Diatribes of Jay

This is a blog of essays on public policy. It shuns ideology and applies facts, logic and math to economic, social and political problems. It has a subject-matter index, a list of recent posts, and permalinks at the ends of posts. Comments are moderated and may take time to appear. Note: Profile updated 4/7/12

23 October 2015

“The Martian”


In myth making, a strong message should never get in the way of a good story. A riveting story is what myth making is all about. But when a strong message joins a great story, the myth becomes transcendent. It forms part of our culture, like the Bible.

So it may be with Matt Damon’s and Ridley Scott’s recent tour de force, “The Martian.”

Don’t worry. I won’t spoil the movie for readers who haven’t yet seen it. Matt Damon has to survive, or there wouldn’t be much of a story. Beyond that, the how, what and when provide the riveting experience.

But the movie offers more than dazzling graphics and a riveting tale. At long last, it transcends the consistently mindless but spectacular violence in which Hollywood has lost itself.

For decades we’ve been trapped in an infinite maze of remakes of “Spiderman,” James Bond thrillers and, yes, Matt Damon’s own “Bourne” series. Never mind the repetition and lack of creativity and imagination. The worst thing about these movies was not their numbing sameness. They all offered a single, depressing moral message: even if you are a superhuman hero, your sad fate is a grinding struggle of mindless violence endlessly fighting mindless human evil. For any alien intelligent species that may be watching us from afar, this consistent message has been an advertisement for our extinction.

Our comic-book superheroes have suffered this Sisyphean lot for some time. Recently, writers, producers and directors have been lost in the same maze of nihilistic tedium, afraid to exit for fear of losing money or position. “The Martian” finally breaks this dismal mold, offering sound moral messages for our era.

Individually, we humans are small, light, weak, fragile, and stupid. Collectively, we have come to dominate our small planet. We out-compete and out-survive all of the other millions of species that share our isolated world.

How do we do that? By working together.

Other primates are capable of cooperating. Even insects are. But our species’ unique combination of intelligent communication and empathy has taken us farther—much farther—than any other species on our planet.

The secret of our human success is not our opposable thumbs, our upright posture or our grapefruit-sized brains. How many Newtons, Adam Smiths, Darwins, and Einsteins have we had in our entire history? No, our chief evolutionary advantage is not our overhyped brains. It’s our ability to work together, at a level of detail and complexity that no other species here has mastered. We do that every day, while we wait centuries for our next individual genius.

The notion of transcendent cooperation seems to be a modern meme. Less than two weeks before “The Martian’s” release, PBS’ “Nova” series aired a retrospective of the lifelong work of an eminent biologist, E.O. Wilson. This scientist made uniquely useful insights into our own human biology by comparing us with ants and termites. As he noted, these species, too, display altruism and individual self-sacrifice in the service of cooperation, though probably not the fully conscious kinds we humans have.

Without preaching, “The Martian” immerses us in our human capacity to cooperate. It does so at three levels. The first is the obvious one: all those scientists and technicians assembled in the control room at NASA’s Space Center.

There each man and woman does a small but necessary task with absolute dedication, precision and professionalism. Electronic systems connect each to the others and to external workers and instruments. The whole endeavor resembles a gigantic super-organism, which comes alive and aware at the critical moment of launch.

The second level of cooperation is “just” a dramatic device. At one point in the story, Matt’s team, on the way home without him, has to turn back to save him.

After discussion, they do so. Fully conscious of risking their lives and prolonging their already wearing ordeal in space, they consent unanimously, in a willing, conscious spirit of altruism and self-sacrifice. Eat your hearts out (if you have them), ants and termites!

The final level of cooperation is global. As you might expect, the ordeal of a single one of us marooned on Mars rivets our entire species. Connected electronically across the vastness of space and around our own globe, we humans all share his fate vicariously, as if we were a single organism.

After a terrible failure of NASA’s, the Chinese space program offers to help. So the enigmatic and aloof Chinese are present, too, offering a helping hand to keep our species’ lonely American hero alive.

Despite their aloofness and strange writing—unreadable by anyone else—the Chinese share our species’ chief evolutionary advantage: cooperation. In the end, the whole world shares the joy of a hair’s-breadth escape from disaster. It is a species-wide triumph—a not-so-subtle message that we are all in this together.

The movie offers other, more subtle messages, too. The Universe in which we evolved is a harsh and unforgiving place. As we search for life like ours on other planets, we have come to study how rare and unlikely is the “sweet spot” of chemistry, gravity, atmosphere, temperature and sunlight that allowed carbon-based life to emerge on this Earth and us to evolve.

We know now that those rare and delicate conditions can change unexpectedly, with unfortunate results. Just ask the dinosaurs.

As a species like all others, our task is to survive and thrive, as best we can, using the chief evolutionary advantage that brought us to this point: cooperation. A second task, which we are just beginning to take aboard, is helping other species survive also, and so preserving other life and our biosphere’s diversity as best we can.

So the movie’s final message is the best. In the end, it chronicles a massive, species-wide effort to save a single human life. The message is unmistakable: life is infinitely precious. In a huge, uncaring Universe, it is also infinitely vulnerable.

So, the film seems to say, our species is at our best when we work together to preserve life. Syria and runaway global warming don’t have to become our epitaphs.

Rarely has a movie with such compelling moral messages come at a more appropriate time. I have written a whole essay on “The Defiant Ones,” whose perfect metaphor of a black and a white man leg-chained together presaged our nation’s civil rights struggle five years before Dr. King gave his “I have a dream” speech. Movies with such powerful and timely moral messages come but once a generation, if at all. They are the guiding myths of our age.

And so it is with “The Martian.” Take your kids to see it, more than once, and be sure to discuss what it means. Our species’ future may depend on how well it drives its multiple messages home.

Footnote: In one respect “The Martian” breaks no mold; it’s in the mainstream of the recent lost-in-space genre, which includes “Interstellar” and “Gravity.” But while those other movies explore the themes of our fragile home sweet home and its preciousness, none probes our species’ chief evolutionary advantage as deeply and beautifully as “The Martian.”

Is it just a coincidence that these movies, all of which have at least some moral message, are among the most successful so-called “science fiction” films in recent years? Could moral value be compatible with making money in the film industry? Might major studios be losing money and talent to so-called “indies” and new media because they have utterly lost their creativity and moral compass in trying to make myths with spreadsheets?

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16 October 2015

Bernie’s Night


Introduction
1. Articulation
2. Passion
3. Understanding and grace
4. Standing his ground
5. Facts and Figures
6. Bernie’s Achilles Heel
Conclusion

Introduction. After two days to think about it (including one day on planes), I’ve come to the conclusion that Bernie Sanders “won” Tuesday night’s Democratic presidential debate. In fact, he won it about as decisively as anyone ever wins such a thing.

His win matters for two reasons. First and foremost, everyone knows who Hillary is. Before Tuesday, few but committed progressives like me really knew who Bernie is. He doesn’t need to convince people like me; we’ll vote for him in the primaries and, if he wins the nomination, in the general. Bernie needs to broaden his “base,” and his fine performance in the debate will help him do that.

Second, the debate marked a contrast from the long and dismal list of televised disasters—depressing and corrupting exercises in policy as entertainment. There was some of that at the beginning, with the overhyped introduction of the candidates and the applause and catcalls. Some day, one hopes, even commercial TV will come to understand that the contest for the world’s most important job is not just another reality show or episode of “Oprah.”

But apart from that, what aired Tuesday actually had a passing resemblance to a debate on the substance of national policy. Anderson Cooper did a good job as moderator, pressing the candidates’ points of personal vulnerability, following up hard, giving candidates a chance to respond to attacks, and trying to keep them all within pre-agreed time limits.

But most impressive thing of all was the substance. The debaters actually discussed important and vital issues, at least as much as one can do in less than two minutes. They also refrained from personal attacks, smears and innuendoes and the endless verbal “gotchas” that have allowed the so-called “Grand Old Party” to degenerate into the Tea Mob.

In my geezers’ Spanish class, we often discuss politics and current events in Spanish. One student called Tuesday’s debate “refrescante” (“refreshing”), especially as compared to the general level of partisan politics for the last eight years. We all agreed.

So Bernie made his mark in a national debate that was a good one. How did he do it? Let me count the ways

1. Articulation. First and foremost, Bernie was by far the most articulate, organized and effective speaker. He spoke in complete sentences and complete paragraphs, all of which seemed to end smartly just as his time ran out.

Try to do that, under immense pressure, in 90 seconds for a reply and 30 for a rebuttal. It’s far from easy. Bernie did it flawlessly, almost every time, far surpassing the others. He especially outdid Hillary, who repeatedly used her commanding tone (and apparently her gender) to overrun her time limits.

When you’re trying to solve the world’s problems in 90 seconds and refute others’ solutions in 30, timing matters. So Hillary’s constantly overrunning her time limits just reinforced the impression that she doesn’t think rules apply to her.

Bernie’s superiority wasn’t just a matter of timing. Nearly all his answers made sense, were duly explanatory, and used simple but important facts to drive his points home. He took several chances, for example, to recite shocking statistics about our nation’s vast and growing economic inequality.

In contrast, Hillary performed as usual. She spoke around the issues, tried to capture all sides, and made lists. Even when asked to state the greatest threat to our national security, she responded with a list. Yes, Hillary, we know that lawyers make lists, and we know you are a good lawyer. But can you make decisions and prioritize?

With his New York accent (do New Yorkers ever lose it?), Bernie reminded me of a once-strongly-held prejudice of mine when young. I once thought that New Yorkers, whatever their social standing, had the best command of the English language among us Yanks. (In my youth, I had bantered about prices with a food server in a New York cafeteria, who spoke of “the exigencies of the profit system.”)

Bernie is of the generation in which New York City’s educational system shone as a global leader. (Full disclosure: both my late parents, like Bernie, were born in Brooklyn.) He shows what it once could do. Maybe some day it will do that again, with students of all races and origins.

2. Passion. In his tone of voice, stance, and enunciation, Bernie showed more honest passion than any other candidate on the stage. He left absolutely no doubt that he believes what he said and that he will, to his last ounce of wisdom and strength, do something about it. You can’t fake that sort of thing.

No other person on that stage came close. Not even Hillary, who was trying hard to show passion and “authenticity.” To be fair to her, I would have to say she came in second in the passion contest, with Martin O’Malley (especially on climate change) a close third.

3. Understanding and grace. Tuesday’s debate had only two moments of surpassing understanding and grace. Bernie captured both of them.

The first came in response to a citizen’s question: “Do black lives matter, or do all lives matter”? My own thought on hearing that question was, “Is this a trick?”

It’s not a trick once you think about it. Of course all lives matter. But only black people have solid, objective, factual reasons to think their lives don’t matter, reinforced by a long chain of despicable and horrible recent incidents.

Bernie understood these points and made them with perfect pitch. He began his answer with three simple words: “Black Lives Matter.” Then he explained why they do, and why the same question applied to others is superfluous.

Although short (under the rules), his answer was a tour de force. No doubt it will soon appear in political textbooks. It didn’t sound in the least contrived. Bernie’s passion was indistinguishable from his indignation that 0.1% of us have as much wealth as the 90% majority.

As important as the BLM movement is—especially to progressives—Bernie’s second showing of understanding and grace was even more critical. Hoping to stir up some dispute among the candidates, Moderator Cooper had asked a question about Hillary’s private e-mail system as Secretary of State. Bernie responded as follows:
“[L]et me say something that may not be great politics. But I think the secretary is right . . . the American people are sick and tired of hearing about your damn e-mails.” [After receiving Hillary’s thanks, Bernie continued:] . . . “[The m]iddle class in this country is collapsing. We have 27 million people living in poverty. We have massive wealth and income inequality. Our trade policies have cost us millions of decent jobs. The American people want to know whether we’re going to have a democracy or an oligarchy as a result of Citizens [United]. Enough of the e-mails. Let’s talk about the real issues facing America.”
With this simple response, passionately stated, Bernie accomplished four things. First, he showed himself to be a human being who can commiserate with colleagues even in the midst of a supremely competitive event. Might that skill be useful in working with Congress and seeking bipartisan agreement?

Second, in being gracious to his chief opponent, who everyone thinks is leading, Bernie showed the kind of courtesy and consideration that seems to have vanished from our public sphere. He reminded me of President Obama, as candidate, holding Hillary’s chair for her during their debates. (At the time I thought that act risky, but Obama won. Bernie’s act of courtesy was less fraught, especially for feminists. It might even cause them to sympathize with him.)

Third, in using the words “damn e-mails” Bernie showed his passionate rejection of the GOP’s “gotcha” tactics, from the Benghazi Witch-Hunt Committee to the persistent attempts by propagandists to distract voters from what really matters in their lives. In this respect, as in most others, Bernie went for the jugular of policy.

Fourth and most important, Bernie made a strongly implicit contrast between the Democratic debates and the carnival side-shows that have passed for Republican debates this year. “We Dems,” he seemed to say, “care about ordinary people and the policies that will improve their lives, not gossip and gotchas.” In so doing, Bernie made himself the chief and most eloquent spokesman for Democrats and progressives on that stage.

4. Standing his ground. At one point, Moderator Cooper gave Bernie a chance to deny or explain his earlier description of himself as a “Democratic Socialist.” Apparently Bernie had accepted that label on several occasions.

As I have explained at length, to intelligent people the label on a box doesn’t matter as much as what’s actually in the box. But for about a generation, Republican propagandists (aka “political operatives”) have made lucrative careers out of false labeling of people and policies. So while labels don’t matter much in substance, they matter a lot in politics. In many cases, they’re all the GOP has got.

Consequently, the question was a tough one for Bernie politically. He could deny the label, risk losing his reputation for “authenticity,” and be called a “Flip Flopper.” Or he could affirm it and undertake the formidable task of explaining what the term “Democratic Socialist” means to voters whom the GOP propaganda machine has conditioned like Pavlov’s dogs to bare their teeth and growl whenever they hear the word “socialist.”

Courageously and characteristically, Bernie chose the latter and more difficult course.

In so doing, Bernie got an “A” for courage and political savvy. He knew that (if he wins the nomination) his eventual opponents will make campaign ads out of whatever clips they can get of him using or affirming that label. So he didn’t fall into the trap of arguing about labels or of trying to weasel out of one he apparently had accepted.

In trying to explain why voters should not blanch at the words “Democratic socialism,” however, Bernie got only a “C.” He did note that many European nations have Democratic socialism, which for them means free, universal health care, free education, and free family leaves. He also made these points repeatedly in his other remarks.

Unfortunately, he never made the crucial point that what he believes in and has advocated all his life is nothing like the dictionary definition of “socialism” (without the modifier “Democratic”), which means government ownership or control of the means of production. No Yank, including Bernie, believes in that.

But in accepting and explaining the label, Bernie showed his political courage, avoided an obvious political trap, and began the long process of leading the public to the notion that free health care, free education, and family leave might actually strengthen families and our nation, rather than destroy our alleged moral fiber, aka suffering of the less privileged.

5. Facts and figures. I hate the phrase “staying on message” with a passion. It reeks of the Big Lies that the GOP has used like Goebbels, from the notion that Saddam had weapons of mass destruction, to Boehner’s nod and wink at the birther movement and his repeated, nonsensical reference to “job-killing taxes.” (As I have explained in another essay, taxes don’t kill jobs; they just provide them in both the government and, through contracts, the private sector when broken private markets can’t or don’t.)

But if you speak truth, not lies, staying on message is not a bad idea. In our twitter age, the clever bon mot or chop often trumps common sense (pun intended). And our educational level is rapidly declining, making it hard for the average voter to maintain a coherent thought for more than a few seconds, let alone a whole day.

In this toxic environment for thinking, repeating important, basic facts of policy is not a bad idea. Bernie did so beautifully, and on a number of issues. They included: (1) the godawful economic inequality that poisons our economy today; (2) our unprecedented levels of poverty; (3) our unprecedented and crushing level of student debt; and (4) the fact that we are the world’s only advanced nation without a national policy for paid family leave, let alone both before and after a new birth.

While these points sound dull and wonky, in Bernie’s hands they were not. He provided—by far—more solid facts on more issues than any other candidate. In fact, if you want a president who knows the facts required to make good decisions, Bernie outshone the others by a considerable margin. If you want a president in close touch with reality and the data that reflect it, he’s your man.

6. Bernie’s Achilles Heel. Some think that Bernie’s stance on guns might hurt him. He was visibly more moderate on gun control than most of the others (except for Jim Webb). He endorsed reasonable measures to keep guns out of bad hands, but he supported the right of people in rural areas to keep small arms. He also appeared to endorse the notion of guns for personal defense—a notion that the NRA has blown into an extremely trigger-happy society.

Yet I don’t think Bernie’s moderate stance on guns will hurt him much. It might lose him a few votes in the primaries, but it will serve him well in the general election, if he wins the nomination. For those voters like me, who see his stronger approach to economic issues as absolutely crucial to national renewal, his moderation on guns will only make him more electable.

In a country where one out of three households own guns—usually a number of them—we are not going to solve the problem of gun violence in one or even two presidential terms. But if we don’t solve the problems of economic inequality and the systemic corruption that causes it, we might no longer have a democracy by 2024. So in prioritizing real and fundamental economic reform over controlling guns, Bernie, in my view, reflects common sense and his own instinct always to go for the jugular.

For me, the chief flaw in Bernie’s debate performance relates to foreign and military policy. There his key response was to a rather vague question, apparently intended to stir up controversy among the candidates. Moderator Cooper had asked, in essence, whether the other candidates thought Hillary might be too quick to resort to military force in an international crisis. Her initial support of the War in Iraq (without reading the National Intelligence Estimate) and comments made during her 2008 presidential compaign might justify that view.

Cooper sought comments on this question from several other candidates. Then he suddenly turned to Bernie, as if in an afterthought, saying, “Senator Sanders, I want you to be able to respond.”

To put it mildly, Bernie reacted like a deer caught in the headlights. While the preceding conversation had been wide-ranging, he focused only on Putin and his actions in Crimea and the Ukraine, saying (in essence) that Putin will come to regret what he has done and is doing.

I absolutely agree with the substance of his answer. But it didn’t respond to the previous discussion or to the charge of excessive militarism against Hillary. Perhaps Bernie was groping for a way to respond while maintaining his grace and amity towards Hillary. But to me he sounded like a man unprepared to speak on foreign and military policy in a comprehensive, meaningful way.

There, in my view, lies Bernie’s greatest electability problem. It’s not guns. It’s having been a conscientious objector in the Vietnam era and now being able to point only to the war against ethnic cleansing in the Balkans, and the current wars in Afghanistan and against IS as recent military actions that he would support.

Don’t get me wrong. I support those positions. Like Bernie, I believe strongly that military force should be a last resort and that we have used it far, far too often in my lifetime.

But Jimmy Carter had a like military philosophy. He negotiated getting our Iranian hostages home unharmed, but Reagan got the credit because the then Ayatollah waited until one minute into Reagan’s term to release them. (Why pundits and some historians let an Ayatollah who was our self-professed bitter enemy determine who among our pols gets credit for lengthy negotiations will forever remain a mystery to me.)

Carter also kept us out of other wars and continued nuclear disarmament talks. But the right wing and our military-industrial complex has relentlessly vilified him as weak. In the long run, history will vindicate him. But as Keynes once said, in the long run we are all dead. In the meantime, we Dems have to deal with a large fraction of our Yankee electorate believing that Carter, although a good man and a good president, was feckless and weak.

The same is true of our current President. He has wound down two gratuitous wars. He has kept us out of another unnecessary war with Iran by making a deal to keep Iran from becoming a nuclear power. He has kept us out of a ground war in Syria and has refrained from making the situations in Ukraine and Syria worse.

In my view, his judgment and record on military action and foreign policy is unmatched. But that’s my view. You can bet that the right wing, Fox, the GOP propaganda machine, and the military-industrial complex, led by Senators McCain and Graham, will vilify Obama’s record on foreign and military policy and will paint Bernie as another Carter, but even weaker.

Bernie is far too smart to pretend to an expertise and interest he doesn’t have. Unlike Hillary, he lacks the knack for self-promotion that can make a single success in Libya (yes, success: the salvation of the rebels in Benghazi and the downfall of Qaddafi) seem like a whole career of hard work and good results in foreign and military affairs. And Bernie, even more than Hillary, bears the cross of age.

You can’t be president if voters don’t see you as a credible commander in chief. I see only one way for Bernie to address this serious deficiency in his campaign so far. He must find someone with impeccable credentials in those fields, secure that person’s consent, and name him (or a short list) as a possible nominee for vice-president or Secretary of Defense in a Sanders administration. Then Bernie must include that person or persons in his campaign.

This is not a new idea, at least with me. After Cheney and Rumsfeld got us into two unnecessary wars and utterly mismanaged both, we the people deserve to know whom any candidate will pick for the crucial foreign-policy roles of vice-president, Secretary of Defense, and even Secretary of State.

If Bernie had a commitment from people of the stature of Colin Powell, Robert Gates and Ashton Carter to serve in those positions if asked, that would do as much to make these issues of electability go away as anything else that he could do. His doing so would also provide a marvelous example and precedent for future presidential campaigns, as I have suggested in my earlier essay.

Conclusion. So that’s my take on Tuesday’s debate. Bernie “won” it decisively. He proved himself not only the best debater, but also the most viable candidate on the most important issues facing our nation, all of which are at present domestic.

But Bernie’s Achilles Heel is foreign and military policy. Issues in those fields can arise unbidden at any time. Foreign leaders can even provoke them to influence our own elections. So if Bernie is a serious candidate—as I and millions of other voters believe and fervently hope he is—he must begin to address this deficit now, long before the primaries start and even longer before the Democratic National Convention.

Footnote on First Names. Readers of this blog will note that I consistently refer to Hillary Clinton and Bernie Sanders by their first names. I know neither personally, but I have reasons for this practice. They differ between the two.

I have no particular affection for Hillary, but I mean no disrespect to her. If she wins the Democratic nomination, I will vote for her for president. I use her first name mainly to avoid confusion with Bill. I also don’t think she deserves to bask in whatever remains of Bill’s reflected glory. As a strong woman and a feminist, she should run on more than the strength of her married surname.

I do have some affection for Bernie, although I know him even less than I know Hillary. My affection arises from his fighting the good fight, at a ripe age, when no one else thought he had a chance. He is, in my view, the only presidential candidate who has any proper conception of the massive economic reforms that we must make to set our country right. Breaking up the big banks and raising the minimum wage are just the beginning.

I also use Bernie’s first name because: (1) he uses it in his own campaign, (2) we Yanks tend to personalize our relationship with our supreme leader, even when there is absolutely nothing personal about it, and (3) to use his last name and Hillary’s first would imply a deprecation of Hillary, which I absolutely do not feel. I simply think Bernie is the better candidate, just as I thought of Obama in 2008.

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11 October 2015

Lizard Brains and New Drug Pricing


One of the most astounding things about our species is how our lizard brains control our thinking on some of the most important things in life. The pricing of unique, patented life-saving medicines is one of those things.

You would think that, if we can send men to the Moon, maintain a global network of routine daily intercontinental flights, and learn (belatedly!) how to reserve our arsenal of antibiotics for deadly diseases, we might also know something real and practical about how to price new drugs. But you would be wrong.

In drug pricing, we don’t believe in science, math or pragmatism. Instead, we believe in a modern form of deity—one increasingly dominant in our commercially obsessed world and our ideologically obsessed politics. We believe in “The Market God.”

Insofar as patented drugs are concerned, this belief is best characterized as theology, or its cousin ideology. Why? Because so-called “markets” for patented pharmaceuticals are nothing remotely like what Adam Smith was thinking about when he concocted the term “invisible hand.”

Don’t take my word for it. Open up any introductory college text on basic economics. There you will find listed and explained, in great detail, the basic assumptions that govern the type of competitive, free market that Adam Smith first recognized. Depending on how you count, and on your tolerance for vital detail, there are six or seven basic assumptions. But the most important boil down to four.

First, there must be a large number of sellers of fungible products, so that no single seller, by itself, has the power to control “market” price. Second, there must similarly be a large number of buyers, each of whom can go from seller to seller seeking a better bargain. Third, transaction costs (the cost, effort and delay of buying and selling) must be minimal. And finally, buyers must have perfect information about the fungible products and prices that each seller offers.

A moment’s thought suffices to show that none—not one!—of these fundamental assumptions applies to so-called “markets” for patented new, life-saving drugs.

Because each drug is patented, only a single seller can offer it. There is no “market,” only a legally protected monopoly. If, as is often the case, the patented drug offers patients unique benefits, the monopoly is an economic one, too.

The number of buyers is limited, too, although not as much as the number of sellers. No one buys expensive pharmaceuticals for taste or fun. Buyers are limited to those with the disease or condition that the patented drug is supposed to treat. (The number of people who qualify is an important variable in calculating drug pricing, which we’ll get to later.)

Transaction costs are sky high in medicine generally, mostly because the costs of medical treatment generally, let alone patented new drugs, are usually far too high for most patients to afford personally. So the patients don’t pay for them at all; only their insurance companies do. Anyone who has spent more than an hour dealing with insurance contracts and insurance companies knows that the “transaction costs” of insurance payment are considerable, if not astronomical.

As for patients having perfect information, of course they don’t. Not even their doctors do. That’s why Big Pharma is constantly getting in trouble for influencing doctors’ decisions with freebies, travel, research support, free samples and other marketing ploys. And in any event, it’s not the doctors or their patients who determine whether to prescribe a new drug; it’s the insurance companies, with all their legal and administrative transaction costs.

So let’s take stock. So-called “markets” in patented new pharmaceuticals obey not a single one of the four most basic assumptions that free markets are supposed to follow. More than that. On all four assumptions, these products depart wildly from anything that Adam Smith would have recognized as a “market.”

So the next time you hear a representative of Big Pharma speaking of “market prices” for patented new drugs, only one response is appropriate. A big belly laugh—which (if you are a patient) might fade into hysterical laughter.

So if The Market God doesn’t set new drug prices, what does? I’m glad you asked. A few years ago, in one of my last pieces of academic research, I wrote a published paper on precisely that point. This post is the Cliff Notes version.

When a new drug is patented and has no reasonable substitutes, that patent owner has both a legal and an economic monopoly. The patent provides the legal monopoly, and the lack of practical substitutes provides the economic monopoly.

Under those circumstances, the patients who suffer the disease or condition that the drug ameliorates or cures have no choice but to buy the drug, or to suffer or die. Those circumstances, of course, are nothing like what Adam Smith contemplated when he called markets “free.”

Some patients who can’t afford the drug—or who can’t afford insurance to pay for the drug—will do exactly that. They will suffer or die, not because of their medical condition, but for lack of cash or a reasonable socioeconomic system to afford them treatment.

But for the moment, let’s bypass that inconvenient unpleasantry. Instead, lets look at drug pricing from the patentee-monopolist’s perspective.

Mathematically, the patentee-monopolist’s pricing depends almost entirely on two independent variables: (1) the number of patients who need the drug and can afford it, and (2) the rate of return on investment that the patentee-monopolist desires. That’s pretty much it. (The price itself is the dependent variable.)

Before we explore the practical consequences of this point, lets look at some numbers. Following is a table, based on pure math alone, showing the relationship between the price of an annual course of treatment (the dependent variable) and the two independent variables, the number of patients and the desired rate of return:

Cost of Annual Course of Treatment as Function of Number of Patients and Desired Rate of Return

Annual Rate of ReturnNumber of Patients N
500,0001 million5 million10 million50 million
5%$763$432$166$133$107
10%$1,782$941$268$184$117
25%$21,784$10,942$2,268$1,184$317
50%$831,414$415,757$83,231$41,666$8,413

One thing leaps out immediately from these figures. The annual cost of treatment with a patented new drug depends dramatically on the size of the patient population, N, and the desired rate of return on investment, R. But while the size of the patient population depends on evolution, genetics and medical practice, the desired rate of return depends entirely on the patent holder, in particular its top corporate managers. To put it plainly, it’s at their whim. (Pharmaceutical patent holders are nearly always corporations, mostly from Big Pharma.)

Not to put too fine a point on it, the primary determinant of a patented new drug’s pricing is individual greed. “The Market God” has absolutely nothing to do with it, because there is absolutely nothing resembling a free market.

The most important thing about this mode of analysis is that it shows only relevant variables. The new drug’s development cost is not relevant: the same proportionate figures apply no matter what that cost is.

Of course new drugs are expensive to develop. Of course innovation costs money. And yes, Virginia, there are indeed several failures (the statistics say four) for every successful new drug. But the table intrinsically includes all these costs in the development cost, i.e., investment, on which the rate of return is calculated.

So the table above includes the high cost of innovation and the cost of failed attempts to discover safe and effective new drugs. It also includes the cost of clinical trials, which is by far the biggest factor in development cost.

Yet as the table shows, the key independent variable is not the development cost, but how quickly and how dramatically the investors in development want to (at least) recoup it and then get rich. When a drug is patented and either uniquely life-saving or ameliorative of suffering, the only variables that mathematically restrict the investors’ rate of return are the number of patients whom the drug can benefit and the price the patients or their insurance companies can afford to pay.

In the extreme case, when a drug preserves life, a rational patient will pay his or her entire net worth to stay alive. So much for “free markets”—that is, if “free” actually implies entirely voluntary “take it or leave it” transactions. Few of us have a cavalier “take it or leave it” approach to life itself.

The point here is not to bash Big Pharma’s greed. All of our species is greedy. Greed is part of our human condition.

The point here is far more subtle. There is absolutely no mathematical or practical restraint on Big Pharma’s greed except: (1) the number of patients who can benefit and (2) the amounts they or their insurers can afford. Neither Adam Smith nor any putative market theology provides any other practical restraint on new drug pricing.

The ultimate conclusion is now crystal clear. The pricing of patented new drugs is inescapably and unavoidably “political” because there is no market restraint on that pricing. The Market God, in this circumstance, simply doesn’t exist.

More precisely, we have no procedure or formula—and no theory for one—to calculate how much greed is “good,” how much profit to put away for future innovation, or how many people must suffer and die for lack of the money or insurance to afford patented new medicines. Reaching for a financial theology to justify any particular pricing is nothing more than the same kind of self-interested hand behind the deity that brought us sadly through our second millennium.

Just as our species must face facts about heating our planet by burning fossil fuels, we must also face facts about new drugs and the expensive research that produces them.

Our resources are limited, both as a nation and as a species. The research that discovers new drugs is indeed expensive and risky. As a nation and as a species, we can’t research and develop everything because we don’t have infinite time, energy and money. We don’t even have infinite attention.

So someone has to set priorities.

At the moment, that “someone” is corporate executives whose primary goal is maximizing their profits and “shareholder value.” By and large, they are ignorant of medicine and epidemiology and therefore the extent to which their research dollars are likely to: (1) produce something characterizable as “success” which (2) will substantially alleviate mortality and suffering of a large number of people. If you doubt that these worthies exist and that their primary goal has nothing to do with medicine, all you have to do is read the recent news.

There’s no use in naming names because there’s so much money to be made by jacking prices up. More likely than not, the practice will spread as far and as fast as the liars’ loans packaged and sold as “mortgage-backed securities” that caused the Crash of 2008, from which we are still recovering. As we have noted, greed is part of the human condition. It’s up to the non-lizard parts of our brains, including our social evolution, to avoid its worst consequences.

So what should we do? One alternative is to move away from lizard-brain belief in false deities, such as “The Market God,” and from individual or corporate self-interest as the lodestar of medical resource prioritization, including drug pricing. Instead, we might move, as much as possible, in the direction of disinterested expertise.

After all, we tend to accept this notion in fields outside medicine. Military experts tell us where to spend our military research budgets, although some pols get bases and plants in their districts for jobs and patronage alone. Civil engineers tell us which of our increasingly dilapidated bridges are likely to fall down first. So why shouldn’t experts in medicine, namely doctors, decide—or at least help us decide—where our medical research dollars might do the most good, as distinguished from making a few privileged people the most profit?

We Yanks fought the opening battle in this war nearly a decade ago, long before so-called “Obamacare” became law. The winning campaign was hardly a triumph of reason. It was a triumph of brilliant propaganda. The insurance and drug industries won the opening engagement simply by calling our doctors, collectively, “death panels.”

Unbeknownst to the vast majority of the voting public, “death panels” were even then widely in practice. They still are. They are groups of distinguished physicians who volunteer their scarce time to write and publish—and to update annually— exhaustive compendia of current knowledge and best practices for every known human malady and condition. Panels of good doctors volunteer their time, for free, to write and update these tomes to advance their prestige and their careers and for love of science and medicine.

If you doubt this, ask your doctor about the tome on a disease or condition that you or your loved ones face. Good doctors will loan you their copies, and some are now available on line. (The summaries of current medical knowledge on the websites of the CDC, NIH, Mayo Clinic and other venerable medical institutions are just simplified and condensed versions of these tomes, with complex medical terminology removed or translated into simple English.)

These facts reflect an extraordinary thing about our American society. When something important needs doing and no immediate profit is involved, usually someone or something will step up and get it done. Our own physicians, through their medical associations, did and do so every year in writing and updating these best-practices compendia. They write the tomes on a purely voluntary basis, without compensation, although as a group they are among the hardest working and most stressed professionals in our entire society.

Similar expert panels routinely decide what fields and types of medical research receive government funding, and how much. The process is called “peer review” of grant proposals. It has been an established aspect of medical science (and other fields of science as well) for most of a century.

So what’ll it be? Who’ll set the prices for patented new drugs and determine in which research to invest? Will it be corporate executives, based on the expected rate of return, which (if the drugs are patented) they can manipulate at will? Or will it be expert doctors, based on their detailed knowledge of the extent and range of human suffering and the realistic chances of alleviating it? (Of course the doctors will have to work with accountants and other financial experts to assess costs and keep the machine of innovation running.)

I don’t know about you. But if it were my or my loved ones’ health at issue, I would go with the expert “death panels” every time.

That brilliant but utterly misleading phrase won the first battle decisively for the privileged executives. But the real war has just begun.

Footnote: The figures in this table come from formulas derived from first principles in Section II of my published paper. They assume a total development cost (investment) of $2.5 billion for each new patented drug. That number in turn assumes a per-drug development cost of half a billion dollars and five attempts, including four failures, for each successful drug.

Because the numbers in the table all scale linearly with development cost, a $ 1 billion development cost with the same five attempts per success (for example) would multiply all dollar figures in the table by two. The relative relationships among the number of patients and desired rates of return would be unchanged. In other words, under our present political-economic system, the two determinants of patented new drug pricing are (1) the size of the patient population and (2) how much profit corporate executives want to make.

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02 October 2015

Syria: Colin Powell’s Solution


Since FDR and his geniuses and generals (including Eisenhower and Marshall), we Yanks have rarely had a general-statesman as wise as Colin Powell.

You might cite Douglas MacArthur, whose brilliant landing at Inchon permitted an honorable stalemate in the Koran War, and hence fostered the economic miracle of South Korea. But MacArthur was insubordinate. Harry Truman had to fire him to avoid a general war with China. Just imagine what the world might be like today if such a war had happened. Imagine a new cold war with China, rather than the current, closest relationship between economic superpowers in human history.

Colin Powell never was insubordinate. He was a classic military man. He even let himself be used at the UN to promote the fiction of Saddam’s non-existent nuclear weapons programs.

But Powell had many, many redeeming virtues. As Chairman of the Joint Chiefs, he presided over our shortest—and only unambiguously successful—major war since World War II.

We Yanks tend to forget that war, which we call “Gulf I.” Maybe we forget it because it was so different from the two sorry, decade-long ambiguous quagmires that Dubya got us into.

It was so short. It took only five months for us to build up our forces in the theater, and two months of combat to crush Saddam. Iraqi forces surrendered to ours in droves.

Our effort absolutely accomplished its limited objectives: kicking Saddam out of Kuwait and its oil fields, protecting the Saudi oil reserves, and keeping those massive reserves (the world’s largest!) available for global free-market exploitation. Just imagine what economic havoc the loose-cannon tyrant could have caused by controlling those absolutely vital resources, long before “fracking” became a word, let alone an action.

Not only was that war an unambiguous success. It was a smashing success, the only military effort of ours characterizable as such since our supporting role in World War II. (The Russians, our current sometime partners and sometime rivals, bore the brunt of that one, at least on the Eurasian continent.)

The perpetual hawks called Powell the “reluctant warrior.” They didn’t mean it as a compliment, but isn’t that the best kind?

Powell made short work of Saddam’s military ambitions by limiting his own. He didn’t invade Baghdad. He didn’t “conquer” or occupy Iraq. Instead, he beat Saddam back from Kuwait and contained Saddam for over a dozen years with a “no fly” zone.

That solution lasted until Dubya’s Oedipal impulses embroiled us in our current quagmire in Iraq, now approaching thirteen years and counting. In contrast, Powell accomplished his important but limited objectives in two months.

Gulf I was not Powell’s only triumph. I’ve written a whole essay lauding his good judgment on matters of military and foreign policy. Perhaps his second most important act, as our Secretary of State, was apologizing to China for our role in the spy-plane crisis, which might have provoked yet another cold war with China. Powell didn’t sound very sincere, but the apology worked. The result today is history’s most interdependent relationship—and so far a peaceful one!—between rival superpowers.

Not everything Powell did was a success. He never became president because, for personal reasons, he decided not to run. So he had to take orders from others, first as Chairman of the Joint Chiefs, and then as Secretary of State. Maybe, like another before him, he preferred to be right rather than be president.

When Dubya wanted to upset all the careful balance in Iraq that Powell had created, Powell tried to dissuade him. Powell invented something he called the “Pottery Barn” rule, after a then-nationally-prominent vendor of pottery and other household wares. (The Pottery Barn disclaimed the rule, citing customer friendliness, but the name stuck.)

“You break it, you own it,” Powell warned Dubya. Isn’t that the most succinct possible description of our decade-long quagmires in Iraq and Afghanistan? Powell’s “Pottery Barn” rule was not only apt, but brilliant. In six words, it predicted and described precisely what has happened in Afghanistan and Iraq for the last fourteen years and counting.

Note that the rule does not predict outcomes, only responsibilities. In each of Iraq and Afghanistan, a salubrious outcome is still possible, although uncertain. Powell’s point was not that bad things would necessarily follow, but that the actor who “broke” a nation would forever be responsible for fixing it. Isn’t that precisely our Yankee position today, as we contemplate the Taliban’s resurgence in Afghanistan and IS’ depredations and brutality in Iraq? Even our cautious President is thinking about delaying withdrawal or sending more troops.

So if we credit Powell (as we should) as having preternatural insight, who “broke” Syria?

Is there any doubt at all? Russian and Iran broke Syria by supporting Assad, who represented a 12% minority of Alawites oppressing and dominating the vast majority of Sunnis by sheer, unadulterated and brutal military force.

It was all much like our own Lieutenant Calley in the Vietnam War. Calley, as you may remember, said, “We had to destroy the [Vietnamese] village to save it.” We Yanks later prosecuted Calley as a war criminal.

Just so, Assad has destroyed and emptied Syria in order to “save” it for his own depredation and exploitation and his Alawite tribe’s.

The result, five years later, is a nation of some 22 million people reduced to refugees and rubble. Many Syrians are “relocated” (what a dismal euphemism!) in regional states that can hardly accommodate them, let alone support them. The rest are trying to get into Europe and a self-evidently more promising life.

Russia and Iran broke Syria. So, according to Powell’s so-called “Pottery Barn” rule, they own it. They also own the turmoil on its territory, the rise of IS, the apotheosis of the jihadi, and the twenty-first-century Armageddon between Sunnis and Shiites that they facilitated, if not encouraged.

So what should we Yanks do? Should we expend yet more of our precious lives and treasure trying to glue together what someone else broke? Should we risk a confrontation with Russia, a new Cold War, or possibly another shot at nuclear Armageddon, just to prove we are right about Assad? I don’t think so.

Let’s be absolutely clear. Bashar al-Assad couldn’t win the post of sheriff in a small town in the Deep South, in a town with 49% blacks and 51% whites, in a free and fair election. He is either one of the stupidest or one of the evilest pols in our new twenty-first century. But for Robert Mugabe and Kim Jong Il, he would likely retain that title for the entire one hundred years.

So if the Russian and Iranians want to double down their misplaced bets on this cretin/devil, if they want to put their treasure and the lives of their loyal troops on the line for Bashar, should we fight them?

Hell, no! They made this mess. Let them clean it up.

Let them learn what real international responsibility means. Let them understand that they are much, much closer to the problem than we are. Let them learn that war is not a benefit or a moment of “glory,” but an expensive and painful responsibility, to be exercised only as a last resort, and only when you are absolutely sure that there is no alternative.

And let them feel the pressure as the cresting waves of jihadis turn from us relatively peaceable Yanks to suicide bombing the nasty Russians and Iranians. Let them feel the full force of the consequences of their actions, alone.

In the meantime, we Yanks have a dilapidated infrastructure to repair, a waning educational system to restore, a contact with scientific reality to re-establish, and a major party of extremists to re-introduce to the art of the possible. It’s time for us Yanks to put our own house in order and to let the folks who broke Syria own it and fix it.

Endnote: In his decision not to run for president, I don’t mean to second-guess Powell, whom I greatly admire. Every man is the best judge of his own future and capacities.

But as a dreamer, I can’t help wonder how much better we would be as nation if Powell had run, beat Dubya in the primaries, and won the presidency. As a military man in the know, he likely would have discovered the “Obama solution” to bin Laden and Al Qaeda—ninjas and drones—at least as quickly as Obama did.

Even more likely, racism in America would have taken a big hit. The GOP couldn’t have afforded to be racist because Powell would have been their man and their champion. And almost all racists already had left the Democratic party. As it happened, Obama’s vociferous enemies managed to confuse their racism with policy differences and justify it as such.

So wouldn’t we Yanks have a much less racist, much more rational country today, if Powell had run and won? In 2000, he was easily more experienced and wiser than any person running for president, bar none.

It’s fun to dream, but you can’t rerun history. All we can say today is that Colin Powell was and is an extraordinary man who might have changed our Yankee history, much for the better. And we can still appreciate the considerable contributions he actually did make.

If only the mindless hawks like McCain and Graham could recognize them also and do likewise . . . . We Yanks really don’t have to partake of every bar brawl, everywhere in the world. We really don’t have to mimic McCain as a student at Annapolis: a stalwart fighter in the bottom 1% of his class.

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