Placebos

Recent research, he said, showed that placebos had helped 59% of patients who had been suffering from an upset stomach. Used to treat depression, placebos have the same effect as antidepressants in about a third of cases.
The efficacy of a placebo depends on many factors, according to the report, including the size and colour of a pill.
The more expensive the placebo, the higher the success rate, the study found, and intravenous injections are shown to be more effective than oral medication.

Source

This kind of thing supports assertions that a lot of medicine has more to do with psychology than biochemistry. Going to doctors does not do much for you, compared to things like diet and exercise and avoiding pollution. The main benefit people get from doctor visits is feeling that someone cares about them.

Inflation

After writing my last post on nickels, I felt the need to explain what economists know about inflation and what will probably happen with inflation in our country. There is a lot of rubbish floating around the popular press, and I'd hate for any of my friends or family to be infected by it.

An important lesson from basic economics is that the money supply in the country depends on more than just how much the government prints. The amount that comes off the printing presses is called the money base. That is just a small fraction of the money supply. The rest of the money supply comes from bank lending. The banking system can generate $10 in loans for every $1 in cash in their vaults, and all of those loans end up counted as money. For example, when you take out a mortgage to buy a house, all of the money goes into the bank accounts of the construction workers right away, and then they can start spending it.

Inflation depends on the total money supply, including the money 'made' by banks as they make loans. In other words, banks can cause inflation by excessive lending, and they can cause deflation by lending less than usual. This action of banks is called the money multiplier, because it multiplies the base to produce the actual money supply.

When the economy is functioning normally, the money multiplier is constant. There will always be inflation if the government prints more money. But things are not normal now. The financial crisis caused the money multiplier to fall sharply. The resulting 'credit crunch' is exactly the same thing as 'deflation'. It was right and proper for the government to print lots of money to compensate. If anything, they did not print enough.

The best measure of the total money supply is called 'M3'. It is not perfect but it is the best number we have. It tries to take all the actions of the banking system into account. Inflation hawks rightly cried foul when the Fed stopped publishing M3 in 2006. Here is a graph of the best estimate of M3 over the last few years:

Source

Note that this is not the inflation rate. Inflation is the growth rate of the money supply minus the growth rate in real output. If we make 5% more stuff, and M3 grows by 5%, then there will be no inflation at all, because the ratio of money to stuff stays the same. The country would be 5% richer and prices would be the same.

Still, this graph shows that there was a lot of inflation in 2006 and 2007, while the housing boom was still in progress. The reason that this inflation did not show up in the news was because it did not affect the things used to calculate the Consumer Price Index. It only showed up in housing and real estate costs. But if you wanted to buy a house, this inflation would have really hurt your purchasing power.

When the financial crisis hit, the growth rate of M3 started falling. By the middle of 2009 the growth rate went below zero and the level of M3 started falling. (The graph shows, at each date, the average growth rate for the previous year.) This means deflation. M3 is still falling. The economy has been experiencing deflation for the past couple of years, even though the government has printed a lot of money. That is one of the reasons the economic recovery has been sluggish.

A lot of people are afraid that there will be inflation in the future. It is true that the government has massively expanded the money base. But they have plenty of tools to take that money out of circulation again, shrinking the base back down to normal as the multiplier goes back up to normal. They have demonstrated a willingness to fight inflation, even at the cost of massive unemployment. If they did not inflate in the past two years, when things were bad, they will not start any time soon.

Of course, inflation is not impossible. It might happen. But I think the odds of American hyperinflation, or even of moderately high inflation, are very low. For any time frame you care to mention, the odds that intelligent computers will cause massive economic disruption are greater than the odds that inflation will cause massive economic disruption. There is no reason to be concerned about inflation, or to spend any time or money preparing for it, or to vote for politicians who make noise about it.

Nickel Hoarding

I honestly think that this will work

US five cent coins contain over 7 cents worth of raw material as of this afternoon, mostly copper and of course, nickel. If there is inflation, the prices of metal will increase, and the coin will have 8, 9, 10 cents worth of metal. Pre-1965 dimes contain over $2.42 of metal today, while pre-1965 quarters have over $6 worth of metal. (www.coinflation.com)
If there is deflation, the coins are still currency at face value. They will always be nickels.

Hoarding nickels seems like a good investment for people without a lot of cash and with plenty of time on their hands. Each time you go to the bank, get about $20 worth of nickels. Store them in your house somewhere. There is zero downside risk. If everything is fine and metal prices fall, you can just spend them. If raw materials prices go up, as many people predict, you will win.

The reason this is not more popular is because of transactions costs. You have to lug around the coins. And you could not really get seven cents by selling them for scrap; the costs of separating and extracting the metal would be too high. But history tells us that coin collections tend to keep their value pretty well.

One word of warning: I do not recommend buying silver or gold coins now. I actually recommend selling gold or silver if you have any. And yes, prices have gone up since I said that, but I still think it is a bubble. Prices could easily collapse. But with nickels you do not have that problem.

Human Echolocation

This is awesome. It may ask you to print. Click 'Cancel' if it does. Web pages nowadays are so cluttered with junk that the only way to get a decently formatted article is to click on the 'printer friendly' link.

Daniel Kish has been sightless since he was a year old. Yet he can mountain bike. And navigate the wilderness alone. And recognize a building as far away as 1,000 feet. How? The same way bats can see in the dark.

Kish and a handful of coworkers run a nonprofit organization called World Access for the Blind, headquartered in Kish's home. World Access offers training on how to gracefully interact with one's environment, using echolocation as a primary tool. So far, in the decade it has existed, the organization has introduced more than 500 students to echolocation. Kish is not the first blind person to use echolocation, but he's the only one to meticulously document it, to break it down into its component parts, and to figure out how to teach it. His dream is to help all sight-impaired people see the world as clearly as he does. 

It was never Kish's goal to run a foundation dedicated to the blind. He planned to be a psychologist. But he could not ignore the fact that few blind people enjoyed anything close to his freedom of movement, and he had grown weary of society's attitude toward the blind. "I am belittled, patronized, disrespected, invaded, restricted, and presumed weak, vulnerable, or otherwise incapacitated," he wrote in his journal. It still drives him crazy when he's congratulated for simply crossing the street or preparing dinner.
...
Young people, says Kish, are especially hard-hit. "Most blind kids hear a lot of negative talk. 'Don't do this, don't do that, don't move. No, here, let me help you.' The message you get, if you're blind, is you're intellectually deficient, you're emotionally deficient, you're in all ways deficient." A few sighted people have commented to Kish that they'd rather be dead than blind.
So in 2001 he started World Access for the Blind. One of its missions is to counter every no that blind people hear. Blindness, Kish says, should be understood — by both the blind and the sighted — as nothing more than an inconvenience. "Most of my life," he writes, "I never even thought of myself as blind. In fact, I saw myself as smarter, more agile, stronger, and generally more capable than most other boys my age." 

World Access doesn't turn anyone away for lack of resources. But there are a couple of reasons why the organization hasn't trained more students. The first is Kish's general ethos about how blind children should be raised. "Running into a pole is a drag, but never being allowed to run into a pole is a disaster," he writes. "Pain is part of the price of freedom.

Emphasis mine. That is an important bit of wisdom for anybody:

Cognitive Modification

This is interesting and scary:

Cognitive-bias modification (CBM) is based on the idea that many psychological problems are caused by automatic, unconscious biases in thinking. People suffering from anxiety, for instance, may have what is known as an attentional bias towards threats: they are drawn irresistibly to things they perceive to be dangerous. Similar biases may affect memory and the interpretation of events. For example, if an acquaintance walks past without saying hello, it might mean either that he has ignored you or that he has not seen you. The anxious, according to the theory behind CBM, have a bias towards assuming the former and reacting accordingly.
The goal of CBM is to alter such biases, and doing so has proved surprisingly easy. A common way of debiasing attention is to show someone two words or pictures—one neutral and the other threatening—on a computer screen. In the case of social anxiety these might be a neutral face and a disgusted face. Presented with this choice, an anxious person instinctively focuses on the disgusted visage. The program, however, prods him to complete tasks involving the neutral picture, such as identifying letters that appear in its place on the screen. Repeating the procedure around a thousand times, over a total of two hours, changes the user's tendency to focus on the anxious face. That change is then carried into the wider world.

This is all very speculative, and it will be a while before they get it useful, if they ever do.  But would be great news if this technique works to help people.

The scary part is that this research shows how easy it is to alter people's thinking.  For example, consider a video game where you have to shoot zombies while avoiding shooting civilians.  Anyone who plays the game will learn to focus on the zombies, looking for them while ignoring the unthreatening people.  This is the exact opposite of the treatment presented in the article: it trains people to subconsciously pay more attention to anything that looks or acts threatening.  It will, according to this research, make them more anxious people.

Of course, if we have good research showing that video games have no such effects, then that makes us doubt the effectiveness of the therapy.  As far as I know, all of the research comparing video games to life outcomes shows that they have almost no effect on anything.  But that research does not look at exactly what type of game people are playing.  It may be that some games have good effects and some have bad effects.  Maybe games cause a mix of behavioral changes, some good and some bad.  Perhaps they make people more anxious but increase the ability to focus and solve problems.

What we would need in order to do proper research is a large-scale data collection project that looks at the actual titles of games people buy and play, and then tests them in various ways.  Of course, there is no reason to single out games.  You should look at the movies and TV shows they watch too.

If we ever do get a good, secure, electronic medical records system, then it should be merged with other kinds of data like this.  Grocery stores keep extensive records on the food that people buy, and it would be fairly easy to link that to medical records.  Your Netflix viewing history could be easily merged, as could the records of what you spend with your credit cards.  Then public health researchers could start crunching numbers.  Maybe they would find that people who play a certain video game are more likely to be anxious, or that people who watch certain movies are more likely to suffer from depression, or that one particular food is especially harmful.  The benefits to people from this kind of knowledge would be massive.

Statistical Composition

It is very easy to make mistakes with statistics.  Averages can often produce the wrong impression.  For example, consider a situation where there are two schools ( 1 and 2 )and two groups of people ( X and Y ).

School 1 has 10 students from group X and 100 students from group Y.

Of those, 5 students from group X graduate and 80 students from group Y graduate.

School 2 has 100 students from group X and 10 students from group Y.

Of those, 70 students from group X graduate and all 10 students from group Y graduate.

It should be pretty obvious that, no matter who you are, you should go to School 2.  Group X has a graduation rate of 50% in school 1 and 70% in school 2.  Group Y has a graduation rate of 80% in school 1 and 100% in school 2.  School 2 is simply better for everyone.

But if you just look at the overall numbers, school 2 has 80 people graduate and school 1 has 85 people graduate, with the same number of students. School 1 looks better, even though it is actually worse.

This kind of thing cause all kinds of problems when people throw around statistics on things like schooling and health care.  For example, you may have heard that schools in Wisconsin, with their collective bargaining for teachers, are better.

Here is the truth:

The NAEP is an annual standardized test given to 4th and 8th graders around the country to measure proficiency in math, science, and reading. Participation is fairly universal; if you've had a 4th or 8th grader in the last few years, you're probably familiar with it. Results are compiled on the NAEP website, broken down by grade, state, subject and ethnicity.
So how does brokeass, dumbass, redneck Texas stack up against progressive unionized Wisconsin?
...
2009 8th Grade Math
White students: Texas 301, Wisconsin 294 (national 294)
Black students: Texas 272, Wisconsin 254 (national 260)
Hispanic students: Texas 277, Wisconsin 268 (national 260)
...(more test score lists)
...
To recap: white students in Texas perform better than white students in Wisconsin, black students in Texas perform better than black students in Wisconsin, Hispanic students in Texas perform better than Hispanic students in Wisconsin.
...
the gap between white students and minority students in Texas was much less than the gap between white and minority students in Wisconsin. In other words, students are better off in Texas schools than in Wisconsin schools - especially minority students.
Conclusion: instead of chanting slogans in Madison, maybe it's time for Wisconsin teachers to take refresher lessons from their non-union counterparts in the Lone Star State.

Drug Courts

Finally, government starts doing something smart: drug courts:

Participants undergo intensive treatment instead of prison. Judges receive special training. Rather than simply resolving a case and sentencing the offender, they preside over teams that include prosecutors and defence lawyers, police, treatment and job-training counsellors and case workers
...
A statewide study in Georgia found the two-year recidivism rate among drug-court participants was 7%, compared with 15% for those on probation alone and 29% for drug-users who served time in state prison.
...
In any event, such schemes not only help the participant, but save money. In Georgia a drug-court sentence costs over $10,000 less than a prison sentence ... drug courts produce $2.21 in benefits (reduced crime and costs of incarceration) for every $1 spent; expanding their reach to cover all arrestees would raise the level of benefits to $3.36.

Although technically, this should be classified as 'slightly reduce the amount of stupidity in policy.'  It should be obvious by now that putting druggies in jail is amazingly dumb.