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Archive for January 2007

Group differences galore

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Kari Stefansson of deCode genetics interviewed (podcast and stream) on Biotech Nation. He discusses published and unpublished results on genetic variation between continental groups, with emphasis on disease resistance. deCode uses genetic and medical data from the homogeneous population of Iceland to find disease-related genes.

See related post here.

Written by infoproc

January 31, 2007 at 5:45 am

Posted in genetics

The wisdom of Ponzi

with 2 comments

I bring you the wisdom of Ponzi Q. Globalization, lifted from the comments on DeLong’s blog.

Beloved corporations like Microsoft and Intel have already learned that they can get good technology R&D cheaply by outsourcing to places like China and India. These are American companies benefiting from innovation abroad. Why is it such a benefit to America to have the R&D and innovation done by Americans in America?

Isn’t Summers an economist? If so, then why is he not for free trade? We need not innovate in any science here in America in order to prosper. Given our high living standards, it’s a waste of money.

Economic orthodoxy states that it’s an absolute good for all nations to focus on what they have a comparative advantage in. The U.S. is not exempt from this. Let the Chinese and the rest of the world do the scientific dirty work. We in America will do the work that suits us. And, as Alan Blinder has pointed out, the work that suits America is personal services, not innovation in biotechnology. Subsidies for innovation or R&D or whatever are a form of protectionism and must be shunned.

Amen.

…We Americans do not have a monopoly on brains. American multinationals can fund biotech innovation abroad and get more for their money. The innovation will be done, just not by Americans in America. American businesses will still get the rewards from the innovations. What’s so bad about that?

…What’s wrong with having America business funding R&D in biotech or whatever the next big thing is overseas? Giving the differences in living standards and labor regulations, they can get a bigger bang for their buck. What’s not to like?

If Americans get screwed out of doing this type of work, so be it. They can go into the one line of work where Americans seem to have a comparative advantage, personal services, and I’m sure everyone will be better off. It’s not a zero sum game, you know.

All this sounds like industrial policy to me. And being a good believer in those most perfect of human intellectual inventions, free markets and free trade, I am appalled at its promotion on this board.

Economists are needed to provide an ideological framework that justifies the screwing of the weak for the benefit of the powerful. They are thus more important to those who matter than any scientist.

The economists most listened to already are established and thus can even promote policies that screw their own kind without fear. The economists who are not established must follow the orthodoxy. Apart from the pressure to conform, economic theory is very complicated and, thus, it is too difficult for a novice to deviate from the orthodoxy.

However, most economists are not masochists. When enough economists suffer sufficiently from extensions of the policies they promote today, then the economic theory will adjust to so that its implementation will ease their suffering.

…There is no market failure here. Given the high costs to do anything here in the good old U.S. of A., it is better if innovation and product development are done abroad if possible. And with each passing day, because of technology and the neo-liberal globalizationized regulatory regime, it becomes more possible.

Americans should stick to the types of work in which they have a comparative advantage. Here I agree with Alan Blinder that America should focus on personal services.

So to heck with biotechnology and science/technology research in general. Let them go the same way we let go of making televisions and other stuff. There’s one big global labor pool now. Let us take advantage of it! Or should I say, let corporate ‘America’ take advantage of it! Because what’s good for corporate ‘America’ is good for America. And we will all share in the prosperity that trickles down from the executive suites and brokerage firms someday.

This is Economics 101 people.

Written by infoproc

January 30, 2007 at 5:48 pm

Posted in globalization

Summers on the biology century

with 5 comments

Via Brad DeLong and Economist’s View, Larry Summers argues for industrial policy favoring life sciences.

Gee, is there a market failure? If life sciences are so important to society, why doesn’t the market reward researchers the way it does hedge fund managers? Does government really need to interfere? Obviously I agree with Summers, but I don’t think strong believers in markets as resource allocators for society can do so without questioning some of their beliefs.

Note, though, it’s a bit more complicated than Summers makes it out to be. Biologists who start companies can become rich, but it’s a longer and riskier road than heading directly into business or finance.

See related posts here, here and here.

[Very nice discussion over at DeLong’s blog, including explanation of market failure vs externalities, why the science track is for masochists, comparative advantage, etc.]

FT.com / Columnists / Lawrence Summers – America must not surrender its lead in life sciences: If the 20th century was defined by developments in the physical sciences, the 21st century will be defined by developments in the life sciences. Lifespans will rise sharply as cures are found for chronic diseases and healthcare will come to be a larger share of the economy than manufacturing. Life science approaches will lead to everything from further agricultural revolutions to profound changes in energy technology and the development of new materials….

It is natural to ask whether the US will lead in the life sciences in this century as it did in the physical sciences in the last. It is a profoundly important economic question, but one whose implications go far beyond to embrace issues of national security and moral leadership. At present, if one looks at levels of investment or at research output or at the prestige of leading institutions, the US is clearly leading in the life sciences. But past performance is no guarantee of future success. In the first third of the 20th century, Europe and Europeans were the dominant source of discoveries in physics….

If America is to maintain its leadership in life sciences in the 21st century, important steps must be taken. Most abstract but most important, there needs to be respect for the scientific method and its results. In sharp distinction to the situation in other industrial countries, there is an increasing move away from respecting the scientific method in US schools….

Second, funding…. During the past three years, when there has been more possible in the life sciences than there has ever been, when we are on the cusp of achieving important breakthroughs in everything from stem cells to the treatment of cancer, government funding for science research has been cut in real terms. This has been particularly hard on young researchers starting out in their careers….

In today’s economy an outstanding graduate of a leading business school earns a substantially higher salary than a potential Nobel prize winner graduating with a PhD in biology. Several years after graduation the differences are even more pronounced. It should not be a surprise that in light of this economic reality more of our talented young people are not headed towards careers in basic research in the life sciences.

Third, we need to control the role of politics in allocating science dollars, which are currently tossed around like so many political footballs…. [I]t is not a step towards a healthier 21st century to allow the views of a vocal minority in effect to cut off funding for embryonic stem cell research — which is likely to lead to revolutions in the treatment of Parkinson’s disease, diabetes and cancer within the next generation.

Finally, we need to support clusters of extraordinary performance. If competition is individualistic, the US is going to have a very difficult time because salary levels adjusted for talent are going to be much lower in other parts of the world. Rather than focus on each individual as an island unto him or herself, the US needs to focus on fostering clusters of innovation such as Silicon Valley in information technology, Boston in the life sciences, New York in finance — where each talented individual derives his or her strength from all that is around. Competing with that on price is much more difficult…

Written by infoproc

January 29, 2007 at 12:22 am

Intellectual honesty? in the eye of the beholder

with 2 comments

PrawfsBlawg, a blog written by a collective of law school professors, recently ran a post entitled Princeton, Berkeley and Asians, about the Jian Li discrimination lawsuit against Princeton and Affirmative Action (AA). It links to an earlier post here on the same topic.

Posts on PrawfsBlawg seem to get anywhere from zero to ten comments. But traffic soared after Instapundit linked to the AA post. Over 50 comments appeared overnight, most soundly critical of the original (pro-AA) discussion. The result? “The comments to this entry are closed” despite PrawfsBlawg’s motto “Where Intellectual Honesty Has (Almost Always) Trumped Partisanship Since 2005” 🙂

Written by infoproc

January 28, 2007 at 4:21 pm

Posted in Uncategorized

Graduate admissions, human capital and globalization

with 6 comments

I’m on the graduate admissions committee this year. We’re in the middle of reviewing over 200 applications for about a dozen places in our PhD program. About 3/4 of the applicants are foreign, the vast majority of those from China, while less than a quarter are domestic. We’re a middle-level PhD program at a flagship public university — not ranked among the top 20 physics departments, but probably not very different from the next 20 departments, with several very strong research specialties.

Through some independent research, I’ve learned that the top 5% or so of students from the very best universities in China (e.g., Beijing University or Tsinghua University) can expect to be admitted to the top 10 programs in the US, so they might not apply at Oregon. A typical student admitted here from China will be in the top 10-20% of their class at one of the top 5-10 departments. The modal GRE quant score is a perfect 800 (>94 percentile) and a typical GRE subject score of an admitted Chinese applicant is above 90th percentile. Very few American applicants score above the 90th percentile on the subject test (the top ranks are dominated by foreigners), and those individuals usually end up at top US grad schools.

Our yield (ratio of students who enroll to those who are accepted) is about 10%, probably because most of these applicants are accepted at multiple programs of similar quality. Among our applicants I’ve already spotted winners of the Chinese national physics and math Olympiads (these teams often score 5 golds at the world competition) and numerous graduates of the “Special Youth” program which admits young talents to university early. One applicant is 19 and took general relativity at age 18. (As I mentioned already, the very strongest Chinese applicants are only applying to the top 5 or 10 US graduate programs, so we may not see them in our pool.)

How do these students perform in graduate school? Typically very well in the courses and on the comprehensive exams. The top scorers on the PhD candidacy exam, both here and when I was a professor at Yale, are disproportionately from China (and rarely Americans, although I think when I was a grad student myself at Berkeley there were often Americans at or near the top). The harder question is whether, in the long term, these Chinese students are as productive researchers as the domestic students. I haven’t seen any systematic studies of this, but I suppose they are at least comparable since a lot of professors these days are PRC immigrants who went through graduate school here. I suspect that mastering English might be harder for many of these students than the physics itself.

One thing I am sure of — without these foreign applicants the strength of US graduate programs in physics would be reduced significantly (I am sure the situation is the same in engineering and other sciences). We’re reaping the benefits of a very well organized system for training students up to the BS and MS levels; most of these students want to stay in the US after finishing their educations. I suppose more and more good students are staying at home for their PhD, rather than coming to the US, but at the moment we can still draw on a huge pool of human talent from abroad.

Written by infoproc

January 25, 2007 at 6:14 pm

China to diversify FX reserves

with one comment

A lot of interest in this over the last few days. Someone sent me a UBS report which contains the following. I’m sure US banks and hedge funds are queuing up for a chance to manage some of these funds. Will we see Chinese FX reserves recycled into equities and other less liquid assets?

China’s inter-agency Financial Work Conference ended over the weekend, and we’ve started to see gradual information flow about the results. This was a rare occasion for the senior leadership to meet and decide on the direction of financial sector policies for the next few years to come.

The main issues included restructuring of state bank management, new bond market regulations, creation of a deposit insurance scheme, fostering rural finance – and, of course, potential changes in FX reserve management and portfolio allocation. With regard to the latter, we do expect to see changes ahead, but we don’t see any near-term implications whatsoever for US or other overseas asset markets.

Going into the conference, the issue of management and allocation of China’s US$1 trillion of FX reserves was clearly one of the biggest policy issues on the table. Needless to say, popular proposals over the past few months have run a wide gamut, including diversification of the PBC’s own portfolio, transferring reserves to the existing Central Huijin Investment Company, allocating reserves to a new State Investment Corporation, creation of a new energy-related private equity vehicle, recapitalizing the National Pension Fund, etc.

At the conclusion of the meetings, it is clear that policymakers did agree on some form of restructuring – however, it is also clear that there has been no detailed decision as to what form that restructuring might take. Premier Wen Jiabao announced that China will “actively explore and broaden the channels and manner of using its foreign exchange reserves”, but that is the only statement we have from the senior authorities on the topic. While we could see further announcements over the next few quarters, as we argued in last week’s note (Big News on Chinese Reserves?, UBS Asian Economics, January 18), we don’t see any significant near-term implications for the US dollar or US treasury market.

Written by infoproc

January 23, 2007 at 6:34 pm

China anti-satellite capability and nuclear deterrence

with 2 comments

There seems to be quite a bit of confusion over the recent demonstration of Chinese anti-satellite capability using medium range ballistic missiles. It’s certainly true that this capability raises tremendous headaches for US military planners, who have become reliant on GPS and satellite intel for precision strikes and use of advanced weaponry. In any conflict over Taiwan, the US now has to factor in what might happen to its satellites. Certainly, it would have been in US interests to negotiate a treaty on anti-satellite weapons before the Chinese had a chance to test their capabilities.

But there’s another aspect to this issue which I’ve not seen discussed. Because China’s arsenal of ICBMs is quite limited (their longest range missiles are still liquid fueled, perhaps numbering less than 20, and their submarine-launch capabilities remain limited), any US missile defense system is a potential threat to Chinese nuclear deterrence. The US has continued to spend billions on a Star Wars program, ostensibly motivated by N. Korea, but such a system impacts the Chinese as well. The planning scenario for PLA strategists goes like this: (1) US first strike against Chinese ICBMs causes significant losses, (2) US missile defense system may be sufficient to stop a second strike consisting of only a handful of ICBMs. The Chinese anti-satellite capability helps guarantee their second-strike capability. They certainly have enough medium range missiles to do serious damage to the US spy satellite infrastructure, perhaps enough to disable any missile defense system.

Most scientists will tell you that the current US system is far from capable of (2), and that the whole thing is essentially military welfare for defense contractors and the aerospace industry, but nevertheless foreign strategists have to take the system seriously — just as the Soviets took Reagan’s original Star Wars efforts seriously. So, Chinese planners need to make sure they have a counter-counter measure against our missile defense system.

Incidentally, those credulous folk who believe the proponents of the current anti-missile system might want to ask themselves how credible the Livermore/Star Warrior/Reaganites were 25 years ago when they claimed they could actually build something to defend against the entire Soviet arsenal. The current system is much more limited in scope — meant to stop one or a handful of incoming missiles — but still hasn’t been convincingly tested. If the Star Warriors were exaggerating then, they’re quite likely exaggerating now.

Written by infoproc

January 22, 2007 at 3:49 am