The problems I've discussed are not limited to psychiatry, although they reach their most florid form there.  Similar conflicts of interest and biases exist in virtually every field of medicine, particularly those that rely heavily on drugs or devices.  It is simply no longer possible to believe much of the clinical research that is published, or to rely on the judgment of trusted physicians or authoritative medical guidelines.  I take no pleasure in this conclusion, which I reached slowly and reluctantly over my two decades as an editor of The New England Journal of Medicine.

It may be my family's redneck nature 
Rubbin' off, bringin' out unlady-like behavior 
It sure ain't Christian to judge a stranger 
But I don't like her 
She may be an angel who spends all winter 
Bringin' the homeless blankets and dinner 
A regular Nobel Peace Prize winner 
But I really hate her 
I'll think of a reason later

Tasty.

In the standard venture capital contract, entrepreneurs have a large fraction of equity ownership in the companies they found and are paid a sub-market salary by the investors who provide the money to develop the idea.  The big rewards come only to those whose companies go public or are acquired on favorable terms, forcing entrepreneurs to bear a substantial burden of idiosyncratic risk.  We study this burden in the case of high-tech companies funded by venture capital.  Over the past 20 years, the typical venture-backed entrepreneur earned an average of $4.4 million from companies that succeeded in attracting venture funding.  Entrepreneurs with a coefficient of relative risk aversion of two and with less than $0.7 million would be better off in a salaried position than in a startup, despite the prospect of an average personal payoff of $4.4 million and the possibility of payoffs over $1 billion.  We conclude that startups attract entrepreneurs with lower risk aversion, higher initial assets, preferences for entrepreneurship over employment, and optimistic beliefs about the payoffs from their products.

During the seminar it occurred to me that these results, assuming they are correct, are evidence of an absence of overconfidence, at least among the kinds of people who leave good jobs to form high-tech startups.  The reason is that if potential entrepreneurs were massively overconfident, one would expect to see lots of entry of startups based on weak ideas, which would lead to an expected payoff so low that forming a startup would be a losing proposition for the potential entrepreneur unless he/she started out extremely wealthy and/or had very low risk-aversion.  But what the authors actually find is that forming a startup with an average-quality idea* is a break-even proposition for a potential entrepreneur with quite modest wealth and with a more-or-less standard degree of risk-aversion.

You found in your research there’s no single solution. Why not?

The answer is not that everybody should have a sewer or everyone should have a toilet. That is simply impractical, and most countries can’t afford it. Culturally, in sanitation, we’re very different around the world. People have different attitudes to hygiene and toilets. Some countries are fecal-phobic and some countries are not. China is quite at home with excrement, and uses it as fertilizer, whereas Indians are not. They’re quite averse to any use of human waste.

In Benin, Africa, some very interesting research was done into what would make people buy a latrine. Mothers, who didn’t have a latrine, could see that their kids were getting sick every week with diarrhea. They were spending money on medicine, and their kids weren’t going to school, but they still wouldn’t buy a latrine.

An academic named Mimi Jenkins discovered that the biggest incentive for someone to buy a latrine in Benin was to feel royal, because the royal family had one. It was a question of pride and status, it wasn’t about health. Health messages never work, because nobody wants to be nagged, even when they’ve got the evidence in front of them.

So telling people, "This is where the cholera is coming from," doesn’t have as much impact as appealing to their pride?

Exactly. It’s what I call the "doctors who smoke" understanding of people. Doctors who smoke know it’s bad for them, yet they still do it. What a lot of sanitation activists are saying is that we have to make people want toilets. It has to be something they aspire to and desire.

Isn’t part of that incentive making defecating in the outdoors unappealing?

Yeah, and there’s a very interesting movement going on in many developing countries, including India, Cambodia and Bangladesh, called Community Led Total Sanitation. It appeals to people’s sense of disgust.

A few visitors will go to a village, and the villagers will want to show off their village to the guests. They’ll take them around the village, and then at the end of the tour, the visitors will say, "Well, yes, that’s nice, but can we see your open defecation grounds?"

Because they’re polite, the villagers will take them there. The technique is to make people stand there and confront it, to not be able to turn away from the fact that they’re shitting in the open, and that their kids are tramping it back into the village, and that they’re all eating it. Someone calculated that people in villages who are doing open defecation are probably ingesting 10 grams of shit a day. That’s pretty disgusting.

People will run off and dig latrines. Once the whole village is cleaned up, nobody will want to be the dirty person in the village. And once the village is cleaned up, the clean village will be in competition with the next village, and that village will want to clean up. It’s a chain reaction.

That’s pretty damn amazing: the fact that it will keep your kid from getting sick doesn’t convince people, but making a latrine an aspirational item will.  And come to think of it it also fits in with Elizier’s idea that people can be amazingly lazy even when the stakes are very high.  But even that doesn’t fully capture the weirdness, but I’ll bet that many of these mothers truly love their kids and would, in other scenarios, go to almost any lengths to protect them.

Don’t get me wrong: that hyper-sensitivity comes mostly from a good place, and I certainly don’t want to go back 50 years when a kid like that would just be thrown in the deep end of the pool.  But come on!

I think this is also a problem for more consequential matters  In real decision-making situations, where there are elements of the problem that need attention besides the (already identified) bias, it is not going to be a trivial matter to fix the bias without screwing up some other part of the problem even worse.  I’m not sure this is the right way to put it, but it seems like OB engineering is a seperate and important discipline distinct from OB science.

Empirical evidence has hitherto been inconclusive about the strength of the link between health care spending and health outcomes. This paper uses programme budgeting data prepared by 295 English Primary Care Trusts to model the link for two specific programmes of care: cancer and circulatory diseases. A theoretical model is developed in which decision-makers must allocate a fixed budget across programmes of care so as to maximize social welfare, in the light of a health production function for each programme. This yields an expenditure equation and a health outcomes equation for each programme. These are estimated for the two programmes of care using instrumental variables methods. All the equations prove to be well specified. They suggest that the cost of a life year saved in cancer is about £13,100, and in circulation about £8000. These results challenge the widely held view that health care has little marginal impact on health. From a policy perspective, they can help set priorities by informing resource allocation across programmes of care. They can also help health technology agencies decide whether their cost-effectiveness thresholds for accepting new technologies are set at the right level.

One shouldn’t overstate the importance of this; it’s only one study and it only deals with two medical conditions.  And of course the study was done on English data, not U.S. data.  We all know that there is evidence that the marginal unit of U.S. medicine has little or no health benefit, so this would be a noteworthy result if the study were done on U.S. data.  I don’t know how noteworthy it is for English data.  Does anybody know if there is any RAND study type evidence about the effectiveness of the marginal unit of medicine in England or in other European countries?

When I was a kid, a cousin who lived in England came to visit us and showed me how to crack open those little plastic cubes containing the four one-use camera flashbulbs we had back then and set them off with a battery.  That totally rocked my world.  So as far as I’m concerned those guys are all geniuses.

The most spectacular event of the past half century is one that did not occur.  We have enjoyed sixty years without nuclear weapons exploded in anger.

What a stunning achievement – or, if not achievement, what stunning good fortune.  In 1960 the British novelist C. P. Snow said on the front page of the New York Times that unless the nuclear powers drastically reduced their nuclear armaments thermonuclear warfare within the decade was a “mathematical certainty.”  Nobody appeared to think Snow’s statement extravagant.

We now have that mathematical certainty compounded more than four times, and no nuclear war.  Can we make it through another half dozen decades?

There has never been any doubt about the military effectiveness of nuclear weapons or their potential for terror.  A large part of the credit for their not having been used must be due to the “taboo” that Secretary of State Dulles perceived to have attached itself to these weapons as early as 1953, a taboo that the Secretary deplored.

Later on in the lecture, Schelling acknowledges that it’s not absolutely impossible to imagine a scenario where the world would be better off without a categorical (and in some very narrow sense "irrational") taboo on the use of nuclear weapons.  But he dismisses this possibility and refers to the taboo as "an asset to be treasured."

I would add that there is something particularly creepy about the kind of people who love pointing out things like the fact that the smallest nuclear weapon is no more destructive than the biggest conventional weapon, so there’s no special reason not to use them.  Those people don’t make that argument because they care so darn much about whatever specific tactical mission a small nuclear weapon would be especially useful for.  You can see by the glee with which the argument is typically advanced that they’re making it precisely because they like the idea of violating the taboo, which strikes me as further evidence that the taboo is really valuable.

*The most generous possible interpretation of what went on, but which would require me to attribute to him a thought process that he did not express at all, is that he understands the difference between the two types of "no evidence" but has come to believe that doctors’ interpretations of imperfect evidence will systematically lead them to over-treat and so has adopted a rule of "do nothing unless there is strong evidence that you should do something" as a second-best optimum.

Suppose you believe that 1% of the population is of extravagantly bad character, in the sense that they would engage in mass bloodshed if they had something to gain from it and could get away with it.  For filling most ordinary jobs, this fact could be more-or-less safely ignored (i.e., nothing would be lost if the hiring criteria consisted almost exclusively of conventional qualifications), because most ordinary jobs offer no outlet for beneficial and consequence-free mass bloodshed anyway.  But political office, especially executive office at the national level, is fundamentally different.  Unlike almost everybody else, political leaders have the power to kill and imprison and torture, and can sometimes benefit, materially or psychicly, from doing so.  If you think that unjustified mass violence is a bad enough thing that it would be worth sacrificing a lot in the way of traditional competence to avoid it, then a key criterion for evaluating a political candidate should be whether or not the candidate is in that 1%.*  This means that, in contrast to the "competence-only" rule that is appropriate for most ordinary jobs, you should put a lot of weight on any information you have about political candidates that bears on their character, and relatively little weight on information that bears on their traditional qualifications.**

*Here I assume that the proportion of political candidates with extravagantly bad character is the same as the proportion in the population at large.  This is a conservative assumption, as the opportunity to wield power will disproportionately attract such people into politics.
**This argument is influenced by something I once heard Eric Alterman say, but I can’t remember where.