you get from tossing a coin. You may have been brought up to think that the probability of a coin landing heads or tails is exactly equal with every toss. That, amazingly, turns out not to be true. A coin flipped energetically and caught in mid-air is 2 per cent more likely to land on the side that was facing upwards the last time. The principles at work appear to be aerodynamic: airflow around the tossed coin makes it by a fine margin more likely to repeat the previous toss than to contradict it. By their own admission some of the richest people on the planet earned their fortunes on the basis of the same odds you get by tossing a coin.

The rest of article is brilliant, too. Worth the annual subscription to the LRB.

That old world

Europe’s economy is a cause for concern, not panic

But as America’s population has risen by a quarter since 1994, while ageing Europe’s has grown far less, the two economies are in fact somewhat closer in terms of income per person than they were at the time of Bill Clinton and Jacques Delors. Factoring in working hours, which are both shorter and on a steady decline in the eu, leaves European workers with even less to blush about. Put very simply, the French and their neighbours toil a third less than Americans, earn a third less, and are a lot more tanned by the end of August.

When I worked in France, in Pierre Chambon’s lab in Strasbourg, Gallic pride was taken in the ability to publish ‘big’ papers before the competitors in the USA and take all of August off.

Posted on Journée internationale de la Francophonie