Smarties, fat tails and British politics

Does anyone you know passionately support any of the contenders in the UK general election? My own anecdotal impression is that there are strong views about who people don’t like and that the preferred candidate or party is only as a result of hating the other choices more.

As to the policies, there is tinkering around which part of the electorate is being bribed by each party, but no dramatic contrasts in views or opinions. On the economy no one challenges the neo Keynesian monetarist orthodoxy that explicitly believes state intervention can help the economy. On health the orthodoxy of free at the point of use NHS is uncontested. On politicians themselves they all present the same variation of cloned leaders to chose from, educated at the school of career politics.

All in all it’s like choosing between different coloured Smarties.

So in what circumstances will the political menu change? I have recently been delving into the works of the economist Nassim Taleb, writer of The Black Swan and Fooled by Randomness. In this interview on the podcast EconTalk he expands on one of his favourite topics, that of the ‘fat tail risk’ or the events that, although at the extreme of the probability distribution, are more likely than widely supposed from observation of past events, and that have a much higher ‘risk of ruin’ than widely considered.

When applied to our current debt ponzi scheme one can question what the political landscape would be if the current rosy low inflation, rising GDP, economy implodes. From history it can be seen that economic collapse and hardship leads to polarisation of politics. In such confusion it is understandable that the populace blame free markets and capitalism when they find themselves in poverty due to the collapse of finance and banking. Extreme socialism, nationalism and fascism have been the historical outcomes of such disasters.

So for those who hold liberty dear, and believe in markets as a force for good, perhaps we can never compete as just another colour of Smarties. Perhaps some of our energies should be in preparing for when the Black Swan events occurs and we need to demonstrate to others the benefits of individual choices and interactions in markets. For as history and Nassim Taleb teach us, if we spin the roulette wheel enough times, we should not be surprised when zero comes up.

How Pfizer could patent bondage gear

On 2nd March 2015 Warner-Lambert LLC (a subsidiary of the pharmaceutical company Pfizer) won a ruling against NHS England and various other drug companies regarding their patent for Pregabalin (trade name Lyrica).

The judge rule that NHS England should advise clinical commissioning groups and clinicians, including GPs, that, when prescribing Pregabalin for pain, the prescription should be written as ‘Lyrica’.

The issue is that Pregabalin was originally licensed for epilepsy, but has subsequently been found to be useful in chronic pain, and has a separate patent on this use. The original patent expired in July 2014 but Pfizer managed to secure a patent extension on Lyrica, when prescribed to treat pain, until July 2017. They justify this by saying they did more work and studies licensing this indication, and have a patient advice leaflet related to this license in the packet.

The usual patent lengths of up to 20 years (extended in some circumstances) are meant to protect the huge capital cost of developing, testing and licensing a new medication. Some argue that this helps promote drug development, although there may be different views on optimum patent durations. As this development cost is a huge part of the cost, the price can fall rapidly once patent protection expires.

Branded Lyrica Pregabalin in the UK costs over £700/year for a basic 75mg twice daily dose. Gabapentin, a drug with some similar uses, costs over £400/year for a branded 300mg three times daily dose yet only costs £40/year in the generic unbranded version. Hence if was expected that generic manufacturers would have started producing Pregabalin as the patent expired in 2014, thus driving down the cost dramatically.

Already pharmacists, afraid of Pfizer’s lawyers, are ‘reporting’ GPs to NHS England for not prescribing the branded medication, as the pharmacists might not get the full branded fee reimbursed without ‘Lyrica’ being stated.

Pfizer should congratulate itself on this talented piece of regulatory capture, first by extending patent laws for a drug already invented, then by forcing doctors to override their usual right to prescribe generically and change their prescribing habits for the sole purpose of protecting Pfizer’s patent. This is no different from a structural engineer specifying a particular strength of RSJ steel joist, and being instructed to specify the manufacturing brand due to patent issues.

Presumably Pfizer’s share price will reflect this success, thus diverting marginal capital into drug companies spending lawyers to persuade judges rather than on research on life saving medications.

Of course there is no reason Pfizer cannot diversify. I understand that Fifty Shades of Grey has led to a boom in certain DIY items for use in the bedroom. Perhaps Pfizer could add a safety manual, run a trial, and patent black gaffer tape, chains and padlocks to be sold as Pfizer Brand Only when used for bondage.


Think of the health consequences

Following recent public health guidance from NICE, the Government are apparently planning to encourage GPs to prescribe boilers, insulation and double glazing to vulnerable patients. I am pleased to say that, if this scheme goes ahead, it can only mean we’re nearing ‘Peak State’ and that the collapse of the current political system is imminent.

The plan is an example of warped solutions from simple observations. This scheme hopes to address the issue of increased ill health from poor living conditions, including poor heating in winter. There is evidence that poor living conditions affects respiratory health, and that some conditions make patients more vulnerable.

The proposed solution, however, is clumsy socialism. It is often said that ‘GPs are best placed to… (do certain tasks)’ but simple economics shows that doesn’t mean they should do that job. I am the fastest typist where I work, but my comparative advantage is in being a well trained registered GP, so it makes sense for my slower secretary to do this work. There will even be inevitable claims that the scheme reduced hospital admissions but these schemes are almost always flawed by selecting the highest risk patients whose hospital visits will inevitably revert to the mean, through natural fluctuations in chronic disease or through death, thus making the intervention look effective.

Worryingly, the guidance includes the recommendation to ‘Record assessments and actions in the person’s notes or care plans. Make this information available to other practitioners, while respecting confidentiality.’ We already know how hollow the aspirations to confidentiality are and, coupled with the trend for integration of health with local authorities – see the ‘Devo Manc’ plan, this could see a disturbing development of a full person record, not only recording your health, but your housing, employment, heating, social habits etc. Would this record be a source of control? Would a local authority cut your health cover if you don’t spend enough on heating from one of their preferred suppliers?

The ‘right’ to health is the largest Trojan horse that perpetuates statism in our current world and, as health needs are rising exponentially, due to ageing and scientific development, tying health to the state will result in an inevitable further expansion of the state. Think of the things that influence health: jobs; food; drink; drugs; housing; activity levels; happiness. The current trajectory would give the state carte blanche to interfere further with all of this.

The paradox, of course, is that the more the state intervenes, the lower these determinants of health fall, and the worse the health outcomes. Even if one were to believe in redistribution, the most honest form of redistributive theft is to give people a handful of money rather than specific services, as they will spend it far more efficiently than the state ever could.

Of course the inefficient state will eventually bankrupt itself on this path, but there is much damage that can be done along the way. Solving the politics and economics of healthcare must be a priority for those who strive for individual liberty.

Digital whistleblowing and the moral highground

Should a whistleblower be paid for information? The creators of Darkleaks, a distributed, anonymous market for information, think so. The software allows anyone to upload information, list it for sale, and receive payments in digital currencies, such as Bitcoin, upon delivery. The information can be broken down into chunks so it can be verified prior to full payment.

The information released could be anything including: military secrets; local authority abuse scandals; details of government privacy invasions; naked photos of famous people; secret corporate research or technology.
Like much of the new internet, it uses anti fragile technology that is immune to the desires of lawyers or regulators to control it.

This, along with other forms of decentralised information exchange, is already changing our world. The fact that the most recent Apple OSX upgrade offers to fully encrypted your hard drive and lock it on standby might not have occurred if not for the Snowden revelations. Of course they may have installed back door access, but they are catering to potential markets, and I can personally attest to becoming more interested in consumer cryptography since his brave actions.

With regards to back doors, the move from closed software to open source will also be spurred on by open information. For if a company’s proprietary technology can be cracked and sold on the internet black market, companies are incentivised to develop open source software, making money on service, support and installation rather than the rights to install the code. The Linux distribution such as Ubuntu are backed by a private profitable company, yet the source code is free to all to inspect, copy and modify.
Will there be harm from these dark markets? Certainly there will. Hacks like the Sony crack revealed interesting corporate information, but also exposed medical information and details of many blameless employees. There is also the risk of blackmail – I may be perfectly happy with what goes on in my bedroom, but don’t want it to be videoed and streamed around the world. As ever there will be individual responsibility, both to protect one’s information, and to the person revealing the information for whatever reason.

A key benefit however is to resolve the asymmetry between individuals, who currently have no privacy, and governments or corporations, who have too much secrecy. By giving the tools to publish anonymously to the world, Darkleaks and other tools empower individuals and disintermediate the regulatory bodies that prosecute sole actors but are easily sidestepped by the powerful.

As to the question of payments for desirable information, this is nothing new. There have always been payments for notable, embarrassing or confidential data. In the past there were even paid professionals, whose job was to tease out such scoops, to question rather than reprint the official press releases, to rail at injustice, to undermine those who abused their state sanctioned power at the expense of individual freedoms, who looked at those in authority as someone who had to be brought down, not bowed to. They called them ‘journalists’.