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November 28, 2012

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Posted: 22 Nov 2012 12:06 AM PST

Marx vs Coase

Posted: 21 Nov 2012 09:43 AM PST

Long drive ahead of me today, and I'm late getting on the road, so just a few quick ones for now. This is from Chris Dillow:

Marx vs Coase: experimental evidence, Stumbling and Mumbling: Are firms efficient institutions for responding to uncertainty, as Coase thought? Or are they, as Marxists believe, means whereby capitalists exploit workers? A new paper by Ernst Fehr and colleagues provides experimental evidence. ...
Fehr and colleagues found that, in one-shot encounters where employment contracts were struck, 51% of principals exploited agents. "The Marxian idea that power can be used for exploitation is real" they conclude. ...
However, in repeated encounters, the prevalence of exploitation dropped to 21%. This is because employers wanted to build a reputation for fairness which they could use to encourage workers to stick to employment contracts.
Simple as it is, this gives us a framework to pose the question: under what conditions are we likely to have Coasian rather than Marxian firms?
One is where there's a strong norm of fairness. ... Another is where firms have a desire for a reputation as a "good" employer. This is more likely to be the case under conditions of near-full employment, where they have to compete for for workers.
A third is the existence of strong unions. ... This corroborates my suspicion that strong unions can be good for an economy.
There is, however, a fourth possibility - for workers to have an outside option such as welfare benefits that allow them to reject exploitative contracts.
The fact that many of capitalism's supporters reject this fourth course makes me suspect that what they are interested in is not so much efficient Coasian firms as the power of capital to exploit workers.

'What the Audience Wants'

Posted: 21 Nov 2012 09:43 AM PST

Paul Krugman:

C Is For Class Warfare, by Paul Krugman: Ryan Chittum has a great piece about CNBC's decision to drop even the pretense of journalistic objectivity and throw its weight behind the deficit scolds. Basically, the network has gone all in on behalf of the 0.01 percent.
One question Chittum doesn't really get at, however, is why CNBC takes this tilt — why, in fact, it has been so dominated by the fake deficit hawk faction, the people who say that the debt is terrible, terrible, and that's why we have to cut taxes on the rich. After all, the network's audience does not consists mainly of the very rich; rather, it's the 1 percent wannabees, who imagine that watching many hours of talking heads will somehow let them absorb the secrets of getting rich. ...
I ... think ... the main story ... is ... this is what the audience wants. And it's what they want even though the Austerian stuff the network peddles has been wrong, wrong, wrong, wrong... Never mind that the Keynesians have been right about interest rates, inflation, austerity, and more; the audience wants to hear about the debt crisis and hyperinflation coming any day now unless we cut taxes on the rich, or something. ...

Only thing I'd say is that those preferences -- what viewers want to hear -- are unlikely to be independent of what they've heard from the media.

'Drug Company Money is Undermining Science'

Posted: 21 Nov 2012 09:42 AM PST

Charles Seife:

How Drug Company Money is Undermining Science, by Charles Seife, Scientific American: ...In the past few years the pharmaceutical industry has come up with many ways to funnel large sums of money—enough sometimes to put a child through college—into the pockets of independent medical researchers who are doing work that bears, directly or indirectly, on the drugs these firms are making and marketing. The problem is not just with the drug companies and the researchers but with the whole system—the granting institutions, the research labs, the journals, the professional societies, and so forth. No one is providing the checks and balances necessary to avoid conflicts. Instead organizations seem to shift responsibility from one to the other, leaving gaps in enforcement that researchers and drug companies navigate with ease, and then shroud their deliberations in secrecy.
"There isn't a single sector of academic medicine, academic research or medical education in which industry relationships are not a ubiquitous factor," says sociologist Eric Campbell, a professor of medicine at Harvard Medical School. Those relationships are not all bad. After all, without the help of the pharmaceutical industry, medical researchers would not be able to turn their ideas into new drugs. Yet at the same time, Campbell argues, some of these liaisons co-opt scientists into helping sell pharmaceuticals rather than generating new knowledge.
The entanglements between researchers and pharmaceutical companies take many forms. There are speakers bureaus: a drugmaker gives a researcher money to travel—often first class—to gigs around the country, where the researcher sometimes gives a company-written speech and presents company-drafted slides. There is ghostwriting: a pharmaceutical manufacturer has an article drafted and pays a scientist (the "guest author") an honorarium to put his or her name on it and submit it to a peer-reviewed journal. And then there is consulting: a company hires a researcher to render advice. ...
It is not just an academic problem. Drugs are approved or rejected based on supposedly independent research. When a pill does not work as advertised and is withdrawn from the market or relabeled as dangerous, there is often a trail of biased research and cash to scientists. ...
The scientific community's answer to the conflict-of-interest problem is transparency. Journals, grant-making institutions and professional organizations press researchers to openly declare ... when they have any entanglements that might compromise their objectivity. ... It is an honor system. Researchers often fail to report conflicts of interest—sometimes because they do not even realize that they present a problem. ...
In theory, there is a backup system. ... When a scientist fails to report such a conflict, the university or hospital he or she works for is supposed to spot it and report it. And when a university or hospital is not doing its job catching conflicted research, then the government agency that funds most of that research—the National Institutes of Health—is supposed to step in. Unfortunately, that backup system is badly broken. ...

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