Kevin Drum

Time for Another Death Panel Uproar

| Thu Oct. 6, 2011 10:17 PM PDT

A couple of years ago, in a bellwether for how hard it's going to be to ever seriously rein in healthcare costs, there was an instant and thunderous backlash against a new recommendation that women with no risk factors put off routine mammograms until age 50. A small number of famous breast cancer survivors who had been diagnosed at a young age took immediately to the airwaves, and that was all she wrote. Within 48 hours, HHS Secretary Kathleen Sebelius had disowned her own task force and assured the nation that absolutely nothing would change.

Now the same group that made the mammogram recommendation is back:

The U.S. Preventive Services Task Force, which triggered a firestorm of controversy in 2009 when it raised questions about routine mammography for breast cancer, will propose downgrading its recommendations for prostate-specific antigen (PSA) for prostate cancer onTuesday, wading into what is perhaps the most contentious and important issue in men’s health.

....“The harms studies showed that significant numbers of men — on the order of 20 to 30 percent — have very significant harms,” Moyer, a professor of pediatrics at Baylor College of Medicine, said in a telephone interview Thursday.

There are never any perfect answers to these questions. We could start routinely testing everyone at age 20, and it's almost certain that at least a few treatable cancers would get screened. At every cutoff point, whether it's age related or condition related, you have to decide if the cost of tightening the testing criteria outweighs the benefit. What you can't do is simply decide that cutoffs should never be tightened because, inevitably, there will be a cost. It might be small, but it's always there. And then the USPSTF becomes a death panel because that's a handy thing for demagogues to call it.

So we'll see how this one goes. My previous brush with prostate screening is here.

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The Right Can't Handle the Truth, Climate Edition

—By Kevin Drum

| Thu Oct. 6, 2011 3:06 PM PDT

In the Wall Street Journal today, Robert Bryce offers up five "obvious truths" about climate change. His first four are mostly practical observations, and it so happens that I actually agree with most of them. We carbon taxers have lost the war for now, we are going to need more energy in the future, greenhouse gas control is a global issue, and we do need to get more efficient at generating energy. I might not like it, but these things are all mostly true.

But then there's his fifth "obvious truth":

5) The science is not settled, not by a long shot. Last month, scientists at CERN, the prestigious high-energy physics lab in Switzerland, reported that neutrinos might—repeat, might—travel faster than the speed of light. If serious scientists can question Einstein's theory of relativity, then there must be room for debate about the workings and complexities of the Earth's atmosphere.

Well, there you go. The fact that a neutrino might — unconfirmed but still possibly might! — travel faster than light means that climate change models are crap. This is what passes for serious scientific thinking on the right.

The practical issues surrounding climate change are gargantuan. I myself am pessimistic that the human race will collectively decide to address them, which is why I support research into geoengineering as a possible last resort and, in the meantime, hope and pray that we figure out a way to generate lots of clean energy in the fairly near future.

But that has nothing to do with whether or not climate change is real. It is. Our current models might turn out to be off by 10% or 20% or 50% — in either direction, mind you — but they're not wrong. When you dump greenhouse gases into the atmosphere, more heat is trapped and the planet warms up very quickly (on geological scales). And when the planet warms up, lots of very bad stuff happens. It's just head-in-the-sand foolish to pretend otherwise. Even after Einstein came along, you'd still kill yourself just as badly if you jumped out of an airplane. Newton wasn't very wrong, after all.

Yet More on the PC vs. Mac Wars

—By Kevin Drum

| Thu Oct. 6, 2011 2:45 PM PDT

In my post this morning about why Apple lost the personal computing battle, I noted that a big part of the reason was the much lower cost of PCs vs. Macs. Matt Yglesias tweets back:

Actually, they did in a way. The original version of Windows was designed to work with the first CGA color adapter, and in order to keep costs down that adapter only supported 16 colors. Later adapters supported more colors, but Windows retained a considerable amount of backward compatibility with old hardware for a very long time. Thus, even as late as the early-90s, versions of Windows were still using logos that rendered properly on ancient hardware.

If everyone will indulge me in a bit of nostalgia, I want to make a broader point here. To understand why PCs beat Macs, you have to understand the era in which the battle was fought. And in that era, the 80s and early 90s, the personal computer world was controlled almost hegemonically by business customers. It's hard to overstate just how overwhelming this dominance was: corporate customers probably outnumbered home users by three or four to one, and even at that, a lot of the home users bought PCs mainly because they wanted to bring in work from the office. It was this corporate domination of the market that drove its early evolution. Here are a few of the ways this played out:

The IBM imprimatur. This was absolutely key to legitimizing the business market. Corporate IT managers just flatly weren't going to buy a million dollars worth of personal computers from their corner Radio Shack or from some shaggy-haired guy in Cupertino. They had lots of IBM gear they needed to interoperate with, they had IBM networks they needed to plug into, and they had IBM service contracts already in place to cover their maintenance needs. Initially, the only way they were going to buy PCs was if they came from IBM, and later on only if they were compatible with all their existing IBM PCs.
Backward compatibility. Home users get annoyed when new software isn't backward compatible. When I upgraded to Windows 7, I lost the ability to play my favorite computer Yahtzee game. Boo hoo. But corporate IT managers are absolutely rabid about backward compatibility. This isn't because they want to play Yahtzee. It's because they have huge fleets of hardware, some of it quite elderly, and they want new software to work on it. What's more, tucked away in various corners of the company there are people running ancient custom applications that are mission critical and absolutely can't break when the OS or the network software is upgraded. Companies like IBM and Microsoft take this very seriously, and it drives a lot of their design decisions. This is why you end up with bloated operating systems and oddities like ugly Windows logos.
Portability. As I said earlier, laugh all you want at the original Compaq portable that was the size of a sewing machine, but in 1983 it was a big deal. Ditto for the clamshells that debuted later in the decade, weighing in at a svelte 8-10 pounds. But big or not by today's standards, they were portable. And since business people travel a lot, having a portable machine you could take out to a client's site was a godsend. Apple just didn't have anything to compete here.
Business applications. Unless you were there, it's hard to explain just how thoroughly Lotus 1-2-3 was the killer app of the early 80s. Everyone used it, and it was available only on PCs. Likewise, lots of serious business apps ran on top of databases like dBase or R:Base, and those were available only on PCs.
Networks. Printers were expensive, so IT managers needed PCs to be on a corporate network. Novell and Banyan networks were designed with PCs in mind, and only the very courageous tried to make a Macintosh work on a PC network. It wasn't impossible or anything, but believe me, you were a lot better off sticking to PCs on the networks available back then.
Flexibility/Expandability. For a few years in the 80s I was the product manager for a very sophisticated communications board for IBM PCs. It allowed corporations to build specialized apps that used X.25 or SDLC or things like that, and it wasn't available for Macs. Why? Because Apple didn't allow you to plug boards into a Mac. PCs did. So if you needed a specialized piece of hardware, you could get it. Or if you just wanted more serial ports or more memory, you could pop in an AST 6-Pack and you were good to go. This was a big deal for corporate IT guys. Apple didn't offer it.
Low cost. Nuff said about that. Thanks to intense competition, PCs were just way less expensive than Macintoshes.

Back in the 80s and early 90s, if you wanted to buy a bunch of personal computers for your company, you'd ask around. And your financial analysts would tell you they used 1-2-3, so you'd better buy PCs. Your IT guy would tell you the corporate network was all built around PCs, so you'd better buy PCs. The CFO would tell you your project budget was a million bucks, so you'd better buy PCs. So guess what? You bought PCs. That's why Apple lost the market share war.

Why this walk down memory lane? Just to explain the environment that got us where we are today, an environment that's largely fading away. But it existed 30 years ago. Business buyers didn't buy PCs because they were mindless drones, they bought them because they really, truly had excellent reasons for preferring them to Macintoshes. And when you bought a PC for your home, it made sense to get one that was compatible with the PC in your office.

This created a virtuous¹ circle: corporate customers preferred PCs, and as a result, when Microsoft set their development priorities, they listened to their big corporate customers. And given a choice between a clunky but functional mail merge function or a snazzier user interface, those customers voted unanimously for the mail merge function. And they voted for low cost, backward compatibility, network functionality, and portability. So that's what they got.

Today, software has so much functionality that it makes sense even for business users to start thinking more about ease of use and design esthetics. But back then it really didn't. So, quite rationally, you got frenetic development of new features even if it sometimes came at the cost of reliability and ease of use. That environment may be long gone, but it explains a lot about why Windows PCs look and feel clunkier than Macs but still rule the roost nonetheless.

¹Well, a circle, anyway. You can decide for yourself if it was virtuous.

Advertising in the Age of Social Media

—By Kevin Drum

| Thu Oct. 6, 2011 11:44 AM PDT

Julian Sanchez points out today that chain restaurants are largely an answer to a signaling problem: once cars allowed us to routinely travel to unfamiliar places, we needed a way to avoid truly awful food. Chains may not have offered the best food in a given place, but they guaranteed that you wouldn't get something too horrible.

Branding and marketing in general serve this same signaling purpose, but what happens if consumer rating services like Yelp take over the world?

Imagine [] what effect it might have if, five or ten years hence, augmented reality using sophisticated image recognition were as ubiquitous as Internet-enabled phones are becoming in the developed world. Imagine that, for nearly any product consumers encountered, some kind of aggregate rating—based on whatever criteria the individual has determined are most important—would simply appear, with minimal effort. Simply looking at an aisle of products—or even passing shops on the street—I might effortlessly learn which were deemed most satisfactory by people with tastes similar to mine. My incentive to take the time to rank products would be provided by my desire to give the system a basis for determining which other user’s rankings were most likely to be relevant for me. (Think here of Netflix recommendations or other type of social filtering, where contributing ratings enables the system to make better predictions about what I am likely to enjoy.)

With such information more directly available, marketing would become far less relevant to the buyer—and a far less worthwhile investment for the producer. Products, of course, would still need to be distinguished in some way, but a seller with a superior product would be far better able to compete without investing in a costly national marketing campaign. Advertising might be initially important in raising awareness about a new product and building an initial pool of reviews, but its salience would rapidly diminish.

I'd need to think about this some more to decide if I agree. In general, I feel that the power of corporate marketing is routinely underestimated by internet-centric consumers. Remember the Cluetrain Manifesto? Well, it turned out that to a large extent, corporate America adapted just fine to the power of conversation and ended up controlling large swathes of the internet, not the other way around. I suspect that corporate advertisers will adapt just fine too. Marketing is simply too central to human activity to be reined in significantly.

Will marketing change a lot? Probably so. But my gut feel is that it will remain controlled by gigantic, rich, sophisticated players for a long time. They'll just figure out ever better and subtler ways of keeping us from knowing it.

Why Apple Never Conquered the Computing World

—By Kevin Drum

| Thu Oct. 6, 2011 10:05 AM PDT

Matt Yglesias, a longtime Apple junkie, wants to know why the rest of the computing industry sucks so bad:

It always seemed to me, as an Apple fan, that the qualities Apple put together were pretty basic — gadgets that work well, which a lot of people do, paired with good design sense. And in fields that aren’t computers and electronics, lots of people seem to do this....In computing, not so much. Even at the height of Microsoft’s power in the late-’90s, Windows 98 was oddly ugly. Surely the richest company on the planet could hire someone to design a better logo than this, right? Why were the default color combinations on Excel charts so wretched? Why didn’t anyone else bother to design power adaptors that look good?

On the power adapter thing, I've long wondered about that too. This is not exactly rocket science. And I can't believe that Apple's version is really that much more expensive than the brick used by everyone else. It's weird.

But on the broader question, there really is an answer. Make no mistake: Apple under Jobs did a great job. But Steve Jobs chose to keep Apple a niche product, aimed at people who could afford to spend a lot of money for a computer that worked precisely the way he wanted it to, and did so with a nice design aesthetic. There are plenty of people who like this vision, but "plenty" still means about 10% of the market or so.

The rest of the personal computing world took a different turn. No one company controlled everything, the PC was a wide-open environment, and it was both cheap and aimed at the business market, where green eyeshade accountants simply didn't care if the Windows logo was ugly. Yes, the competition over price, features, flexibility, and bringing new applications to market was so frenetic that there was a price to be paid in reliability. But no matter how much you hate it, lots and lots of people decided this was a superior approach. Sure, the parts didn't work together as well as they did on a Macintosh, but there were a lot more parts available. Sure, the design aesthetic was clunky, but lots of people didn't care and the cost was often half of a comparable Macintosh. Sure, the Mac did a few things better in the page makeup and illustration fields, but PCs did a lot of things better in the business software field, in both the front office and the back office.

This whole argument reminds me of the great VHS vs. Betamax controversy. Consumers are stupid! screamed the Beta fans when their format died. Beta was clearly a superior format. Well, no, it wasn't. There's no single continuum of "quality": every piece of technology ever invented is a series of compromises. Beta provided better picture quality, but with short runtimes and relatively high cost. VHS made a different set of compromise: adequate picture quality with higher runtimes and lower cost. That set of compromises turned out to be more popular.

Ditto for PCs. By hook or by crook, PCs and Macintoshes simply represent a different set of compromises. If you're primarily a writer or an artist, aren't too price sensitive, don't care about setting up an office network, and value good design, then a Macintosh is a great computer. But don't kid yourself: you're accepting a certain set of compromises, not picking an objectively better product. If you're primarily a financial analyst or a product manager, want lots of choices of computing platform and software, work primarily on a corporate network, don't want to spend a lot of money, and don't really care about design aesthetics, then a PC is a better choice for you. This was especially true in the 80s and 90s, when PCs and Macintoshes were initially duking it out for market share. You can laugh at those old Compaq sewing machines all you want, but in 1983 they were revolutionary and it was many years before Apple had anything to compete with it.

A lot of these differences are less pronounced now than they used to be. Although price is still a big difference, Macs are more network friendly and have a broader range of software than they did in the past. Likewise, PCs have a better design sense and work better than they used to. To a large extent, PC market share today is just an artifact of the inertia PCs gained in the 80s and 90s. Still, that inertia happened for a reason, and only part of it was the famous Microsoft marketing juggernaut. The PC market and the Macintosh market evolved as a different set of compromises to address a similar set of problems, and in the end, the PC's compromises attracted more buyers. Neither one was better or worse. They were just — as Steve Jobs might have said — different.

Obama and the Wall Streeters

—By Kevin Drum

| Thu Oct. 6, 2011 9:18 AM PDT

It's prediction time. Do you think that President Obama, in the reasonably near future, will embrace the Occupy Wall Street movement? Cast your vote in comments.

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No, the Tea Party Has Never Cared About Wall Street

—By Kevin Drum

| Thu Oct. 6, 2011 8:00 AM PDT

Will Bunch is exactly right about this:

One of the biggest myths about the Tea Party is that a driving force in its creation was anger over bank and Wall Street bailouts. It's true that some rank-and-file joiners did feel that way at first, but they were quickly co-opted by the movement leaders — including radio talkers and groups funded by the Koch Brothers — into worshipping the rich instead.

The tea partiers really do hate TARP, and they hate the auto bailout, and they hate the Fed and its money debasing ways. But the tea party's leaders have always been careful to give those things plenty of lip service while channeling all the movement's real energy into the issues that its big-dollar funders have always cared about most: lowering taxes on the wealthy, reducing regulations on corporations, and cutting spending on the poor.

After all, tea partiers could have poured their energy into protesting the AIG bailout. They could have poured their energy into insisting that Dodd-Frank be tightened up. They could have poured their energy into demands that the Fed be reformed and made more transparent.

But those were never more than side issues. The real issues for the tea partiers have always been healthcare reform, tax cuts, deficit fever, and EPA bashing. And in the most obvious tell of all, they were actively opposed to Dodd-Frank, a bizarre stand for an allegedly anti-bailout movement. The tea party, in the end, simply isn't anything new. It's the same old right-wing fluorescence we see every couple of decades or so, with all the same hobbyhorses. The media really should have figured that out by now.

13 Ways In Which Republicans Are Wrong

—By Kevin Drum

| Wed Oct. 5, 2011 10:01 PM PDT

I've got a piece coming up in the next issue of the magazine about five economic memes that deserve to die. By the time it was done, it had actually turned into six memes, but apostate Republican David Frum goes me seven better today by listing 13 — yes, 13! — ways in which the Republican consensus on the economy is wrong, wrong, wrong:

It is wrong in its call for monetary tightening.
It is wrong to demand immediate debt reduction rather than wait until after the economy recovers.
It is wrong to deny that “we have a revenue problem.”
It is wrong in worrying too much about (non-existent) inflation and disregarding the (very real) threat of a second slump into recession and deflation.
It is wrong to blame government regulation and (as yet unimposed) tax increases for the severity of the recession.
It is wrong to oppose job-creating infrastructure programs.
It is wrong to hesitate to provide unemployment insurance, food stamps, and other forms of income maintenance to the unemployed.
It is wrong to fetishize the exchange value of the dollar against other currencies.
It is wrong to believe that cuts in marginal tax rates will suffice to generate job growth in today’s circumstance.
It is wrong to blame minor and marginal government policies like the Community Reinvestment Act for the financial crisis while ignoring the much more important role of government inaction to police overall levels of leverage within the financial system.
It is wrong to dismiss the Euro crisis as something remote from American concerns.
It is wrong to resist US cooperation with European authorities in organizing a work-out of the debt problems of the Eurozone countries.
It is wrong above all in its dangerous combination of apocalyptic pessimism about the long-term future of the country with aloof indifference to unemployment.

I have to say, once people break with the Republican Party these days, they really break. They don't become Democrats or anything, but if anything, they actually savage their former comrades more than Democrats do. I'd love to see something this pithy from, say, Barack Obama. It's inspiring.

Sarah Palin Decides Against Demotion to President

—By Kevin Drum

| Wed Oct. 5, 2011 3:26 PM PDT

Sarah Palin made it official today: she's not going to run for president. I'm posting about this just in case anyone out there was still unsure about Palin's prospects.

But riddle me this: why did she make this announcement through the lamestream media? What's up with that?

UPDATE: Ah, I see. Jay Newton-Small misled me. Palin actually made her announcement on the Mark Levin show.

A Wee Question About Financial Transaction Taxes

—By Kevin Drum

| Wed Oct. 5, 2011 12:12 PM PDT

Financial transaction taxes are getting some attention again, and Megan McArdle is against them:

Myself, I don't really see the charms. Tiny taxes on high-volume transactions raise a lot of money, but they also cost money to record, collect, and audit, which is why few jurisdictions have 0.25% sales taxes. And I'm not clear on what problem taxing financial transactions is supposed to solve. It's not as if our woes were caused by legions of high-frequency traders wrecking the markets with their tiny, tiny spreads.

I'm going to take this opportunity to write something potentially really ignorant. But hey — how else do you learn new things aside from putting yourself in a position to get viciously called an idiot in the blogosphere?

So then: when we talk about FTTs, the usual topic is, as Megan implies, high-frequency traders who make money by executing millions of computerized trades that each produce only a tiny profit. Introduce an FTT and they'd become unprofitable and high-frequency trading might go away. I'm perfectly fine with this, since I'm on record as having a dim view of high-frequency trading, but by itself I agree that it isn't enough of a reason to mount an FTT. Besides, if we really think high-frequency trading is dangerous, we should just ban it and move on.

So here comes the possibly ignorant part. One of the most dangerous aspects of the financial system of the aughts — not the only one, but one of them — came from the virtually frictionless nature of modern money flows. That prompted traders to follow a strategy similar to the one that blew up Long Term Capital Management in the 90s: seek out trades that are only barely profitable, and then lever them up enormously. Even a spread of a tenth of a percent is a money spinner if you can lever it up 30:1 or 100:1 with mountains of cheap money.

My question, then, is whether an FTT would slow this down. Basically, any trade with a spread of less than 0.25% would automatically be unprofitable. There would still be plenty of marginally profitable trades, of course, but they'd tend to be a little less exotic. Lots of people can spot an arbitrage opportunity of 0.4%, so they wouldn't last long. The real problem lies in the clever, minuscule trades that stay hidden long enough to be profitable at high levels of leverage but that blow up spectacularly when they go bad. If we had fewer of them, the entire system would be a little more stable.

I can think of several reasons why I might be wrong about this. I don't know, for example, how this would affect big banks, or how it would affect the construction of rocket-science securities like the subprime CDOs that brought down Wall Street in 2008. Maybe the small-spread trades I'm thinking of aren't really as widespread as I think. Or maybe the danger would simply get transferred wholesale from trades with 0.1% spreads to trades with 0.35% spreads.

Hopefully someone who actually knows how high finance works will see this and provide some kind of definitive answer. I've long thought that aside from limiting leverage, which is clearly Job 1 for a more stable financial system, we also need to throw just a little bit of sand in the gears and slow things down slightly. Capital controls, for example, might be a good idea for a lot of countries if they're kept small: just enough to prevent massive hot money flows but not big enough to seriously affect capital formation. An FTT seems like something along these lines.

But I'm open to being swatted down. I'm looking at you, Economics of Contempt.