By Dr Oana Borcan
As parties tour the country parading their shiny manifestos and skilfully dodging the tough questions from the press, much confusion ensues over the problem of inequality in higher education and how best to address it. On the one hand, Labour and others criticised the Tories for the hike in tuition fees over the past years and for scrapping the £3500 non-repayable maintenance grants for students from disadvantaged backgrounds in August 2016. The implication, as critics suggested, would be that disadvantaged students would be laden with the largest debts, potentially deterring university entry in this group and deepening income inequality. On the other hand, we see the Conservative government raving about the current record number of disadvantaged students in higher education and warning that a Brexit in the hands of other parties will ruin this progress. In defending their policies, the Tories seem to focus more on absolute numbers and Labour, Lib-Dems, Greens and UKIP more on the relative performance of disadvantaged students; In this blog I will (1) go over the numbers and (2) the proposals and, finally (3) discuss the evidence relating to the effectiveness of proposed policies. While I focus here on policies related to the equality of opportunity in higher education, other proposed education policies can be analysed in a similar way.
By Prof. Ted Turocy
In the World Baseball Classic currently underway, Major League Baseball is testing out a rule change designed to resolve tied games more rapidly. When a game goes into the eleventh inning (the second extra inning), each team will begin their turn at bat with runners already on first and second bases. For readers not familiar with baseball, this will make scoring easier, and therefore ties should be broken more quickly. This rule has been used in international baseball for a few years (and amateur players may have encountered a version of it in local baseball and softball leagues as well).
Prof. Ted Turocy – Behavioural Economist and Baseballer
By Dr David Hugh-Jones
This post is about a paper of mine with Carlo Perroni of Warwick University, The Logic of Costly Punishment Reversed. It has just been accepted in the Journal of Economic Behavior and Organization (ungated version at my website).
The germ for this paper came in 2006 at Northwestern University, in a chat with my game theory lecturer, Christoph Kuzmics. He mentioned to me that he was working on evolutionary game theory explanations for costly punishment.
The idea of costly punishment is that people are prepared to pay costs so as to punish bad behaviour or take revenge. For example, if a guy starts a bar fight because you spilled his beer, or someone lectures you for leaving litter, that might be costly punishment. Why is that important? Well, all societies need to maintain order – to prevent crime and ensure that people contribute to community goods. Modern societies have the machinery of the state – the policeman and the tax office – to do this. But throughout history, most people have lived in small societies without states; and there are many kinds of bad behaviour, like littering, that it would be too expensive or intrusive to control using the state’s coercive power. Instead, people in the group must punish bad behaviour, either verbally, financially or physically.
(by Farasat Bokhari & Bruce Lyons)
Last week the UK Competition and Markets Authority (CMA) imposed a fine of approximately £90 million on Pfizer and a generic manufacturer Flynn Pharma, on the grounds that each abused a dominant position by charging excessive and unfair prices for phenytoin sodium capsules, an anti-epilepsy drug (brand name Epanutin). The price of a pack of 84 capsules of 100MG increased from £2.83 to £67.50 in October 2012. This came about as part of a deal where Pfizer sold the distribution rights in the UK to Flynn Pharma, who in turn ‘de-branded’ the drug, and sold the generic at an inflated price. The drug in question is not protected by any patents, so other generics are available and further generic entry is possible, yet the branded original drug was replaced by a higher priced generic. The CMA’s case is a rare example of an abuse of dominance finding (under Art. 102 and/or Ch.2 of CA98) in relation to exploitative pricing. While we await the full published decision, it is worth looking at industry price and quantity data to contextualise the CMA’s case. We also try to understand how this price hike was possible and ask whether the CMA should pursue more exploitative pricing cases.
By Dr David Hugh-Jones
After the Brexit vote, a standard story is doing the rounds: the poor and uneducated are threatened by globalization. They respond atavistically, asserting their superiority over ethnic outsiders. As a result, they are fooled into voting against their own interests, for racist parties who do not really care about them.
This explanation comes in various flavours. To make it more left-wing, substitute “neoliberal world order” for “globalization”. But the basic recipe is widely reused. Obama talked about people “clinging to guns and religion”. This year, we are told it explains why people are voting for Trump.
There are some specific problems with applying this idea to Brexit. The context for the British vote was not just “globalization”: it was free movement of labour in the EU, combined with policy failures elsewhere that have led large numbers of people to seek employment in the UK.
Here’s a more basic question. Is nationalism truly irrational?
By Dr Farasat Bokhari
This article originally appeared in STAT on 28th September 2016.
Banning “pay-for-delay” deals that postpone the production of less-expensive generic drugs is a key action point in Hillary Clinton’s comprehensive plan to lower prescription drug costs. Eliminating these deals, she says, could save Americans billions of dollars on medications. But an even more productive strategy would be to stop drug makers from producing so-called authorized generics. (I tried to examine Donald Trump’s thoughts on this issue. While his website says he will remove “barriers to entry into free markets for drug providers,” no details are provided and no mention is made of pay-for-delay deals.)
A patent on a new therapeutic molecule is granted for 20 years, though its validity can be challenged at any time. Much of that 20-year window is often spent formulating the drug and testing it in animal studies and clinical trials. Acknowledging this delay, the Hatch-Waxman Act provides an incentive for drug development by granting the patent holder five years of market exclusivity during which no competitor can file to produce a generic variant. Not surprisingly, the price of the drug is high during this period.
By Dr Farasat Bokhari
In a new development surrounding the controversy of price hikes of Mylan’s lifesaving drug EpiPen, the manufacturer announced that it will introduce a generic version, and sell the new drug at half the price of its branded version. Mylan has increased the price of its EpiPen injections from about $100 in 2009 to over $600 this year and will sell the generic at $300, and has come under scrutiny and strong criticism from public and government officials alike. Mylan are not alone in increasing drug prices in recent times. For instance, Martin Shkreli increased the price of Daraprim by 5000 percent in 2015. However, that was to do with a hit-and-run opportunity that arose out of its orphan drug status, and the speed with which a rival generic could gain approval to enter the market (see my earlier post, ‘The Economics of a $750 Pill’).
Leaving aside the issue that the generic is still three times more expensive than the original 2009 price, this announcement has left some puzzling over why, or rather how, such a move makes any sense. To paraphrase the incredulity expressed by Richard Quest of CNN, why would anyone pay $600 for a drug when the exact same product by the same company is also available for $300? How does Mylan stand to gain anything from this move?