Source: Bernie Sanders Op-Ed: A Soda Tax Would Hurt Philly’s Poor.
Straight talking from @BernieSanders on #sugartaxes @JordNZ
06 May 2016 Leave a comment
in applied price theory, health economics, income redistribution, politics - USA, Public Choice, rentseeking Tags: 2016 presidential election, do gooders, heavy-handed Samaritans, meddlesome preferences, nanny state, regressive taxes, sin taxes, soda taxes, sugar taxes
Does invested $1 in retrofitting saves $6 in health expenditure? @PhilTwyford @PeterDunneMP @AndrewLittleMP
05 May 2016 Leave a comment
in economics of regulation, energy economics, health economics, politics - New Zealand, public economics Tags: cost benefit analysis, economics of housing, economics of insulation, energy efficiency gap, The fatal conceit, The pretense to knowledge, valuation of life
Various bold claims have been made about the payoff from investing more in retrofitting insulation into housing. The government recently spent $600 million on such retrofitting of insulation.
https://twitter.com/PhilTwyford/status/728137160113557505
There is a private member’s bill before Parliament to introduce minimum standards for rental properties with regard to insulation and other matters. Little is by the Leader of the Opposition Andrew Little said for the consequences for rents of this additional expense to landlords.
Ian Harrison of Tail Risk Economics initially estimated that the $600 million invested in retrofitting of insulation will save barely half of that:
After correcting for this major error and taking a more realistic view of the benefit estimates in other studies, the net benefits of $630 million disappear.
The $600 million insulation investment will probably generate benefits of closer to $170 million, for an economic loss of $430 million.
After meeting with Ian, I read through the rather dull background documents behind a cost benefit analysis relied upon by the government to spend the $600 million dollars.
The most interesting part of the cost benefit analysis is most of the benefits come from fewer cardiovascular related hospitalisation of the elderly and not from respiratory diseases among children.
I found the error was far more fundamental than a incorrect transfer of a calculation between tables discussed in the first publication by Harrison. I had to read the background documents several times to understand what had been done wrong.
The cost benefit analysis for the Warm Up New Zealand Heat Smart Programme assumes that the number of elderly occupants of the newly insulated house increases by one each year and after 5 years, one of these dies but is replaced by a new elderly occupant.
We have modelled the probability of a vulnerable person avoiding mortality as a result of the intervention. The probability of this is (112.7/1000)*0.27= 0.03 (3%). We treat avoidance of mortality by treatment in each year as independent events.
The multi-year benefit calculated above would accrue based on the life years gained as a result of deaths avoided in year one.
However, we would expect these benefits to accrue in year two for different vulnerable individuals (aged 65 and over with a cardiovascular related hospitalisation in previous 18 months), and for different individuals again in every subsequent year that the treatment continues to have an effect, i.e. an on-going stream of benefits of $1,050.74 per year. This assumes a constant proportion of people aged 65+ who have recently been hospitalised with circulatory problems….( p.38).
In the first year of the new insulation, the first occupant benefits and the net present value is included in the benefit cost analysis calculation – the erroneous benefit cost analysis calculations which its authors still defend.
In the 2nd year, another elderly person moves into that same house and the same calculation is done for them. In the following year, yet another elderly person moves into the same house and the net present value calculation is repeated.
By the end of 5 years, there are 5 occupants in this house all benefiting from the same insulation investment. In the 6th year, the first elderly occupant dies to be replaced by a new elderly occupant who then gains from the insulation upgrade.
There was double counting of the number of people who benefited from the insulation as Iain Harrison explains
The analysis assumed that there was not one, but five occupants who had been hospitalised with a cardiovascular illness in the previous 18 months in each of the relevant insulated houses. There should have been only one such occupant.
The retrofitting of insulation was estimated to cost $600 million. Iain Harrison estimated the benefits to be $300 million, not $1.2 billion. That is a benefit cost ratio of 0.5.
Source: Iain Harrison, The mortality reduction benefits of insulation: the error identified.
The Vice Fund (now the Barriers Fund) continues to outperform S&P 500
03 May 2016 Leave a comment
in defence economics, energy economics, entrepreneurship, financial economics, health economics Tags: BDS, efficient markets hypothesis, entrepreneurial alertness, ethical investing
Source: VICEX – USA Mutuals Barrier Fund Investor Class Shares Mutual Fund Quote – CNNMoney.com
The Vice Fund has outperformed the S&P 500 since 2004 as shown by the green line. This mutual fund invests invest in sinful stocks as its managers describe it:
Designed with the goal of delivering better risk-adjusted returns than the S&P 500 Index. It invests primarily in stocks in the tobacco, alcohol, gaming and defence industries. Vice Funds believes these industries tend to thrive regardless of the economy as a whole.
The Vice Fund is now known as the Barrier Fund because it extended out of sinful stocks into industries with high barriers to entry. Minimum Investment is $2,000.
The Barrier Fund primarily invests in the following industries: Aerospace/Defense, Gaming, Tobacco and Alcoholic Beverages. These four industries were chosen because they demonstrate one or more of these compelling and distinctive investment characteristics:
- Natural barriers to new competition
- Steady demand regardless of economic condition
- Global Marketplace – not limited to the U.S. economy
- Potentially high profit margins
- Ability to generate excess cash flow and pay and increase dividends
The Barrier Fund believes numerous investment opportunities in these industries which have been largely overlooked by other funds.
The Fund has high management fees of 2%. Americans can buy Vanguard’s or Fidelity’s index funds and pay only 0.1% in expenses.
Cost to Develop and Win Marketing Approval for a New Drug Is $2.6 Billion
03 May 2016 Leave a comment
in economics of media and culture, health economics Tags: drug lags
The $2,558 million figure per approved compound is based on estimated:
- Average out-of-pocket cost of $1,395 million
- Time costs (expected returns that investors forego while a drug is in development) of $1,163 million
Estimated average cost of post-approval R&D—studies to test new indications, new formulations, new dosage strengths and regimens, and to monitor safety and long-term side effects in patients required by the U.S. Food and Drug Administration as a condition of approval—of $312 million boosts the full product lifecycle cost per approved drug to $2,870 million. All figures are expressed in 2013 dollars.
Source: PR Tufts CSDD 2014 Cost Study | Tufts Center for the Study of Drug Development
The science of attraction
03 May 2016 Leave a comment
in economics of love and marriage, economics of media and culture, health economics Tags: dating market
Why Do Black Markets for Marijuana Still Exist in Colorado? @PeterDunneMP
24 Apr 2016 Leave a comment
in applied price theory, economics of regulation, health economics, politics - USA Tags: black markets, economics of prohibition, marijuana decriminalisation, tax evasion
Why Is Marijuana Legal in Some States and Not Others?
24 Apr 2016 Leave a comment
in constitutional political economy, economics of crime, economics of regulation, health economics, law and economics Tags: federalism, war on drugs
#MorganFoundation errors about @nzinitiative’s Health of the State – part 2
23 Apr 2016 Leave a comment
in economics of media and culture, economics of regulation, health economics, politics - New Zealand Tags: anti-market bias, do gooders, meddlesome preferences, Morgan Foundation, nanny state, political psychology, rational rationality
E-cigarettes as a way of reducing obesity?
23 Apr 2016 Leave a comment
in economics of regulation, health economics Tags: E-cigarettes, economics of obesity, economics of smoking, expressive voting, meddlesome preferences, nanny state, rational irrationality
One of the many interesting things that Maori Party MP Marama Fox said at a panel discussion for the launch of the New Zealand Initiative’s Health of the State report was that the Maori women she knew who smoked did so out of stress relief.
It is also well known that there is a weight gain after stopping smoking. If people cannot smoke because of higher taxes but still need to have an outlet for their stress, they look elsewhere and seek comfort in food.
Source: Weight Gain After Quitting Smoking – Quit Smoking Community.
This is before you consider the general pleasure seeking aspect of smoking. Some people find smoking pleasurable; I find it disgusting.
This suggests to me that the restrictions on E-cigarettes are the worst of both worlds. If people are going to smoke, you may as well let them have access to a technology that is safer.

Instead, the do-gooders prefer to put an extra bullet in the chamber as smokers play Russian roulette.
#MorganFoundation errors about @nzinitiative’s Health of the State – part 1
22 Apr 2016 3 Comments
in economics of information, economics of regulation, health economics, law and economics, politics - New Zealand Tags: Aaron Director, alcohol regulation, economics of obesity, economics of prohibition, economics of smoking, meddlesome preferences, Morgan Foundation, nanny state
The Greens have joined that Morgan Foundation in playing the man rather than the ball on the recently published report of the New Zealand Initiative on sin taxes. Green Party health spokesperson Kevin Hague said:
The New Zealand Initiative cares more about junk-food barons’ bottom lines than it cares about Kiwis who are getting sick and dying because of obesity-related illnesses
The Morgan Foundation was just as keen to argue that their opponents on sin taxes are both ignorant and steeped in moral turpitude as a way of avoiding substantive argument:
The New Zealand Initiative are not interested in reducing obesity, or preventing the looming diabetes crisis where 1 in 3 Kiwis will have the disease. They make no attempt to understand the causes, and don’t propose any way to deal with these issues…
Is there no room for honest disagreement and different views on the ability of further government intervention to be a net benefit? As Aaron Director said:
Laissez-faire is no more than a slogan in defence of the proposition that every extension of state activity should be examined under the presumption of error.
One of the specific claims by the Morgan Foundation that seems to be in error is:
In fact, the report seems devoid of any research outside a narrow economic focus. The food industry has funded an enormous amount of psychological research on how to influence people to eat more junk food through packaging, advertising, product placement etc, much of which is publicly available, but which the New Zealand Institute has roundly ignored. Ironic, given that they funded by the same organisations that funded this psychological research.
The Food industry’s own research shows our choices are hugely influenced by the environment that surrounds us, but the New Zealand Institute conveniently prefers to cling to the oversimplification that we are all rational economic units – known as homo economicus.
The report of the New Zealand Initiative has a nice discussion of the limitations of rationality which did not weigh as heavily as it should in the critique by the Morgan Foundation part of which is in the snapshot below:
Source: Jenesa Jeram, The Health of the State, The New Zealand Initiative ( April 2016, p.10).
18.1% of all children born on this planet in 1960 died before they could celebrate their fifth birthday
18 Apr 2016 Leave a comment
in development economics, economic history, health economics Tags: infant mortality, The Great Escape
The payoff from drinking organic juice
14 Apr 2016 Leave a comment
in economics of media and culture, health economics Tags: food snobs, organic food, quackery
How long have you got in Europe when you are waiting for God?
13 Apr 2016 Leave a comment
in health economics Tags: European Union, healthy life expectancies, life expectancies, The Great Escape
The contradictions of decriminalising marijuana and banning tobacco
12 Apr 2016 Leave a comment
in economics of regulation, health economics Tags: economics are smoking, Left-wing hypocrisy, marijuana decriminalisation
Healthcare Triage: Antibiotics and Resistance | The Incidental Economist
12 Apr 2016 Leave a comment
in economic history, health economics Tags: The Great Escape
A century ago, the top three causes of death were infectious diseases. More than half of all people dying in the United States died because of germs.
Source: Healthcare Triage: Antibiotics and Resistance | The Incidental Economist
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