Two Infinities

Sat, 11 Mar 2006

Arguing fair about big pharma
I picked up The Truth about Drug Companies a couple weeks ago. The New York Review of Books maintains an exerpt on-line here. Dr. Angell has performed a great service to the public writing this information up.

I worry that she might have weakened her argument by pushing it too hard. One thing in particular caught my attention. She misunderstands the phrase "opportunity cost of capital" and argues rather heatedly on the basis of that misunderstanding. Basically, industry apologists use this idea when estimating the cost of developing new drugs. The idea is used to rationalize investments made a different points in time; somehow the cost of an investment is greater when one must wait longer for a return.

The point isn't so much that she should misunderstand financial jargon, but rather what the mistake revealed about her mindset. If she seems less judicious, she is less persuasive.

Progress or Stagnation?
A new paper Where did the Productivity Growth go? by I. Dew-Becker and R. J. Gordon received pundit coverage February 10 by Samuel Brittan in the Financial Times and again a couple weeks later by Paul Krugman in the New York Times. Basically, the vaunted gains in productivity have gone to the superstars while the median wage earner has realized no palpable gain over the last 40 years.

On the other hand, a recent report by the Census Bureau 65+ in the United States: 2005 states that "people in the United States are living longer and healthier lives than ever before," with emphasis on healthier. In fact, "disability among the older population is declining," and "studies over the past two decades have revealed substantial declines in the rates of disability and functional limitation."

"People today have a better health expectancy than did their predecessors," Richard Suzman, head of the Behavioral and Social Research Program for the National Institute on Aging said. "Education, in particular, is a particularly powerful factor in both life expectancy and health expectancy, though truthfully, we're not quite sure why." (quoted by the NYT.)

Do these fit together? Possibly. Brittan, a week later, questions the importance of GDP growth as a broad measure of economic well-being, saying, for example, "there is an extremely loose connection between income and reported life satisfaction" (translation: money doesn't make you happy).

I wonder how, say, safer automobiles relate to productivity, or, perhaps, fewer smokers.