The FM newswire for 16 November – News you can use

Today’s broadsheet from the FM website pressroom.  There are 4 sections, all with hot news.

  1. Links to interesting news and analysis
  2. Featured article – a look at America’s criminal class
  3. Economists fight against conservatives’ faux economics
  4. Quote of the Day – about Athens, Sarah Palin, and us
  5. Plus, an Afterword

(I)  Links to interesting news and analysis

(a)  Another example of the media manufacturing news to fit their narrative:  “If women can defend Fort Hood, they can defend America“, William Saletan, Slate, 6 November 2009 — Regard all early news reports with skepticism!

(b)  At Fort Hood, Witness Credits Second Officer“, New York Times, 12 November 2009 — After the initial media story has had its impact, the media allows the truth emerge (to be forgotten, while the initial headlines remain in people’s subconscious).  Swarms of like-minded people self-organize to propagate these stories, needing no central HQ to direct these narratives. 

(c)  The most brilliant economic analysis I’ve read in a long time.  Nothing new, but a superlatively clear presentation — using history to provide a clearview of today’s situation:  “Structural Problems in the Economy and Unemployment“, interview with Bruce Greenwald (Prof Finance at Columbia U), Advisor Perspectives, 10 November 2009

(II)  Feature article – A look at America’s criminal class

A true-crime article about serial law-breakers who receive nothing bug taps on the wrists: “Pfizer Broke the Law by Promoting Drugs for Unapproved Uses“, Bloomberg, 9 November 2009 — Of course, the health care bill was written to protect or even grow their profits. Crime does pay, and well. Please read the article in full. Excerpt:

Prosecutor Michael Loucks remembers clearly when lawyers for Pfizer Inc., the world’s largest drug company, looked across the table and promised it wouldn’t break the law again. It was January 2004, and the attorneys were negotiating in a conference room on the ninth floor of the federal courthouse in Boston, where Loucks was head of the health-care fraud unit of the U.S. Attorney’s Office. One of Pfizer’s units had been pushing doctors to prescribe an epilepsy drug called Neurontin for uses the Food and Drug Administration had never approved.

In the agreement the lawyers eventually hammered out, the Pfizer unit, Warner-Lambert, pleaded guilty to 2 felony counts of marketing a drug for unapproved uses.  Pfizer agreed to pay $430 million in criminal fines and civil penalties, and the company’s lawyers assured Loucks and three other prosecutors that Pfizer and its units would stop promoting drugs for unauthorized purposes.

What Loucks, who’s now acting U.S. attorney in Boston, didn’t know until years later was that Pfizer managers were breaking that pledge not to practice so-called off-label marketing even before the ink was dry on their plea.

… “Marketing departments of many drug companies don’t respect any boundaries of professionalism or the law,” says Jerry Avorn, a professor at Harvard Medical School in Boston and author of “Powerful Medicines: The Benefits, Risks, and Costs of Prescription Drugs” (Random House, 2004). “The Pfizer and Lilly cases involved the illegal promotion of drugs that have been shown to cause substantial harm and death to patients.”

The widespread off-label promotion of drugs is yet another manifestation of a health-care system that has become dysfunctional. “It’s an unbearable cost to a system that’s going broke,” says Avorn, who heads the pharmacology economics unit of Brigham and Women’s Hospital in Boston. “We can’t even afford to pay for effective, safe therapies.”

About 15% of all drug sales in the U.S. are for unapproved uses without adequate evidence the medicines work, according to a study by Randall Stafford, a medical professor at Stanford University.  He estimates that doctors write more than 10 million such prescriptions each year.

As large as the penalties are for drug companies caught breaking the off-label law, the fines are tiny compared with the firms’ annual revenues.

… Companies regard the risk of multimillion-dollar penalties as just another cost of doing business, says Lon Schneider, a professor at the University of Southern California’s Keck School of Medicine in Los Angeles. In 2006, he led a study for the National Institute of Mental Health of off-label use of drugs, including Zyprexa, for the treatment of Alzheimer’s disease. “There’s an unwritten business plan,” he says. “They’re drivers that knowingly speed. If stopped, they pay the fine, and then they do it again.”

(III)  Economists fight against conservatives’ faux science

(a)  Depression multipliers“, Paul Krugman, blog of the New York Times, 10 November 2009 — Krugman fights to defend Economics 101 against conservatives’ self-induced amnesia. 

(b)  From Great Depression to Great Credit Crisis: Similarities, Differences and Lessons“, Barry Eichengreen et al, 23 October 2009 — Fiscal stimulus is not magic, but it does work.

(c)  From the FM website’s archives:  Everything you need to know about government stimulus programs (read this – it’s about your money)

(IV)  Quote of the Day – about Athens, Sarah Palin, and us

Bouncebackability“, David Runciman, London Review of Books, 29 January 2009 — Review of Democracy and Knowledge: Innovation and Learning in Classical Athens by Josiah Ober — Subscription only.  Excerpt:

Around 500 BC Athens got democracy, but less than twenty years later it also got lucky, and rich, with the opening up of a new group of silver mines in southern Attica, which produced a substantial windfall profit for the state and provided the basis for its long-term growth. A large part of this good fortune derived from the fact that the mines were relatively easy to exploit (though it required an army of slave labourers, working in hideous conditions), so that Athens was the only city-state that could literally dig its wealth straight out of the ground.

Ober weaves this big slice of natural advantage into his story of democratic achievement, by pointing out that when the assembly had to decide what to do with the first influx of extra wealth, it chose to spend it on building the navy that went on to defeat the Persians at Salamis in 480 BC, instead of distributing it among individual citizens. Compare and contrast, say, with Sarah Palin’s Alaska (admittedly one of the least plausible candidates ever for that hotly disputed title ‘Athens of the North’).

With oil prices high early last year, Palin decided to use the extra state income to fund $1000 credits to every Alaskan to help with their fuel bills. Ancient democracies use their good fortune to take tough decisions in the common interest; modern democracies use it to bribe the voters with handouts. Ober suggests that the ability of the Athenians to exploit their natural advantages in order to drive economic growth and political expansion is a testament to their democratic strengths. ‘Students of development economics,’ he writes, ‘have posited a “resource curse”: by lowering incentives for innovative forms of social co-operation, an exceptionally rich resource endowment may actually depress economic growth.’

If the Athenians managed to overcome this curse, Ober argues, they did so because they had other things going for them besides the silver mines, notably democratic institutions that helped them select the best way to use what came out of the ground to their overall advantage. They also managed to overcome another aspect of the resource curse, which is that easily exploited natural endowments often promote autocracy not democracy, because when states don’t have to worry about securing the consent of their citizens to raise taxes, they don’t really have to worry about securing the consent of their citizens at all.

Thomas Friedman in Foreign Policy called this ‘the first law of petropolitics’: ‘The price of oil and the pace of freedom always move in opposite directions.’ Silver is not oil, but in the ancient world it might as well have been. Yet in Athens, an easy source of income went along with enhanced democratic freedoms, not the reverse.

(V)  Afterword

Please share your comments by posting below. Per the FM site’s Comment Policy, please make them brief (250 word max), civil and relevant to this post. Or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).

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8 thoughts on “The FM newswire for 16 November – News you can use

  1. Part II seems to be an excellent example of why we should consider a broader definition of organized crime as I’ve mentioned elsewhere (http://crimint.blogspot.com). I doubt this will happen though as such a nasty definition might undermine the legitimacy of such organizations by bringing their actions into a whole new light.

  2. Funny how those in favor of Big Gov’t have to go back 2500 years to find a single case of gov’t expenditure selecting ‘the best way to use’ the wealth which is, arguably, better than giving it directly to the people.

    Of course, to ‘establish justice, and provide for the common defense’ are the key jobs of a gov’t, and it was indeed wise of Athens to increase provision for common defense. Compared to most gov’ts, including the US Federal Gov’t, I’m pretty sure in any rigorous comparison of taxpayer or citizen utility gained by the distribution of cash as compared to other expenditures of the same amount, cash to people would be better than any other recent gov’t program of expenditure in practice.

    No hard data, just belief. And lots of anectdotes of gov’t waste, like what Dem controlled LA did before Katrina.
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    FM reply: Just because somebody uses an Athens as an example, it is absurd to say “they had to go back 2500 years…”

  3. I’ve also argued for a version of Kling’s ‘Bleeding Heart Libertarian Welfare State’ where each citizen/permanent resident gets a cash payout instead of the various forms of welfare. It would be nearly bureaucracy free and difficult to corrupt.

    Conservatives are skeptical of stimulus because a) politicians routinely oversell it as job creation and b) the process is highly influenced by special interest lobbying, e.g. Remembering the Roots of ‘Cash for Clunkers’:

    …When lobbyists got a hold of the bill it quickly morphed into legislation designed to clear inventory from the floors of struggling auto dealers, while much of the environmental benefit fell by the wayside.

    Among the additions to the original bill, according to Moody’s Economy managing director Sophia Koropeckyj, was a provision specifically designed to move light trucks like the Ford F-150 and Chevy Silverado. That portion of the bill allowed for the trade in of a light truck with a fuel economy rating of less than 18 miles per gallon for a voucher worth up to $4,500 off a new light truck.

    Bush style rebate checks may have a lower multiplier, but at least everyone gets one. How much of the multiplier is erased when the funds are redirected to politically connected entities rather than those who need it?

    FM, you mentioned something about adding new features to the site a while back. If you are still taking suggestions, a comment preview function would be nice.
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    FM reply: Only features provided by the Great God WordPress are possible. That’s not one of them.

    “Conservatives are skeptical of stimulus because …”

    Yes, and painkillers and antibiotics have side-effects too. We might be in a severe depression now without the intense public policy measures taken in the 4th quarter of 2008 and Q1 of 2009. Although terribly designed and executed, the accomplished their primary task of stabilizing the economy and mitigating suffering. In Heaven you will see well-designed and executed public policy.

  4. “Structural Problems in the Economy and Unemployment“, interview with Bruce Greenwald (Prof Finance at Columbia U), Advisor Perspectives, 10 November 2009

    Nice job, Bruce. :)

  5. More Americans Bypass Banks, Parade Magazine, November 08, 2009, excerpt —

    With the credit crunch making it tough to get a loan and the recession hammering interest rates for investors, “peer-to-peer lending,” or “P2P,” is becoming increasingly popular. P2P websites like Prosper and Lending Club link lenders lured by high interest rates with borrowers who need money for everything from home repairs to college tuition to debt consolidation.

  6. Another unfortunate side effect of the stimulus is that it removed any urgency in fixing our broken political system. Like it or not, avoiding pain is an excellent motivator.
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    FM reply: The revolutionary’s maxim — “the worse, the better.” Not for me, neither the pain nor the revolution.

  7. Fabius, thanks for the link to Greenwald, & all the other economic links too. All are on subjects I am interested in now (ways to argue that even if govt. stimulus is poorly designed, there’s a reason to have them).

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