Category: Incentives

British Government Environmentalists Increase London Air Pollution

(p. A4) London is choking from record levels of pollution, much of it caused by diesel cars and trucks, as well as wood-burning fires in private homes, a growing trend.
. . .
London’s air pollution today is different from seven decades ago, and more insidious. No longer thick as “pea soup,” as it was traditionally described, the city’s air is now laced with nitrogen dioxide — a toxic gas mostly produced by vehicles with diesel engines.
. . .
The current problem is, in part, an unintended consequence of previous efforts to aid the environment.
The British government provided financial incentives to encourage a shift to diesel engines because laboratory tests suggested that would cut harmful emissions and combat climate change. Yet, it turned out that diesel cars emit on average five times as much emissions in real-world driving conditions as in the tests, according to a British Department for Transport study.
“No one at the time thought of the consequences of increased nitrogen dioxide emissions from diesel, and the policy of incentivizing diesel was so successful that an awful lot of people bought diesel cars,” said Anna Heslop, a lawyer at ClientEarth, an environmental law firm that last year forced the British government to produce a better plan to improve air quality.
. . .
Bob Miller, 69, a cabdriver who has crisscrossed London for 30 years, wasn’t convinced. He has lost faith in recommendations by policy makers and experts, he said.
“We were told how wonderful diesel is, how they were supposed to be cleaner than petrol,” Mr. Miller said, idling his cab in heavy traffic with the window open.
“The experts make the rules, then they’re wrong,” he said, shaking his head. “I give up.”

For the full story, see:
KIMIKO de FREYTAS-TAMURA. “A Push for Diesel Leaves London Gasping Amid Record Pollution.” The New York Times (Sat., FEB. 18, 2017): A4.
(Note: ellipses added.)
(Note: the online version of the story has the date FEB. 17, 2017.)

Wall Street Needs Return to Partnership Culture

(p. A17) Ever since the crisis of 2008, banks have been subject to ferocious attack and more regulation. In “Why Wall Street Matters,” William Cohan, the author of earlier books on Goldman Sachs and Lazard Frères, mounts a defense of Wall Street banking institutions and argues that much of the regulation after 2008 has been counterproductive. In his view, the main culprit in the financial meltdown was Wall Street’s compensation culture, and he presents some controversial proposals to reform it.
. . .
So what went wrong? Where did useful innovation morph into lunacy that almost brought down the whole system? The sea change began in 1969, Mr. Cohan says, when the first investment bank (Donaldson, Lufkin & Jenrette) sold equity to the public. Previously investment banks were partnerships whose capital came from the net worth of the individual partners, who would assume only the most modest risk since investment failure might endanger their life savings. But once a firm’s capital could be increased by debt and equity financing–in essence, by other people’s money–the calculus shifted.
. . .
Mr. Cohan’s solution is to replace Wall Street’s broken compensation system: the bonus culture that creates incentives to take big bets with other people’s money while avoiding accountability when the bets go bad. He says that we need to “return to a compensation system that more closely resembles that of the partnership culture” of earlier times. Going well beyond calls for a claw-back of bonuses when trouble hits, Mr. Cohan proposes that the leaders of Wall Street firms be required to put their entire net worth on the line. Their co-op apartments, houses in the Hamptons, art collections and bank accounts would all be “fodder for the bank’s creditors” if something goes wrong.

For the full review, see:
Burton G. Malkiel . “BOOKSHELF; Big Bonus, Big Problem; Dodd-Frank and the Volcker Rule address the wrong problems and did nothing to fix Wall Street’s broken compensation culture.” The Wall Street Journal (Weds., March 1, 2017): A17.
(Note: ellipses added.)
(Note: the online version of the review has the date Feb, 28, 2017.)

The book under review, is:
Cohan, William D. Why Wall Street Matters. New York: Random House, 2017.

Doctors Lack Incentives to Use Best Ovarian Cancer Treatment

(p. 22) In 2006, the National Cancer Institute took the rare step of issuing a “clinical announcement,” a special alert it holds in reserve for advances so important that they should change medical practice.
In this case, the subject was ovarian cancer. A major study had just proved that pumping chemotherapy directly into the abdomen, along with the usual intravenous method, could add 16 months or more to women’s lives. Cancer experts agreed that medical practice should change — immediately.
Nearly a decade later, doctors report that fewer than half of ovarian cancer patients at American hospitals are receiving the abdominal treatment.
“It’s very unfortunate, but it’s the real world,” said Dr. Maurie Markman, the president of medicine and science at Cancer Treatment Centers of America. He added, “The word ‘tragic’ would be fair.”
Experts suggest a variety of reasons that the treatment is so underused: It is harder to administer than intravenous therapy, and some doctors may still doubt its benefits or think it is too toxic. Some may also see it as a drain on their income, because it is time-consuming and uses generic drugs on which oncologists make little money.

For the full story, see:
DENISE GRADY. “Ovarian Cancer Treatment Is Found Underused.” The New York Times (Tues., AUG. 4, 2015): A1 & A13.
(Note: the online version of the story has the date AUG. 3, 2015, and has the title “Effective Ovarian Cancer Treatment Is Underused, Study Finds.”)

“Patients Should Be the Owners of Their Own Medical Data”

(p. A21) THERE’S quite a paradox when it comes to our health data. Most of us still cannot readily look at it, but there’s been an epidemic of cybercriminals and thieves hacking and stealing this most personal information.
. . .
. . . , giving consumers control of their own medical data would revolutionize who owns medical data and how it is used. Concerns about researchers losing access to this amassed data are overstated. Patients have shown an overwhelming willingness to share their information for altruistic reasons (which far exceeds the track record of doctors and health systems when it comes to sharing data).
. . .
We need to move on from the days of health systems storing and owning all our health data. Patients should be the owners of their own medical data. It’s an entitlement and civil right that should be recognized.

For the full commentary, see:
KATHRYN HAUN and ERIC J. TOPOL. “The Health Data Conundrum.” The New York Times (Tues., January 3, 2017): A21.
(Note: ellipses added.)
(Note: the online version of the commentary has the date January 2, 2017.)

President Kenyatta Burns Ivory, Raising Its Price, and Increasing the Incentive for Poachers to Kill Elephants

If President Kenyatta wants to save elephants, instead of burning ivory, he should sell it on the open market, moving the supply curve to the right, and lowering the price of ivory. A lower price of ivory would reduce the incentive for poachers to kill elephants.

(p. 10) NAIROBI, Kenya — What do you do when you have more than $100 million worth of ivory sitting around, just collecting dust?
You burn it, of course.
That is what Kenya did on Saturday, when President Uhuru Kenyatta lit a huge pyre of elephant tusks as a way to show the world that Kenya is serious about ending the illegal ivory trade, which is threatening to push wild elephants to extinction.
“No one, and I repeat, no one, has any business in trading in ivory, for this trade means death — the death of our elephants and the death of our natural heritage,” Mr. Kenyatta said.

For the full story, see:
ELLEN BARRY. “A Year Later, Nepal Is Trapped in the Shambles of a Devastating Quake.” The New York Times, First Section (Sun., May 1, 2016): 10.
(Note: ellipses added.)
(Note: the online version of the story has the date APRIL 30, 2016, and has the title “A Year After Earthquake, Nepal’s Recovery Is Just Beginning.”)

Hidebound Banks Ride Uber, Hoping to Manage I.P.O.

(p. A1) Wall Street banks can be hidebound in their ways: insisting on suits and ties and handing out BlackBerries after everyone else has moved on to the iPhone. But if there is one thing that can push even the most conservative bank into the future, it is the prospect of business.
The latest reminder came this week when JPMorgan Chase announced that it would reimburse all of its employees for rides taken with Uber — offering access to “Uber’s expanding presence and seamless experience,” the company said in a news release.
JPMorgan made its decision long after other parts of corporate America were already hailing cars through the California start-up. But banks have recently shown a fondness for the service — with Goldman making the company part of its official travel policy in late May and Morgan Stanley putting out its own news release about its Uber use late last year.
Bank experts were quick to note that these moves come as the banks are jockeying to win a coveted spot managing Uber’s initial public offering — one that is not yet scheduled but that is assumed to be coming in the not-too-distant future. The I.P.O. for Uber, whose fund-raising so far has pegged its valuation at $50 billion, will most likely be the blockbuster I.P.O. in whatever year it takes place.

For the full story, see:
NATHANIEL POPPER. “An Uber I.P.O. Ahead, and Suddenly Bankers Are Using Uber. Coincidence?” The New York Times (Fri., JULY 10, 2015): B3.
(Note: bracketed date added.)
(Note: the online version of the story has the date JULY 9, 2015 and has the title “An Uber I.P.O. Looms, and Suddenly Bankers Are Using Uber. Coincidence?”)

Government: “One Vast Honey Pot with Thousands of Ants Lined Up Around the Rim”

(p. A21) Ms. Tolchin hit on the subject of patronage when Mr. Tolchin, then a reporter in the metropolitan news department of The New York Times, wrote a series of articles on the topic that several publishers urged him to turn into a book. Daunted, he turned to his wife for help.
“The political-science literature had an enormous hole on the subject,” she told The Washingtonian in 2011. “It’s such a critical part of the political process — it was wonderful virgin territory.”
Their combined efforts — he provided the reporting, she provided the scholarship — resulted in “To the Victor…: Political Patronage From the Clubhouse to the White House,” published in 1971.
In lively fashion, the book surveyed the history and examined the mechanisms of a system the authors described as “one of the occupational hazards of democracy.” They traced its influence, for good and ill, in city halls, statehouses, courthouses and, onward and upward, Congress and the White House.
The picture it painted was often bleak, presenting government at all levels as “one vast honey pot with thousands of ants lined up around the rim to get at the sweetener inside,” according to a review in The Times.
It was a rich subject to which the authors returned in “Pinstripe Patronage: Political Favoritism From the Clubhouse to the White House … and Beyond,” published in 2011. Patronage is “the major reason people go into politics,” Ms. Tolchin told The Washingtonian.”

For the full obituary, see:
WILLIAM GRIMES. “Susan Tolchin, Scholar and Author, Is Dead at 75.” The New York Times (Fri., May 20, 2016): A21.
(Note: ellipses in original.)
(Note: the online version of the obituary has the date May 19, 2016, and has the title “Susan Tolchin, Political Scientist Who Foresaw Voter Anger, Dies at 75.”)

The two books on government patronage that are mentioned above, are:
Tolchin, Martin, and Susan Tolchin. To the Victor: Political Patronage from the Clubhouse to the White House. New York: Random House, 1971.
Tolchin, Martin, and Susan Tolchin. Pinstripe Patronage: Political Favoritism from the Clubhouse to the White House and Beyond. Boulder, CO: Paradigm Publishers, 2011.

Tech Replaces Labor When Government Raises Labor Costs

(p. A11) In late 2013, Chili’s and Applebee’s announced that they were installing more than 100,000 tableside tablets at their restaurants across the country, allowing customers to order and pay their bill without ever talking to a waiter. The companies were soon followed by Buffalo Wild Wings, Panera Bread, Olive Garden and dozens of others. This means fewer servers covering more tables. Quick-service restaurant chains are also testing touch-screen ordering.
. . .
So why the increased use of technology? The major reason is consumer preference. Research shows that many appreciate the speed, order accuracy, and convenience of touch screens. This is particularly so among millennials who already do so much on smartphones and tablets. I’ve watched people–young and old–waiting in line to use the touch screens while employees stand idle at the counter.
The other reason is costs. While the technology is becoming much cheaper, government mandates have been making labor much more expensive.
In 2015, 14 cities and states approved $15 minimum wages–double the current federal minimum. Additionally, four states, 20 cities and one county now have mandatory paid-sick-leave laws generally requiring a paid week of time off each year per covered employee. And then there’s the Affordable Care Act, which further raises employer costs.

For the full commentary, see:
ANDY PUZDER. “Why Restaurant Automation Is on the Menu; Forget about robot waiters, but technology helps cut government-imposed costs. And consumers like it.” The Wall Street Journal (Fri., March 25, 2016): A11.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date March 24, 2016.)

Trophy Hunting Preserves Endangered Species

(p. A1) Despite intensifying calls to ban or restrict trophy hunting in Africa after the killing of a lion named Cecil in Zimbabwe, most conservation groups, wildlife (p. A8) management experts and African governments support the practice as a way to maintain wildlife. Hunting, they contend, is part of a complex economy that has so far proven to be the most effective method of conservation, not only in Africa but around the world as well.
While hunting is banned in government parks here in South Africa, animals inside their boundaries are routinely sold to game ranches when their populations are considered excessive, generating money to maintain habitats and fight poachers.
And because trophy hunting is legal in private game reserves, the animals end up fetching higher prices than they would in being killed for food or other reasons, conservationists contend. Lion hunts, one of the most lucrative forms of trophy hunting, bring in between $24,000 and $71,000 per outing on average across Africa, according to a 2012 study. In southern Africa, the emergence of a regulated trophy hunting industry on private game ranches in the 1960s helped restore vast stretches of degraded habitats and revive certain species, like the southern white rhinoceros, which had been hunted almost to extinction, conservationists say.
A similar shift occurred in the United States decades earlier when the Pittman-Robertson Act of 1937 allocated the proceeds from hunting to bring back lands and animals, they argue.
“There’s only two places on the earth where wildlife at a large scale has actually increased in the 20th century, and those are North America and southern Africa,” said Rosie Cooney, a zoologist who is the chairwoman of the International Union for Conservation of Nature’s Sustainable Use and Livelihoods Specialist Group. “Both of those models of conservation were built around hunting.”

For the full story, see:
NORIMITSU ONISHI. “Outcry for Cecil the Lion Could Undercut Conservation Efforts.” The New York Times (Tues., AUG. 11, 2015): A1 & A8.
(Note: the online version of the story has the date AUG. 10, 2015.)

Parents Set Up For-Profit Companies for Quicker Cures

(p. B1) Karen Aiach was working as a management consultant when she learned that her first daughter, Ornella, had Sanfilippo syndrome, a rare disease in which a missing enzyme causes toxic substances to build up in the body.

Ornella was 6 months old, and the prognosis was grim: She would develop mentally and physically to between ages 2 and 4, plateau and then lose whatever she had learned. She would become extremely hyperactive and develop sleeping disorders. Most likely she would not live past 15.
Within two years of the diagnosis, Ms. Aiach, who lives in a Paris suburb, had quit her consulting job to learn everything she could about the disease. She hired a neurobiologist to guide her in the world of medical research. And when she learned that few treatments were in the works, she founded a company called Lysogene to focus on genetic therapy.
Instead of raising money and awareness by setting up a nonprofit foundation, a more typical route, she opted to start a for-profit company to seek treatments, if not a cure. Far from common, what Ms. Aiach and other parents like her are trying is to leverage their wealth, contacts and the hope of sophisticated investors to jump-start research into rare diseases.
. . .
(p. B4) . . . with some rare diseases, where minimal research has been done, a little effort goes a long way.
Nicole Boice, who founded Global Genes, one of the leading rare-disease patient advocacy organizations, said even small investments can have meaningful impacts.
“You can start moving the needle with $3,500,” she said. “That leads you to the next $25,000, and then to innovation grants and funding at $100,000. That starts the interest from biotech.”
Gradually, parents like Matt Wilsey, a technology entrepreneur, have made headway. First, his family spent the better part of four years trying to figure out what afflicted his daughter, Grace, now 6. Even after her genome was sequenced, the first diagnosis turned out to be wrong. Grace, it finally was determined, was the second person in the world known to have a deficiency in the gene known as NGLY1.
“We went around the country,” Mr. Wilsey said. “We were just trying to find one doctor who had seen another patient with these symptoms.” After years of efforts, several dozen children have been found to have the same deficiency.
“Our goal is to find a cure,” said Mr. Wilsey, who lives in the San Francisco area.
“A lot of people in science dismiss that because cures are rare. But when I say cures, they’re not going to be astronauts. They’re going to be leading some sort of independent life. They’re going to be able to eat without choking. They’re going to be able to take a bath without drowning. They’re going to be able to communicate, whether with some assistive device or not.”
These parents also had a successful model to follow. In 1998, John Crowley left his job at Bristol-Myers Squibb to start a biotechnology company to search for a treatment for Pompe disease, a neuromuscular disorder that two of his children had. Within four years, the company, Novazyme Pharmaceuticals, had devised a treatment that he credits with saving their lives. His story was immortalized in the 2010 film “Extraordinary Measures,” starring Harrison Ford. And his company was bought by the pharmaceutical giant Genzyme for $137.5 million in 2001.

For the full story, see:
PAUL SULLIVAN. “Wealth Matters; Parents of Children With Rare Diseases Find Hope in For-Profit Companies.” The New York Times (Sat., DEC. 26, 2015): B1 & B4.
(Note: ellipsis added.)
(Note: the online version of the story has the date DEC. 25, 2015, and has the title “Wealth Matters; Building a Company to Treat a Rare Disease.”)

Audits Worth Less When the Audited Directly Pay for Them

(p. B1) Environmental regulators in Gujarat, one of India’s fastest-growing industrial states, found themselves in an implausible situation a few years ago: Every single city breached national air quality standards. And yet environmental audits kept finding that factories met pollution limits.
So the Gujaratis hired some researchers from Harvard and the Massachusetts Institute of Technology to carry out an experiment, changing the way the audits were made. Instead of hiring their own auditors, companies had auditors assigned to them randomly. Instead of being paid by the companies they audited, auditors drew a fixed fee from a pool that all companies paid into.
Measured compliance rates abruptly plummeted. But once the new system was in place, the real emissions from polluting factories finally started to decline. The Gujaratis kept the new approach.
“When fact-checking is not done in an independent way, there is a long history of things turning out the way the entity being fact checked wants them to turn out,” said Michael Greenstone of the University of Chicago, a former chief economist for President Obama’s Council of Economic Advisers who was one of the researchers involved in the study. “Until you change the incentives, this will not change.”
The problem may seem remote, but it turns out that the same incentives apply in the United States, even in programs that, at first glance, appear to provide an unmitigated benefit.
Last month, the Energy Department released an extensive report assessing the impact of the federal weatherization program, which was begun in 1976 to shield the homes of low-income Americans from the elements, save them money on heating bills and improve energy efficiency.
It concluded that weatheriza-(p. B10)tion — insulating homes, changing boilers, plugging leaky windows and the like — was a stellar investment. Not only were the energy savings substantially larger than the cost of weatherizing homes, the report found, but the gains soared even more once the broader impacts on health were taken into account.
“The results demonstrate that weatherization provides cost-effective energy savings and health and safety benefits to American families,” the Energy Department announced.
But do they? When Professor Greenstone and two other independent economists looked under the hood — not a trivial challenge, given the report’s 4,500 pages — they found a collection of idiosyncratic choices and unorthodox assumptions that severely undermined the credibility of the enterprise.
In the end, they concluded, the government research effort, which was led by the Energy Department’s own Oak Ridge National Laboratory, cannot tell us whether weatherization is a fabulous program or a waste of taxpayer dollars.

For the full commentary, see:
Eduardo Porter. “ECONOMIC SCENE; For Government That Works, Call In the Auditors.” The New York Times (Weds., OCT. 7, 2015): B1 & B10.
(Note: the online version of the commentary has the date OCT. 6, 2015, and the title “ECONOMIC SCENE; For Government That Works, Call In the Auditors.”)