Author Archives: David J. Balan

“It is Simply No Longer Possible to Believe”

This piece by Marcia Angell in the New York Review of Books, while very good, mostly consists of stuff that would be familiar and unsurprising to OB readers.  But I was somewhat surprised that she went so far as to say this:

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.

That's pretty strong stuff for someone who is enough of an establishment figure to become the editor of the NEJM.  It's worth pointing out, though, that most of the biases that she is talking about are the product of plain old financial corruption, not the subtle cognitive biases that we mostly worry about here (though those undoubtedly play a role in allowing physicians to delude themselves into believing that they are not being swayed by the money).  So these kinds of problems could probably be mostly eliminated by a conceptually simple (though of course politically very difficult) change in the rules of the game.  Getting rid of problems like physician overconfidence would be much harder.
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I’ll Think of a Reason Later

I just got a lovely gift of a song called "I'll Think of a Reason Later" by Lee Ann Womack.  Maybe some of you already know it.  Here is the chorus:

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.

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Entrepreneurs Are Not Overconfident

Not too long ago, the well-known economist Robert Hall presented this paper (co-authored with Susan E. Woodward) at my place of work.  Here is the abstract:

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.

After the talk, I asked Professor Hall if he agreed with this interpretation (he seemed to), and if he would object to my posting about it on OB (he didn't).  But I will make him aware of this post, and invite him to comment if he would like, and correct any mistakes that I might have made.

*The authors have no way to distinguish the quality of an idea, so there is an implicit assumption that the marginal quality of the idea is equal to the average quality of all ideas that actually get implemented.
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Toilets Aren’t About Not Dying of Disease

I’m not nearly as far gone as Robin on the idea that social status is the predominant human motivation, but here is a pretty powerful example from an interview with British journalist Rose George about her new book, "The Big Necessity: The Unmentionable World of Human Waste and Why It Matters" (I haven’t read it, but I’ve read a bit about it, and Tyler Cowen recommends it).  Excerpt below the jump.

Continue reading "Toilets Aren’t About Not Dying of Disease" »

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Give it to Me Straight! I Swear I Won’t be Mad!

I have an American friend (same guy as in this earlier post) who lived for a number of years in Mexico.  He married a Mexican woman, and while he always spoke to his kids in English, their real first language was Spanish.  He recently moved back to the U.S., and he enrolled his oldest daughter in kindergarten.  The school gave her some kind of language evaluation, and they concluded that she was slightly behind in English, and said they would like to give her some kind of limited special instruction if her parents wanted it.  My friend and his wife were inclined to go along with what the teachers thought, but they wanted to know the answers to a few common-sense questions: how behind was the kid really, was what they would do for her during the special instruction time really worth giving up whatever she would miss in the regular class, and so on.  The problem was, they were having a hard time getting any straight answers out of the teachers, and they were pretty sure they knew why: these very nice, well-meaning teachers were so worried about offending them that they couched every answer in a million caveats and weasel words.  My friend said he said he was dying to say something like: "I hereby unconditionally vow not to sue you, hate you, or speak or think ill of you in any way.  Now will you please just tell me what’s going on with my kid?!?"

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!

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Correcting Biases Once You’ve Identified Them

Most of the discussion on this blog seems to focus on figuring out how to identify biases.  We implicitly assume that this is the hard part; that biases can be really sneaky and hard to ferret out, but that once you’ve identified a bias, correcting it is pretty straightforward and mechanical.  If you’ve figured out that you have a bias that causes you to systematically overestimate the probability of a particular kind of event happening by .2, you simply subtract .2 from future estimates (or whatever).  But it seems to me that actually correcting a bias can be pretty hard even once it’s been identified.  For example, I have a tendency to swing a bit too late at a (slow-pitch) softball.  I’m sure this bias could be at least partially corrected with effort, but it is definitely not simply a matter of saying to myself: "swing .5 seconds sooner than you feel like you should swing."  That just can’t be done in real time without screwing up the other mechanics of the swing.

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.

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Good Medicine in Merry Old England

Here’s the abstract of an article by Martin, Rice, & Smith in the current issue of the Journal of Health Economics (generally regarded as the top journal in the field):

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.

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Schelling and the Nuclear Taboo

Thomas Schelling’s Nobel Lecture is pretty similar to the point made by Eliezer the other day.  Here’s the first couple of paragraphs.

Continue reading "Schelling and the Nuclear Taboo" »

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Doctor, There are Two Kinds of “No Evidence”

I have a relative who has cancer and has been taking a particular chemotherapy drug.  It has been very successful; all of the tests and scans have been coming back negative for some time.  Recently I went along to an appointment with a fancy consulting oncologist to get his opinion about how much longer to continue with the drug.  Going into the appointment, I had the idea (based on nothing but what seemed to me like common sense) that there was a tradeoff: more chemo means a higher chance that the cancer won’t reappear, but also means a higher chance of serious side effects, and that we were going there to get his opinion on whether in this case the pros outweighed the cons or vice-versa.  What he said instead was that there was "no evidence" that additional chemo, after there are no signs of disease, did *any* additional good at all, and that the treatments therefore should have been stopped a long time ago and should certainly stop now.  I asked him what was incorrect about the (seemingly) common sense notion that additional chemo might get rid of the last little bits of cancer that are too small to show up on scans, and he said, more or less, that it’s not my idea of common sense that matters, it’s the evidence, and there is no evidence that things work that way.  So then I asked him whether by "no evidence" he meant that there have been lots of studies directly on this point which came back with the result that more chemo doesn’t help, or whether he meant that there was no evidence because there were few or no relevant studies.  If the former was true, then it’d be pretty much game over: the case for discontinuing the chemo would be overwhelming.  But if the latter was true, then things would be much hazier: in the absence of conclusive evidence one way or the other, one would have to operate in the realm of interpreting imperfect evidence; one would have to make judgments based on anecdotal evidence, by theoretical knowledge of how the body works and how cancer works, or whatever.  And good people, maybe I’m being unfair and underestimating this guy, but I swear to you that this fancy oncologist in this very prestigious institution didn’t seem to understand the difference between these two types of "no evidence."  So while he had a very strong and very (generally) laudable instinct that one ought to base one’s medical opinions on evidence rather than instinct, he seemed to be unable to avoid what strikes me as a pretty fundamental mistake.*  I’d love to hear thoughts about this, particularly from doctors who either have something to say about whether this is a common mistake among doctors or who have something to say about the chemotherapy question itself.

*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.

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Don’t Choose a President the Way You’d Choose an Assistant Regional Manager

In a previous post, I argued that it’s a mistake to use the same character-evaluating template for political candidates that you use for people you encounter in everyday life.  Here I’d like to make a related argument regarding the appropriate weight that should be accorded to character (as opposed to more conventional measures of qualification, such as relevant experience) in evaluating a political candidate as compared to evaluating a candidate for an ordinary job.

Continue reading "Don’t Choose a President the Way You’d Choose an Assistant Regional Manager" »

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