Expensive Pharmaceuticals for Targeted Diseases

by  Alex Tabarrok in

My latest paper, The Price of a Cure: Luxturna and the Economic Dilemmas of Precision Medicine, is in the Journal of Law, Medicine and Ethics. I discuss the economics of the pharmaceutical industry and the special issues that arise with targeted drugs that cure. We are going to get many more of these drugs in the future–more value but smaller patient group–so this paper is timely.

The $850,000 price for the gene therapy Luxturna is often framed as a story of private profiteering from publicly funded science. This paper challenges that narrative. Pharmaceuticals are a hit-driven industry: most projects fail, so the few successes must earn revenues well in excess of their own direct costs if the portfolio as a whole is to attract investment. Precision medicine intensifies this logic through two core economic challenges: (1) the “sticker shock” of one-time cures, which compress decades of value into a single payment, creating a financing problem more than a value problem; and (2) the “targeting dilemma,” in which precisely targeting drugs to smaller patient groups shrinks the market, requiring higher rewards per treated patient to maintain incentives to innovate. Rather than simply controlling prices, the paper proposes a policy toolkit that includes amortizing payments over time, bundling diagnostics with drugs and insurance, and streamlining regulation to lower development costs. The aim is to preserve innovation while expanding patient access.

Should you feel grief for the dead who go to heaven?

by  Tyler Cowen in

I am not myself religious, but let us consider the possible gulf between behavior and doctrine amongst those who are.

It has long struck me as a kind of mini-puzzle why people feel so much grief for the departed, at least for the departed who are supposed to be headed for heaven (and yes there are supposed to be at least a few).

It is fine to miss those people after they are gone, but it seems that, in addition, their death is considered a tragic event to be mourned, and also if possible to be postponed.  We are crying for them, not just for ourselves.

I do not doubt the sincerity of the religious belief that these people are headed to heaven.  And I do not doubt the sincerity of the grief and mourning for their departure from this world.

So what is going on here?  Why can’t you just be happy for them?

I believe that people often construct a portfolio of moods when faced with stressful situations.  Sometimes they will mix a positive and a negative mood, other times they will mix two different kinds of negative mood (worried about a recession?  Buy a book that heralds a financial crash and hold the talisman close to your chest as pre-emptive mood management exercise.)

So if the death of a loved one is a terrible event, there is a partial assuagement if you also think they are going to heaven.  It makes their death modestly less terrible.  But if you simply celebrated their passing, you would feel disloyal and like a rotten person who cannot recognize true loss.  The point is not that you can make this bundle of feelings consistent, rather it is useful psychologically precisely because it is a portfolio and is not entirely consistent, and also not consistent over time.  As your moods change, and you need an extra dose of either modest cheer or true mourning, you can adjust your blend accordingly.

Others kinds of portfolios end up being constructed.  For instance sometimes you may focus on some other terrible thing, to distract yourself from the first pain that came along, a bit like how you might pinch yourself during a dental session.  You might prefer to have a portfolio with more pain in a way, but some of it being pain you can control.

You can multiply additional examples in these directions.

When people hold views for reasons of mood management (however sincerely), typically they are unable to respond intelligently to questions challenging their beliefs.  Even very smart people will pull b.s. out of the hat and stick with it, moving on rapidly, mentally, to some other topic.  Their response is not really thought through, it is a placeholder for “now I can move on to something else.”  After all, consistency was never the goal in the first place, you might even argue that anti-consistency was what was needed, and what proved to be psychologically stable.

I once asked someone religious about mourning death and the answer I received was something like “Well, the people in New Orleans celebrate death with funerals like parties.”  Now, I am not sure how true that is, but assume it holds.  It still resolutely refuses to address why the queried person might mourn and grieve the death of loved ones, rather than celebrate their ascent to heaven.  Nonetheless it fills in the box “I did say something back to the initial query.”  The person then wanted to simply move on to another topic.

If you challenge smart people on this issue, namely the discrepancy between beliefs and actions, they often will respond with extremely weak counters and dismissals, rather than thinking the issue through.

Once you see this kind of psychological portfolio construction in action, and learn how to identify it, you cannot unsee it.

These days, you see it especially frequently in response to AI and its advances.  People have an odd love-hate relationship with the models, and they adjust their emotional balance as their stress needs may require.  They do not want to give up either the very positive or the very negative side of their visions, because then they would have a non-diversified emotional portfolio, and they would be very vulnerable to disappointment.

You can understand some of the current AI debates by pondering how religious people react to the deaths of their loved ones.  It was never about consistency in the first place.

As predicted, the ACA exchanges seem not to be stable

by  Tyler Cowen in

The average price of health insurance in the Obamacare marketplaces will rise by 13 percent next year, according to an analysis on Friday by KFF, the health research group.

The Trump administration on Friday published new prices for 2027 in 30 states with markets managed by the federal government. Using that data and state figures, KFF calculated the increase nationwide.

…The average cost for the cheapest bronze plan with a high deductible will be about $700 a month for a 50-year-old single person, according to Ms. Cox.

Here is more from the NYT.  Of course that makes the people who can expect to be healthy all the less likely to sign up, given that the enforcement of the mandate, for political reasons, was forced to evolve into something quite weak.  For purposes of context, when the original mandate was more tightly enforced, with actual penalties, the ACA was very unpopular and led to significant political protests.  In essence the benefits to a broad, scattered majority were imposed on a well-identified minority, namely those who signed up because of the mandate.  Trump in his first term relaxed mandate enforcement, thereby politically saving Obamacare at least for a while, but also creating this longer-term problem.

It is striking to me how infrequently I hear Democrats boasting about Obamacare.  They instead prefer to talk as if little or nothing has been done for America’s uninsured.

Sunday assorted links

by  Tyler Cowen

1. Jakob Davidsen, The Individual and the Entire Tissue (song cycle).  It is good.

2. The Oilers Entertainment Group pushed prices too high and here is what happened.

3. The “endless cruise” has ended.

4. Should driverless vehicles replace school buses?

5. Art Nouveau and more in Mexico City.

6. How are potential mathematicians responding to AI with their career decisions? An important piece.  And a GPT Pro summary.

7. Profile of Michael Kratsios.

8. Economist James Andreoni, RIP.

What are the Worst MR Posts?

by  Alex Tabarrok in

What are the worst MR posts, most illogical, poorly reasoned, low value, inconsistent?

From the Archives, written by ChatGPT:

These are provisional candidates for weak reasoning, selected because there is a specific gap between the evidence and the conclusion. This is not an objective ranking of all 40,326 posts in the downloaded archive. Poor reasoning should also be distinguished from low value: an overstated argument can still be unusually useful to think against.

1. Tyler Cowen — Democracy and the Democrats

October 22, 2022 · Main defect: conflating concern about democratic breakdown with unwillingness to accept electoral defeat. Cowen writes that many Democrats believe:

“democracy works satisfactorily only when it delivers sufficiently low gas prices!”

But two positions are logically distinct:

  • “Democracy is illegitimate when voters choose policies I dislike.”
  • “Voters might elect politicians who subsequently weaken democratic institutions.”

These are illustrative formulations, not quotations from the post. The second does not imply the first. Someone can accept an election’s legitimacy while worrying about what its winner will do. The post does not adequately establish which position its targets hold. It then compares a sympathetic account of classical liberalism with an unsympathetic account of Democrats, without applying an equivalent evidentiary test to both. The opening also dismisses certain anticipated objections through an insult. That discourages scrutiny precisely where the argument needs distinctions. Verdict: One of the clearest candidates for an unfairly framed argument. The useful underlying point—that democracy can produce bad outcomes—does not establish the accusation being made. Read the original post

2. Tyler Cowen — What the hell is going on?

May 25, 2016 · Main defect: an elastic psychological explanation supported by loosely connected observations. The central hypothesis is:

“The contemporary world is not very well built for a large chunk of males.”

That is worth investigating. The trouble comes when male economic difficulties, changing gender relations, political anger, violence, and support for quite different political movements are bundled together under “brutes.” Several things remain unestablished:

  • Are the men experiencing the cited disadvantages the same men driving the political developments?
  • Does the mechanism explain support for Sanders and Trump in the same way?
  • What observation would distinguish resistance to a “nicer” world from resentment of economic insecurity or perceived contempt?
  • What does “nice” mean independently of the author’s preferences?

The label risks doing the explanatory work: people support objectionable politics because they are brutish; their politics then becomes evidence of their brutishness. Credit where due: Cowen explicitly calls the hypothesis uncertain and acknowledges weak evidence. That makes it an honest speculative post, rather than a falsely presented research finding. Verdict: A provocative conjecture that outruns its supporting evidence. The caveats are better than the causal argument. Read the original post

3. Alex Tabarrok — The Gaslighting of Parasite

June 25, 2020 · Main defect: treating a contestable interpretation as an unambiguous demonstration. Film spoilers follow. The pivotal sentence is:

“This is not my judgement it is what the film tells us.”

That is exactly what the review needs to establish. Several inferences are too strong:

  • A child noticing a smell does not establish that the smell lacks class significance. Material conditions can produce differences that children notice.
  • The poor family’s dishonesty does not rule out a critique of inequality. A film can depict morally compromised people within an unjust or damaging social structure.
  • Images of sewage and infestation do not uniquely imply that the filmmaker regards the family as morally filthy.
  • Other critics reaching a different interpretation does not establish deliberate deception or “gaslighting.”

The strongest version of the review would argue that conventional readings underweight the family’s agency and wrongdoing. Instead, it often claims those observations exclude alternative readings. Verdict: Among the most intellectually stimulating but least securely demonstrated of the reviews considered in this archive analysis. This qualifies the earlier recommendation of the review: it deserved inclusion as provocative criticism. That does not make its claims of interpretive certainty persuasive. Read the original post

4. Tyler Cowen — No, American fascism can’t happen here

March 1, 2018 · Main defect: turning a plausible obstacle into an impossibility claim. The MR excerpt argues:

“American fascism cannot happen anymore because the American government is so large and unwieldy.”

Institutional complexity plausibly makes comprehensive control harder. But the conclusion requires additional premises:

  • Why must an authoritarian movement control the entire bureaucracy rather than strategically important parts?
  • Why does administrative fragmentation necessarily constrain coercion rather than sometimes obscure responsibility?
  • How much control would be sufficient, and what evidence establishes that this threshold cannot be reached?

These are questions about the argument’s structure, independent of whether one thinks a particular American administration qualifies as fascist. The June 16, 2025 retrospective points to institutional resistance and executive setbacks. Those are relevant evidence for constraints. They cannot, by themselves, validate the original categorical impossibility claim. Verdict: A potentially valuable institutional argument weakened by excessive certainty. “Important barriers exist” is much better supported than “cannot happen.” This assessment concerns the argument reproduced on MR; the complete linked Politico essay could not be retrieved for this review. Read the original MR post

5. Alex Tabarrok — The Case for Getting Rid of Borders—Completely

October 13, 2015 · Main defect: moving too quickly from equal moral worth to a particular institutional conclusion. The excerpt argues that foreigners do not possess less inherent moral worth. But that premise alone does not settle whether governments may impose any entry restrictions. Equal moral worth can coexist with arguments about special obligations, institutional responsibilities, competing rights, or consequences. Those arguments might ultimately fail—but they require engagement. Likewise, comparing restrictions on exit with restrictions on entry does not establish their moral equivalence. It poses a question rather than answering it. The longer Atlantic essay, published October 10, 2015, adds economic arguments, so it would be unfair to characterize the case as exclusively moral. Nevertheless, the sweeping dismissal of competing moral frameworks is insufficiently defended. Verdict: Forceful advocacy with a missing argumentative bridge. This is a criticism of the claimed deduction, not a demonstration that open borders is wrong. Read the original MR post

Recurring weaknesses

Across these examples, three weaknesses recur:

  • Certainty exceeds the argument: “cannot,” “obviously,” and “the film tells us” substitute for establishing the relevant threshold.
  • Opposing positions receive less charitable treatment: disagreement becomes evidence of bad motives, confused psychology, or inability to face reality.
  • An interesting mechanism becomes a complete explanation: institutional complexity, male displacement, or equal moral standing is asked to resolve more than it actually establishes.

Allegations of inconsistency across posts require more caution. A changed view, a different context, or a different definition is not necessarily a contradiction. The stronger criticism here is uneven standards of proof within individual arguments. For a rigorous critical essay, the strongest starting points are Democracy and the Democrats and The Gaslighting of Parasite. Both have identifiable logical problems that can be examined without relying on hindsight or agreement with the critic’s politics.

Those new service sector jobs?

by  Tyler Cowen in

A suburban Chicago man has been sentenced to two years in federal prison for conspiring to stage armed robberies so that the purported victims could apply for U.S. immigration visas reserved for crime victims.

From 2022 to 2024, PARTH NAYI organized and participated in hundreds of staged armed robberies at coffee shops, restaurants, liquor stores, and gas stations throughout the country, including in Chicago and the suburbs of Lombard, Elmwood Park, St. Charles, Hickory Hills, River Grove, Lake Villa, and South Holland.  Nayi worked with others to recruit fake victims, pay off store owners to use their locations, coordinate and pay fake robbers, and coach the bogus victims through the plan.  Thousands of individuals who posed as victims each paid Nayi $5,000 to $30,000 to participate in the scam so that they could later apply for Nonimmigrant U-Visas, which are set aside for foreign nationals who are victims of certain crimes and are helpful to law enforcement in the investigation.

During the staged robberies, individuals acting as robbers brandished what appeared to be firearms, approached the purported victims, and demanded money.  Afterwards, the purported victims submitted forms to local law enforcement to obtain certification that they were victims of a qualifying crime and were helpful in the investigation. Upon receiving the certification, the purported victims then submitted fraudulent U-Visa applications to U.S. Citizenship and Immigration Services predicated upon their alleged status as robbery victims.

Here is the full story, via Ryan.

Are LLMs good or bad Bayesians?

by  Tyler Cowen in

Bryan Caplan:

It seems like you and other AIs are bad Bayesians. When presented with counterevidence, you should move toward or against the presenter with roughly equal probability. It depends on whether the argument was better or worse than expected. In fact, you seem to either move toward the speaker or just not change.

ChatGPT:

I think you’ve identified a genuine and important failure mode in AI reasoning: LLMs tend to treat a plausible counterargument as evidence in favor of its conclusion, rather than comparing the counterargument to what they should have expected to hear.

Your Bayesian point is correct, with one qualification: there’s no general theorem that updating toward and away from a speaker should happen with equal probability. But under appropriate calibration assumptions, both directions should occur, and an argument that’s weaker than expected should cause a negative update—even if the argument is perfectly valid as far as it goes.

Here is the full dialogue.  But will they try to fix this?  Should they try to fix this?  Can you undo this with good enough prompting?  The scope and limits of Bayesian are truly at stake here…

Saturday assorted links

by  Tyler Cowen

1. Organizing Intelligence.

2. World Bank African urbanization report.  Building out African cities in a decent way could end up being the task of our coming era.

3. Summary of The Commanding Heights.

4. “Meanwhile in Armenia…”

5. “Female psychopathology has worsened despite increased resources and opportunities, suggesting it does not entirely reflect absolute deprivation, but rather, is a competitive adaptation activated by heightened social competition.”

6. One account of what is going on in Poland.  I am not endorsing that (or any other) interpretation, but if nothing else it shows you how interpretation of these events can make your head spin.  Grok has a simpler answer, again not endorsing.

The pass-through of retail crime

by  Tyler Cowen in

This paper shows retailers increase prices in response to organized retail crime. We match store-level crime data to scanner data from the universe of transactions for cannabis retailers in Washington state. Using quasi-experimental variation from robberies and burglaries, we find a 1.7–1.8 percent price increase at victimized stores and nearby competitors. This rise is not driven by short-to-medium-term demand changes but is consistent with crime-related cost shocks. Effects are larger for independent stores and less concentrated markets. We estimate crime imposes a 1 percent “hidden” unit tax on affected stores, implying $30.7 million in additional social costs, primarily borne by consumers.

That is from a newly published paper, AEJ: Economic Policy, by Carl Hase and Johannes Kasinger.

The unintended consequences of academic leniency

by  Tyler Cowen in

Education is widely recognized as the primary driver of human capital accumulation. However, policies designed to promote educational attainment often overlook students’ endogenous responses. This paper provides empirical evidence of the causal impact of relaxed academic standards on student effort and achievement. We find that academic leniency results in mechanical GPA increases, but significant reductions in effort among lower ability students based on lower attendance and lower numerical grades. These heterogeneous effects compound and exacerbate gaps in engagement and achievement throughout high school, ultimately worsening deficits in human capital accumulation as measured by ACT scores.

That is from a newly published paper, in AEJ: Economic Policy, by A. Brooks Bowden, Viviana Rodriguez, and Zach Weingarten.