Thursday, December 16, 2010

Effectual Charity

I was thinking the other day about how I would structure a charity if I were to build one.

I've long believed that charities, just like companies, work best when they have a coherent vision of one thing they wish to accomplish. By trying to accomplish many different things piecemeal, you end up inefficient, weak and non-impactful. (This is not to say that flexibility is not important - if you come across another concept that is a better way for your organization to proceed than you initially thought, that's great... but even if you alter the vision, you should still have one vision that everyone is working towards).

This is an opinion, of course, but I base the rest of this post on it.

I was thinking about what a really effective way to promote medical research would be. I have always preferred charities involved in medical research because the impact-per-dollar if you do it right can stretch far beyond just the direct recipient of each dollar you spend. In other words, you're investing in goods that otherwise receive too little investment because of positive externalities. Safety net charities are certainly admirable, but the opportunity cost of my dollars is such that I prefer scientific research.

This got me to thinking: What would happen if you created a pharmaceutical or medical devices company, structured entirely for profit, with the only stipulation being that 75% of all profit must be spent on R&D, and some percentage of R&D spending (20%? 50%?) must be basic research? You'd probably want to ban M&A in most cases, as well, because then you're buying something that others have already discovered - you want the spending to go to NEW treatments.

In all other respects, the company would operate as a for-profit - advertising, market development, salaries, pricing, etc. If your goal was to make an impact on medical progress, wouldn't this be the best way to divert as much money as possible to furthering medicine?

You don't want all profit going into R&D because then nobody has an incentive to grow the business. You need the basic research stipulation because basic research is the most underfunded area and also the most economically unprofitable.

Wouldn't this structure direct the most possible money to further medical research? Your initial dollars largely go to research (to have a pharma or medtech company, you need a product), and followup dollars go to research, too. That's a way to really further medical technology.

Anyone interested?

Rich vs Poor Relative Marginal Consumption under Deleveraging

A number of people have made the argument that the tax cut isn't really as stimulatory as it could be because rich people save too much of their income, so they shouldn't get the tax cut.

The problem with this argument is that we're currently in a period of deleveraging, and marginal savings rate is what matters when you have a tax cut.

Peter Poorman may make little money; say, $25,000 a year (We'll ignore the substantial aid programs that exist that would boost his salary substantially - like, double). He's in debt. He's trying to pay it off, slowly, after incurring it over the last few years. His savings rate has risen from negative 2% to positive 3%, and he's adjusted his lifestyle to fit the 4.9% budget reduction (spending 102% of his income to spending 97% of his income means a 4.9% reduction in his budget).

Rodney Richman may make more money - say, $250,000 a year, and have no debt. He's able to save 20% of his income!

Clearly, Rodney's savings rate is much higher than Peter's; the economy would be better off if Rodney would spend like Peter.

The problem, of course, is that this is an average effect, and a tax cut happens on the margin.

If you gave Peter an extra $100, some of the money is going to go to alleviating the budget reduction, but, importantly, he's ALREADY SET A GOAL OF REDUCING HIS DEBT BURDEN. It's quite plausible that he'd use $25 to alleviate the budget reduction, and $75 to hit the debt that he knows he needs to get.

Rodney's behavior's a little more challenging, but not much more so. Rodney is not likely to exhibit the behavior "Save 0% up to $200,000 and 100% after that!" His savings on the margin will be higher than his average - as should always be the case for everyone, regardless of income level - but it's actually quite likely that he ends up saving 50% and spending 50%, just like Peter.

50/50 and 25/75 are arbitrary numbers; I don't know what the real ones are. But based on the psychology of debt consumption and an understanding of marginal utility of income, it is very likely that on the margin, tax cuts for the rich are more economically stimulatory than tax cuts for the poor IN AN ENVIRONMENT OF DELEVERAGING. The conventional (read: "during leveraging") wisdom about savings for rich vs poor gets thrown out the window when you're in an environment where the poor are deleveraging.

Think Carefully: Government Role in Regulating Relationships

This case - the Columbia political science professor who has been carrying on a three year (physical) relationship with his now-24 year old daughter - brings up a number of very interesting areas, some of which have been touched on somewhat elsewhere.

The first question is the simpler one - why is it that he is being charged, but she isn't? I understand that in most cases, the party perceived as the "victim" is not charged, but the law isn't supposed to be based on perception of victimhood, it's supposed to be based on actual victimhood. A 21 year old girl is old enough to know what she's doing. There is no evidence of coercion or "abuse of a position power", and even if there was, then incest isn't the right charge - rape or blackmail is. The fact that they're charging him and not her is very disconcerting. Part of it is because he's older, part of it is because he's the man, but from any principle of equity, you need to charge both or neither.

It strikes me that the correct action may actually be "neither", in this case. I'm in no way condoning incest, and even the idea of making an argument in defense of the professor and his daughter makes me somewhat uncomfortable, because they're clearly screw-ups, and it's a really gross story. However, being a gross screw-up is not in-and-of-itself criminal.

The question becomes what the proper government role is in regulating consensual relationships, and the implications are far-reaching.

There are a number of choices you have to think about when formulating this policy. Does the government have any moral right at all to tell consenting adults what they can do? If it does, what is the basis for deciding what is appropriate?

To list some of the issues on which you have to be consistent:
Gay Marriage
Consensual Incest
Consensual Polygamy

If you believe the government shouldn't regulate what consenting adults can do, then you implicitly need to permit all of the above. Bestiality is one possible exception, depending on how you feel about animal rights, but people do much worse things to animals than bestiality; it seems silly to ban bestiality with a cow if you can cruelly slaughter it as a calf, for example. Adultery is actually the next easiest thing to combat - marriage is a contract not to be unfaithful and in being unfaithful, you should be open to civil lawsuits for violation of contract. This is the only camp I can feel comfortable placing myself; even if I find incest or bestiality, in particular, to be distasteful, moral consistency and tolerance of others' independent choices (with no direct impact on others) require this viewpoint.

If you do believe the government should regulate what consenting adults can do, you need to have a basis, because "it makes me uncomfortable" is not a valid reason for banning consenting adults from activity that hurts nobody else, and "Christianity says so" isn't a valid reason in a secular government.

One popular argument is reproductive - relationships are meant to be reproductive, so anything that isn't reproductive isn't legitimate. Of course, this doesn't provide any valid reason to ban polygamy, and many conventional heterosexual relationships are not reproductive. With the advent of birth control, sex and children are no longer necessarily attached. Banning the above requires banning birth control, as well. I don't see anyone other than the Catholic Church making that argument, and the Catholic Church does so a) based on religion and b) in opposition to polygamy as well. So I'm not sure there's a consistent argument there.

Another is "family-based" - Some things are destructive to the "family ideal" and thus shouldn't be permitted. This, too, doesn't pass scrutiny. It's hard to argue against anything on the basis of family if there is no family involved. You don't see people clamoring for the position "gay relationships are acceptable but they can't have kids" (if they believe that children of gay parents are worse adjusted than straight parents, which I do not.). Similarly, bestiality has nothing to do with a family ideal. This would argue against adultery, incest and polygamy, but not the others. People don't seem to be on a crusade to send adulterers to jail, so this seems like a difficult thing to pin as the principal driving force. Drinking and smoking while pregnant is not illegal, and that is far more detrimental to children than any of the above things (other than incest).

Power relationships is a common argument - polygamy, bestiality and incest and such rely on relationships between one person who is more powerful than everybody else. Setting aside the "bargaining power" element of polygamy - maybe one man is the implicit "boss" of multiple wives, but each woman, being in greater demand, has much more bargaining power than each man does - how does gay marriage qualify? For that matter, incest between consenting adults doesn't really qualify, either - by the time you're 18, the law holds you responsible enough to do most things, and 21 pretty much knocks off the rest of the things you're legally allowed to do. Why should incest be different?

Counter-evolution is a final example I can think of - some things are negative from an evolutionary perspective - but that seems to apply strictly to incest, because the others do not create evolutionarily weak offspring, nor do they prevent a party from (if they wish) creating evolutionarily strong offspring.

Maybe there's something else I'm missing, but I can't think of a basis by which the government can regulate those behaviors in the manner they currently do (adultery ok, gay marriage highly conflicted depending on the state, the others prohibited) in a manner consistent with its own role in regulating relationships and other areas.

Some of those clearly make me uncomfortable (incest and bestiality are, in my opinion, genuinely disgusting), but uncomfortable isn't a basis for law. The only conclusion I can come to is that the prosecution of this professor and the legally-justified prosecution of his daughter is an unjust role for the government to be playing.

Monday, December 6, 2010

Wikileaks Defenders, explain this

I've mentioned a couple times before that I think WikiLeaks' "full disclosure" ideology is irresponsible and puts American lives at risk, and that pragmatism is important when dealing with this stuff. Wikileaks' defenders call it "journalism" and simply assert that transparency is always good.

I'd like to posit that the following is an example of why this is completely false:
"WikiLeaks has published a secret U.S. diplomatic cable listing locations abroad that the U.S. considers vital to its national security, prompting criticism that the website is inviting terrorist attacks on American interests."

can someone give me ONE good reason why this type of transparency helps people? Except for maybe Iran, North Korea and Al Qaeda, who benefits from this?

I'd also like to point out that (at least according to my went-to-Medill-and-is-an-actual-journalist cousin) a cornerstone of journalistic ethics is that you don't publish things that threaten national security.