The Enterprise Blog

Archive for November, 2009

The blogosphere pile-on over Climategate continues. Over the weekend, several folks noted that “Climategate” had already surpassed “global warming” on webpage hits on Google. As I mentioned yesterday, analyses of the leaked Climate Research Unit documents, such as coding notes, are proliferating so fast that it’s become impossible to keep up.

And now Eric Raymond has joined the fray. Raymond is a well-known and well-regarded computer programmer and open-source guru. He’s already written a half dozen short analyses with more on the way. Here’s a representative sample:

From the CRU code file osborn-tree6/briffa_sep98_d.pro , used to prepare a graph purported to be of Northern Hemisphere temperatures and reconstructions.

;
; Apply a VERY ARTIFICAL correction for decline!!
;
yrloc=[1400,findgen(19)*5.+1904]
valadj=[0.,0.,0.,0.,0.,-0.1,-0.25,-0.3,0.,- 0.1,0.3,0.8,1.2,1.7,2.5,2.6,2.6,$
2.6,2.6,2.6]*0.75 ; fudge factor
if n_elements(yrloc) ne n_elements(valadj) then message,’Oooops!’
;
yearlyadj=interpol(valadj,yrloc,timey)

This, people, is blatant data-cooking, with no pretense otherwise. It flattens a period of warm temperatures in the 1940s 1930s – see those negative coefficients? Then, later on, it applies a positive multiplier so you get a nice dramatic hockey stick at the end of the century.

All you apologists weakly protesting that this is research business as usual and there are plausible explanations for everything in the emails? Sackcloth and ashes time for you. This isn’t just a smoking gun, it’s a siege cannon with the barrel still hot.

Raymond is just the sort of person that ought to be focusing on Climategate—and he is. The alarmists following the story have to know that this thing has gotten away from them.

Read the rest of Raymond’s installments here.

There’s a game played in Washington and in many of the capitals of Western Europe that centers around drawing a big distinction between Vladimir Putin, the former president, now prime minister of Russia, and his presidential successor, Dmitry Medvedev: Putin, we now concede, is something of a ruthless thug, but Medvedev is an animal of a different stripe. Medvedev is, we are told, someone who knows what truly ails Russia and, if not exactly a Western-style liberal, he is someone we should be working with to stop the slide in relations with Moscow and the deterioration in Russian civil liberties.

So far, drawing that distinction has not borne much fruit. On Medvedev’s watch, Russia has invaded Georgia, kept up the pressure on neighboring states to fall within the Russian security and economic orbit, and done little to make Russian democrats and critics of the current regime feel any less likely to suffer vengeance from the state or its mafia.

Now, the latest: after a year or so of suggesting that a new security architecture for Europe and Russia was in order, Medvedev finally offered up a draft treaty over the weekend designed, he hoped, to put “the Cold War … behind us.” Well, in some respects, the proposed treaty does put the Cold War behind us. Unfortunately, it resurrects an “imperial” Russia to take its place.

The core principle in the draft accord is that those who sign onto the treaty—presumably all the nations of Europe and the countries on Russia’s western borders—would undertake no activities “affecting significantly the security of any other party,” nor would any state or alliance take any measures without “due regard to the security interests of all other parties.” Left undefined is what “significantly” might mean, along with “security” and “security interests” of other parties. But the thrust of the treaty is clear enough: expanding NATO should be out; expanding NATO’s defensive capabilities with its member states in the east of Europe should be out; providing assistance and advice to democratic states on Russia’s borders should stop; and, implicitly, Russia should have a veto over what others (including the United States and the European Union) do when it comes to foreign and defense policies in what it considers to be its near abroad.

In his first major speech after becoming NATO Secretary General, Anders Fogh Rassmussen, the former Danish prime minster, called for a “new beginning” with Russia and said “We must all aim for a Euro-Atlantic security architecture in which Russia sees herself reflected.” Well, we now have Medvedev’s vision of how Russia wants to see itself reflected in that architecture. It’s not a pretty picture.

Today’s fascinating Buffalo News column by Edward Cowle, CEO and president of U. S. Rare Earths, reveals the stunning fact that 84 percent of the $1.05 billion dollars in “green stimulus” money spent by the Obama administration has gone to foreign companies, particularly Chinese firms.

One wind farm project that was planned using $450 million in stimulus money would have paid for the windmill construction in China, creating 2,000–3,000 jobs for the Chinese, but only 300 temporary and 30 permanent jobs here in the United States (Senator Charles Schumer is apparently trying to get this project axed.)

Such trends are likely to continue if we keep chasing the “green energy” bandwagon, because, as Cowle observes:

Rare earth elements are vital to green energy applications like wind generation and hybrid vehicles. Rare earth magnets are found in components in wind turbines and rechargeable batteries, in key national security systems that keep us safe at home and protect our war fighters in the field and in everyday consumer products like computers, cell phones and iPods.

Worldwide demand for these materials is escalating rapidly, and more than 95 percent of currently available rare earth mining occurs in China or is controlled by Chinese-led interests.

China, in turn, has used this lock to become the Saudi Arabia of rare earths globally. By enacting unfair export quotas and taxes on rare earths and related products, China has placed U. S. rare earth magnet manufacturing at a competitive disadvantage and forced producers overseas. This has led to an increase in Chinese green manufacturing jobs and driven Chinese firms up the value chain at the expense of American workers.

Today no significant production of rare earth metals takes place in North America or anywhere outside of China.

The United States and Canada have their own rare earth resources, but, as with America’s own oil and gas reserves, the United States doesn’t make it easy to develop them.

The rare earth issue raises another question that isn’t discussed in Cowle’s column. Advocates of wind and solar power always claim that costs will come down for renewable energy as more of it is deployed, but this makes little sense when the costs of the technology tilt heavily toward the input materials, especially if those materials are scarce. In that situation, one would expect costs for wind and solar power devices to go up with increased deployment, not down.

Charles Murray

Stigma Makes Generosity Feasible

By Charles Murray

November 30, 2009, 11:02 am

I am sure the New York Times is right when it says that the stigma of using food stamps is fading, but it brings us to another aspect of the “Do we want to be like Europe?” question that has been at the center of so much that’s happened since the inauguration of Barack Obama.

Stigma is the only way that a free society can be generous, whether through private help or government programs. The dilemma is as old as charity: how to give help without creating a cycle in which more people need help. Stigma is the way out. Stigma does three things.

First, stigma leads people to socialize their children in ways that minimize the chance that they’ll need help as they grow up. When children are taught that accepting charity is a disgrace, they also tend to be taught the kinds of things they should and shouldn’t do to avoid that disgrace.

Second, stigma encourages the right kind of self-selection. People in need are not usually in a binary yes-no situation. Instead, they are usually somewhere on a continuum from “I’m desperate” to “Gee, a little help would be kind of nice.” Stigma makes people ask whether the help is really that essential. That’s good—for the affordability of giving help, and for the resourcefulness of the potential recipients.

Third, stigma discourages dependence—it induces people to do everything they can to get out of the situation that put them in need of help.

All of these benefits of stigma reflect tendencies. Of course there are lots of exceptions. But large-scale assistance is shaped by tendencies. The European model says that people should look upon assistance as a right. Once you say that, the tendencies you create commit you to a cradle-to-grave system of government-decided support systems and corresponding limits on the ability of people to make choices for themselves.

The American model holds up the ideal of individuals and families making lives for themselves as they see fit and accepting the consequences of their choices. We all understand that sometimes people get in trouble through no fault of their own and that getting in trouble even if it is their fault doesn’t mean they should be left to their fate. If we as a nation still believe in the American Model—and that’s an open question—then we have to accept that stigma is indispensable for providing help without destroying the model.

While leftist authoritarians backed by the budding dictator Hugo Chavez are attacking democracy in Bolivia, Ecuador, Nicaragua, and Venezuela, two elections in Honduras and Uruguay underscore that free elections are embraced by people throughout the Americas.

In Honduras, nearly two-thirds of the eligible voters turned out to elect Porfirio “Pepe” Lobo as their new president. The historically high turnout (20 percent greater than elections four years ago) and 57–38 percent margin of victory is expected to put an end to a political crisis that was sparked by the illegal bid by former president Manuel Zelaya to hold on to power. The United States and several Central American governments already have pledged to recognize these elections. However, new leadership at the U.S. State Department and the Honduran president-elect will have to convince Brazil and other nations to accept the legitimacy of the new government, which takes power in January.

Lobo is a businessman of the Nationalist Party who narrowly lost to Zelaya in 2005. He defeated Elvin Santos, of Zelaya’s Liberal Party, who conceded last night. The real losers were those who cast doubt on the democratic process with the intent of undermining the transition and sustaining the costly crisis. Several leftist governments—following Chavez’s lead—have sought to delegitimize the process, and the Organization of American States refused to observe the elections. However, Lobo’s convincing margin, Santos’ recognition of the free and fair balloting, and the overwhelming turnout should be sufficient to convince any serious government that the Honduran people have spoken, and it is time to move on.

In Uruguay, a former leftist revolutionary secured power at the ballot box, having failed in the 1970s to win power through violent struggle. Jose Mujica won a 5-point margin over former President Luis Alberto Lacalle, who recognized the results. The Uruguayan people gave Mujica a vote of confidence to succeed another leftist, Tabare Vazquez, who has governed with moderation, pursued responsible economic policies, and maintained a very positive relationship with the United States.

During the campaign, Mujica said that he “repented,” and he condemned the “stupid ideologies that come from the 1970s.” He rejected statist recipes and anti-Americanism. “Down with ’isms!,” he shouted during the campaign. “I am more than completely cured of simplifications, of dividing the world into good and evil, of thinking in black and white. I have repented!”

It remains to be seen whether Mujica will choose to continue moderate, market-oriented policies favored by his predecessor Vazquez and his model, Brazilian President Luis Inacio “Lula” da Silva. Uruguayan institutions are so strong and centrist that he will have little choice but to pursue a middle-of-the-road course in domestic affairs. However, Chavez will spare no effort to see if he can teach the new dog old tricks.

Too many patronizing outsiders are quick to seize on the notion that Latin Americans are not mature enough for traditional democracy, primarily as an excuse for the transgressions of dictators on the Right or, lately, the Left. For example, Venezuela’s Chavez and Bolivia’s Evo Morales explain that they have to tear down old institutions to usher in a more just political and social order. It is more than transparent that what they are up to is destroying constitutional separations of power and the rule of law with the intention of consolidating power and holding on to it indefinitely.

When Hondurans were forced to decide between Chavismo and democracy they made the right choice. After months of wrongheaded decisions, the international community can do the right thing and choose democracy, too.

While I was off for Thanksgiving, Kevin Drum blogged over at Mother Jones in favor of a grand bargain on Social Security reform, saying:

It would also have the huge virtue of taking Social Security off the table as a political issue. If we could, at long last, get the Washington Post and the Wall Street Journal and the Peterson folks to quit droning on endlessly about this, we might actually clear the way for discussion of some real issues.

Fairly predictably, this produced some pushback from others in the liberal blogosphere: Atrios asks why cut a bargain with the Right—“They don’t want the programs to survive, they want to kill them.” (According to the comments in Drum’s response post, I’m one of those people. I’d better start amending that book I’m writing, in which Social Security, alas, survives to see another day!)

Scott Lemiuex at the American Prospect’s Tapped echoes Atrios’s view, putting it in blunt (although probably correct) political terms: “I’m also not sure why it would be desirable to have Social Security ‘taken off the table’ even if it were somehow possible, since having it as a live issue obviously helps Democrats, as Bush’s failed attempt at privatization proved.” This strategy of deliberately keeping the program weak in order to reap a political advantage is pretty obviously where most liberals’ political instincts take them, and in my view is fairly odious. But it’s also clearly the strategy that’s predominant in the party leadership—recall House Speaker Nancy Pelosi’s answer in 2005 to when the party would put forward its own Social Security plan (“Never. Is never good enough for you?”)—and one that’s pretty effective in practice. Sometimes nice guys do finish last.

Drum replies that the program has to be fixed eventually and now is a time when the Left will get a better deal. That’s almost certainly true: the Left holds more power than it has in the past and that it’s likely to hold in the future. Moreover, many Republicans actually want to fix Social Security and would be willing to make some big compromises to do so. Assuming—hypothetically, apparently—a good faith desire to actually fix the program, now is the time when the grand bargain would come out most to Democrats’ liking. Do they think they’ll get a better deal, say, two years from now? Not likely. Drum also replies, reasonably, that the demographic forces pushing Social Security’s finances are reasonably predictable, so it’s not too likely the system will fix itself of its own accord.

On the conservative(ish) end of things, Ross Douthat argues that conservatives should be championing a cut in Social Security taxes: “When the Republican minority needed an alternative to the Obama administration’s sweeping stimulus proposal, for instance, a number of free-market economists were ready with an answer: a payroll tax cut. It was plausible, elegant and easy to explain—but there was no Republican leader with the wit to seize on it and sell it.” This sort of typifies my reaction to the reformist wing of the Republican Party: I’m all for the reform part, but the actual policy ideas coming out of the movement don’t always strike me as fully baked. For one thing, Obama already had a payroll tax cut—called “Making Work Pay,” which passed and is more progressive than anything the GOP would propose. Moreover, it’s hard to justify cutting payroll taxes when to make Social Security solvent over the long term would demand an immediate and permanent payroll tax increase of around 3.4 percent (that’s a 27 percent increase over the current 12.4 percent Social Security tax rate), plus larger increases for Medicare. Douthat’s view, while intending to be forward-looking, instead relies on the old Republican playbook of cutting taxes without thinking hard about spending.

Real reform of the Republican Party—or the Democratic Party, for that matter—would involve ways to cut back on generations of overpromises while maintaining the underlying values that generated those promises. Nothing coming forward on healthcare or—given the above blog posts, Drum’s excepted—on Social Security gives me much confidence that mainstream Democrats will have much of value to say in the near future. Forging a view of a scaled back government that works is a political opportunity for whoever chooses to take on the policy challenge.

The Climategate/Climaquiddick scandal brings to mind that one of the iconic images of climate science—the “hockey stick” chart showing unprecedented and alarming warming—might get renewed scrutiny.

300px-hockey_stick_chart_ipcc_large

If the climate hockey stick doesn’t withstand the blog-swarm of analysis Jay mentions, we might need to find a new hockey stick to replace it.

Courtesy of economist Jim Hamilton, who has been looking at government spending figures for his debate with Paul Krugman over the significance of recent government deficits, there’s this (note the shape of the red line):

fed_exp_nov_09

Hamilton looked at federal government expenditures as a percentage of GDP. Those expenditures were remarkably consistent for four decades. But there has been a pronounced—one might say “hockey stick”-like jump—in the last year.

Accompanying the infamous Climate Research Unit (CRU) emails leaked last Thursday night, there are all sorts of documents, including detailed coding notes from programmers. These notes reveal the attitudes of programmers who had grappled with the data and computer programs supposedly establishing drastic warming patterns in the twentieth century. These program code segments are, if anything, more revealing than the emails.

Since these documents are more technical than the emails, however, analysis has been slower in coming. And, as in the case of the emails, there’s unmistakable evidence of fudging and book-cooking, all designed to give the impression that the warming in the twentieth century is unprecedented. The evidence is all the more damning because of the expletive-laced complaints of programmers tasked with altering code to corral unruly, unreliable, and sometimes cherry-picked data in a pre-determined direction. At one point, a poor, exasperated programmer, “Harry,” bemoans “the hopeless state of our databases.” (See telling examples and good analysis of these code notes here, here, here, and here.)

Hiding and manipulating data and code are especially serious in climate science because, as Willis Eschenbach has pointed out, “unlike all other physical sciences, [climate science] does not study things—instead it studies averages . . . This is because climate by definition is the average of weather over a suitably long period of time (typically taken as a minimum of 30 years).” So without the background information, it’s almost impossible for other scientists to verify—or falsify—your results.

Of course, most of the big broadcast media are still in full blackout mode on this story, choosing instead to report on breaking news about Pete the orphaned moose. They’re following the pattern of the Dan Rather Memogate controversy in 2004. With that history-making story, the legacy media mostly tried to ignore the story, and then, when it got too big, began to spin it. Rather and CBS issued increasingly bizarre denials. Even though the gig was up within a couple of days, they continued to defend the document in question, and the stories based on it, for two excruciating weeks. (Compare CRU’s Phil Jones offering similarly risible explanations.) Meanwhile, in the parallel universe called reality, unknown and often apolitical bloggers with specialized expertise in font styles, IBM Executive Series and Selectric typewriters, military protocol, and word-processing software dismantled the details for any curious person with an Internet connection. Other, politically oriented blogs consolidated, analyzed, and broadcast the findings.

MemoGate gave many of us our first taste of the swarm-intelligence of the blogosphere, and showed that it can beat the legacy media for getting to the bottom of a story via a networked, open-source form of peer review, with a highly refined division of labor.

We may just now be seeing the potential for this new way of transferring and analyzing information. In Memogate, remember, we were talking about a single one-page Word document. With Climategate, we’re dealing with thousands of detailed, often technical documents. They may even have been compiled internally at the CRU in response to a Freedom of Information request and were then leaked instead. So the revenge of the nerds could be especially brutal and prolonged. Already, insights and analyses are proliferating on the climate blogosphere so quickly that it’s becoming impossible for even the best consolidators to keep up.

Jay Richards

Those Problematic Pilgrims

By Jay Richards

November 26, 2009, 7:17 am

Michael Medved has a great piece in USA Today explaining the real intentions of the early Pilgrims who founded New England. While the reality differs in some ways from the Hallmark card version of the story, it’s more accurate and illuminating:

Most children learn that the Mayflower settlers came to the New World to escape persecution and to establish religious freedom. But the early colonists actually pursued purity, not tolerance, and sought to build fervent, faith-based utopias, not secular regimes that consigned religion to a secondary role. The distinctive circumstances that allowed these fiery believers of varied denominations to cooperate in the founding of a new nation help to explain America’s contradictory religious traditions—as simultaneously the most devoutly Christian society in the Western world, and the country most accommodating to every shade of exotic belief and practice.

Medved corrects old stereotypes while highlighting the role of Christianity in the early American colonies. Unfortunately, our public educational institutions often avoid or distort these details, especially when it comes to the Pilgrims and Thanksgiving. John West had a funny/depressing piece last Thanksgiving in National Review Online telling of his family trip to Plymouth. He describes a cabal of public servants at Plymouth Rock, the Mayflower II, and “Plimouth” Plantation, all of which were singularly committed to debunking whatever positive lessons the hoi polloi try to draw from these historical landmarks.

The Left is increasingly uncomfortable with American history. Puritan Pilgrims are especially irritating, and so subject to all manner of deconstruction. Fortunately, we’re free to give our children the details that they’re unlikely to hear in school. We’ve even got a couple of days off to do it. That’s something to be thankful for.

A friend sends along the following chart from a J.P. Morgan research report. It examines the prior private sector experience of the cabinet officials since 1900 that one might expect a president to turn to in seeking advice about helping the economy. It includes secretaries of State, Commerce, Treasury, Agriculture, Interior, Labor, Transportation, Energy, and Housing & Urban Development, and excludes Postmaster General, Navy, War, Health, Education & Welfare, Veterans Affairs, and Homeland Security—432 cabinet members in all.

obamacabinet

When one considers that public sector employment has ranged since the 1950s at between 15 percent and 19 percent of the population, the makeup of the current cabinet—over 90 percent of its prior experience was in the public sector—is remarkable.

UPDATE: Politifact has raised some issues with the chart, which you can read about here.

The American Enterprise Institute hosted an event last week titled “Why Aren’t There More Female Scientists?” that discussed whether the underrepresentation of women in engineering and math fields is the result of gender bias or alternatively because of differences in academic interests and cognitive strengths.

Recently released data by the College Board for math scores on the 2009 SAT exam (data available here and here) shed some light on the controversy because the test results suggest that there are significant gender differences in mathematical abilities as demonstrated by performance on standardized tests. The College Board data reveal that high school girls have math preparation that is equivalent to high school boys, measured by: a) the average number of years of math study (3.8 years for girls vs. 3.9 years for boys), b) the highest level math taken (50 percent of both boys and girls take math through calculus in high school), and c) both males and females have average GPAs of 3.14 for their high school math classes.

And on several other general measures, females in 2009 might have actually been better prepared for the SAT math exam because: a) 117 high school girls took advanced placement honors math courses for every 100 boys, b) girls outnumbered boys in both the top 10 percent of their high school class and the next 10 percent, and c) there were 150 girls with GPAs of A+ for every 100 boys and 156 girls for every 100 boys with a GPA of A.

And yet despite equal or better academic preparation, girls underperform boys on the SAT math test. These differences are significant and they persist over time, suggesting that some gender differences exist for certain cognitive abilities. For example, the mean math SAT test score for males in 2009 was 534 compared to the mean score for females of 499, for a difference of 35 points that is comparable to the 30+ point male-female gap that has persisted at least since the early 1970s (see chart below).

sat1

The next chart displays the ratio of male to female test-takers for the 2009 SAT math test by 10-point increments for scores between 200 (lowest) and 800 (highest, perfect score). For perfect scores of 800, males (6,928) outnumbered females (3,124) by a ratio of 2.22 to 1, and therefore 69 percent of the high school students who got perfect math scores were males vs. 31 percent for females.The graph further shows that high school boys outnumbered girls at all of the 23 SAT math test scores between 580 and 800 in 10-point intervals. There is also a clear trend that male students increasingly outnumber girls at higher levels of test performance, as the male-female ratio rises from 1.0 at test scores of 580 (equal number of boys and girls) to a ratio of 2.2 at the highest test score of 800 (222 boys per 100 girls with perfect scores).sat21

If we are trying to explain the underrepresentation of females in top science, math, and engineering positions in industry and research universities, and if we realistically assume that those high performers are likely to have very high scores on the SAT math test, the explanation of the gender gap in science seems pretty clear: males are over-represented by a factor of 2:1 for math SAT test scores above 750 (98th percentile). Unless and until there is something close to gender parity for math test scores on standardized exams like the SAT, especially for test scores at the high end, women will likely continue to be underrepresented in engineering and math fields as a natural and expected outcome of some gender differences in certain mathematical aptitudes.

Andrew Smarick

Inflated Expectations and the Race to the Top

By Andrew Smarick

November 24, 2009, 6:01 pm

With the release of final Race to the Top documents, reporters from local papers asked the obvious question: “Is our state positioned to win?”

The resulting spate of articles has been extremely edifying. The most interesting commonality is that most state leaders believe their states are in great shape to get a grant—occasionally in open defiance of countervailing evidence—even though Education Secretary Arne Duncan has made clear that few states will actually win.

The biggest gaps between expectations and reality might be in Maryland and Ohio. Maryland’s Governor Martin O’Malley said, “we’re in a very strong position to go after those Race to the Top grants.” A Baltimore Sun report, however, made clear that the state was far behind. Its editorial board went farther, excoriating state policy makers, saying the state was “limping along at a snail’s pace compared to the rest of the pack”; that Gov. O’Malley “hasn’t lifted a finger to remove the legislative roadblocks that put Maryland at a competitive disadvantage”; that the governor and state superintendent have demonstrated a “blasé attitude” and don’t “seem to understand that none of the groundwork is in place for a successful proposal.”

Ohio’s Gov. Ted Strickland “is bullish on the state’s chances.” His spokeswoman said, “Ohio is ‘one of the strongest-positioned states.’” But the Thomas B. Fordham Institute isn’t as optimistic. Their analysis released Thursday concluded: “Ohio today is not as well-positioned for dollars as many lawmakers, educators and others are claiming.”

Meanwhile, Florida is so convinced of its position that Education Commissioner Eric Smith “said it looks like the state could end up asking the federal government for $1 billion.” (That’s three to four times more than the feds have in mind.) Arizona’s “top school official said the state has an excellent chance of snagging a share of $4 billion in new federal education grants.” “Delaware Education Secretary Lillian Lowery thinks the state is in a good position to win a grant.” Indiana’s “state superintendent says it deserves (to win) because of recent changes lawmakers made to education policies … ‘Our reform efforts already under way closely mirror the pillars of ‘Race to the Top.’” Minnesota is confident. “There’s a pretty good chance of the state getting the money.”

A few states, however, are more circumspect.

Colorado isn’t bragging; they’ve just been working hard. Missouri is making no promises but the state “will gather about 300 people … to begin shaping Missouri’s bid for the federal dollars.” Alabama realizes its fate may hang on its decision on allowing charter schools. Michigan, to its credit, realizes that it needs to make some changes if it wants to compete. The state superintendent said bluntly, “we have to have a number of pieces of legislation or we will not win Race to the Top.”

I’m curious whether these leaders really believe that their states are going to win or if this is just political strategy to buy time, calm waters, and keep opponents at bay?

More importantly, the Department of Education could extract more reforms out of states by making use of these results. For example, they might confirm Michigan’s concerns and make officials in Maryland and Ohio aware that their expectations are inflated. They also might want to consistently reiterate over the next two months (until applications are due) that there is a long list of confident states, so the bar is high. The only way to help your cause, they might repeat, is to pass reform-oriented laws and develop a very bold proposal.

It would be a shame if states, thinking they were well-positioned, submitted weak proposals that might have been improved had they received some not-so-subtle nudges.

human_paneth_cellsWhen Congress rushes to pass a healthcare reform bill of 2,000 pages or so, you have to worry about what will be slipped in, pulled out, or just changed in a few details. One inside-the-Beltway item is constructing a regulatory pathway for the approval of “biosimilars” or “follow-on biologics” (FOBs for short). Biologics are different from traditional drugs because instead of being relatively simple chemicals, they are hideously complex proteins that are essentially grown in high-tech vats, often after undergoing sophisticated biotechnology procedures that may involve changes in DNA, the use of bacteria to express humanized proteins, and so on and so forth. For old-fashioned drugs, the 1984 Hatch-Waxman Act makes it easy for generic manufacturers to enter the market after pioneer patents expire. They can do that because they do not have to re-run the clinical trials that supported original FDA approval of the pioneer drug, but instead can make use of the data from those trials even though the data are the intellectual property of the pioneer firms.

There is no Hatch-Waxman-like regulatory pathway for most biologics, and thus no easy way to foster competition after patents expire. Both the House and Senate healthcare bills include an FOB provision. Of special importance is “data exclusivity.” This refers to how long a generic manufacturer must wait until it can piggyback on pioneer drug data—in case the patents expire unusually soon after the pioneer obtains FDA approval. For chemical-based drugs, this is about five years, but it does not often come into play because most drugs are approved with more than five years of patent life left. For biologics, the situation is murkier, for two reasons. One is that for the foreseeable future, exact generics—which are essentially interchangeable with the original, like a generic version of amoxicillin—will not be created by anyone. The manufacturing process is just too complex and unpredictable. That means that the FDA will require at least some clinical trials for the FOB, although probably nowhere nearly as long or intense as were required for pioneer drug approval.

The other difference is about patents. The generic business model in recent years focuses on challenging patents well before scheduled expiration, partly because the first firm to challenge a patent can in certain circumstances obtain the right to market the only generic for the first six months, and partly because patents sometimes fail to hold up in court. Biologics patents tend to be very different from those protecting chemical-based drugs. They may prove to be far more susceptible to challenge, although we won’t know for sure until the new FOBs world is launched through legislation. Hence the threat of dismantling a patent for a biologic relatively soon after FDA approval is very real and almost certainly greater than for traditional drugs. This means that the period of data exclusivity may comprise the primary foundation for the pioneer manufacturer’s ability to sell its biologic without competition for a reasonable number of years after FDA approval. The period of unopposed sales is essential to recouping R&D expenses. Biotech biologics drugs require a lot of research. Moreover, research continues long after FDA approval as the manufacturer explores the drug’s therapeutic potential. For example, the biotech cancer drug Avastin has gone through scores of trials, and five years after approval, scores more trials are underway.

Clearly, an assured period of data exclusivity is essential for the continued growth of the biologics industry. The European Union, which is ahead of us on this regulatory front, provides for ten years plus a one-year extension in certain circumstances. Their commonsense reasoning is that the mammoth research funding necessary for biotechnology drug development is largely dependent on having an assured period of sales exclusivity after marketing approval. Both the House and Senate healthcare reform bills provide for 12 years. This eminently reasonable number is under attack, however, as some Senators want to amend the Senate bill to cut the period to seven years or less. Although no one can know for sure, there is a real risk that such a short data exclusivity period could seriously impede progress in one of the most important industries of all. We should hope that Congress sticks with 12 years, whatever happens to the rest of healthcare reform.

I have written about this topic twice: here and here. Recently, Henry Grabowski also wrote a Health Policy Outlook on data exclusivity. His piece drew upon his own research, which was published in Nature Reviews Drug Discovery.

A letter to President Obama from 23 prominent economists and published in a New York Times blog recommends four key measures for healthcare reform: deficit neutrality during a ten-year budget window, an excise tax on high-cost insurance plans, a Medicare commission to suggest changes in “the quality and value of services,” and delivery system reforms to address how “hundreds of billions of dollars are spent on care that does nothing to improve outcomes.” The signers endorse reform based on the Senate Finance Committee bill as meeting those objectives.

Neither the Senate Finance Committee bill nor the version approved on November 21 by the Senate for floor debate would likely make a significant dent in federal healthcare spending. Projected reductions in Medicare spending will help finance Medicaid expansion and hundreds of billions of dollars in premium subsidies to persons and families with income up to 400 percent of the federal poverty level. The Congressional Budget Office’s cost, revenue, and deficit projections depend on numerous assumptions and are subject to considerable uncertainty, as well as to pay-go accounting. The cost projection of about $850 billion from 2010 to 2019 would be significantly higher if not for the delayed implementation of Medicaid expansion and premium subsidies. The projected cost for the first ten years after coverage expansion takes effect (2014-2023) is reported to be $1.8 trillion.

The CBO projects ten-year deficit reductions of $102 billion and $72 billion, respectively, from the House and Senate bills, due to projected net receipts from creation of a federal long-term care insurance program, without reflecting the new program’s projected accrual of liabilities. The projected Medicare savings assume that payment rates for many providers would be held below the rate of inflation and that a proposed independent Medicare commission would be “fairly effective in reducing costs.” In his November 19 commentary on the Senate bill projections, CBO Director Douglas Elmendorf stated that extrapolations beyond ten years indicate that Medicare spending growth will average 6 percent over the next two decades (2 percent real growth per beneficiary), compared with annual growth of 8 percent the past two decades (4 percent real growth per beneficiary). He concluded (emphasis added): “Whether such a reduction in the growth rate could be achieved through greater efficiencies in the delivery of healthcare or would reduce access to care or diminish the quality of care is uncertain.”

The economists’ strong statement that “hundreds of billions of dollars are spent on care that does nothing to improve outcomes” implies that there is a large free lunch to be eaten if we just permit panels of experts to tell us “what tests and treatments work and which ones do not.” But there is no free lunch in healthcare reform, regardless of the signers’ wishes.

Some weeks ago, the Wall Street Journal, not always a fan, touted the candidacy of Tony Blair for the new position of EU president, making the point that all of the other candidates in sight were clearly Lilliputians. Well now they’ve done it: after agonizing indecision and backroom, low-life maneuvering the EU pooh-bahs have chosen—a Lilliputian, in the person of Herman Van Rompuy, the Belgian prime minister. Henry Kissinger famously complained several decades ago that the main problem with dealing with our European allies was that he didn’t know whom to call when he had a crisis. That is likely to remain the case in the unlikely event that Kissinger comes calling again.

Before I go any farther, let me say that from all accounts Van Rompuy is an estimable, honorable man. But it is also true that even those who supported his candidacy would be hard put to counter the impression and descriptions of him as a “harmless, plodding, nonentity.” (He is also tagged as a “nice guy.”) Ironically, in many ways, Van Rompuy’s elevation represents a late triumph for Margaret Thatcher, who, were she still contributing her acerbic comments on EU politics, would likely applaud the choice. “Nonentities” would suit her fine in the top positions, and it is telling that Britain’s Conservatives vehemently opposed Tony Blair because they feared that a strong, “charismatic” figure would indeed increase the power of Brussels in world affairs.

As a faithful Thatcherite on most economic issues, I still think that, for all the problems it will generate, over the long haul it is in U.S. interest to have Europe as a strong(er) partner in foreign affairs—not least as our accommodating president faces the calculating realism of a rising China.

Thus, I would agree with the Economist magazine, which argued (to no avail): “ We believe that national governments have a unique claim to democratic legitimacy … We want Europe to have a more coherent voice in the world. Whatever else you think of him, Blair is a man with direct access to world leaders. For all his merits, Van Rompuy’s main experience in international disputes as prime minister is the Belgo-Dutch row over the dredging of the River Scheldt.”

Baroness Catherine Ashton, the new EU foreign affairs chief, is another kettle of fish. While she also may be “nice,” she has displayed a driving (“naked?,” “self-promoting?”) ambition in her relatively short tenure as EU trace commissioner. Even more than Van Rompuy, Ashton comes to her office with virtually no experience in her foreign policy portfolio (chair of the health authority in Hertfordshire; undersecretary of state in the education department), but in the House of Lords she proved skillful in shepherding the Lisbon Treaty through the legislative maze. Still, since she was unexpectedly handed the trade post, she has worked assiduously to master her brief—and, until recently, campaigned night and day for reappointment to the post in the new EU Commission. As the EU foreign affairs and security “high representative,” she will potentially preside over a very large budget and a diplomatic corps of some 7000 minions. With a vague mandate, and EU bureaucratic wolves lurking in the bushes, she will have to watch her step—and back. But no one will call her plodding.

Finally, Van Rompuy is noted for his fondness for Japanese poetry, and may indeed have written the most telling commentary on his own appointment in a haiku poem about a fly, as reported by The Times: “A fly zooms, buzzes: Spins and is lost in the room. He does no one harm.”

Nick Schulz

U2 Ripe for Reform

By Nick Schulz

November 24, 2009, 3:00 pm

Bill Easterly makes an appearance in From Poverty to Prosperity. Easterly has been waging a valiant fight against one of the dominant wrong beliefs of the foreign aid establishment, namely, that smart technocrats in the West can best tell developing countries’ leaders how to reform to ensure economic growth. So I enjoyed this table-turning thought experiment of his, in which leaders of developing countries tell U2′s Bono how he should reform his band.

An expert commission of African leaders today announced their plan for comprehensive reform of music band U2. Saying that U2’s rock had lost touch with its African roots, the commission called for urgent measures to halt U2’s slide towards impending crisis.

“Our youth today are imperiled by low quality music,” said Commission chairman Nelson Mandela. “We will be lending African musicians to U2 to try to refurbish their sound to satisfy the urgent and growing needs for diversionary entertainment at a time of crisis in the global music and financial sectors.”

Can We Escape Inflation?

By The Editors

November 24, 2009, 12:13 pm

Our friends at Cato recently talked to Allan Meltzer about making the Fed credible again. It’s worth a listen.

Nick Schulz

Start-Up Nation

By Nick Schulz

November 24, 2009, 10:50 am

At a recent event with the National Chamber Foundation, several AEI scholars joined with academics, policy makers, and leaders in the business community to discuss the challenges to job creation in the current economic environment. Economist Bret Swanson was there and he made a terrific observation (at 1:17:10) about Israel’s entrepreneurial culture and the creation of new jobs by launching entirely new industries and firms. For those interested in Israel’s entrepreneurial success, take a look at Dan Senor and Saul Singer’s new book, Start-Up Nation.

On November 20, a large, well-known group of Evangelical, Catholic, and Orthodox leaders released a document called the Manhattan Declaration (not to be confused with the Manhattan Declaration on Climate Change). The declaration is intended to underscore the importance of three issues:

1. the sanctity of human life
2. the dignity of marriage as the conjugal union of husband and wife
3. the rights of conscience and religious liberty.

The declaration argues that these aren’t mere private religious concerns but rest at the very foundation of public justice and the common good. The document was drafted by Robert George of Princeton University, who is Catholic, Charles Colson (of Prison Fellowship), and Tim George (of Beeson Divinity School), both of whom are Evangelical. Many well-known conservatives have signed the list, including Archbishop Charles Chaput and James Dobson. But among the initial signers are also folks like Ron Sider, who is frequently identified with the more progressive side of the Evangelical spectrum. (Full disclosure: I have also signed it.)

Unlike many recent statements, signed by obscure church bureaucrats who incorrectly claim to represent their organizations, the Manhattan Declaration begins with refreshing clarity:

We, as Orthodox, Catholic, and Evangelical Christians, have gathered, beginning in New York on September 28, 2009, to make the following declaration, which we sign as individuals, not on behalf of our organizations, but speaking to and from our communities.

It also acknowledges that many who disagree with the statement are well-meaning.

By emphasizing life, marriage, and conscience, the signatories don’t intend to downplay the importance of other issues, but they do argue that these three issues deserve special attention:

While the whole scope of Christian moral concern, including a special concern for the poor and vulnerable, claims our attention, we are especially troubled that in our nation today the lives of the unborn, the disabled, and the elderly are severely threatened; that the institution of marriage, already buffeted by promiscuity, infidelity and divorce, is in jeopardy of being redefined to accommodate fashionable ideologies; that freedom of religion and the rights of conscience are gravely jeopardized by those who would use the instruments of coercion to compel persons of faith to compromise their deepest convictions.

And the signatories also state their intention to resist government attempts to compel them to participate in acts they consider immoral:

Because we honor justice and the common good, we will not comply with any edict that purports to compel our institutions to participate in abortions, embryo-destructive research, assisted suicide and euthanasia, or any other anti-life act; nor will we bend to any rule purporting to force us to bless immoral sexual partnerships, treat them as marriages or the equivalent, or refrain from proclaiming the truth, as we know it, about morality and immorality and marriage and the family.  We will fully and ungrudgingly render to Caesar what is Caesar’s.  But under no circumstances will we render to Caesar what is God’s.

Read the whole thing here.

Roger Bate

China Executes Two Over Milk Scandal

By Roger Bate

November 24, 2009, 10:18 am

This BBC story tells of the execution of two people involved in the China melamine milk scandal. The government hopes the ultimate sanction will convince people it is tough on crime and that food safety standards are improving. But while it might do the former, it will not show the latter. Regulatory controls are moderate on paper and poorly enforced in practice, and critically the government still has to give permission for civil litigation to proceed. Until China opens up to allow litigation that it is not directly involved in, better corporate governance will not result.

Kevin Hassett assesses the recent performance of Treasury Secretary Tim Geithner:

If Timothy Geithner were a Broadway show, the producers would shut it down.

Treasury secretaries get attacked all the time and have to take it with aplomb. It’s in the job description. The criticism serves a purpose: A secretary who can withstand the withering attacks of congressmen has what it takes to manage a real crisis.

Against this backdrop, Geithner’s performance last week was the most pitiful by a major economic policy maker in ages. Geithner broke the cardinal rule for Treasury secretaries. He lost his cool.

Nick Schulz

From Poverty to… Precious

By Nick Schulz

November 23, 2009, 5:01 pm

In From Poverty to Prosperity, Arnold Kling and I write:

Sixty years ago a social studies teacher looking for a movie that would motivate students to sympathize with the plight of the unfortunate in America might have chosen “The Grapes of Wrath.” Today it would be “Supersize Me.”

Courtesy of Steve Sailer via Eric Falkenstein we have this:

This weekend saw the national rollout of two crowd-pleaser movies about impoverished 350-pound black teens: “Precious” and “The Blind Side.” (What an amazing country we have, where a pair of poor children can tip the scales at 700 pounds!)

John Yoo

Trying KSM: What Are the Benefits?

By John Yoo

November 23, 2009, 12:50 pm

The loudest silence from the administration on its decision on trying Khalid Sheikh Mohammed in New York City is its failure to explain what the benefits are.

The administration claims that critics of its decision fear what Mohammed will say on the public platform provided by a civilian trial. “I have every confidence that the nation and the world will see him for the coward that he is,” Holder said. “I’m not scared of what Khalid Sheikh Mohammed has to say at trial, and no one else needs to be, either.”

This red herring distracts from the administration’s failure to explain why the benefits of using civilian courts outweigh the costs to the war effort. The only benefit of the trials mentioned, usually by unidentified administration sources, is improving America’s international image. But America’s place in the world did not suffer after World War II when President Harry S. Truman used military commissions throughout occupied Germany and Japan, or during the Civil War when President Abraham Lincoln used them to try Confederate spies and saboteurs. America’s victories in those wars, sometimes against prevailing opinion, were far more important to its world standing. Defeating al Qaeda will do far more for the United States’ image than trying Mohammed in civilian court. For more, see my column in the Philadelphia Inquirer.

Ryan Streeter

America as Texas vs. California

By Ryan Streeter

November 23, 2009, 12:48 pm

New Geography, the online magazine created by Joel Kotkin and others with a special focus on demographics and trends, has been tracking the implosion of California in an interesting way: by comparing it to Texas.

Texas and California are America’s two most populous states, together numbering approximately 55 million people, which is only about 6 million less than the United Kingdom, where I live. California, as everyone knows, has a coolness factor that Texas cannot match. Hollywood, Silicon Valley, and wine. Say no more. But, unless one has been living in a cave, everyone knows that the cool state is also the broke state. If Hollywood turned California’s budget and fiscal position into a movie, it would be a blockbuster horror film indeed.

Texas, on the other hand, is growing, creating wealth, and attracting the entrepreneurial and creative classes that too many people think only go to places like New York and California. This interesting post by Tory Gattis at New Geography explains why. He shares a four-point analysis from Trends magazine:

First, Texans on average believe in laissez-faire markets with an emphasis on individual responsibility. Since the ’80s, California’s policy-makers have favored central planning solutions and a reliance on a government social safety net. This unrelenting commitment to big government has led to a huge tax burden and triggered a mass exodus of jobs. The Trends Editors examined the resulting migration in “Voting with Our Feet,” in the April 2008 issue of Trends.

Second, Californians have largely treated environmentalism as a “religious sacrament” rather than as one component among many in maximizing people’s quality of life. As we explained in “The Road Ahead for Housing,” in the June 2009 issue of Trends, environmentally-based land-use restriction centered in California played a huge role in inflating the recent housing bubble. Similarly, an unwillingness to manage ecology proactively for man’s benefit has been behind the recent epidemic of wildfires.

Third, California has placed “ethnic diversity” above “assimilation,” while Texas has done the opposite. “Identity politics” has created psychological ghettos that have prevented many of California’s diverse ethnic groups and subcultures from integrating fully into the mainstream. Texas, on the other hand, has proactively encouraged all the state’s residents to join the mainstream.

Fourth, beyond taxes, diversity, and the environment, Texas has focused on streamlining the regulatory and litigation burden on its residents. Meanwhile, California’s government has attempted to use regulation and litigation to transfer wealth from its creators to various special-interest constituencies.

I wrote an article for New Geography related to the second point last spring. The role played by housing regulations in the housing bubble is one of the most under-reported and under-analyzed factors contributing to the 2008 financial crisis, and nowhere was its destructive force more evident than in California. Regulators lathered on rule after rule to construction requirements, escalating costs so dramatically that lenders had to design “exotic” mortgages so even relatively affluent people could afford homes. One of Texas’s attractions, meanwhile, was the opportunity of much more affordable homeownership.

Perhaps the analysis above falls a bit short, though, in not giving enough attention to role that the tax structure in California has played in driving people away, and the parallel problem of the state’s hemorrhaging public sector workforce. Kotkin has written in Forbes that California’s government workforce has saddled the state’s budget with $200 billion in unfunded pension liabilities. Kotkin also points out that California has been losing high-tech jobs to the Southwest and elsewhere because of its increasingly hostile tax and regulatory environment.

By now, the subtext of this post should be clear: the Obama administration is behaving as though California were its model for growth. Increasing unfunded liabilities, proposing $1 trillion in new healthcare spending, responding to the economic crisis with new regulatory agencies but balking on the core causes of the problem—all of this and more betrays a sinister psychology of policy making.

Like California, the Obama team and their congressional allies seem to think that entrepreneurs and business leaders will simply sit there and take it, doing their “civic duty” by paying new direct and indirect taxes, and complying like obsequious puppies with new regulatory requirements. California provides pretty good evidence that this type of “civic duty” wears thin. The best and the brightest won’t just sit there and take it. We are already seeing this in the UK, where entrepreneurs and the job-creating class are leaving (witness this rather enjoyable account of the situation by London’s mayor, Boris Johnson).

“Texas vs. California”—hardly any phrase more succinctly captures the battle going on today for America’s philosophical soul.

Ryan Streeter is a senior fellow at the London-based Legatum Institute and can be followed on Twitter here.

Most of us who follow the climate change debate have spent the last 48-72 hours trolling the climate blogosphere to get the latest information on the thousands of emails of climate catastrophists released on the Internet on Thursday night (some 168 megabytes of information). The emails came from a database at the University of East Anglia’s Climate Research Unit (CRU), which often collaborates with the Hadley Centre (also in the United Kingdom). The CRU controls, and has effectively hidden, a large amount of the data related to global climate.

The emails (already available online in word-searchable format) start in 1996 and continue to the present. They include detailed conversations with some of the key players on the alarmist side of the climate debate: Phil Jones, Michael “Hockey Stick” Mann, Keith Briffa, Kevin Trenberth, Tom Wigley, and many others. The leak of these files is already being aptly dubbed Climategate.

The authors are lamely complaining that the emails are being taken out of context, except that in most cases, the context is obvious—and damning. No open-minded person who takes the time to read the emails will fail to see a pattern—a pattern that is deeply disturbing. The emails confirm some of my worst suspicions: that for many climate alarmists, ideology and politics have trumped good science.

Let’s discount the fact that most people say things in private that they wouldn’t want broadcasted. These climate scientists are no different. That said, no one should buy the defense that this is just how all human beings/scientists talk amongst themselves. No, this is how conniving, colluding, ideologically self-deluded scientists talk amongst themselves.

Several troubling themes have emerged so far (h/t to “Jeff C” in comments at the Air Vent):

1. Data manipulation: Several times the scientists discuss ways to massage and cherry-pick data and spin presentations to give the strongest impression of warming, and to downplay contrary evidence—just as they have been suspected of doing.

2. Evading Freedom of Information inquiries: In many emails the scientists are clearly colluding to avoid releasing correspondence and data that they are legally obligated to release. They discuss deleting emails after being directed by officials not to do so.

3. Manipulating peer review: They discuss how to blackball scientists who don’t tow the orthodox line, get journal editors fired who allow “skeptical” papers to be published, how to destroy the reputation of journals that allow such papers to be published, and how to prevent “contrarian” research from being included in UN reports. Since the catastrophist crowd speaks so loudly and insistently about “peer-reviewed” research, it’s stunning to find out what this really means in the scandal of contemporary climate research.

Some have complained of the illegality of hacking into a server and releasing private emails. But the leak looks like the work of a scrupulous whistleblower on the inside, who would be legally protected in the UK.

This episode is going to add to the growing disrepute of the alarmist cause, and if other, more reasonable climate scientists fail to respond appropriately, it could tarnish the reputation of the entire field of climate science—at least in the mind of the public.

If you’re new to the story, here are a few helpful links to get up to speed. Here’s a list of the top 100 most-discussed emails (scroll to the bottom of the page). Here’s a timeline of events over the last few days, from the initial leak, to a confirmation that the documents are genuine. Climate Depot is keeping a good running update of articles on the controversy. Read Tom Fuller’s piece on what he calls “the Team” to understand the back story behind the key players in the leaked email correspondence.


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