Mises Sees Krugman Coming From a Mile Away

Posted on May 5, 2013 by Hamsterdam Economics

Okay, so this post is probably not entirely fair (and not entirely substantive, either), but I couldn’t help myself. I just came across Paul Krugman’s NYT column for tomorrow and, while I’m not going to address any of the claims he makes here, one sentence did catch my eye.

Yet calls for a reversal of the destructive turn toward austerity are still having a hard time getting through. Partly that reflects vested interests, for austerity policies serve the interests of wealthy creditors…

The only reason I note this is because, just several nights ago, I came across this passage while reading through Ludwig von Mises’ Human Action.

The popularity of inflationism is in great part due to deep rooted hatred of creditors. Inflation is considered just because it favors debtors at the expense of creditors. (p. 467)

And, more recently, this one.

Over all species of deferred payments hangs, like the sword of Damocles, the danger of government interference. Public opinion has always been biased against creditors. It identifies creditors with the idle rich and debtors with the industrious poor. It abhors the former as ruthless exploiters and pities the latter as innocent victims of oppression. It considers government action designed to curtail the claims of creditors as measures extremely beneficial to the immense majority at the expense of a small minority of hardboiled usurers. (p. 540)

Mises also notes soon thereafter that, in many capacities, the rich tend to themselves be debtors, and that the bias against the wealthy creditor class is not only (often) unearned, but even contradictory.

Way later on, Mises brings up the point again.

The devaluation, says its champions, reduces the burden of debts. This is certainly true. It favors debtors at the expense of creditors. In the eyes of those who have still not learned that under modern conditions the creditors must not be identified with the rich nor the debtors with the poor, this is beneficial. (p. 791)

Like I said, not a lot of analysis here, and I’ll concede that Krugman only said this in passing; he wasn’t making a point of it. Still, though, I am amazed at how often I happen upon sections of Human Action that read as though they were written in direct response to one of Krugman’s columns.

Posted in Economics | Tagged , , , , | Leave a comment

Bad Arguments Against Bitcoin

Posted on May 5, 2013 by Hamsterdam Economics

I’ve been hesitant to jump wholeheartedly into the Bitcoin debate because, unlike a lot of commenters, I’m not sure I fully understand Bitcoin, its role as a medium of exchange (or not), and how this entire thing is going to play out. That being said, it’s still worth saying that there are some seriously bad arguments against Bitcoin floating around out there.

One of these is the “resource cost” argument, voiced most notably by Paul Krugman and Bloomberg’s Mark Gimein. This argument holds that the process of mining bitcoins (in the form of complex algorithmic equations solved by computers dedicated for that sole purpose) costs us computing power, and therefore is wasteful. By Gimein’s calculations, Bitcoin miners used $147,000 worth of energy–enough to power half of a large hadron collider–in just one 24-hour period several months ago.

But as I detailed at length here, this argument represents a Nirvana fallacy, since neither Krugman nor Gimein acknowledge that there are resource costs to fiat currencies (as well as every other physical thing we as humans produce). In fact, simply the direct costs that are associated with physically printing dollar bills amounted to $848 million in 2008 alone, which works out to $2,323,288 a day, and that’s not to mention the physical waste that is generated in the process of physical paper production. Furthermore, it’s been said that fiat systems are prone to credit expansion and therefore resource misallocation and malinvestment, which brings the indirect cost of paper money to some sky high total. By comparison, Bitcoin looks rosy. (Now, just because paper money is more expensive than Bitcoin, it doesn’t mean it’s better or worse–we pay more for better things all the time. It simply means, though, that “Bitcoin costs us something” is a bad argument against virtual currencies). And, on top of all that, some provide evidence to suggest that the volatility of a paper money system itself serves as a driver of gold mining (and, presumably, future Bitcoin mining) and therefore does little to save on those resource costs.

Those arguments are based on misconceptions, but they are at least cohesive. They make sense, even if they don’t take enough into account. I’m not sure I can say the same about the arguments presented in this video I just stumbled across on Twitter.

There’s too much here for me to really know what to do with, so I’ll just pick up on some of the pieces that I think make for pretty invalid criticisms of Bitcoin.

I think there’s something worrying about the use of Bitcoins or any other form of digital currency. One of the things that binds us together as a society is our commitment…certain obligations and rules of how our currency actually works. This Bitcoin business, one of the things about it is its free of politics, its free of any sense of obligation to society, indeed any connection with society. Its been described as being–we know about Facebook being a social networking system–as an anti-social networking system. It’s highly individualistic, and the concern is, in part, while it’s pretty sinister–drug dealing or money laundering or whatever–there’s also an inclination towards a highly individualistic society, in which we can operate anonymously, nothing is traceable, we avoid paying taxes, we avoid exchange rates, we avoid a lot of the things that binds us together as a society, so I do think it’s quite a sinister thing.

Okay, in this first long comment, there are two threads that I’m picking up. The first of these is that we as a society are bound together by certain obligations, and that meeting these obligations (for some reason through a preferred form of currency) is what gives us a sense of community. The second of these is that Bitcoin bypasses these obligations.

I’m not sure how much I can really say about the idea that our society is held together by the fact that we use dollar bills. This, to me, seems to be something of an arbitrary idea, and the speaker doesn’t provide any sort of intellectual grounding for it. Which “certain rules and obligations of how our currency works” bind us as a society? Legal tender laws? State-influenced gross market rates of interest? The author names none, and even if he did, I’d still be skeptical. Most members of society, I’m guessing, view their connections to their neighbors less in terms of their legal tender laws than in terms of their mutually shared communities and interests. (Another way to think about this is to ask whether societies that existed without paper currencies are any less “societies” than we are; how you answer this probably says a lot about the intersection of your economic and political views). The arbitrariness of this idea comes out most in the last bit. The author lists the lack of anonymity, immense traceability, taxes, and exchange rates as the characteristics that bring a society together. I would argue that these things actually function to drive a wedge between members of society, but I think this is just a groundless argument overall. It seems to be pulled out of thin air.

But, assuming that the first part of this speaker’s idea is valid, how do we interpret the second one? He laments that Bitcoin is free of politics, but to supporters of Bitcoin, that is actually a selling point, not a criticism. In fact, it’s actually the explicit reason Bitcoin was created in the first place. The speaker also lists another common argument: Bitcoin’s anonymity makes it perfect for drug and criminal transactions. Of course, this implies his support for state criminalization of drugs in the first place, and it’s probably safe to say that a lot of people who believe the state should stay out of people’s money might think it should stay out of people’s bodies as well. But, on top of that, the criticism that Bitcoin’s lack of traceability makes it good for shady transactions also applies to paper money. It’s like the resource cost argument, all over again.

The next speaker quotes Krugman.

The economist Paul Krugman made the point that you can’t actually separate money from society; society makes money. And what you do with it is what makes it money, so if you can’t pay your taxes in it, then it’s not gonna work.

I’m not really sure what to do with this. It’s true that Krugman has lambasted Bitcoin as an “anti-social network,” but I’m not really sure what that means. In fact, I’m not really sure it means anything at all. But what I gather from this is that the speaker is implicitly confusing society with government. No supporter of Bitcoin–at least none that I’ve read, and I’ve tried to seek out quite a few of them to help me understand this–is advocating for a system of currency that is somehow separate from society. As the speaker rightfully points out, such a thing could never exist, and the concept doesn’t even make sense. Most supporters of Bitcoin, however, are simply seeking to divorce money from government, which Bitcoin–at least for the moment–does do, and which is plainly possible.

Furthermore, the idea that governments essentially “make” a currency by accepting it in the form of taxes is known as “chartalism,” and it’s more problematic than this speaker’s simple dismissal of Bitcoin lets on. Jonathan Finegold of the Economic Thought blog, in fact, argues that the chartalist theory faces in the wrong direction. 

The problem with this theory is that it doesn’t explain how governments know the weight of the coins they ought to mint. The demand for money, while forward looking, has to have some basis in the present (or near past), because it’s only by looking at prices that we can calculate the amount of money we’d like to hold. This is how I understand Mises’ regression theorem, which was an attempt to solidify Menger’s theory of the origins of money. Commodities such as gold were first traded as non-monetary goods, and as their exchange spread gold became more liquid and people began demanding it for this liquidity. But, as aforementioned, this demand had to find some basis in present prices, otherwise people have no idea how much money they ought to demand.

What this suggests is a degree of simultaneity between the formation of money prices and the emergence of said money. Government can mint currency, but it has to have some basis to calculate in what weights coins ought to be minted, which is dictated by the public’s demand for money. Thus, it makes more sense to assume that government could only begin to mint currency once demand for this currency already existed, meaning after the emergence of money. The chartalist theory looks at this exactly backwards, and for this reason I can’t make much sense of it (although it’s true that government’s demand for money, through taxation, adds to the liquidity of money and therefore has some role in explaining currency formation).

Now, back to our video. The second speaker continues on with another of criticism of Bitcoin that again is often interpreted as a strength by its supporters.

Kurt made an interesting point, actually, that the supply of Bitcoins is kept. That actually makes it a very inflexible currency because, the reason we don’t have a gold standard anymore is that we need to be able to control the supply of our money, so that means either we’re playing around with interest rates or we’re printing money or not. If you can’t do that, it’s not gonna work.

Again, Bitcoin was designed with a fixed supply specifically so that central planners would be unable to “play around” with interest rates and the supply of money. It is based on a theory of the economy that holds that these behaviors are destructive, so arguing against Bitcoin on the basis of its prohibition of these behaviors begs the question. When you get down to it, the argument over Bitcoin is an argument over central planning of monetary systems and government monopoly over money. To argue that Bitcoin is bad because it interferes with this system assumes that this is the proper system in the first place. (Also, the speaker ignores the fact that Bitcoins are divisible to something like eight decimal places, which means that the system, for all intents and purposes, is highly flexible. The nominal supply might remain fixed, but the nominal values of goods in the economy can adjust up and down without an issue).

Like I said, there are valid arguments against Bitcoin. The ones presented in the above articles and video, however, are not any of them.

P.S. I couldn’t help but noticing how the second speaker in that video kept saying “if you can’t [do x/y/z], it’s not going to work,” which particularly reminded me of this clip from Scrubs. (skip to 1:18)

Posted in Economics, Monetary Policy | Tagged , , , , | Leave a comment

A Contradiction in the NYT

Posted on May 4, 2013 by Hamsterdam Economics

As promised, I have returned from an extended personal hiatus. I can’t make promises, but I hope that I’ll be returning to blogging more or less consistently from here on out.

I wanted to highlight something I saw in passing in the New York Times this morning. In a guest op-ed entitled “Where Have All the Jobs Gone,” former economic advisor to the vice president Jared Bernstein advocates for a return to full employment policy.

We also need a significant, permanent program to absorb excess labor (an explicit part of the Humphrey-Hawkins law). We should consider restarting and rescaling a subsidized jobs program from the 2009 Recovery Act that, though relatively small, made jobs possible for hundreds of thousands of workers.

And we have to reassess our manufacturing policy, including reducing the trade deficit. That means both reshaping our dollar policy — going after competitors who suppress their currencies’ value to get an edge on net exports — and public investments in areas where clean energy intersects with production.

Finally, financial deregulation has become the enemy of full employment: it funnels capital to unproductive parts of the economy, and plays a key role in the “shampoo cycle” of bubble, bust, repeat. Less volatile capital markets mean fewer shocks to the job market.

I find this passage–or at least the last two parts–to be confusing and contradictory. I’ll start with the last part: Bernstein indicts financial deregulation for heightening volatility in the market and contributing to the business cycle, and argues that this process “funnels capital to unproductive parts of the economy.” But Bernstein provides no explanation for this claim, and especially fails to provide proof that it is financial deregulation that might be most responsible.

I definitely don’t disagree that capital is being funneled to unproductive sections of the economy, but why is that? Different schools of thought have different views on this, and Bernstein is certainly not alone in his view that financial deregulation is to blame. But, in my opinion, the cases I’ve seen for this argument are vague and tenuous, and also tend to come from academics who have not had the direct exposure to finance that helps one to understand what purposes it can serve. (When challenged once that he made money only by “moving money around,” a friend of mine in the banking sector responded to the claim by pointing out that supermarkets make money simply by moving goods around). If cash is being moved into unproductive sectors of the economy, there must be a reason.

In Human Action, Ludwig von Mises provides a hypothesis that will be heavily familiar to those interested in the Austrian school of economics. Mises argues that credit expansion, either on the part of banks or of the government via the central bank, makes it appear as though new resources have come into existence by lowering what Mises refers to as the gross market rate of interest. Formerly, when interest rates where high, entrepreneurs restricted themselves to projects that they believed would be profitable even with a rate of interest relatively unfavorable to them. As the gross market rate of interest falls due to the credit expansion, however, more and more projects look profitable, and as a result entrepreneurs begin embarking on these additional projects.

A drop in the gross market rate of interest affects the entrepreneur’s calculation concerning the chances of the profitability of projects considered. Along with the prices of the material factors of production, wage rates, and the anticipated future prices of the products, interest rates are items that enter into the planning businessman’s calculation. The result of this calculation shows the businessman whether or not a definite project will pay. It shows him what investments can be made under the given state of the ratio in the public’s valuation of future goods as against present goods. It brings his actions into agreement with this valuation. It prevents him from embarking upon projects the realization of which would be disapproved by the public because of the length of the waiting time they require.

Credit expansion, therefore, sends a false signal to the entrepreneur. By lowering the gross market rate of interest, credit expansion tells the entrepreneur that the wishes of the public as regards future goods have changed, when they haven’t.

The drop in interest rates falsifies the businessman’s calculation. Although the amount of capital goods available did not increase, the calculation employs figures which would be utilizable only if such an increase had taken place. The result of such calculation is therefore misleading. They make some projects appear profitable and realizable which a correct calculation, based on an interest rate not manipulated by credit expansion, would have shown as unrealizable. Entrepreneurs embark upon the execution of such projects. Business activities are stimulated. A boom begins.

For a number of reasons, Mises continues, the boom eventually and inevitably must come to an end, which is when the recession occurs. Before it does, however, the artificially low gross market rate of interest stimulates malinvestment and apparently productive–but in reality counterproductive–economic processes. I find this explanation to be far more convincing than Bernstein’s.

Of course, credit expansion is not the sole province of the state. Free banks are capable of credit expansion as well, but they risk at least two things: (1) that the fiduciary media they release into the market will come back to them in the form of claims from their competitors and that they, unable to meet these claims with gold, will be revealed as insolvent, and (2) that the public will eventually become aware, through rising prices, of their credit expansion, lose confidence, and bring the bank down via bank runs. Why do neither of these phenomena occur? The answer, in fact, is financial regulation. Banks are almost always granted special contractual privileges during periods of instability that allow them to essentially escape their duties to their depositors, and competing banks are able to coordinate their credit expansion via the action of the government’s central bank. Whether or not you support these activities, it should be clear that regulation as a cause of market volatility is a thesis that is at least worthy of consideration.

But what interests me most about Bernstein’s claim that financial deregulation funnels money into unproductive sectors of the economy, and that it is therefore to be blamed for economic woes, is that it comes directly on the heels of Bernstein’s argument in favor of state-directed assistance towards “clean energy” production. But this is a contradiction: if clean energy requires state assistance in funding, then it is by definition an unproductive venture in the economy. (Yes, a physical product results, but that is never what we mean when we call something “productive.” The body, for instance, produces real fluids, solids, and metabolites every day, but we still call them “waste.”) It is unproductive because not enough consumers value it enough to justify diverting resources toward it; its lack of profitability is an indication that those resources can be used more efficiently elsewhere, as Art Carden elucidated in a brief blog post on Solyndra from several years ago.

One thing that is conspicuously absent from a lot of discussions of policies aimed at creating “green jobs” or providing “affordable housing” is a clear recognition of the information-revealing properties of markets, prices, profits, and losses. The fact that people aren’t willing to put their own money at risk suggests that this or that business plan probably isn’t a very good idea. Interventionism of this sort also involves two inconsistent premises. First, greedy people will do anything to make a buck. Second, those greedy people will leave money on the sidewalk because they are too ignorant to recognize great investments like Solyndra or Associated Steel.

Now, Bernstein could make the claim that, yes, clean energy is unproductive in the sense that it is unprofitable and people don’t value it highly, but these people are mistaken. But then it’s his word against theirs, and he’d have to convince us that he knows well enough that he is justified in using coercion to divert their money towards his preferred projects. And all of this comes back to this point: if wasteful projects are the problem, then clean energy by definition cannot yet be the solution. (Or it can, in which case it will most likely reveal itself as such). The irony here is that Bernstein’s case for market intervention rests on two areas where the market cannot possibly succeed due to…preexisting intervention.

There’s a lot more that could be discussed with the Bernstein piece, but I’ll leave this one as it is for now. Obviously, these arguments probably won’t sway people who aren’t more or less already on board with most of what I write, but I think there are some questions that are worth asking. The biggest ones come in response to Bernstein’s claim that it is financial deregulation that is chiefly responsible for misallocation of resources. Which instances of financial deregulation? How do they contribute to resource misallocation? Do they mark a return to the unhampered operation of the market, or do they open up a vulnerability to a shortcoming of another intervention (such as specie suspension)? And, lastly, is Bernstein’s case more or less persuasive than that of Mises?

Posted in Economics, Fiscal Policy | Tagged , , , , , , | Leave a comment

The Chronicle: What’s Wrong with Bitcoin?

Posted on April 21, 2013 by Hamsterdam Economics

Sorry for the sparse posting; life, as you may know, has been crazy in Boston lately.

I never got around to posting my Chronicle column for this past week, so here it is: What’s Wrong with Bitcoin?

Posted in Economics | Leave a comment

Higgs, Krugman, and Expectations

Posted on April 13, 2013 by Hamsterdam Economics

Robert Higgs is frequently referenced for his idea of “regime uncertainty,” which is the notion that economic recoveries can be retarded by a lack of confidence on the part of the investing class in the presiding government. If the investors fear that the state might take drastic steps, such as neglecting property rights and confiscating wealth, they may choose not to invest their money but rather to keep it out of harm’s reach.

Since World War II, economists, with only a few exceptions, have overlooked regime uncertainty as a cause of the Great Duration for other reasons, such as the availability of standard macroeconomic models whose variables do not include the degree of regime uncertainty and, even if one wanted to incorporate it into an existing model, the absence of any conventional quantitative index of such uncertainty. Somewhat inexplicably, most economists regard evidence about expectations drawn from public opinion surveys as scientifically contemptible.

Paul Krugman, I think, is one of those economists. Although I’ve never seen him reference Higgs or regime uncertainty by name, it’s certainly this idea that he’s caricaturing when he refers to the “confidence fairy.”

This conventional wisdom isn’t based on either evidence or careful analysis. Instead, it rests on what we might charitably call sheer speculation, and less charitably call figments of the policy elite’s imagination — specifically, on belief in what I’ve come to think of as the invisible bond vigilante and the confidence fairy.

Krugman’s idea of the confidence fairy is well-known enough that he believes it will be one of his “lasting contributions to economic discourse.” A commenter on Bill Anderson’s Krugman-in-Wonderland blog, however, sees a double standard between the way that he treats regime uncertainty/the confidence fairy and Krugman’s own ideas about how to stimulate an economy when conventional monetary policy is no longer an option.

Did you see a recent post on his NYT Blog…

http://krugman.blogs.nytimes.com/2013/04/11/monetary-policy-in-a-liquidity-trap/

He writes:

“…haven’t I been arguing that monetary policy is ineffective in a liquidity trap? The brief answer is that current policy is ineffective, but that you can still get traction if you can change investors’beliefs about expected future monetary policy – which was the moral of my original Japan paper, lo these 15 years ago.”

How is this not a “fairy” of sorts? Like, perhaps an “expectation fairy” to go along with the “inflation fairy”. Since he favors them over the “confidence fairy” it seems he is dictating that only government-directed stimulus can generate the positive feedbacks in the private sector to get the economy going, while private-sector origins will always hang back and stash cash in mattresses and dividends until, well, it doesn’t…

I had never considered this before, but it seems like a worthy point. Krugman for his part has responded to this criticism before, though.

Some readers have asked whether there isn’t an inconsistency between my view that the Fed can promote economic recovery by changing expectations about future policy, and my ridicule of austerity proponents who invoke “confidence” as a reason to believe that austerity will actually be expansionary. But there isn’t really any inconsistency; it’s an orders of magnitude thing.

What the expansionary austerity types are claiming is that the indirect effect of austerity on confidence will outweigh the large direct depressing effect of cutting government spending now. That’s a very tall order…

By contrast, expectations-based monetary policy has no direct effect on the economy today, so any positives from expectations make it favorable over all. You don’t have to believe that the effects are really big to believe that they might be there.

Although Krugman does include a link to a New Keynesian model supporting this idea in the space I omitted from my quote, I have to confess that I do not find this explanation to be particularly convincing in any way. Perhaps he feels he has done the work elsewhere, and that interested parties can find the support for his position there, but other than that almost every element of this blog post is assumption based.

Posted in Economics | Tagged , , , | Leave a comment

The Chronicle: Open Access Academia

Posted on April 10, 2013 by Hamsterdam Economics

My column in the Chronicle this week deals with some of the same open access issues I discussed in my last blog post, but this time with more interesting facts on retractions in major publications and the success of the PLOS ONE platform.

Enjoy!

Posted in Uncategorized | Leave a comment

Henrietta Lacks and Genomic Property Rights

Posted on April 4, 2013 by Hamsterdam Economics

Many of you may be familiar with the story of Henrietta Lacks. Lacks was a poor African American woman who died of ovarian cancer in 1951, and whose cells (specifically, her tumor cells) were taken and immortalized for the scientific study.

At the time, obtaining patient consent for such a practice was not standard as it is now, and no such consent was obtained in the case of Lacks, whose cells have become known as HeLa cells and can be used for any number of things. HeLa cells, as any cancer researcher will already know, are practically ubiquitous in laboratory research, making obtaining retroactive consent from Lacks’ family a difficult practical issue for a number of reasons.

In 2010, Rebecca Skloot wrote a book about the Lacks case, entitled The Immortal Life of Henrietta Lacks. Although I have yet to read Skloot’s book, my understanding (correct me if I’m wrong) is that she comes down firmly on the side of the Skloot family, and that she at least implies, if not states outright, that the practice of using biological material of a patient without consent from them or their next of kin is highly suspect.

Recently, the HeLa cell line had its entire genome published, which prompted Skloot to write an editorial in the New York Times.

The family has been through a lot with HeLa: they didn’t learn of the cells until 20 years after Lacks’s death, when scientists began using her children in research without their knowledge. Later their medical records were released to the press and published without consent. Because I wrote a book about Henrietta Lacks and her family, my in-box exploded when news of the genome broke. People wanted to know: did scientists get the family’s permission to publish her genetic information? The answer is no.

Michael Eisen, a biologist at UC-Berkeley whose speech on open access publishing I made a post about last night, wrote an interesting response to Skloot on his blog. Eisen argues that the practice of obtaining and utilizing biological material from patients without consent is undoubtedly wrong, and that every effort should be made to distance lab work from cell lines obtained in such a way. There, he and Skloot agree.

To me, there really is no moral question here. We should not be using HeLa cells because no consent was obtained to take them. And I am very uncomfortable with the general idea that heirs/descendants should be allowed to retroactively consent for a dead relative. Nothing that can happen now or in the future can make up for the lack of real consent. But whether they should be used or not, these cells are being used all over the planet. Given that this is unlikely to change, there’s really no choice but to de facto give the Lacks family a kind of proxy consenting power to act on Henrietta’s behalf.

Eisen, however, sees a difference between that issue and the problems that Skloot and others have with publishing the genome of a cell line taken from an individual who has relatives with something to lose.

Skloot’s piece glides from the issue of how to retroactively get Henrietta’s permission to experiment with and publish about her cells to the seemingly related  issue of whether publication of the HeLa cell genome is an invasion of the privacy of Lacks’ living relatives. Skloot repeatedly raises the issue of all the things we can learn about an individual and their relatives by sequencing their DNA, and whether family members should have some kind of veto power over the publishing of a relatives genome.

But this is a very different than the question of how to obtain consent from an individual who is not longer alive. To see why, lets stipulate that Henrietta Lacks had consented to all these studies – had, in sound mind, given permission for the doctors to take her cell lines, establish cultures, send them around the world to be used for any purpose and to freely publish the results of any studies on these cells. Would you still require the authors of the paper to consent Lacks’ family?

Skloot clearly thinks the answer is yes – positing that publishing any individual’s genome sequence is intrinsically   an invasion of the privacy of their relatives –whether or not the sequenced individual consented to the process.

There are, as Eisen points out, two issues at play here. (1) If I die and my cells are taken and used without my consent, can the future consent (or lack thereof) of my heirs be used as a meaningful proxy, and (2) If I decide to publish my genome, can my family members (whose genetic information will be similar to mine) stop me, because they are interested in maintaining the confidentiality of their own genetic material?

Although Eisen agrees with Skloot on the first, he disagrees with her on the second.

Some of you (not me) may think that a family’s right to genetic privacy trumps the right of an individual to publish their genome.

The death of the individual in question, and the retroactive publishing of their genome without consent, muddles the issue, so let’s stick with the following question: could I try to publish my genome without the consent of my family?

I have to agree with Eisen on this one, and not just only because I tend to be more of an individualist than most other people I encounter. First of all, the grounds that people use for arguing in favor of genome secrecy are ones–life insurance, disability coverage, etc–that I do not find entirely convincing for a number of reasons. For one thing, insurance companies are modeled for an older system, in which access to such information was not only impossible, but probably inconceivable. If our health care system is allowed to grow and keep up with the times, it’s possible that genomic information could be used to lower health care costs rather than to shut people out of insurance. This may be a long ways off, but I think it’s important not to get tunnel vision when considering such a big issue. (On a related note, I also tend to favor moving away from insurance as a model for all health care purchases, which I think would also help to alleviate objections to open genomes.)

For the moment, though, we do have an insurance-based health care system, so perhaps we should stick to arguments pertaining to today.

Surprisingly, I find Walter Block’s stance on libel, slander, and blackmail to be somewhat instructive here:

What is a person’s “reputation?” What is this thing which may not be “taken lightly?” Clearly, it is not a possession which may be said to belong to him in the way, for example, his clothes do. In fact, a person’s reputation does not “belong” to him at all. A person’s reputation is what other people think of him; it consists of the thoughts which other people have.

A man does not own his reputation any more than he owns the thoughts of others–because that is all his reputation consists of. A man’s reputation cannot be stolen from him any more than the thoughts of others can be stolen from him. Whether his reputation was taken from him by fair means or foul, by truth or falsehood, he did not own it in the first place and, hence, should have no recourse to the law for the damages.

What then are we doing when we prohibit, or object to, libel? We are prohibiting someone from affecting or trying to affect the thoughts of other people. But what does the right of free speech mean if not that we are all free to try to affect the thoughts of those around us? So we must conclude that libel and slander are consistent with the rights of free speech.

Now, Block’s position is certainly a provocative one, and I’m not here to either endorse or condemn his views on libel, slander, and free speech. What I am suggesting, however, is that we consider Block’s desire for departing from society’s normative position on a given issue and instead try to determine what is really, in logical terms, going on.

If I make the decision to publish my genome, for instance, and my family objects, I would likely hear their objections and possibly change my attitude. If I do not, however, one of my relatives might press a little harder: think about what this could do, they may argue, to their chances for obtaining life insurance, or some other related necessity.

But what is, a la Block, really going on here? What is really going on is that my relative is trying to keep her genome a secret, because she worries that the truth about her genome could convince a provider of a service not to accept her as a client. Basically, she worries that publicly available information about our partially shared genome could preclude her from receiving property, in the form of benefits or payments, from someone else.

Some people feel that this is justified. Health care is, or should be, a human right, they might argue. Since it is not provided, it might then be justified to obtain it by any means possible, and the benefits or payments from an insurance company might be considered the rightful property of the beneficiary. I’m not going to endorse or reject this view, but simply going to point out that no agreement can be made on this issue until all the terms and variables have been defined. If you believe those benefits are your human right, then you probably come to a different conclusion on this issue than those who believe that health care is not and can never be a human right, since your position on this issue shifts the locus of the property rights involved.

In fact, although the familial issues involved might be very complicated, the property rights of genome publication have some other basic and interesting corollaries. Consider, for example, Stephan Kinsella’s position against intellectual property, which states that since ideas are infinitely reproducible they cannot legitimately be called property. I think a similar issue could be seen to apply here: publishing my genome in no way precludes my relative from access to hers. I am not physically depriving her of all of the biochemical materials that make up her genome, or of her ability to do with that physical material as she pleases. I am simply making information publicly available, which she worries could affect the decisions of others as to how to distribute their property.

There is a lot more that can be said on this; nothing can be concluded, however, without a more basic conversation on the nature of the intersection between body, health, and property.

Posted in Healthcare | Tagged , , , , , | Leave a comment

Open Access Academia

Posted on April 3, 2013 by Hamsterdam Economics

UC Berkeley and HHMI investigator Michael Eisen posts a speech he recently gave to the Commonwealth Club in San Francisco on the topic of open access publishing in scientific research. Eisen, who along with others worked to found the PLoS family of online, open access scientific publications, knows his stuff, and the speech is well worth reading in its entirety.

Eisen gives some background on the history and development of peer-reviewed journals in scientific research in order to demonstrate that the vast majority of these journals are still laboring under a business model that made sense at the time of their conception, but which seems old, outdated, and, frankly, a bit ridiculous today.

Most people date the birth of the modern scientific journal to the middle of the 17thcentury, when the Royal Society in England took advantage of the growing printing industry to begin publishing proceedings of their meetings for the benefit of members unable to attend, as well as for posterity.

But scholarly journals as we know them were really a product of the 19th century, when growing activity and public interest in science led to the creation of most of the big titles we know about today: Science, Nature, The New England Journal of Medicine, The Journal of the American Medical Association and The Lancet published their first editions in the 1800’s.

They had noble missions. For example, the preface to the first edition of Science in July 1880 stated that its goal was to  “afford scientific workers in the United States the opportunity of promptly recording the fruits of their researches, and facilities for communication between one another and the world”.

Like their predecessor, these journals were enabled by the technologies of the industrial revolution – steam powered rotary printing presses and efficient rail-based mail service. But they were also severely limited by them. Printing and shipping articles around the country and the world was expensive, and because of this, two key features of modern journals were established.

First, journals limited what they printed, choosing for publication only those works deemed to be of the greatest interest to their target audience. And second, they sold subscriptions – sending copies only to those who had paid. While intrinsically restricting, this business arrangement made sense. Every printed copy of a journal incurred a cost to the publisher, and charging readers meant revenues scaled with costs.

As science grew, so too did science publishing, with increasingly specific journals emerging to cater to new disciplines. By 1990 there were around 5,000 scientific journals in circulation, all of them printed and shipped to subscribers. And the costs were skyrocketing. If you were lucky enough to be at a major research university, you could find most of these journals in the library. But most scientists had to make do with a small subset – whatever their library could afford. And the public was all but completely shut out.

Then along came the Internet.

Scientific journals, serving a computer savvy audience with access to fast Internet connections through universities, were amongst the first commercial ventures to take advantage of this new technology. Within a few years – from 1995 to 1998 – virtually all major publishers put versions of their printed journals online.

But in doing so they made a crucial and fateful choice. Rather than adopting their business model to the new medium, they stuck with the same subscription-based system that they used for their print journals. And why not – so long as scientists were still giving them papers, and universities were buying them back, it was a great business. An even better one given that they no longer had to pay for printing and shipping.

But with this major shift in the means of dissemination, what was once a common sense way for publishers to provide a valuable service while dealing with the limitations of available technology became an irrational impediment to achieving this very goal.

Eisen then goes on to argue that the biggest problem with set-up is that journals tend to do a minimal amount of the start-to-finish work involved in the conception, design, and publication of a scientific paper, but reap an outsized benefit.

Take your typical scientist at my home institution – the University of California Berkeley. She draws a salary from the state of California, and works in a building funded by the state. When she has a new idea, she goes out and raises money to buy equipment and supplies and to pay the salaries of the students and staff who will actually do the work. In all likelihood this money will come from the US government – through agencies like the NIH or NSF. And if not from them, from a public minded non-profit or foundation like the Howard Hughes Medical Institute that funds my lab. This scientist and her students then spend a great deal of time – usually years – pursuing the idea, until they finally have a result they want to share with their peers.

So they sit down and write a paper describing why they were interested in the question, what they did, how they did it, what they found, and what they think it means.

And then they hopefully submit it to one of the 10,000 journals currently in operation – choosing based on scope and importance. With few exceptions, these journals work the same way. The paper is assigned to an editor – sometimes a salaried professional, but usually a practicing scientist volunteering their time. They read the paper and decide who in the field is in the best position to evaluate the authors’ methods, data and conclusions. They send the paper to these scientists – who again are volunteering their time as a service to the community – who read it and render their opinion on the paper’s technical merits and suitability to the journal in question. The editor looks at all these reviews and decides whether to accept, modify or reject the work. If the paper is accepted, the journal takes the manuscript, converts it into a publishable form, and posts it on the web. If the paper is not accepted, the scientists either go back and do some more work and rewrite the paper, or they send it to another journal, triggering a complete reprise of the entire process.

I want you to note just how little the journal actually does here.

They didn’t come up with the idea. They didn’t provide the grant. They didn’t do the research. They didn’t write the paper. They didn’t review it. All they did was provide the infrastructure for peer review, oversee the process, and prepare the paper for publication. This is a tangible, albeit minor, contribution, that pales in comparison to the labors of the scientists involved and the support from the funders and sponsors of the research.

And yet, for this modest at best role in producing the finished work, publishers are rewarded with ownership of – in the form of copyright – and complete control over the finished, published work, which they turn around and lease back to the same institutions and agencies that sponsored the research in the first place. Thus not only has the scientific community provided all the meaningful intellectual effort and labor to the endeavor, they’re also fully funding the process.

Universities are, in essence, giving an incredibly valuable product  – the end result of an investment of more than a hundred billion dollars of public funds every year – to publishers for free, and then they are paying them an additional ten billion dollars a year to lock these papers away where almost nobody can access them.

It would be funny if it weren’t so tragically insane.

Eisen notes that the long waiting time involved in publishing scientific papers is, for one thing, hazardous to health. Each extra month a paper with an important breakthrough spends in review is an extra month that its findings aren’t being put towards developing treatments or findings that could have a positive impact for the public. On top of that, our reluctance to leave closed-access publication behind also skews the field in favor of those who have the resources either to pay for these materials, to attend institutions that do, or who otherwise have access to luxuries like the top peer-reviewed journals.

Since Eisen himself has been a pioneer in open access scientific publications–he is a well known biologist, and has published all of his studies in open access format–he is perhaps best at discussing the ways in which such a format might work.

In 2007, PLOS launched a new journal – PLOS ONE – that not only provided open access to all of its content, but also dispensed with the notion – central to journal publishing since the 17th century – that journals should select only papers of the highest level of interest to their readers.

Rejecting papers that are technically sound is a relic of the age of printed journals, whose costs scaled with the number of papers they published and whose table of contents served as the primary way people found articles of interest.

But we are no longer limited by the number of articles we can publish, and people primary find papers of interest by searching, not browsing. So PLOS ONE asks its reviewers only to assess whether the paper is a legitimate work of science. If it is, it is published. The process is relatively simple – no need to ping pong from one journal to another in order to find the highest impact home.

This idea evidently appeals to the scientific community, because PLOS ONE has grown rapidly. It will publish in excess of 25,000 articles this year, and though only five years old, it is now the biggest biomedical research journal in the world. And it publishes great science – PLOS ONE articles are routinely talked about both by science journalists and the popular press.

And PLOS ONE has not just been a success as a journal, but also as a business, turning a profit that has not only put PLOS on solid financial footing, but attracted the eye of commercial and non-profit publishers worldwide. In the past year several PLOS ONE clones have been launched and there is broad consensus that this sector will grow and ultimately dominate scientific publishing.

He does a good job of selling his idea, so why doesn’t it fly? (Or, well, I guess the question I should be asking is why the whole world hasn’t bought into it and transitioned to open access publications?) In most areas, the easy answer to this would be money. Somebody somewhere is making money, so that’s why things aren’t changing. And that is, to a point, true here too. But the bigger motivation is prestige.

Academics feel themselves notoriously poorly paid, and so prestige plays a very large role in how they perceive themselves. Since they do not bring their work directly to market and therefore cannot be validated by consumers, academics tend to place importance on how they are received by their like-minded peers and competitors. It is this motivation, Eisen argues (and I agree), that largely stands in the way of open source publications.

Many scientists go their entire careers without a publication in Cell, Science, or Nature, and a rare few publish there regularly. A substantial collection publish in these journals sparingly, and just a few appearances from any of them on a resume can go a long way not only toward tenure and promotions, but toward recognition from peers. As silly as this sounds to outsiders, the effects are real, and it’s difficult not to get caught up in once you find yourself immersed in the field.

Academia is an industry of prestige, and the currency in which prestige is traded is journal titles. In most scientists’ minds, a publication in an elite journal like Nature or Science is as good as gold – a ticket to a job, grants and tenure. And the allure of these publications is so high that most scientists continue to choose journals based entirely on their prestige, even while they acknowledge that their business practices are bad for science and the world.

Realizing that our biggest obstacle was overcoming the prestige of established subscription based journals, PLOS launched with two journals that adopted the same elitist editorial policies of Science, Nature and their ilk – PLoS Biology for basic life sciences and PLoS Medicine for the clinical world. We hired professional editors from others in the industry, built fancy editorial boards and had a suite of Nobel Prize winners singing our praises.

But prestige is a difficult thing to engineer. Colleagues, friends and even family members would stipulate all the flaws in the current system and praise what we were doing, but, when they had a high profile paper, would turn around and send it to the same old subscription journals. It was a very frustrating experience.

I’d like to say that I understood why they made these decisions. But I didn’t. I thought – and still think – they were just being cowardly. And when I suggested they were being chickens by sending papers to Science or Nature they would complain that they couldn’t because their jobs – or their trainees jobs – were at stake.

I didn’t think they were right. But the truth is that I didn’t have a lot of evidence to show them. At the same time we were starting PLOS, I was starting my own lab in Berkeley. Senior colleagues, knowing about my extracurricular activities, took me aside and warned that I would never get grants or tenure if I didn’t publish my work in the old guard high profile journals, and that I would ruin the careers of my trainees if I put my principles over practical realities.

I didn’t want to believe them. I wanted to believe if I did good work people would notice. I wanted to believe that success in science did not require capitulating to stupid, destructive traditions. I also knew I’d look like a total hypocrite if I failed to live up to my own exhortations.

So I made a commitment that every paper from my would go to journals that made them freely available from day one. And, over 13 years, I have stuck completely to my pledge. And you know what? The sky didn’t fall. I got grants. Then I got a tenure track job at Berkeley (I had started out at the National Lab up the hill). Then I got tenure. And then I was named an investigator with the Howard Hughes Medical Institute – a coveted award that now funds most of my research. And the people in my lab have not suffered either. My graduate students have received fellowships and gone on to land plum postdoctoral positions – except for the one who went to Face Book and is now a millionaire – and my postdoctoral fellows have all gotten faculty positions at good schools.

I’m no expert, but I tend to agree with Eisen. It seems to me that as the next generation or two of scientists comes up into the labs, acceptance of open access publishing will tend to grow. Of course, that will take a commitment towards bucking prestige and opting for those open access journals, but a small amount of something like that can easily snowball.

Posted in Uncategorized | Tagged , | Leave a comment

The Chronicle: But It Might Work For Us

Posted on April 3, 2013 by Hamsterdam Economics

A follow-up to my post last night on the assignat inflation in France at the end of the 18th century, my column today is entitled “But It Might Work For Us” (see last night’s post for source material).

Posted in Economics | Leave a comment

All of This Has Happened Before…

Posted on April 2, 2013 by Hamsterdam Economics

I’m going to spoil tomorrow’s Chronicle column with this, but it’s too good to keep just to myself.

Late one night last week, I found a book called Fiat Money Inflation in France, written by a man named Andrew Dickson White. White was a co-founder of Cornell University and a fierce opponent of fiat money systems. His book, as far as I gather, was compiled from a series of talks he had given before influential people urging them against fiat money and its inflationary tendencies.

As far as the book goes, White sticks to discussing the phenomenon of the “assignat” in 18th century France. In 1720, France experienced a severe recession at the hands of John Law and the inflationary fiat money crack-up for which he was responsible. Later, after the French Revolution, the nation found itself severely indebted and with a desire for an easy way out of its economic problems. Their basic solution, after haggling for some time with advocates of specie and hard money, was to create a paper money system backed by lands seized from the Roman Catholic Church.

These bills, known as “assignats,” were to be issued one time, in a sum bearing value equal to 400 million French livres and at a rate of interest of 3 percent. White details the way in which this one time issuance gave way to a second flood of 800 million assignats, after which the French swore that the net total assignats in circulation at any given point in time could not exceed the already issued 1.2 billion assignats. Of course, six months after this, another 600 million assignats were issued. You can see where things go from there.

What is most remarkable about White’s book, though, is how closely the comments of the supporters of the assignats–whom I would like to call “assignatistas”–resemble what is said today by supporters of loose monetary policy. I’ll include just a few examples.

Paper money under a despotism is dangerous; it favors corruption; but in a nation constitutionally governed, which itself takes care in the emission of its notes, which determines their number and use, that danger no longer exists.

[We will be] delivered by this grand means from all uncertainty  and from all ruinous results of the credit system…[it] would bring back into the public treasury, into commerce and into all branches of industry strength, abundance, and prosperity.

These assignats, bearing interest as they do, will soon be considered better than the coin now hoarded, and will bring it out into circulation again.

[The assignat] will supply a circulating medium which will protect public morals from corruption.

If it is necessary to create five thousand millions, and more, of the paper, decree such a creation gladly…[they] are the only means to insure happiness, glory and liberty to the French nation.

If gold has been hoarded through timidity or malignity, the issue of paper will show that gold is not necessary, and it will then come forth.

Citizens, the deed is done. The assignats are the keystone of the arch. It has just been happily put in position. Now I can announce to you that the Revolution is finished and there only remain one or two important questions. All the rest is but a matter of detail which cannot deprive us any longer of the pleasure of admiring this important work in its entirety. The provinces and the commercial cities which were at first alarmed at the proposal to issue so much paper money now send expressions of their thanks; specie is coming out to be joined with paper money. Foreigners come to us from all parts of Europe to seek their happiness under laws which they admire; and soon France, enriched by her new property and by the national industry which is preparing for fruitfulness, will demand still another creation of paper money.

That’s just in the first twenty pages. More to come in tomorrow’s column!

Posted in Economics | Tagged , , , | Leave a comment