Tuesday, 17 September 2019

Keeping up with the state of play on vaping

I was looking around the other day for something like this. The Competitive Enterprise Institute has started tallying up all the reported cases of 'vaping-related' illness in the US.

THC-vaping, and especially illicit vape cartridges, feature prominently, but there are other cases where that's not yet pinned down.
As Dr. Konstantinos Farsalinos, a cardiologist, recently wrote, a sudden outbreak in a short period of time and in a specific geographic region (so far this appears restricted to the U.S.) when e-cigarettes have been available and widely used around the world for more than 12 years, is not indicative of disease, but rather of poisoning. That is, it is unlikely that the cause stems from well-established products, but rather from a new product, ingredient, or manufacturing practice affecting products in the illegal market, legal market, or both. It does not, as some argue, prove that e-cigarettes or vaping causes long-term harms.
Recall that THC-based vaping is legal in some states, but not others. There are dodgy suppliers of vaping cartridges, often for THC-based product; that THC-based vaping is illegal in some places means there will be dodgy suppliers. Here's a New York Times report on illegal vape cartridges in Wisconsin, where THC is not legal.
On Wednesday the Trump administration said it planned to ban most flavored e-cigarettes and nicotine pods — including mint and menthol, in an effort to reduce the allure of vaping for teenagers. But the move may expand underground demand for flavored pods. And it does nothing to address the robust trade in illicit cannabis vaping products.

The Wisconsin operation is wholly characteristic of a “very advanced and mature illicit market for THC vape carts,” said David Downs, an expert in the marijuana trade and the California bureau chief for Leafly, a website that offers news, information and reviews of cannabis products. (‘Carts’ is the common shorthand for cartridges.)

“These types of operations are integral to the distribution of contaminated THC-based vape carts in the United States,” Mr. Downs said.

They are known as “pen factories,” playing a crucial middleman role: The operations buy empty vape cartridges and counterfeit packaging from Chinese factories, then fill them with THC liquid that they purchase from the United States market. Empty cartridges and packaging are also available on eBay, Alibaba and other e-commerce sites.

The filled cartridges are not by definition a health risk. However, Mr. Downs, along with executives from legal THC companies and health officials, say that the illicit operations are using a tactic common to other illegal drug operations: cutting their product with other substances, including some that can be dangerous.

The motive is profit; an operation makes more money by using less of the core ingredient, THC — which is expensive — and diluting it with oils that cost considerably less.

Public health authorities said some cutting agents might be the cause of the lung illnesses and had homed in on a particular one, vitamin E acetate, an oil that could cause breathing problems and lung inflammation if it does not heat up fully during the vaping aerosolization process.

Medium-grade THC can cost $4,000 a kilo and higher-grade THC costs double that, but additives may cost pennies on the dollar, said Chip Paul, a longtime vaping entrepreneur in Oklahoma who led the state’s drive to legalize medical marijuana there.

“That’s what they’re doing, they’re cutting this oil,” he said of illegal operations. “If I can cut it in half,” he described the thinking, “I can double my money.”
In normal markets, brand reputation is incredibly important. In illegal markets, having a very popular brand means that you're likely soon to be found and arrested. That makes for very different incentives. In normal markets, you build up brand reputation to be able to run over the long term. In illegal markets, if your brand starts getting popular, you probably need to start thinking about end-game strategies for cashing out as fast as you can.

That said, it's still ridiculously stupid to draw massive attention to your own product by killing your customers. More likely, the Dank Vapes people didn't think the thickeners would do harm (it's a vitamin; vitamins are healthy!) and figured it was time to cash out. 

Vaping has been well established in the US for some time. The big recent surge in cases can then be consistent with a few potential hypotheses:
  • Long-term risks are always unknown, and now some folks have been vaping long enough for those to eventuate
    • But that would predict a slowly rising number of cases broadly matching the uptake pattern. Instead there's a surge, and a surge that's particular to America and not seen in the UK where vaping is also well-established;
  • When millions of people are vaping, random-draw low-probability stuff becomes more likely
    • That could be part of the base rate, but also doesn't explain the surge;
  • Dodgy suppliers, mostly in the THC market but potentially also in the nicotine market, figured out they could cut product with weird oils and double their money; supply chains of empty cartridges and counterfeit packaging established themselves around the THC market. 
I'm still betting on that dodgy suppliers explains most of this mess. 

Megan McArdle nails it:
At this point, the best information suggests that a recent spate of deaths from a vaping-related lung disease — six at last report — had little or nothing to do with legal e-cigarettes. Rather, the deaths, and more than 300 confirmed cases of the disease in dozens of states, seem to be linked to illegal cartridges, mostly using marijuana derivatives that had been emulsified with vitamin E acetate, according to Food and Drug Administration investigators. The FDA has warned against using it for inhalation, and it isn’t used in legally manufactured e-cigarettes.

Naturally, the government wants to ban legally manufactured e-cigarettes.
Meanwhile, Radio New Zealand is running every scare story it can find on vaping, and providing none of the necessary context about the illicit THC market. I absolutely do not envy the folks over at MoH having to deal with the political pressure caused by RNZ's driving of a moral panic. 

Monday, 16 September 2019

Explaining the Outside of the Asylum

I had a chat about NZ as the Outside of the Asylum with the Heritage Foundation's Timothy Doescher when he was in town recently.

The podcast is available here. You can also catch it at Heritage's website, where it has the links to Spotify and other versions of it.

My Outside of the Asylum piece, on which the conversation was based, is here.

Friday, 13 September 2019

Job Openings for Economists - Spotify edition

This would be a heck of a lot of fun for somebody.

We are looking for an outstanding Head of Economics to join Spotify’s Content team. Our mission is to unlock the potential of human creativity by giving a million creative artists the opportunity to live off their work and billions of fans the opportunity to enjoy and be inspired by it. Are you a creative thinker who can combine a strong economic toolbox with a desire to learn from others, and who knows how to execute and deliver on big ideas. You would be working across the content teams and with many other related departments, providing economics, statistical and policy support that enable evidence-based decision making to help Spotify achieve its stated goal.

What you’ll do

  • You will be working horizontally across the company, from markets to marketplace and licensing to policy. 
  • You will be working closely with cross-functional teams across the company on complex and unprecedented problem-solving challenges that require fast turn-around solutions.
  • You will be able to learn quickly and apply all relevant excel, coding and query skills available within the company, and to be able to build user-friendly tools on top of those data platforms
  • You need to be able to present economic analysis clearly and concisely to both internal and external audiences who are not trained in the subject, including media.
  • Work from our New York or London office, with occasional travel.

Who you are

  • You have 7-10 years experience with a strong understanding of economics within the broader media and tech industries.
  • You have 3+ years experience managing a team.
  • You have excellent statistical training and a proven track record in constructing excel models (such as long tail analysis) for solving problems that are without precedent.
  • An MSc (or above) economics training at a reputable university with a research background in applied macro and microeconomics, and proven modelling skills.
  • Applicants with considerably more experience are encouraged to apply.
  • You have a proven ability to commission and project manage large research projects. 

It is a plus if you

  • Have experience in the music industry.
  • Can demonstrate how you retain objectivity in your analysis and communication.
  • Love working a dynamic and fast-moving environment
  • Possess effective verbal and written communication skills.
  • Have the technical competence to perform more advanced analytics:
    • Analytics tools experience (such as Tableau)
    • Experience performing analysis with large datasets
    • Knowledge of conjoint software (i.e. Sawtooth) and other pricing tools
Econ lecturers: be sure to note this as one of the interesting places that a solid economics degree can take you. 

A rubbish clean-up

That rubbish set of stats over at the Keep New Zealand Beautiful website, noted earlier this week, is now corrected.

The National Litter Audit website has been purged of the bogus numbers, and the report updated.

This is good.

Unfortunately, in the absence of any more formal retraction or notice from them to the journalists that reported so credulously on the figures, we're unlikely to see either any correction or any updated stories noting the figures are wrong.

Minimum wages and piece-rate work

Piece-rate payment for work can make a lot of sense when it's easy to observe output, hard to observe effort, and effort can yield substantial differences in worker output. It's been common in some agricultural work, especially fruit-picking.

This tweet from last year somehow crossed my stream this week. Jennifer Doleac last year tweeted the job-market papers of female economists out on the job market. And this paper struck my eye:

Dr Hill is now Assistant Prof in Ag Econ at Colorado State - excellent.

The paper shows what happens when a minimum wage sets a lower bound on wages payable under piece-rate work.

Suppose you think that you'd have to exert a lot of effort to make more than the minimum wage under piece-rate, and that you could get away with a lot less effort while not being fired. In that case you may prefer to exert less of that costly effort and get your backstop wage - the minimum wage.

If the minimum wage increases, or at least increases by more than any inflation adjustment to the piece-rate paid, more workers will be discouraged from putting in that effort. Hill shows that a three percent increase in the minimum wage reduces the average worker's productivity by seven percent.

But the paper goes beyond that with some nice theoretical testable results. Like that there'll be a range of income from piece-rates just above the minimum wage that will never be observed, because people will always prefer putting in minimum effort and getting the minimum wage to putting in more effort to get a small amount above the minimum.
In this paper, I use a theoretical model to show how, under this compensation policy, increases in the minimum wage can affect productivity. In particular, I show that for some workers the wage floor removes the incentives provided by the piece rate and creates the opportunity to shirk, i.e. to reduce effort a lot in exchange for a little decrease in pay. In the empirical application, I find evidence that supports the theory. My analysis follows the productivity of workers over two separate harvest seasons during which the employer raises the minimum wage and the piece rate. I show that in both seasons, minimum wage increases cause workers to slow down and piece rate increases cause workers to speed up. Both changes in the minimum wage are roughly three percent increases and cause the average worker to decrease productivity by seven percent. The piece rate is increased several times in both seasons, allowing for estimation of a piece rate-productivity elasticity. I estimate elasticities that range from 1.2 to 1.6. These suggest that a four to six percent increase in the piece rate would offset the productivity losses from the observed minimum wage increases. I replicate this analysis over a season with no changes in the minimum wage and find precise estimates of no effect from placebo increases and similar estimates of the piece rate-productivity elasticity (1.5 to 1.6).

I find evidence that employers can offset these losses by raising the piece rate. Estimates indicate that a four to six percent increase in the piece rate would offset the productivity losses from the examined increases in the wage floor. Though outside the scope of this paper, there are other strategies for mitigating these productivity losses. For example, employers may consider alternative contract structures or adopting new technologies that enhance productivity. Piece rate pay has well documented productivity gains compared with hourly pay, but alternative contract structures, such as hourly wages with daily, weekly, or seasonal bonuses, provide comparable incentives. Another potential strategy comes from technological innovation. The productivity decreases I find are an effect of piece rates and productivities that are low enough so that the minimum wage is desirable for some workers. Employer practices that increase productivity by lowering worker disutility from exerting effort are clear options for mitigating these effects. Technological innovations, such as picking assist for strawberry harvesters, are one way employers can do this. Future research can build on this by examining the economic viability of alternative compensation policies and mechanization for reducing the productivity effects from minimum wage increases.

In the next few years, the California minimum wage is scheduled to increase incrementally until reaching $15 per hour, a 40 percent increase from current levels. My results suggest that the farmer I study will need to increase the piece rate by 50 to 80 percent to prevent productivity losses from these minimum wage increases. Though my results are unlikely to translate linearly to large, statewide policy changes, these predictions are not unreasonable. Based on the productivity and piece rate in the 2015 season, the piece rate would need to increase by 20 percent for the average worker to earn $15 per hour. These piece rate increases can prevent productivity losses, but will substantially raise the marginal cost of producing strawberries. This farmer, and many other employers in low-wage industries who pay by the piece, face substantial increases in payroll costs from rising state minimum wages.
So, in short, a minimum wage has some weird interactions with piece-rate work. Piecework provides incentives to supply effort. A minimum wage increase removes that incentive not only for anyone whose piecework effort would result in piecerate wages no higher than the minimum wage, but for a lot of people above that margin: the extra earnings in the interval above the minimum wage aren't worth the extra effort that needs to be expended all the way though. So the piece-rate paid also has to increase.

The point of a minimum wage in piece-work is to ensure that employers aren't exploiting vulnerable workers. If the most a worker could hope to earn under a piece-rate is less than the minimum wage, and the worker is stuck there after having shifted out to the region because Work and Income insisted they take a job, that's not so hot.

So what to do? A few years ago, we did some work suggesting allowing regional variation in policy, in accordance with local needs. One idea I'd had at the time was allowing a modified version of the minimum wage for piece-rate employers in regions with a lot of fruit-picking.

The modified version would work as follows.

Any employer providing piece-rate pay would be deemed compliant with the minimum wage if at least 80% (say) of its workers on piece-rate were earning at least 125% (say) of the minimum wage. If the vast majority of workers earn a margin over the minimum wage on piece-rate, then it's hardly some sham piece-rate. If you're failing to earn at least the minimum wage while 4/5 of your coworkers are, on piece-rate, the remaining problem is likely you rather than your employer.

So even if some workers didn't wind up earning the minimum wage, that would be their problem rather than the employer's so long as most other workers were earning a margin over the minimum wage.

That kind of scheme could also hit some of the concerns MBIE tends to have about allowing seasonal workers to come in. It's less plausible that seasonal workers are driving down wages if the employer's complement of workers is still earning that margin over the minimum wage.

Thursday, 12 September 2019

Radio NZ on vaping, again

The Washington Post notes the growing consensus around just what the heck is going on with 'vaping-related' illness and death. Like I'd said last week, dodgy additives in THC vapes look to be the issue. You don't have to be paying massive attention to this file to know this.
Oregon health officials said last week that a middle-aged adult who died of a severe respiratory illness in late July had used an electronic cigarette containing marijuana oil from a legal dispensary. It was the first death tied to a vaping product bought at a pot shop. Illinois and Indiana reported deaths in adults but officials have not provided information about their ages or what type of products were used.

State and federal health authorities are focusing on the role of contaminants or counterfeit substances as a likely cause of vaping-related lung illnesses — now up to at least 450 possible cases in 33 states.

Officials are narrowing the possible culprits to adulterants in vaping products purported to have THC.

The sudden onset of these mysterious illnesses and the patients’ severe and distinctive symptoms have led investigators to focus on contaminants, rather than standard vaping products that have been in wide use for many years.

One potential lead is the oil derived from vitamin E, known as vitamin E acetate. Investigators at the U.S. Food and Drug Administration found the oil in cannabis products in samples collected from patients who fell ill across the United States. That same chemical was also found in nearly all cannabis samples from patients who fell ill in New York in recent weeks, a state health department spokeswoman said.

On Monday, New York state officials said they are issuing subpoenas to three companies the department has identified as selling “thickening agents” containing high levels of vitamin E that can be used in black market vaping products that contain THC. Dealers have been using thickening agents to dilute THC oil in street and illicit products, industry experts said.
I like that the Post uses the basic plausibility check. If this really were about nicotine vaping, which has been around for a long time, why would there suddenly be a pile of hospitalisations? This is new over the past year. They might yet find cases that look certain to be nicotine-only, but it's a tough one to prove: they've certainly found dodgy stuff in the THC cartridges that sick folks have brought with them to hospital, but not everyone who has used a THC cartridge will want to admit to it.

The best advice remains to buy your vaping product from a source you can trust. And to follow Michael Siegel (Twitter) and Clive Bates to keep up with the state of play. I like Action on Smoking and Health NZ, but they haven't really been putting up updates on the US state of play.

Meanwhile, here's how Radio NZ has continued to play the story.
US President Donald Trump has announced that his administration will ban flavoured e-cigarettes, after a spate of vaping-related deaths.

Mr Trump told reporters vaping was a "new problem", especially for children.

US Health Secretary Alex Azar said the Food and Drug Administration (FDA) would finalise a plan to take all non-tobacco flavours off the market.

There have been six deaths across 33 states and 450 reported cases of lung illness tied to vaping.

Many of the 450 reported cases are young people, with an average age of 19.

Michigan this month became the first US state to ban flavoured e-cigarettes.

Joining Mr Trump at the White House on Wednesday, Mr Azar said it would take the FDA several weeks to distribute the new guidance on e-cigarettes.
Everything in the RNZ reporting makes it seem that the illness is around e-cigarettes rather than vaped dodgy THC.

I expect this is deliberate. It is lying through omission. So I've put in another complaint, this time around accuracy.

RNZ has been on a campaign against vaping for some time. RNZ demonised Marewa Glover's harm reduction efforts. They gave ample airtime to attacks on her. Their reporting on vaping is consistently conflating illness in the US due to dodgy and counterfeit THC product with the kind of vaping people in NZ are familiar with. And they are doing it when the regulatory framework is soon to be announced, helping to fuel a moral panic that will lead to worse regulatory outcomes.

I don't know why RNZ is like this. But RNZ is like this. I wish that I weren't compelled to pay, through my taxes, for their dishonest reporting.

Wednesday, 11 September 2019

The Joyful Contrarian

Reason Magazine has a wonderful tribute to Gordon Tullock by Michael Munger. The steering wheel with the spike on this blog's masthead? That's the Tullock Spike. 
What kind of crank wants to put bayonets in steering wheels, praises political corruption as "working out rather well," and thinks that competition can be harmful and should be discouraged? Gordon Tullock, the late George Mason University professor of law and economics, made all those arguments with a (more or less) straight face, while also helping invent the then-new discipline of sociobiology. His insights have proven to be more durable, and more sensible, than his many critics expected.

To be fair, economists tend to value counterintuitive arguments, where surprising conclusions emerge from innocuous assumptions. In 2019, we will pass the 70th anniversary of the Communist takeover of China, an event that Tullock witnessed in person from the vantage point of his diplomatic post in Tientsin. That experience launched his thinking about the problem of governance, anarchy, and the importance of rules. Looking back, many of the insights that powered his work from that time—once dismissed not just as counterintuitive but as outlandish—have now become conventional wisdom.

There are lots of contributions worth examining, including his work on voting, bureaucracy, and constitutional theory. But those fit reasonably well into the "public choice" tradition, which Tullock helped found, and are easily accessible to those interested in that approach. I will consider three of Tullock's less well-known, but probably even more important, insights—regarding safety regulation, corruption, and the rationality of evolved behaviors—and see how this work has stood the test of time. The three are very different, but they are unified by one feature that is the hallmark of the economic approach: In every case, Tullock reached a conclusion but pressed further to ask, "And then what?"
A superb must-read, filled with insights. Go read!