Instrumental Variables: How the UK can become a world leader in medical innovation

Introduction

A little under a year ago, the New York Times reported on do-it-yourself insulin pumps. Tech savvy people, mostly parents to diabetics, were pairing glucose sensors with insulin pumps. These would allow caregivers to constantly monitor glucose levels. Some even made what are, in effect, artificial pancreas, with the glucose sensor triggering the insulin pump, automating insulin delivery.

In September, the FDA approved MiniMed 670G, a mostly automated insulin pump, for sale to the general public. The device was made available spring 2017. The device is only available in the US, and Medtronic, the device manufacturer, has stated there is no timeline to bring it to other markets—diabetics can only access the years old previous version.

Automated insulin pumps illustrate two important aspects of drug and medical device regulation. First, existing regulatory systems have been slow to adapt to changes in the development of new medical devices, and medical innovation more broadly. Second, safe and effective medical devices are often unavailable in the UK, while British newspapers abound with stories of life-saving drugs unavailable in Britain.

Brexit gives the UK the opportunity to tackle both challenges and to become a leader in medical innovation. The European Medicines Agency (EMA), as well as the Medicines & Healthcare products Regulatory Agency (MHRA), the UK’s own regulatory body, were both designed for a different era.

They were created for big medicine, when large, multi-national corporations were the primary drivers of innovation. The world is in the early stages of changes in the nature of medical innovation. The era of big medicine will soon be behind us. To take full advantage of the coming changes in the structure of innovation, regulatory policy must adapt.

The UK has two advantages which could allow it to lead the charge in medical innovation.

First, the UK has a well-educated population, even relative to other developed countries, scoring near the top of the pack in maths and science, according to the multi-national TIMSS exams. It also has disproportionately strong higher education, with more universities in the world top 10, top 50, and top 500 than any country except for the US, according to most rankings. It has the human capital 2 necessary to be at the cutting edge of innovation.

Second, Brexit caused a large regulatory shock. Most regulatory changes take substantial time because of slow moving bureaucracies. Because of Brexit, the UK must make rapid changes. The question is, what type of changes should they make?

Read the whole paper.

The neoliberal mind

In The Neoliberal Mind, Dr Madsen Pirie makes the first serious, monograph-length attempt to describe what a 'neoliberal' really is – as a description of temperament and political beliefs, not as a political slur. Optimistic, forward-looking, and globalist in outlook, Dr Pirie's neoliberals are people who are excited about the prospect for deeper trade links around the world to lift people out of poverty and for technological advances to solve the problems that face societies around the world. They prefer to draw their ideas from the real world instead of theorising abstractly, and believe that markets above all alternatives have proven themselves to be the best way of promoting innovation and economic efficiency, to drive humanity's prospects forward.

Read the whole paper here.

Killing the cash cow: why Andy Haldane is wrong about demonetisation

In this polemical essay, Prof. Kevin Dowd lays into Bank of England chief economist Andy Haldane's views on demonetisation—abolishing cash.

One of the most significant developments in economic policy in recent years has been a gradually escalating government war against cash. At first sight, one might think that there is nothing too much to worry about: we are merely talking about technocratic issues related to payments technologies and the implementation of monetary policy, and cashless payments systems are already both commonplace and spreading. The reality is rather different: the issues at stake are of profound importance. The abolition of cash threatens to destroy what is left of our privacy and our freedom: we wouldn’t be able to buy a stick of gum without the government knowing about it and giving its approval. The cash abolitionists want total control over your money and what you can do with it. Besides making us all entirely dependent on the whim of the state, banning cash also threatens to cause widespread economic damage and have a devastating impact on the most vulnerable in our society. Quite simply, the government’s war against cash is the state’s war against us.

Read the whole paper here.

Lackademia: Why do academics lean left?

  • Individuals with left-wing and liberal views are overrepresented in British academia. Those with right-wing and conservative views are correspondingly underrepresented. Around 50% of the general public supports right-wing or conservative parties, compared to less than 12% of academics. Conservative and right-wing academics are particularly scarce in the social sciences, the humanities and the arts.
  • Though relatively little information is available, evidence suggests that the overrepresentation of left-liberal views has increased since the 1960s. The proportion of academics who support the Conservatives may have declined by as much as 25 percentage points since 1964.
  • The left-liberal skew of British academia cannot be primarily explained by intelligence. The distribution of party support within the top 5% of IQ is relatively similar to the distribution of party support within the general population.
  • The left-liberal skew may be partly explained by openness to experience; individuals who score highly on that personality trait tend to pursue intellectually stimulating careers like academia. And within the top 5% of IQ, openness to experience predicts support for left-wing parties.
  • Other plausible explanations for left-liberal overrepresentation include: social homophily and political typing; individual conformity; status inconsistency; and discrimination.
  • Ideological homogeneity within the academy may have had a number of adverse consequences: systematic biases in scholarship; curtailments of free speech on university campuses; and defunding of academic research by right-wing governments.
  • Recommendations include: raising awareness; being alert to double standards; encouraging adversarial collaborations; and emphasizing the benefits of ideological heterogeneity within the academy.

Read the whole paper.

Against the National Living Wage

  • The National Living Wage, announced in the 2015 Autumn Statement and effective from 1 April 2016, effectively takes control of the Minimum Wage out of the hands of the Low Pay Commission and gives it to the government.
  • Whereas the LPC had a mandate to balance both pay and employment concerns, free from political pressure, the issue is now politicised.
  • There are worries that abandoning this framework will threaten employment: the Office for Budget Responsibility projected last year that 60,000 fewer jobs will be created under this regime than the previous status quo.
  • This paper reviews the empirical evidence on the direct and indirect impacts of increases to the Minimum Wage.

Read the whole paper here.

The Tide Effect

The people of California have just voted to legalise cannabis – a decision which will have immense repercussions both in America and around the world, while efforts are already underway in Canada to legally regulate the cannabis market. The Tide Effect argues strongly that the UK should follow suit, and that the legalisation of cannabis here is both overdue and imperative.

The eight main points outlined in The Tide Effect are:

  1. The government strategy is based around three main pillars: reducing demand, restricting supply and building recovery. All three are failing.

  2. Regulation is substantially more desirable than simple decriminalisation or unregulated legalisation, because only regulation addresses all four key issues: ensuring that the product meets acceptable standards of quality and purity; removing criminal gangs from the equation as far as possible; raising revenue for the Treasury through point-of-sale taxation; and best protecting public health.

  3. The entire language used to address cannabis-related issues needs to change. Language poses a barrier every bit as formidable as legislation does. The opponents of legalisation have long been able to reinforce their position by using the words of public fear
    – ‘illegal,’ ‘criminal’, ‘dangerous’, and so on. Only by using the language of public health, consumer rights and harm reduction, the same language used about alcohol and tobacco, can we move towards regulation.

  4. The scale of a legalised industry will be huge. The US market is estimated to be worth $25bn by the time of the next election in 2020. A similarly regulated UK market could be worth around £7bn per annum.

  5. Legally regulating cannabis will allow long-term studies of its health effects not currently possible. The effects of both tobacco and alcohol are well understood because of the amount of scientific scrutiny brought to bear on them.

  6. Many shifts in public policy are prompted, or at least prodded, by an emotional response on the part of the public. Greater efforts must be made to show that the cannabis issue also has a human aspect to which many people respond.

  7. Any campaign to legalise cannabis must be multifaceted, involving public support, media analysis and political engagement. 

  8.  Responsibility for cannabis policy should be moved primarily to the department for Health, while the role of the Home Office should change from enforcement of prohibition to enforcement of regulation and licensing. 

Read the full paper here

    Solar Power in Britain: The Impossible Dream

    Supporters of renewable energy argue that wind- and solar-generated electricity can form the basis of a secure, affordable, low carbon energy supply for the UK and EU, despite the inherently variable and intermittent nature of these sources.

    • This paper first contributes to the debate by estimating the output of a model UK fleet of solar farms rated at 8.4GW, by using ten years of half-hourly aviation weather reports as a data source.

    • The key findings for such a solar fleet are that: 
    - It has a capacity factor of just 9% when the panels are new, and so generates less than a tenth of its nominal output over the course of a year.
    - It produces hardly any power in winter when demand is highest.
    - Power output is severely intermittent, lying below 10% of installed capacity for 5,790 hours a year and exceeding 60% for only 7.

    • The claim that a mixture of solar and wind generation can smooth out this intermittency is found untrue. Under this compounded system, power output falls below 10% of installed capacity 97 times a year for periods of between 6 and 141 hours.

    • This study evaluates three other proposed solutions to the intermittency problem, and comes to the following conclusions:
    - Pumped storage is currently the best and most cost-effective solution for large-scale energy storage, but would be enormously expensive on such a huge scale and have a severe environmental impact, even in the unlikely event that enough UK sites could be identified.
    - Battery storage on this scale is likely to be even more expensive and batteries would require frequent replacement.
    - Interconnectors to a northern European renewable-energy grid would be ineffective, because both solar and wind resources vary with time across the region in much the same way as for the UK.

    • With the energy storage technology available for the foreseeable future, no combination of wind and solar energy with backup storage would be suitable to supply a significant proportion of grid electricity without full conventional backup being available.

    • However, intermittent renewable energy could have a useful role to play if it was used primarily for domestic space and water heating. An option which has been successfully implemented in New Zealand in the past.

    Read the full paper here.

    Sinnovation: Risk reduction in vice

    • In a complex world, there will be times when our actions have consequences that we could not have foreseen, however good our intentions were. This complexity is one of the major challenges in public policy: it is what divides people with similar goals, and what demands rigorous analysis of public policy.
    • Most people fall somewhere in between paternalism and libertarianism. They regret the harms that alcohol and tobacco cause to heavy users, but also believe that those users should have the right to take those if they are aware of the harms and aren’t hurting other people. For these people, though they are not libertarians, liberal harm reduction is the key – not rigid prohibitionism.
    • For the authors of the papers in this book, government bans on harmful behaviour do not automatically reduce harm. Indeed, because of the complexity of society and the difficulty of making good public policy, these bans (or other restrictions) may have the opposite effect, and increase harm to the public.
    • By stifling innovation, regulation may freeze products in a state that is far less safe than free-wheeling capitalism would otherwise provide. Given that most smokers or drinkers would prefer not to die young or suffer from chronic illnesses, there is a clear (and perhaps very strong) profit incentive for the firm that can replicate the experience of smoking a cigarette without producing the harm that cigarettes do.
    • A ‘permissionless innovation’ approach may be the best way forward. In this framework, firms are free to innovate and markets anything they like to consumers, with the proviso that untested products must be explicitly marketed as such, with the firm forced to pay the price if and when things go wrong. A regulatory approach on this basis would create a pathway for new reduced-risk products that were, if not 100% safe (such a thing is impossible), a lot safer than the things they were replacing

    Read the paper in full here.

    The Border after Brexit: How technology can secure Britain’s borders

    • Britain’s Border Force is not equipped to quickly, accurately and securely monitor passengers in and out of Britain. After Brexit it will become even more important for Britain’s borders to be secure.

    • The Warning Index and Semaphore systems the Border Force uses are years out of date, and at times 7.5% of high risk flights have not been properly screened, which if representative of the whole year would translate into over four thousand high-risk flights not being met. This has allowed known terrorists to leave the country without being detained properly.

    • The Border Force operates a slow service at peak times: during the summer of 2016, an average of three out of four Heathrow Terminals every month failed their target wait times for non-EEA passengers through passport control.

    • After sovereignty, polls have found control of the UK’s borders to be the second most important driver of voting for Brexit, and many voters desired sovereignty itself in order to control who comes in and out of the country.

    • Public trust in the UK immigration system, and its key enforcer, the UK Border Force, is crucial in order for the UK to have a sensible immigration policy.

    • The Border Force is only collecting data from the Advanced Passenger Information System for 86% of passengers, making a mockery of “exporting the border” claims.

    • Some past collaborations with the private sector, like the Raytheon project, have turned out badly, but these involved heavy governmental micromanagement; decentralised private companies like AirBnb prove that the private sector can create high trust, heavily-vetted systems.

    • The government must thoroughly modernise the force and deliver a new, realtime database and biometric scanning system, collaborating with the private sector to deliver a technological solution and paying for results, not trying to build its own system from the ground up.

    Read the full report here.