What Should Government Do?

What Should Government Do?

On the Fox News Channel the 6 pm – 7 pm show is “Special Report with Bret Baier.”  The last twenty minutes or so is a roundtable discussion called the “Fox All-Stars.”.   It has four individuals including Mr. Baier as moderator.  On a show in May the discussants were Tucker Carlson, Kirsten  Powers, and Charles Krauthammer.  Mr. Carlson made an observation about the proper role of government in our lives.  His position, as I recollect, was that it should be reduced because it is philosophically wrong to say nothing of its abysmal track record.  Ms. Powers disagreed, believing that government can be a force for good.  They went back and forth on this issue for a few minutes.

It got me thinking about the proper role of government and  at which level: local, state, or federal;  any such activity should take place.  My belief, similar to Mr. Carlson’s, is that the influence and intrusiveness of government in our lives should be drastically reduced.  The incentives facing government employees are to expand its sphere of influence.  They need to have people in distress, the more the better.  This translates into bigger budgets and more control.  On the other hand, private charities engage in a form of triage.  They rank order those in need so that resources tend to go to those in the most dire straits.  They do this because their resources are limited; simply put,  they can’t print money.  In order to induce people to contribute they must show that the funds are well spent.  At the same time, their approach causes the  demands on them to be smaller than those on government agencies because they “size up”, if you will, those who request help.  Government agencies are notoriously lax in doing so.  A pulse is usually all that is required, sometimes that isn’t even necessary.  Today, there are close to eleven million people on disability in this country, even as the economy becomes more service-oriented and manufacturing has become safer.  Would these same people who have no qualms about taking funds from the ‘government’ be as likely to take money from their fellow citizens if they had to get it via the Red Cross, the Salvation Army, Catholic Charities, etc.?  I doubt it.

Even if one believes that government should do many of the activities it does the question arises as to which level of government should do it. Again, it is my belief that as much as possible should be done at the local level.  Welfare reform in the mid-1990s resulted in major programs being transferred to the states.  By all accounts this reform of the welfare system was a resounding success.   On the other hand we have the spectacle of FEMA and not just Katrina’s debacle.  If a tropical storm trashes beach houses built in areas that are susceptible to storms like coastal beaches, FEMA will rebuild homes in the same spot as they went down.   There are instances of houses being rebuilt at taxpayer expense multiple times.  Why should someone from Montana or the Upper Peninsula of Michigan which get snow storms and manage to take care of themselves subsidize this behavior?    Does anyone think that a program overseen and funded locally would be as generous as a federal government bureaucrat is in enabling that sort of behavior?  Of course not.  They are close to the scene and recognize risky behavior.  Folks at the federal level don’t have the same incentive because it isn’t their money in any meaningful sense.  As Milton Friedman has pointed out: I would spend your money on a third party with minimal regard for the results.

While doing things at the state level are superior to doing them at the federal level, it still leaves much to be desired.   I live in Western NY.  The politicians in Albany are predominantly from the New York City area since the bulk of the state’s population lives there.  Policies enacted in Albany are standardized for application across the State.  Seems reasonable, however, in practice this means one size has to fit all.  Needless to say, this can lead to serious waste as officials follow the playbook irrespective of the logic of doing so.  They don’t have the flexibility of adapting to local circumstances.

We, also, have the spectacle of state officials around the country signing up people for food stamps because they view that as a way to bring federal funds into their state.  The long-run implications of making people less independent seems to be irrelevant to them.  It is doubtful that this would occur if the funds were taken solely from one group of residents in the state to hand over to another.  Or, even better, from citizens of the same county to others in the county.   Again, local agencies and, especially, private ones are much more cognizant of the harm that will be done by subsidizing people , making them dependent on handouts, to say nothing of the disincentives they are creating for those taxed to continue producing at the same rate.

As a taxpayer, one has little real influence on how tax dollars are spent doing “good”.  On the other hand, if one doesn’t like the way a certain charity is spending the funds entrusted to them, it is very easy to stop supporting them.  They know this and, invariably, spend their funds as judiciously as possible.  If they don’t their reputation will be tarnished and contributions will dry up.  Private institutions more closely reflect the values of the community they serve.  Funds will be spent most wisely.  The only thing one can say about government programs is that they will spend lots and lots of money, with outsized portions on overhead.  Because of that one can be sure the government programs will be wasteful in the extreme when compared to a private sector provider.

Cycling back to Ms. Powers’ view, while we can see the “fruits” of government spending that doesn’t tell the whole story.  Five or six years ago the Congress was embarrassed into not funding the so-called “bridge to nowhere.”  This was a very expensive bridge to an island in Alaska that was home to a few hundred people (who had made the decision to live there knowing it didn’t have bridge.)  If the bridge had been built people would have admired the engineering prowess involved.  They wouldn’t have stopped to think about all the things that weren’t built which represent the true cost of the bridge.  Government officials loves to build things because they can put plaques with their names on it.  I believe the only plaque on any government building that isn’t dedicated to the members of our armed forces should read: paid for by the taxpayers.

In the final analysis the only reason to do something through government is that it can do it less expensively than the private sector. On this basis, government’s role in our lives would be reduced dramatically.  As it should, in my opinion.

Gun Control: Be Careful of What You Wish for (with an update).

Wilson, NY, is a rural community located on the southern shore of Lake Ontario about 70 miles west of Rochester and 12 miles east of the Niagara River.  It was the scene of a tragedy on July 24, 2012.  A home blew up and was totally destroyed.  It looked as if a tornado had come through.  It hadn’t.  The cause was a propane leak.  The 14-year old daughter of the owners died.

What does this have to do with gun control you may ask; a lot, actually.  Some of the worst incidents: the April 20, 1999, Columbine, CO, shooting which left 13 dead and the July 20, 2012, Aurora, CO, which left 12 dead, in particular; were done by individuals who were bound and determined to cause as much carnage as they could.

At Columbine, Eric Harris and Dylan Klebold used a TEC pistol, a shotgun, 99 explosives, and 4 knives.  One of their weapons was a propane tank that had nails taped to it.  Fortunately, it didn’t function as planned and didn’t explode.   As I pointed out above, propane can create quite an explosion.  From Harris’ writings it was clear he intended to kill and maim as many as he could.  If had been unable to get hold of the pistol and the shotgun he would have devoted more effort to ensuring that the propane alternative worked.  In the school cafeteria where the shootings took place the death toll would have been much greater if the propane tank had exploded.  While no one, least of all me, wants minimize the loss of life caused by these disturbed individuals, it is fortunate that they had obtained the pistol and the shotgun: these are lousy ways to kill lots of people.  Propane tanks are far more deadly.

In Aurora, the alleged perpetrator used tear gas to cause confusion.  He had also booby-trapped his apartment.  The apartment held more than 30 homemade grenades, wired to a control box in the kitchen, and 10 gallons of gasoline. The bombs themselves weren’t sophisticated but the layout was.  Ten gallons of gasoline exploding in the apartment would have brought the whole building down with a consequent loss of innocent life.  Here, again, we find an individual who was determined to kill and maim as many as possible.  He used a rifle with a 100 round magazine.  It jammed, fortunately. He wasn’t aware that those drums are really designed so you don’t have to reload as often when shooting at a rifle range.  Attempts to fire rapidly cause them to jam.  The intricate trap set in his apartment is clear evidence that he would have opted for explosives if he couldn’t have obtained a rifle.

If we go back in time to May 18, 1927, we can see the slaughter caused by explosives.  A Mr. Andrew Kehoe was annoyed about rising property taxes (join the club!) and his deteriorating financial position.  First, he blew up his farmhouse, then turning his attention to the local school he detonated dynamite and hundreds of pounds of pyrotol, an incendiary explosive used by farmers at the time, which he had secretly planted inside over a period of time.  Thirty-eight people were killed, mostly children, in this blast.  As people rushed to the school, Kehoe came in his car which he had filled with scrap metal, shrapnel, and detonated a bomb that was inside his vehicle, killing himself and others. During rescue efforts searchers discovered an additional 500 pounds of unexploded dynamite and pyrotol planted throughout the basement of the school’s other wing.

My point is that more onerous gun control laws will not stop the carnage.  Ninety-nine plus percent of gun owners are law-abiding who would never consider doing anything like these acts.  They are outraged by them.  People intent on doing these types of abominable acts, though, will find a way to do them.  Guns have been around for hundreds of years.  They were made mainly by hand up until the mid-1800s.  Any tool and die maker worth his salt can make one in a garage shop.  Gun control laws, then, will only impact those who would never use who would never use them irresponsibly in the first place.

Let’s assume we do enforce draconian gun control measures, then what.  There will still be individuals who have some perceived gripe against society.  They will find a way to “get even” as we can see by the Columbine killers’ diaries or the actions of Mr. Kehoe in Bath.  What then? Are we going to outlaw gasoline or propane next?

Earlier this year an individual bought a knife in a store in Salt Lake City and started stabbing people.  A bystander who had a concealed carry permit witnessed the attacks.  He drew his pistol and challenged the knife-wielder who decided bringing a knife to a gun fight wasn’t a winning proposition.  He was arrested.  Are we going to outlaw steak knives, too?  How about cars?  They have been used before and probably will be used again to mow down people the driver has a grudge against. Where will it stop?

We have learned that Harris and Klebold had been rather explicit about their intentions and attitudes on their website.  The authorities were knowledgeable about the increasingly deranged and deadly postings.  Nothing was done.  On January 8, 2011, U.S. Rep. Gabby Giffords was shot and injured while six people were killed by Jared Loughner.  It is clear that Loughner had serious mental problems but the authorities did nothing.  James Holmes, the alleged Aurora killer, also has serious psychiatric issues.  The common thread is that we, society as a whole, have made it extremely difficult for mental health professionals to inform authorities of their concerns without violating the rights of their patients.  The threshold for committing someone to a psychiatric hospital is quite high these days.  We believe that this is a good thing; we don’t want unscrupulous individuals getting rivals incarcerated just to be rid of them.  This stance, though, has a cost.  Every so often someone will commit a heinous act.  There needs to be a mechanism whereby a medical professional can relate their concerns to the proper authorities similar to getting a warrant.

Today, we have NYC’s mayor, Michael Bloomberg, the representative from the nanny state, posturing for more gun control laws.  NY senator Charles Schumer, never one to pass up any TV exposure, wants more laws.  Layering on more ineffectual gun control laws by preening politicians who are urged on by sanctimonious, self-righteous, and ignorant editorial page writers and even less-informed letters-to-the-editor writers will not make a dent in the problem, much less solve it.  There will always be evil people.  Don’t disarm the good people thinking it will make a bit of difference, it won’t.  If the laws are passed, what do you tell the families of future victims, as there assuredly will be,  after it is clear that the laws did nothing.  Rest assured, a sense of complacency will set in with people thinking  “now we are safe.”  Why?  Because the government said so.  Oh, Gertrude!.  More competent regulations in the treatment and control, if you will, of the mentally  disturbed need to be enacted regardless of whether or not they offend the ACLU?  Results matter, not sophomoric symbolism.

Update 8/7/12

Sunday we awoke to the news that a white supremacist had killed six people at a Sikh temple.  The shooter who was killed by a police officer was a member of a neo-nazi rock band.  Described as a “frustrated neo-Nazi,” Page started a “racist white-power” band called  End Apathy in 2005, according to the Montgomery, Alabama-based Southern Poverty Law Center, SPLC.  It said it had been tracking Page for a decade.

Of course, we also witnessed NYC mayor Michael Bloomberg frothing at the mouth, demanding more gun control.   (There have also been reports of killings and maiming with knives but we don’t hear calls to ban knives.)

These killings are a tragedy.  Before we succumb to the mayor’s vision of a more perfect world, though, we need to reflect on the implications.

Drugs are illegal and have been for 75 or more years.  The result has been to spawn a thriving illegal business in importing them and manufacturing them illicitly.  Turf wars between drug dealers account for most of the shootings in America.  When alcohol was illegal in the 1920s the results were similar.

Today, the U.S. has no problem with contraband guns entering the country or the illegal manufacture of them here.  Does any sentient person believe that we could stop the flow of guns if it became lucrative for the bad guys to do so?  Of course not.  We can’t stop the flow of illegal aliens into the U.S.   Guns, especially handguns, can be disassembled and brought over piecemeal and reassembled here.  The costs of trying to interdict this would blow even bigger holes in our budget.  As noted above, any tool & die maker can make guns in his garage.

There is an alternative.  Encourage more people to obtain concealed carry permits.  Most of the thugs who are killing people would think twice if there was the possibility that a potential victim would shoot back.  John Lott’s book, “More Guns, Less Crime, 3rd ed.” documents this.  The police can’t protect us all of the time, in fact, they can’t protect us very much, at all.  It’s not their fault; it is just reality. By making more people able to defend themselves, we are  increasing the amount of effective security.

Again, we need to think before we jump onto the “more gun control” bandwagon.  It will make things worse.

Posted by Jim

The Pygmalion Syndrome

Several readers have asked why I haven’t posted for a while. Rather than admit simply that I had nothing to say, I claimed to be busy with class notes and my draft manuscripts. I was aroused to pen this when I heard a babble head doll on a business program going on about the need to accelerate management change in US industry. This brought back memories of the golden age of change management during my consulting days. The note is drawn in part from the draft chapter on Nature vs. Nurture that Jim and I are working on for the business economics book.

The Pygmalion Syndrome describes change management theories and related efforts to create designer corporations. Formal change management efforts rarely succeed and often destroy more value than they create. These efforts are typically the product of management hubris, a shallow understanding of the evolutionary co-development of organizations with their environment, and a lack of respect for the learning and experience embodied in a firm’s routines. Routines comprise the practices and know-how that define how the firm converts inputs into something of value that it offers to the market. A firm, especially an established firm, is the result of an evolutionary process of adaptation and environmental adoption. The firm’s routines, which environmental economists Nelson and Winter liken to genes because they are replicable, persistent, and selectable define the firm and the products that it offers to the environment for selection. It is the routines that make the product possible that are selected; just as it is the cheetah’s genes that make it faster than some gazelles, not the speed per se, that are selected. In this sense, the firm has been changing from birth and has survived because the environment has selected its routines from among the many rival offerings. This is a joint process involving both nurture and nature; man nurtures a firm or set of routines by seeking advantage relative to rivals and alignment with the environment or nature which makes the final decision.

One of management’s most important jobs is of course to guide the creation and adaptation of routines to align better with the environment. The problems come when management tries to impose a design (complex of routines) dramatically different from the existing structure of routine and out of harmony with the environment. These are often vanity organization designs intended to shape the firm to reflect better the chief executive’s tastes or pretentions. The failures that result are yet more evidence of man’s limits in dealing imperiously with natural forces of which we have a long literary history from which to learn. In Ovid’s Metamorphoses (Transformations), the sculptor Pygmalion fell in love with the statue of a beautiful woman that he had carved of pure white ivory. In his effort to change the statue into his lover, Pygmalion violated just about every community standard of decency by fondling, kissing, dressing, undressing, and taking his statue to bed with him only to be frustrated by her cold inanimate nature. Fortunately goddesses are endowed with change management skills denied us mortals and Venus solved Pygmalion’s problem by granting life to the statue who then married Pygmalion and bore him a son. Now that’s transformational change that even Gary Hamel could believe in! George Bernard Shaw’s version of the story, Pygmalion, involves a pompous phonetics professor, Henry Higgins, as the change manager who transforms Eliza Doolittle, a Cockney flower girl, into a faux Duchess. Eliza however retains her essential character; she asserts herself and rebels against Henry’s clinical approach to her by threatening to leave and marry another. Henry then realizes how shallow are his changes to Eliza but how profound her affect on him has been. In the play’s later musical stage and movie adaptation, My Fair Lady, the story line is very similar but when the professor accepts finally Eliza’s natural character he recognizes his love for her more emphatically than in Shaw’s original version (“I’ve Grown Accustomed to Her Face”), prompting her to return and it seems likely that they will, like Ovid’s original pair, marry. Shaw had it right; most of the changes that can be applied in an ordinary change management program are superficial. BP was never “Beyond Petroleum” and its sunny solar logo and green posturing couldn’t offset its failure to create more effective operational routines consistent with producing in a still unfamiliar deepwater environment.

Kafka’s most famous novel, usually titled in English as Metamorphosis, shares its title with Ovid’s poem but has a very different story line than either Metamorphoses or Pygmalion. Gregor Samsa, a traveling salesman, wakes up one morning at home and finds that he has been transformed into a giant insect. His family is at first alarmed by his new form but eventually they become resigned and then resentful and finally happy when he dies. Samsa’s failed transformation is consistent with the evolutionary evidence that most biological mutations result in less fit organisms and quickly die out. This is consistent also with the experience of most change management programs. Efforts to transform utilities into energy services companies typically created overweight creatures that didn’t fit their environment.

Business change is evolutionary and its speed is determined within the system. Revolutionary rates of change rarely if ever occur because almost all of the change is incremental and internal to the system. The rare but dramatic changes in biological evolution such as the asteroid that probably lead to the extinction of the dinosaurs have no useful parallel in business or economic evolution. The rate of business change is governed primarily by two factors: the entrepreneurial capacity of the firms involved and the environmental selection process. The environment comprises all of the rival firms, their customers, and the collateral social and political systems that influence selection. Environmental selection operates by sorting and sifting through the variety of products and routines submitted by firms; it can select only from what is offered. Entrepreneurs seek continually to offer new products and routines for evaluation and, hopefully, selection. Individual entrepreneurs are human and thus limited in the variety that they can offer the environment but so long as there are many entrepreneurs there is a good chance that some will offer a product and routines aligned with the environment’s characteristics. The sort of unprecedented and accelerated change proclaimed by Hamel and others to be disruptive is the product of the system and not some external threat to it. (It’s also not nearly as unprecedented as he makes out – consider electricity or, before that, steam power.) Some firms will fail to adapt but unless some succeed, positive change can’t occur.

Submitted by Bob

Hogwarts School of Economics

Few are aware of the influence wielded by the Hogwarts School of Economics. This is probably because, as our president has observed, we Muggles neither pay attention nor understand what is going on. Like their counterparts at the college for wizards, the Hogwarts economics faculty and its graduates have mastered an impressive array of spells and charms. By relying on magic, Hogwarts economics eliminates the awkward operation of a primitive (i.e. market) economy, in particular the troublesome need for trade-offs. In an effort to increase awareness of the new economics, I’ve collected a few recent examples of the more powerful economics curses, spells, and charms rendered in the original J.K. Rowling Latinized terminology.

Lay manus, Lay manus, Lay still bro’ ! Spell created in 2008 by then-Treasury Secretary and Wizard Henry Paulson whose early training as a Christian Scientist and later experience as CEO at Goldman Sachs prepared him to accept and to accelerate the divinely ordered demise of the Muggle bank Lehman Brothers. This spell was cast heroically to enforce financial discipline and to repudiate the Too-Big-to-Fail mantra of the Big Bankers (aka Lord Voldemort and his Death Eaters) and thus ushered in a world of stable financial systems. Oh, wait…

Goldmine Sackus. Used to transform a hideously profitable investment bank into an obnoxious bank holding company and hence eligible for a government helping hand of somewhere around $15 billion dollars. The spell was created by holding up a magic mirror while chanting the Lay-manus, Lay-manus curse (see above) thus inverting it and thereby ushering in a world of stable financial systems. Coincidentally, it too was cast by Wizard Henry Paulson (see above).

Windy Milly Dilly. A powerful spell that blows money from the pockets of Muggle taxpayers to those of rent seeking weasels such as Jeffrey Imelt, CEO of Grasping Electric. Imelt distilled, so to speak, this spell from a predecessor, Ethanolis described below.

Ethanolis Alcoholis! An enhanced version of the prohibition-era spell, Bootlegitas, in which corn is transformed into cash through the intermediate production of alcohol. Only today it is performed using much larger stills coupled with the innovative mutation of Revenuers from tax collectors into subsidy payers. This spell has been effective in raising grain and food prices while lowering water tables without the embarrassing jail sentences and fines associated with earlier price-fixing efforts by the Wizards of ADM. Bootlegitas at least gave us NASCAR.

Cialis Stimulatus. Cast using the incantation, “When the Time is Right, Will You Be Shovel Ready?” as uttered by Woolly-Minded Witch of the West at the request of Wizards Obama and Geithner who have shoveled out, so to speak, $800 billion to find out. Guaranteed to increase economic dysfunction by inducing naked couples to hold hands while inexplicably reclining in separate bathtubs. The symbolism is obvious to every Congressman.

Hire, Hire, Pants on Fire! A novel spell suggested by rent-seeking weasel Jeffrey Imelt (see above) in a recent speech to the unenlightened Muggles of the Chamber of Commerce in which he urged them to get over their concerns about the course of the government and the economy and just go out and hire someone. GE has done its part by releasing 40,000 of their own employees since 2008 thus making them available to the timid souls at the Chamber.

Affordibullous Healthus Carus. A truly breathtaking spell cast by the Woolly-Minded Witch of the West, Wizards Obama and Reid, and managed by Wizard Sibelius, this spell transforms 14 per cent of the national economy into one large, centrally administered bureaucracy staffed by trolls who worked formerly at the Ministry of Magic. This spell builds on the previous experience and success at the Post Office, Amtrak, The Bureau of Indian Affairs, the Bureau of Land Management, and other noteworthy institutions.

Quanticus Easibus (aka QE1, QE2, QE3…) Cast by Grand Wizard Bernanke to cause the miraculous creation of prosperity simply by buying private securities and injecting even more money into the economy, thus maintaining near zero rates of interest, lowering yields on private securities, and producing little or no new investment. Imported from Japan where, due to the local habit of speaking Japanese, it was known as economic Hara-Kari, and successfully contributed to the “lost decade.” It is the credit creation equivalent of building speculative ball fields in Iowa cornfields.

Debtus Ceiling Relievus. More a ritual than a spell or curse; it is modeled on the 12-step program for recovering alcoholics with the only difference being that participants never pass through the denial step. As a result, the government predicts that the world as we know it will end on August 3rd.

French kissus. Jim, my co-blogger, brought this new charm to my attention. University of Texas professor and Wizard wannabe James Galbraith has suggested that unemployment could be significantly reduced if the government would encourage more people to retire early and take social security, perhaps by lowering the eligibility age or offering a buy out. Something similar has already been implemented in France so we know it has to be a good idea.

Posted by Bob

Whither Oil Prices?

Every time there is an oil price spike as there is today, two things happen. First, various government agencies launch investigations to see if there has been something nefarious going on.  Second, despite the clamor for more drilling in the US, it is said that doing so won’t affect oil prices today.  This is always used as the argument to allow the rabid environmentalists to continue to keep the most likely places to find oil off limits.  The first is a silly waste of time.  Not once has manipulation of the markets been discovered.  The second deserves closer scrutiny, though.

Let’s say that is autumn and the wheat crop is in for the year.  You have bought it all up with the intent of releasing it into the market in such a manner as to maximize your profits.  With interest rates being positive the most will be released in the first month and the least in the final month before the next harvest.  (I’m assuming that there isn’t any seasonal variation in the consumption of wheat.  If there was the amounts would be adjusted accordingly.  Ignoring it doesn’t change the qualitative results, though.)  But now something terrible happens.  The Argentine and Australian wheat harvests are expected to their best ever.  They will have sufficient quantities to sell into the US market.  This wheat will come onto the US market in six months.

Clearly, you won’t be able to sell the wheat you had planned to sell in months 7 – 12 for as much as you had planned.  What to do?  Being rational, you will want to increase the quantities you sell in the first six months, even though it will result in a lower price.  You will do this because it will enable you to maximize your profits (which will now be lower than they had been expected to be before the bumper crops elsewhere) under the new price-quantity combinations that are expected to prevail.  Note that while the Argentine and Australian crops haven’t arrived yet the implications of their impact on prices have been factored into the plans of the holder of the US wheat.  The rational response is to recognize that the inventory is now less valuable and the needs to be sold sooner even though it means receiving a lower price.

Wherever you see (U)S wheat replace it with OPEC oil.  Wherever you see Argentine and Australian wheat replace it with US oil.  The analysis is exactly the same.  If the government allowed our oil firms to explore in the currently off-limits areas where we know there is plenty of oil, the current price of oil would decrease.  It would do so as OPEC realized that its inventories of oil are now less valuable than they were before.  In order to maximize their profits they will supply more oil into the world markets today.  This is a critical insight.  The expectation of more oil (or wheat) will cause the current price to fall from what it would have been.

The lower price of oil will be an enormous increase in the discretionary incomes of Americans, far greater than any targeted tax reduction would be.  It would reduce our Balance of Payments deficit.  It would employ, at rather handsome wages, many people.  It would reduce the incomes of some of the most unstable and mischievous regimes on the planet.  It is difficult to see why our political leaders continue to allow a small but vocal minority negatively impact our lives.

Posted by Jim

Stick With The Needle

Dr. Andrew Wakefield is an entrepreneur. In 1987 he patented a measles vaccine that faced a major impediment to success; the existing combination mumps, measles and rubella (MMR) vaccine dominated the market. So in 1988 Wakefield, with research support from equally entrepreneurial personal injury lawyers, published an article in the prestigious medical journal The Lancet that suggested that the MMR vaccine might be responsible for autism in young children. The problem was that Wakefield made up the data; there were only twelve children in the study (several of whom were offspring of litigious parents searching for confirmation of their suspicions of the vaccine), and the invasive procedures performed on the children were never cleared by an ethics board. Following a sensational news conference announcing Wakefield’s results, many concerned and frightened parents refused to vaccinate their children, exposing them to serious disease. Other researchers were unable to replicate Wakefield’s finding and no other scientists could find evidence that the vaccines were in any way linked to autism. Nevertheless, U.K. vaccination rates plunged below the levels necessary to contain the diseases and measles, a disease once on its way to eradication, reappeared and some children died. Resistance to vaccination spread to the U.S. and other countries and soon they too were reporting outbreaks of measles.

In 2004, due largely to the work of journalist Brian Deer (http://briandeer.com/solved/bmj-enterocolitis.htm), the fraudulent nature of the work, and the enormous sums paid Wakefield to support the litigation were widely publicized. Thereupon 10 of the original 13 co-authors redacted their names from the Lancet article. Prime Minister Tony Blair also spoke out for the efficacy of vaccination. Incredibly, The Lancet’s editor, Dr. Richard Horton, while conceding some irregularities and concerns, refused to retract the article. Publicity about Deer’s 2004 findings led to a rebound in vaccination rates but many parents remained fearful. Deer continued his research, unearthing, among many disturbing things, that about $780 thousand dollars paid to Wakefield came from The Legal Services Commission a publicly funded agency intended to help poor people gain access to legal aid that was hijacked by anti-vaccine activists to underwrite phony research and testimony. After losing his position at the Royal Free Hospital in 2001 Wakefield absconded to the U.S. and Florida’s International Child Resource Development Center, purveyors of dubious autism testing and treatment products, and was soon appointed to a $280,000 position at the oddly named Thoughtful House in Austin, Texas. Dr. Horton and The Lancet continued to defend the original article but a competing publication, The British Medical Journal, published and endorsed Deer’s findings. Finally in 2010, 12 years after the fraud, a British medical panel found that Wakefield’s work was dishonest, unethical, and displayed a “profound callousness” to the suffering of children affected by his work. The only double-blind factor in the fraud, The Lancet, finally retracted the article in 2010.

This is a story about a meme, those gene-like messages that biologist Richard Dawkins defined to explain the propogation and persitence of ideas. Memes, like viruses, are typically very simple creatures that rely on hijacking their hosts’ resources to reproduce and proliferate. The “vaccines cause autism” meme is short, memorable, and easily transmitted. Once a population is infected it is very hard to extinguish a bad meme. Many memes are not antigens in the sense of automatically stimulating our intellectual immune system. Treatment and removal of bad memes usually requires sustained action, either preventive inoculation in the form of expertise or exposure to compelling new information. Unfortunately, while the meme linking the vaccine to autism spread rapidly and widely, the meme refuting the fraud has moved relatively slowly and encountered stiff resistance from the original meme’s dupes and dupesters. Some believers have even threatened the people who exposed the fraud and others have sued to discourage efforts to discredit the false story. Wakefield’s fraud is but an example, although a dangerous one, of the proliferation of false or corrupt memes; in many cases made through the Internet. We call some of them “urban myths” or “legends” and everyone occasionally receives a few in their email.

Why do so many succeed in entering and lodging in the popular mind? To paraphrase the Irish philosopher Edmund Burke, “All that is necessary for the triumph of ignorance is that good men learn nothing.” The promotion of gratuitous self-esteem, the postmodern notion that facts are mutable social constructs, and increasingly common exposure to diluted forms of higher education supports spread of ignorance. As biologist Peter Medawar has observed, many people are educated well beyond their capacity for critical thinking.

Take Jenny McCarthy, former Playboy model, college drop-out, actress in a slew of tacky shows and movies, including being typecast in The Stupids, and a curiously influential autism activist who has helped spread and defend the “vaccines cause autism” meme. Let us grant Ms. McCarthy that having an autistic child, as she does, is a serious blow but it is no excuse for imperiling the children of impressionable and equally ignorant parents by discouraging vaccinations. Ms. McCarthy has remained steadfast in her support of Dr. Wakefield and, like others in the anti-vaccine industry, has sought to launch a new meme that Brian Deer is part of a drug company conspiracy to protect their investment in dangerous vaccines and other drugs.

What have we learned from this sorry episode? The story of the MMR vaccine meme is instructive in a number of ways. Robert Goldberg, author of Tabloid Medicine, How the Internet is Being Used to Hijack Medical Science for Fear and Profit, applies the findings of behavioral economists, Daniel Kahneman and Amos Tversky, that we are not very good at evaluating risks, particularly long term risks. I think that is a very useful insight that explains our vulnerability to fraudsters but we need also to look more broadly to the systems and institutions we create that facilitate the fraudsters.

• A fair number of memes are intentionally generated by self-interested people, lawyers in this case and many others, but they often find channels among self-promoting celebrities, gullible journalists, and guilt-addled citizens. Activists are continually looking for new targets.
• Corroborating experts can always be found, Wakefield in this case, but highly credentialed people have profited in many dubious frauds upon the public. Courts have been extraordinarily lax in testing and policing credentials.
• Tax-supported programs intended to provide legal support to poor and uneducated people (such as The Legal Services Commission in the U.K. or poverty law programs in the U.S.) are vulnerable to hijacking by self-interested parties, often lawyers. Whatever their initial mission, they exist to challenge the establishment and to sue, and so they do. These groups face no market discipline and measure success in suits and claims filed.
• Corrupt memes, such as the Rosenbergs’ innocence, the U.S. government’s advance knowledge of Pearl Harbor, and the MMR vaccine hoax, often spawn vested interests that promote their distribution and resist their eradication – often for years. These people can be vicious in defense of their franchise to exploit their ignorant supporters. Tevi Troy, a former deputy secretary of HHS, reports in a recent Weekly Standard book review that Dr. Paul Offit, a legitimate vaccine expert, has been repeatedly harassed and sued, called a terrorist, prostitute, and devil. No one seems to have used similar tactics with Ms. McCarthy.
• Official and media bodies are often slow to respond and often ineffective in battling false memes. Independent efforts such as Brian Deer, are often more effective but face the threats mentioned above as well as the institutional agendas of seemingly reputable actors. The Lancet, under Dr. Horton, protected the seed meme for twelve years, in part for Horton’s left-wing political agenda which included prostituting the once-great journal with articles of extravagantly biased estimates of Iraq war casualties intended to erode support for the campaign.

The story of vaccines tells us a lot about the public system of health regulation and reminds us that incentives matter. Why we are surprised when initially well-intentioned institutions support the efforts of evil people is another issue.

Posted by Bob

How Could We Have Missed These Uprisings?

This is a question that has been asked numerous times over the past three weeks as, first, Tunisia, and, then, Egypt exploded in the streets with thousands demanding freedom.  The US’s intelligence agencies were faulted for not anticipating these events.  I think that this judgement is a bit unfair.  To know something is going to eventually explode is not the same as knowing the precise time.  Think of our ability to predict volcanoes.  We know where they are, which ones are most likely to blow, but not when.  Similarly, we know that societies that have large, young, educated, and unemployed populations with minimal political and economic freedoms are powder kegs.  Depending upon the ruthlessness of the regime uprisings are more (Tunisia) or less (Iran) likely.

Professor Timor Kuran, currently at Duke University, wrote a book, “Private Truths, Public Lies: The Social Consequences of Preference Falsification (Harvard University Press: 1995)” that explains how this toppling of the regimes came so quickly and unexpectedly.

I want to quote from his book, p. 250-251.

Imagine a ten-person society featuring the threshold sequence

A: Individual a b c d e f g h i j
Threshold 0 20 20 30 40 50 60 70 80 100

Person a, whose threshold is 0, supports the opposition regardless of its size, just as person j always supports the government.  The remaining eight people’s preferences are sensitive to the expected size of the public opposition.  Depending on its level, they will opt for one camp or the other. Initially, as in the geometric illustration [p.249], the opposition consists of 10 percent of the population, so Y=10 [where Y is represents the size of the opposition to the government].  Specifically, person a supports the opposition, and persons b through j support the government.  Because individuals other than a have thresholds above 10, a public opposition of 10 is self-sustaining [implying the regime maintains power].

Suppose now that person b has an unpleasant encounter at some government ministry [such as, for instance, the street vendor in Tunisia, or the person beat up by the cops in Egypt].  Her alienation from the regime deepens, pushing her threshold down from 20 to 10. The threshold sequence becomes

A’: Individual a b c d e f g h i j
Threshold 0 10 20 30 40 50 60 70 80 100

The new threshold of b happens to equal the existing Y of 10.  So she switches sides, revealing her decision by tossing an egg at the country’s leader during an official rally [or self-immolating oneself as the Tunisian did].  Y thus becomes 20.  The new Y is not self-sustaining but self-augmenting, as it drives into opposition.  The higher Y of 30 then triggers a fourth defection, raising Y to 40.  And the process continues until Y reaches 90 – a new equilibrium.  Now the first nine individuals are in opposition, with only j supporting the government.  A slight shift in one individual’s threshold has generated a revolutionary bandwagon.


I believe that this analysis succinctly captures exactly what has taken place in northern Africa.  Once one individual shook his fist at the government other realized that they weren’t alone in their discontent.    Gone are the days when opponents of a regime could be locked away and the only means of communication with the outside world was on purloined sheets of toilet paper.  In the US, in the 1950s and early 1960s, the civil rights movement got started because decent-minded citizens saw on TV scenes that they never thought could happen in the US.  In the 1980s, the VCR brought news of freedom to the communist bloc.  Today, cell phones and the internet have all but eliminated a regime’s ability to suppress the news of their treatment of their citizenry.

The various intelligence agencies can only guess at the thresholds of the citizens of other countries.  They could only engage in some scenario exercises of the “what-if” variety.  It is doubtful that any of them would have been able to predict these topplings much less the speed, any more than they could have predicted the collapsing of the Soviet puppet states, one by one, in the late 1980s.  We must learn that no one is omniscient and that not every event can be forecasted with precision.  We shouldn’t look for a scapegoat. Instead, the lesson here is that the desire for freedom is innate in all human beings.  America needs to give moral support to those who stand up and defy the regimes.

Posted by Jim