Monday, January 30, 2017

Why So Much Bad Science

Last time I featured the latest news about palm oil, that it might be carcinogenic (or maybe not).  I used it to show how the debate about various cooking oils along with butter and margarine has been going round and round for several decades.  First A is bad for you so use B instead; and then we hear that the scientists have changed their minds about B.  We get lists, ordered from good to not so good, of oils (or another category of food) from different sources giving different information.  But each seems to have good reasons for their opinions based on some scientific study. 

Confusion is compounded when the news media pick up the story of a new study just out with new information of danger or benefits or else contradicting an older study.  The palm oil story reminded me of a published paper by a Stanford statistician in August 2005 “Why Most Published Research Findings Are False.”

One important reason for his claim is that scientific experimentation is never absolute.  When trying to find a relationship between a behavior or treatment and a result, several problems arise.  Some relationships may happen by chance alone.  The common standard of 95% correlation coefficient leaves a 5% chance that the result is incorrect.  The standard allows for one in twenty to be a false positive.  But many other factors conspire to push the number of false findings much higher.

First, correlation does not imply causation.  Even if one thing happens right after another, or they both vary in the same way, there may be no relationship.  This site gives several examples, one where a simple nutrition questionnaire found a (strong statistically significant) correlation between eating eggrolls and dog ownership and between drinking coffee and cat ownership.  Obviously eating an eggroll doesn’t result in an irresistible urge to get a dog.

Some other factors that may lead to errors include: 
  • Using smaller sample sizes – this is often done for efficiency and economy; it’s easier and cheaper when fewer people are tested.
  • Settling for a smaller effect size – the link to cancer or other outcome may be very slight; but if they find any link at all, they are tempted to get it published to beat others.  Science is very competitive for both funding and credit.
  • Considering a greater number of relationships – the more you look for the more you will find.  In June 2015 I gave the example of a paper claiming a positive relationship between eating chocolate and losing weight.  Although the author did not make up any data, he later admitted that he had compared so many variables that one or two were bound to show a relationship just by chance.  It so happened that he found this very counterintuitive and alluring relationship, chocolate and weight loss, and published it as a tongue-in-cheek report.  Unfortunately, before he could correct the record, news agencies around the world ran with it as breaking scientific news.
  • Greater flexibility in experimental designs – a lack of standardization in the design of a test can cause results to vary.
  • Greater financial and other interests and prejudices, especially in a hotter scientific field – scientists have personal interests and biases just like all other humans.  They may unconsciously try harder to make the data fit their theory.  They may not check a supportive result because it is the answer they and their sponsor or employer are looking for.
Another problem is that scientists are less likely to spend time replicating research to confirm findings.  It’s hard to get funding for merely repeating someone else’s work.  It’s also not as interesting, and you are less likely to get headlines or other recognition. 

Fortunately, this idea of testing the results of others is catching on.  In 2011 a group of psychologists from around the world tried to replicate findings of 100 published papers from 2008.  They could reproduce the results from only 39.  Furthermore, “Daniele Fanelli, who studies bias and scientific misconduct at Stanford University in California, says the results suggest that the reproducibility of findings in psychology does not necessarily lag behind that in other sciences.”  They confirmed that twelve-year-old assertion that just because it’s published in a reputable journal doesn’t necessarily mean it’s true. 

So where does it leave critical thinkers who want to rely on scientific data instead of social media rumors or endorsements and anecdotal evidence from advertisers?  We can’t jump to conclusions based on every “latest discovery” seen on Dr. Oz or the news.  Be patient.  Look for large sample sizes and confirming tests.  In this fast-paced technological age, it is doubly difficult to separate the valid from the bogus, but virtually none of the breaking news requires an instant response.

Friday, January 27, 2017

This Time It's Palm Oil

As I wrote in September, Nutella has been a common spread in Europe for years but has recently caught on in America with its niche, cult, unique and elite appeal.  Whether or not it’s considered cool here, it is now getting some bad press across the Atlantic.

According to this Reuters story, its makers claim that Nutella “relies on palm oil for its smooth texture and shelf life. Other substitutes, such as sunflower oil, would change its character.”  But palm oil faces criticism after European health authorities listed it as a cancer risk.  “The European Food Safety Authority (EFSA) said in May that palm oil generated more of a potentially carcinogenic contaminant than other vegetable oils when refined at temperatures above 200 degrees Celsius. It did not, however, recommend consumers stop eating it and said further study was needed.”  The news puts the $44 billion palm oil industry at risk and threatens the profitability of Nutella and the quality of the product if they are forced to change.

Meanwhile Italy’s largest supermarket chain is boycotting palm oil in its store-brand products, and Barilla has begun adding "palm oil-free" to their labels.  Palm oil is not banned by any agency and the FDA has taken no action.

As this news came out, I thought it all sounded familiar.  Remember the controversy about butter and margarine?  Years ago when epidemiologists declared fat the culprit in American diets (and denied the role of sugar), we were encouraged to drop butter and move to margarine.  Now Harvard Health reports:  “Today the butter-versus-margarine issue is really a false one.”  Butter is high in saturated fat, but stick margarines are high in trans fats and the newer margarines that are low in both are sill high in calories.

So we want to avoid butter for the saturated fat, but a 2010 study published in the American Journal of Clinical Nutrition concludes there is “no significant evidence for concluding that dietary saturated fat is associated with an increased risk of CHD [coronary heart disease] or CVD [cardiovascular disease].”

Of course many of the more exotic oils got a boost when butter was discouraged.  The Prevention website announced:  “We Researched and Ranked 14 Cooking Oils. Which One Should You Buy?”  They favor those high in monounsaturated fat with a relatively high smoke point. Palm Oil is listed fairly high, with 39% Monounsaturated, 11% Polyunsaturated and 50% saturated fat and a smoke point of 450ºF.  “Pros: It's got nutrients like vitamin E and the antioxidant beta-carotene” and has a long shelf life.  That doesn’t sound too bad and it’s listed above rapeseed oil, coconut oil, corn oil, and soybean oil.

But wait, the heart association lists corn oil and soybean oil among the healthier choices.  “They contain more of the ‘better-for-you’ fats and less saturated fat.”

As if this is not confusing enough, a June 2016 NIH review of headlines reads:  “Study says there's no link between cholesterol and heart disease.”  But they warn that these types of news stories “are often based on a selective view of evidence, rather than a comprehensive systematic review. There is currently no comprehensive body of evidence that contradicts current official advice on saturated fat consumption.”  Unfortunately, this one and studies like it often make headlines, leaving us scratching our heads as to what science really tells us.

Finally, movie theater popcorn is horrible.  Some websites consider it practically poison for the high calories and the use of coconut oil.  But here’s one source that says coconut oil has the benefit of being very heat resistant.  “Coconut oil also has powerful health benefits. It is particularly rich in a fatty acid called Lauric Acid, which can improve cholesterol and help kill bacteria and other pathogens,” and “the fats in coconut oil can also boost metabolism slightly and increase feelings of fullness compared to other fats.”  The praise continues:  “It is the only cooking oil that made it to my list of superfoods.”  (Superfood? – no wonder movie theater popcorn is so expensive!)

The primary advice from most of these popcorn-related sites is that coconut oil should be consumed with portion control in mind.  From this review of information, this advice applies to all the other oils, butter, margarine and, for that matter, any other food.

Wow, all things in moderation!  A little perspective would have gotten us there without running around the Internet and plowing through the vast and various and often contradictory reviews and warnings.  If only the authorities and others trying to make diet decisions for us would take note.

Monday, January 23, 2017

More About Predicting the Future

Americans tend to make knee-jerk reactions to changing economic conditions.  As the gas prices have remained low, the switch is on to bigger cars and trucks.

In April we heard the news:  “Pickup truck sales surged in the first quarter as businesses rushed to replace aging equipment and consumers, encouraged by both low gas prices and interest rates, purchased bigger vehicles.”

A little later in the year the news came, “General Motors' U.S. sales plunged 18% in May as low gasoline prices took a bite out of car sales.”

Finally in November “General Motors announced…that it will permanently lay off nearly 2,100 U.S. auto workers in the coming months. Why? Apparently because drivers are buying fewer smaller cars.”

This was not a surprise.  It is totally consistent with past consumer behavior.  People make decisions not based on their needs, but based on the short-term conditions.  Do they expect gas prices to remain low forever, or even for the average length of time they own their cars?  This seems not even to be a consideration.

When will we see the trend change and gas prices to once again move up?  No one really knows.  One energy forecasting website predicts that the price of oil will increase by about 15% in the next 6 months.  That’s not too bad.  The US Energy Information Administration (EIA) forecasts oil and gasoline prices around 20% higher this year, but there is a possibility for prices to swing up to more than double 2016 prices before settling back down.

Another site provides an interesting review of all the factors involved in the supply and demand for oil and gasoline.  What effect will the OPEC production cutback last month have?  What about increased Iranian production now that sanctions have been lifted?  Will the shale oil industry in the US and Canada survive long enough at the current prices to make a difference?  Will worldwide demand continue to grow despite an easing in the growth of the Chinese economy?  Will other factors affect the value of the dollar, the currency used to price oil internationally?  Will speculation cause the kinds of huge price swings we have seen in the past?  All these and others could send the price of gasoline skyward.

Do you think the average American car buyers look at any of this information before making the decision to trade in small cars or sedans for a large car or pickup truck?  This is very doubtful.  Instead they look at the posted price at the corner gas station and take the plunge.  In this case it may work out with prices remaining relatively low for quite a while, but the price of oil is very unpredictable and volatile.

Sooner or later, when the price of a gallon of gasoline rises again to around $4 and we hear the news of people in panic, trying to make ends meet, should we be surprised?  Yet the news media will make a big deal of it, saying how unfair it is, interviewing people at the pump complaining as they fill their trucks and large SUVs.  But the news media is always looking for an opportunity to feature victims, refusing to ask what behavior led them to their current predicament or to even entertain the notion that they may have had anything to do with it.

Friday, January 20, 2017

The World's Richest

Last time I gave a very short summary of the principles of economic understanding.  Often personal and governmental decisions arising from good intentions lead to disruption and unintended consequences, whereas economic understanding would help us to anticipate and avoid these very natural outcomes.

One important omission from last week was the idea that the “economic pie” is getting bigger.  As the economy grows everyone is better off.  It is not the case that if I get more you must get less.  It's not a zero-sum game where having winners means some must be losers.  This is not obvious to young people because progress takes time.  

Eighty years ago only about half the households in the US had a radio and flush toilet.  Only about 60% had a car and 70% had electric lights.  About 60 years ago televisions came on the scene, and in another ten years color TV.  It wasn’t until about 40 years ago that home air conditioning began to spread.  Microwave ovens and home video recorders were brand new.  Regular use of personal computers in home and office came about in the last 25 years.  Cell phones and smart phones followed.  Today we take all this for granted, but we can afford to have the lifestyle we have due to a growing economy.

The poor today have appliances that a few generations ago were limited to the rich or that no one had because they were not invented yet.  The latest information I found were 2011 Census estimates of the percentage of poor households in the US that owned the following:  clothes washer and dryer (65%), refrigerator (98%), microwave (93%) air conditioner (83%), television (96%), video recorder/DVD (83%), computer (58%), cell phone (81%).  Those numbers are higher today, and it all came about through innovation, increased productivity and a growing economy, not because someone else had to settle for less.

 But Oxfam International sees it differently.  Using the tag line: “The power of people against poverty,” their focus seems not to be on eradicating poverty directly, but on the size of the gap between the world’s haves and have-nots.  In the news this week, a press release against income inequality lists the eight richest men in the world whose combined wealth equals that of the poorest 50% of the world.  Oxfam has been releasing this type of information each year before the World Economic Forum in Davos, a private conference for the world’s richest people, apparently trying to embarrass and shame them into supporting the cause.  (Note that just 1% of the people in the bottom 50% of the world are from North America.  And using their measurement criteria, new college graduates who owe more money than they have could be counted among the world’s poor.)

If we took everything away from these eight and distributed to the 7.4 billion people in the world, each of us would get $57.70.   The following year we would get considerably less from the next eight or ten or twenty.  It doesn’t work that way.

Some of the people listed are Bill Gates, who sold software to billions; Jeff Bezos, who lets us shop for almost anything on Amazon; Warren Buffet and Mark Zuckerberg.  None of these people forced us to give them our money.  We could have used inferior software, not shopped from home and never joined Facebook.  But many people chose to support them.  That’s how they got to be the richest people in the world, by inventing something we wanted, that added value to our lives and that we were willing to buy.  Gates and Buffet have set up charitable organizations.  Amazon has just announced plans to add 100,000 jobs in the US over the next 18 months. 

Now that we have freely given them our money and the growth of their companies has provided a huge number of jobs, Oxfam thinks they should feel guilty and the government should punish them with higher taxes.  Doesn’t confiscating someone’s money through threat of force constitute punishment?  (Should we limit the number of twitter followers anyone can have so we all have an equal chance to get our message out?  Wouldn’t that be fairer, too?)

Economic growth doesn’t work that way, and the key to ending poverty is through economic growth, not artificially shuffling around a fixed amount of money.

Monday, January 16, 2017

Basic Economic Understanding

Last time I wrote about the “cola tax” in Philadelphia, how it went wrong and how the flaws were obvious when it was passed last June.  It took just a little economic understanding, which the lawmakers in the city seemed to lack.

To be able to look at economic decisions and foretell possible problems does not require advanced study of the subject.  Ordinary citizens can develop adequate skill to help them make better everyday decisions and notice the errors of others by understanding a few basic principles.

First, assume that only people have money.  Businesses and governments spend money and move it around, but that money comes from people.  By considering it our money, money that was taken from us through taxes or won from us by offering a tempting product or service, we are able to look at economic decisions and see the link back to our wallets and bank accounts.  There is always a link.

When people (or businesses) invest money, they balance risk and reward.  A bank account pays little interest for low risk.  Corporate bonds pay higher interest for a little more risk.  Return from investments in stocks over a long period is considerably higher, but sometimes you lose.  Running an established business is risky and the return is generally higher.  Starting a new business is even higher risk and may bring a larger reward, but most disappear in the first two to three years.  Higher reward is generally expected (and deserved) when taking higher risk.

The concept of supply and demand is straightforward.  If something is rare or hard to get, the supply is low and the price is high.  If something is common, the supply is high and the price goes down.  If something is popular, the demand goes up and people are willing to pay more, otherwise the price will go down until buyers emerge.  Diamonds are rare and popular, so they are expensive.  Great quarterbacks are in demand by many teams, so they too are expensive.  Ordinary water is common – it falls from the sky – and very inexpensive at the tap; but the fussier you are about the source, purity and packaging, the more you will pay.

Supply and demand in a free market usually work together to set a price where both the buyer and seller are satisfied with the outcome.  Problems arise when someone starts tinkering with this balance.  Last year the price of oil stayed low due to more production in the US and the lifting of sanctions on Iran.  OPEC agreed to restrict their operations hoping the reduced supply would push prices up.  Officials in Philly imposed the tax on sugary drinks hoping the higher price would reduce demand, leading to healthier citizens.

Laws in some states forbid private enterprises from moving food, water or generators to a disaster site and selling them at a profit.  There is already a low supply, and those who could afford it might be willing to pay a little more but they can’t.  So everyone, rich and poor, waits in longer lines for the official relief.  The well-intentioned law hurts everyone.  Where there is no disaster, retail stores do exactly the same thing, ship goods from far away and sell them at a profit – and no one complains.

It is also important to understand business.  Businesses are relatively high-risk operations.  This is clear from the number that are forced to cut back or go out of business each year.  Profit is not a dirty word.  It is the return they get for the risk.  The profit comes from selling goods or services at a price people are willing to pay.  There is no force or coercion.  You buy brand A or Brand B from Store A or Store B, or you don’t buy at all, or you buy a similar product that is almost as good.  It is a free exchange.  In millions of transactions a day, both parties are satisfied.  When you check out, they say thank you (for the purchase) and you say thank you (for the product).  But we hear on the news only of the scams or illegal operations, just like we hear only about the few airline crashes and not the millions of safe landings.

Most businesses are not greedy and evil.  Most business people are no more greedy and evil than anyone else.  Smart businesses know the key to their success is a group of loyal, satisfied customers who return and spread positive comments.  Again, it’s often the tinkering – government favoritism, crony capitalism, regulations that impede competition or favor a small group – that screws up the balance.

Those, very briefly, are the keys to economic understanding:  only people have money, risk/reward, supply and demand, business and profit in a free enterprise system and the dangers of tinkering with the balance.  Thinking about these principles helps anyone do a respectable job of predicting the future.