Some Thoughts on Immunotherapy of Solid Tumors

A) CAR CD28

The question is why CARs don’t infiltrate solid tumors & why they don’t proliferate as much when targeted against a solid tumor as they do when targeted against a leukemia or lymphoma. I think it could be because their CD28 doesn’t interact with cd80/86 so they become anergic. The story is that proteins from leukemias are presented by antigen presenting cells, but when cells in solid tumors die, their proteins are not processed by peripheral blood leukocytes (PBLs) but rather stay in the poorly vascularized tumor and are metabolized by other cancer cells.

If this is the problem, then there are well established approaches to overcoming it

1) Ablation. If there are multiple tumors then killing many cells in one (with x-rays or liquid nitrogen or whatever) is useful. This causes inflatimation and releases large amounts of tumor antigens attracting the attention of PBLs which then present the antigens

2) Vaccination. The targets of CARs are very well defined. If the CARs are not activated by tumors, they can be activated by inoculating with target antigens and adjuvant.

3) In vitro activation. The CARs can be activated in vitro before they are infused. The idea is to infuse memory CARs not resting CARs. An advantage of in vitro activation is that one doesn’t have to worry about damaging test tubes’ livers. It could be done with target antigen, IL15-IL15rAlpha, and anti CD-28 (maybe on beads or something because one better not infuse anti-CD28 into people).

I wonder how many groups are trying each of these approaches. I think it should be a large number.

B) Ordinary CD8 killers.

I know of three trials at the NCI each of which adds to anti PD1: Kevin Conlon adds anti-PD1, the Geraldine H. O'Sullivan Coyne, adds anti-CTLA4 and the Tim Gretens adds ablation and anti-CTLA4. I think some might get together and ablate and add IL15. They might also add an antibody such as anti-mesothelin.

There is also a much simpler way to redirect a TCR to a target – a bifunctional antibody with anti target and anti CD3. Amgen is trying this with the melanoma maturation antigen. I never got the logic of CARs – why does the modified TCR have to be a chimeric protein held together with amino bonds and not a CD£-anti-CD3 complex ? I do think that if one uses the anti-CD3 approach it is necessary to have activated CD8 killers, which can be obtained with any antigen especially including inoculation with non self HLA. Here the variable chains of the TCR don’t matter as the cells are targeted with anti CD3.

C) NK cells

There is a group trying trifunctional targeting antibody, anti FC III (also known as CD16) and IL-15 ClinicalTrials.gov Identifier: NCT03214666. I don’t see why just plain gamma globulin with Fc (which sticks to Fc III and Fc IV) and systemic IL-15 wouldn’t work as well. In any case, it seems to me that if one is causing NK cell proliferation and Fc IV expression with IL15, then one really wants a tumor specific monoclonal (again anti Mesothelin or maybe something new like the Hopkins (Vogelstein group) anti KRAS g12v presented with HLA A2 monoclonal.

Paul Ryan wouldn't recognize a free market if one bit him

Robert Costa and Mike DeBonis wrote an excellent retrospective on the career of Paul Ryan

‘He was the future of the party’: Ryan’s farewell triggers debate about his legacy

They are quite harsh, but not, I think, quite harsh enough.

My comment

This is an excellent article. Tough but fair with no sugar coating but also no discourtesy. However, there is one clear error. Costa and DeBonis wrote " to apply free-market principles to create opportunities in impoverished communities. The tax bill included a provision creating low-tax “opportunity zones,”"

Establishing opportunity zones might be good policy, but such zones are completely inconsistent with free market principles. The idea is to tilt the playinf field in order to favor the poor. The free market principle utterly rejected by advocates of opportunity zones is that the government shouldn't play favorites and should leave market incentives unaffected except as absolutely necessary to raise funds for necessary purposes.

Only someone unclear on the concept could think that the radical intervention in the economy with the aim of achieving higher welfare is based on free market principles, when it is clearly a rejection of free market principles.

Jack Kemp was a very decent man who genuinely wanted to help the poor. He also believed that he believed in free markets. But he wouldn't have recognized a free market if he tripped over it.

I think establishing opportunity zones is good policy. I do not think highly of free market principles. The fact that people who present themselves as advocates of the free market also propose non free market policies is just one reminder that free market principles can not solve our problems.

Now I think it is clear why Ryan and Kemp mistake social engineering for free markets. Opportunity zones would increase post tax profits and increase the budget deficit. They are consistently pro-business, if one considers the interests of businessmen to be only short term post tax profits and ignores any costs from the deficits the two of them created (with help from Roth, Reagan, McConnell and Trump but Ryan and Kemp are the men deficit lovers must love best).

The fact that Ryan was reputed to be more thoughtful than other Republicans demonstrates the utter idiocy of the party as a whole.

Again. I appreciate this excellent article.

Kidz theze dayz

I am quite confused. I see a racially integrated group of 4 long haired kids escorted by an (also young) scary looking police officer in riot gear.

Guess what banner they are bearing ?

The Wizard of Odds

Dorothy was in a strange land and had no idea what would happen next. The good witch of the North said she should follow the scientific method to a sound forecast. Unfortunately, neither she (nor anyone else) explained what exactly the scientific method is.

As she wandered down the yellow brick forking path of endless options, Dorothy was surprised by the voice of a heuristic firmly attached to a degenerate prior. She freed the heuristic from the prior and discovered that he was amazingly swift and flexible. She suggested that with his enormous speed he could quickly reach a sound conclusion.

The disconsolate heuristic sang that he could “If I only had a brain”

And they wandered off to find a shiny extremely strong hypothesis test with a razor sharp ax. The hypothesis test was rigidly chopping down the same deadwood. Dorothy said that his great destructive power could help him clear the way to the truth. All he needed to know was a promising direction, and he could eliminate all plausible but false hypotheses, leaving only the truth. The sorrowful hypothesis test explained that he had no idea how to create hypotheses or to decide which ones were worth testing and sang that he could find the truth “If I only had a heart”.

Having heard of the wonderful Wizard of Odds who could solve all of their problems, they made a bee-line for the land of Odds. On the way they stumbled over a cowardly line. The cowardly line said he made no claim about expected values or disturbance terms, because he claimed to be nothing other than what he was, the king of the summary statistics, the OLS regression.

They said that with his daring contempt for consistency and lack of any fear of bias, he surely cold provide them with a forecast. The lion explained that he could fit but didn’t forecast – that treating an OLS regression as a forecasting model might appeal to the foolish heuristic and might follow from implausible hypotheses which were easy to test and reject, but he couldn’t do it because he didn’t have the courage.

Finally they arrived at the City of Odds where they met a wonderful Wizard of Odds named Thomas Bayes who dramatically provided the probability of any conceivable event based on any conceivable data set. They were in awe until Toto barked. The Wizard boomed that they should pay no attention to the arbitrary prior behind the curtain.

Then Dorothy gave up on the effort to solve the problem of induction. And Toto too.

Anti anti Centrism

Charlie Pierce wrote a great post on the abuse of the word "centrist" as a term of abuse.

Then he criticized Bernie Sanders (whom I ask to sit out 2020 please). I am shocked to find myself almot to the left of someone who actually had a drink with Alexander Cockburn, but I think there is a lot to be said for demanding it all immeediately.

On "Centrist" you wrote [I comment]

Sanders here is being almost preternaturally optimistic [true] , to the point of being unacceptably [false*] glib [true] , about the difficulty of getting McConnell and the Republicans to do anything of the sort. [skip] that's a short route to chaos and a return to general minority status [very false **].

The fact is that there is a natural center in American politics [skip] It happens to be the solid place whence [false ***] can be launched real progress.

* it is irritatingly glib but that glibness is useful and not just to own the cons but also to appeal to the naive. I don't like Sanders's glibness. Nor did I like Reagan's, and I'm pretty sure that Kennedy would have gotten on my nerves in 1960 if I could have heard what he was saying (a uterus got in my way, plus I didn't know how to speak during most of his presidency). I am not the voter who matters. I always vote for Democrats (or Charles McMathias). The audience is those who sometimes vote, but only if beguiled by some preternatural optimism.

** Ask Sen McConnell how reliable sowing chaos is as a path to minority status. The Democrats are in opposition. The house passing popular measures (with 70% support) which are blocked by Republicans in the Senate is not their path to general minority status. The problem is something else ****

***"Whence" ? No Whither. Real progress is launched with slogans ("happy days are here again" was not a solid policy proposal) and dishonest promises (Obama didn't really think there could be health reform without a mandate (although the Republicans are proving that his 2008 bogus proposal actually works ... better than the old system anyway). Real progress lands in the solid center it is launched by those who have (or fake) preternatural optimism.

**** The real problem is that Democrats care about policy and are semi honest (case in point is H Clinton who lost to Trump, because she was perceived to be dishonest and, what's worse, is honest). The Democratic house would tie itself into knots trying to write a solid centrist Medicare for all Bill. "All" would be redefined to mean 90 % or 95%, and the party would tear itself apart fighting over which. The fools would actually pay for it with no aid from Rosy (the riviting) Scenario. There would be months of struggle with problem making "problem solvers".

Sending the Senate a bill declaring Medicare shall be available for all and this shall be financed by soaking the rich, would be deadly to Republicans. Trying to write a solid bill which could be implemented the second it was signed by Trump ?!? would be pure policy porn appealing only to nerds.

That's why Sanders is smart to talk about what others should do. Clinton would be scheduling meetings to discuss drafting a bill right now if Trump hadn't ended her effort to replace politics with solid policymaking.

The Jeffreys prior

Over at twitter I learned a lot. I claimed (and claim) that there is no such thing as an uninformative prior. I also claim that the penalty functions multiplied by likelihoods and called priors are not priors. This lead to a debate which was as uninformative as prior debates on the topic. A lot of my obsessions are semantic.

I was also taught about someone called Harold Jeffres who presented something which he called a prior. OK so Wikipedia taught me (twitter being unsuited for explaining things to me (or anyone)). His prior is proportional to the square root of the determinant of the Fisher information matrix. The Fisher information matrix is -1 times the second derivative of the expected log likelihood with respect to a parameter vector theta evaluated at the true theta. It is also the variance covariance matrix of the gradient of the log likelihood at the true theta (the two matrices are identical).

The Fisher information matrix is a function of theta. A penalty which depends on the Fisher information matrix is a function of theta. It can be called a prior (I reserve the term for sincere beliefs).

The point of Jeffreys's prior is that it is invariant under any reparametrization of the model. if phi = g(theta) and g is one to one, then the posterior distribution of phi given Jeffreys's prior on phi will imply exactly the same probabilities of any observable event as the posterior distribution of theta given Jeffrey's prior on theta.

This is true because if theta is distributed according the Jeffres's prior on theta, and phi = g(theta) then phi is distributed according to Jeffreys's prior on phi.

The gradient of the expected log likelihood with respect to theta is the gradient with respect to phi times the Jacobian of g. This means that Jeffrey's prior transforms the way probability densities do and the Jeffreys prior on theta implies the same distribution of phi as the Jeffreys prior on phi.

I am quite sure this is simply because the gradient of the expected log likelihood with respect to theta is a gradient of a scaler valued function of theta. for any scaler valued h(theta) I think the square root of (the gradient of h)(the gradient of h)' would work just as well. For example, if one used the gradient of the likelihood rather than the log likelihood, I think the resulting prior would be invariant as well.

Now except for the expected log likelihood, the Hessian (second derivative) is not equal to minus the product of the gradient and the gradient prime. That implies that for every h() except for the log likelihood there are two invariant priors the square root of the determinant of the expected value of (the gradient times the graident prime) and the square root of the determinant of the expected value of the second derivative.

I think this means that the set of invariant priors is basically about as large as the set of possible probability distributions of theta. Given a prior over theta, invariance implies a prior over any one to one function of theta, but this seems to me to be a statement about how to transform priors when one reparametrizes (which is just the formula for calculating the probability density of a function of a variable with a known probability density).

The log likelihood is a very popular function of parameters and data, but I see no particular reason why a distribution calculated using the log likelihood is more plausible than any other distribution. I don't see any particular appeal of Jeffreys prior. I think one does just as well by choosing a parametrization and assuming a flat distribution for that parametrization.

I don't think I have ever seen Jeffreys prior, that is, I don't think I have ever seen it used.

I disagree with Jennifer Rubin

Conservatives object to the Washington Post defining never-ever-ever Trumper Jennifer Rubin as a conservative. Reflecting, I had to admit that I hadn't disagreed with anything she wrote for months. Now, finally, I do. But, sadly, this isn't evidence that she is still a conservative. She has clearly become a radical centrist third way mugwump (RC3WM).

She argues that the 2018 blue wave shows that Democrats should reject Bernie Sanders and rely on a poll conducted by "The Third Way".

I think this is nonsense consisting entirely of setting up an oxymoronic straw man and pretending that values shared by conservatives, liberals, centrists, progressives, socialists, and fascists belong to conservatives.

Her column.

My comment

I don't see any evidence that people rejected Sen Sanders's policy proposals, which are actually fairly moderate. It is very easy to get issue poll results one wishes by choosing the questions. Notably, the ACA is only moderately popular (50% approval) while Medicare for all has 70% approval (recently including Donald Trump).

On entitlements the moderate centrist approach is to achieve trust fund solvency with balanced tax increases and benefit cuts. The vast majority of the public wants more generous pensions, expanded medicaid and an increased Medicare budget.

The case that Americans are conservative is that they believe in hard work (and the family). Notably, this is the position of mainstream and left wing Democrats. Conservatives have convinced each other than non-conservatives are Leninist hippies. Totally aside from the fact that "Leninist hippy" is an oxymoron, very few people are Leninists and very few are hipplies.

Conservatives point to the free love socialist demon Nancy Pelosi- who is the mother of 5 children. I'm sure she loves them dearly but I think it has something to do with her deep religious faith which prevented her from using artificial birth control (see flustered Stephen Colbert). I don't know if she has changed her views,since she has had perfectly natural menopausal birth control for about 3 decades by now.

The idea that conservatives have something to offer which a majority of Americans want is based on falsehoods about the alternative (which have convinced a solid minority of Americans but which are, nonetheless false).

Elisabeth Warren, Kamala Harris, Corry Booker, and Sherod Brown are Berny Sanders with better manners. They have the same policy proposals. I really hope one of them is elected in 2020.

Quote of the Day

Yes, Spinal Tap is now part of federal criminal cases. We live in days of wonder not seen since druids danced naked around Stonehenge.

Kevin Drum discusses single parent households

Disqus won't let me comment, so I post my comment on this post here

I am honestly impressed that you didn't mention lead. So I will. The single parent household peak came later than the murder peak -- as one would expect. Single parent households last (until another marriage & good luck with that Ms single mom). You graph a stock (OK 3 stocks) each correspond to flows -- births to single moms and separations of couples. Teenage births peak when the girls (and 18 and 19 year old women) in queston had maximum lead exposure as babies and toddlers. The boys (and men) aren't always even identified on birth certificates, but ages of mothers and fathers are usually similar. Haty marriage (including of couples who are racing to be spouses before they are parents) are less likely to last. [update: I meant to type "Hasty marriages" but, in fact, Haty marriages don't last long either]

I am surprized to be more piombophobic than you, but I think it was lead. Certainly the evidence on lead and teenage pregnancy looks similar to the evidence on lead and crime.

In any case, to understand causes, it is almost always better to look at flows than stocks.

Totally Twitty Fiskin of Antoine Levy

Antoine Levy has some ideas about how the European Central Bank could help uncompetitive economies on the European perifery. I would like to read it and decide if he has good ideas. Unfortunately, to do so, I have to sfogare (let off steam) with some francophobic Euroskepticism. This is therapy. don't waste time reading it

"The euro improved the credibility of monetary policy for many member states, but " You keep using that word. I do not think it means what you think it means. What is this "credibility" ? Why is it desirable ? It is a magic word. it's origin was the claim that credibile disinflation would not cause high unemployment. I suffer from a bileous humor when the moon is in the 7th house, Jupiter aligns with Mars, and I read "credibility". I propose a definition "credibility is that all of which has been lost by those who insisted Europe could have balanced budgets and tight money without decades of enormous unemployment". Chemists don't often talk of phlogiston and thermodynamicists haven't tried to weigh caloric in centuries, but economists still use "credibility" as a magic word which (in the VoxEU post only partially) justifies policies which have caused vast suffering.

In any case, credibility certainly does not mean consistently missing a declared target, nor is it consistent with "below but close to" being used in definition of that target.

"At the time of its inception, the euro area was often derided by (mostly Anglo-Saxon) economists as an incomplete and sub-optimal currency area. According to its detractors, the union lacked enough private and public risk-sharing channels, and factor mobility, to justify relinquishing monetary sovereignty (e.g. Eichengreen 1992)." I submit that "Eichengreen" is not an Anglo Saxon name (unless his ancestors came over straight from Saxony). Barry Eichengreen is no more Anglo-Saxon than I am. The USA is not an Anglo-Saxon country. We are of all ethnicities. The two words used to indicate people who use English as a means of communication is "human being" (I note that the quote snearing at Anglo-Saxons is written in the bastard language born of Anglo-Saxon and Norman). The word for people who's first language is English is "anglophone." Most of us are neither Angles nor Saxons.

"After a decade of apparent success, both in the convergence of living standards and in the stabilisation of monetary aggregates," Odd priorities. The first claim is not, I think, well supported by data. Italy fell further behind the core during that decade, and Italy is considerably larger than Ireland and Greeced combined.

"It is widely considered that, while the euro improved the credibility of monetary policy in many member states that had previously been relying on frequent depreciations to maintain competitiveness, it may have done so at the expense of sorely needed monetary autonomy in crucial times. " In other words, while the Euro is good because it prevents countries from relying on frequent depreciatino to maintain competitiveness, it is bad because it prevents countries from relying on frequent devaluations to maintain competitiveness. The crucial times are time when a devaluation of the Greek, Spanish, Portoguese and Italian currencies are long long over due. The conviction is that without the crutch of devaluation we would find a way to compete. Oddly, Europe doesnt' kick away the actual crutches used by paraplegics. Nor do European physicians rely on bleeding patients. I can only hope that European economists will reach the 1900 level of European medical science before I die.

Is there a way to improve stabilisation mechanisms in the euro area, while preserving the trade-enhancing and institutional benefits of integration afforded by the common currency? What trade enhancing benefits ? It is possible to measure them using a natural experiment. If they are non-negligible, then Denmark's trade will have grown less compared to Euro block countries. If this were the case, I would have heard of it. There is, I think, essentially no evidence that the Euro has had any trade-enhancing effect. It clearly had a housing bubble enhancing effect. I don't know what an "institutional" benefit might be. I can only assume that it is a declaration that the less democratic influence there is on policy the better. The case was not that democracy is vulgar in itself. It was promised that technocracy would give better results. The post would not exist without proof that this promise was broken. The soi-disant* technocrats know little about technique, they are, in fact, oligarchs who speak power to truth, that is, to the data.

I've agreed with a many lines but now " These misalignments, in turn, required internal devaluation and painful fiscal consolidation," They did not. The painful fiscal consolidation was imposed by the stability and growth pact. It was not required by anything else. Why has painful fiscal consolidation not been "required" of Japan ? Tell me about the painful fiscal consolidation of Iceland ? I hate to admit it, but Republican fiscal insanity in the USA has not had painful effects -- because we aren't bound by the stability and growth pact which is the cause of vast suffering.

OK I get to the proposal. It is based on the assumption that asset purchases matter even if the returns on the assets are identical. It is just assumed that demand in a country is stimlated if the ECB purchases bonds issued by that country's government. No reason is given for this assumption. Levy admits that there might not be "first order" effects, Here I think "first order" is being used as a fancy way of saying "any" or at best "measurable". The final argument is that there can't be exchange rate stability and autonomous monetary policy along with free capital flows. No reason is given why free capital flows are required. No costs of pre-1992 capital controls are discussed. No advantages of eliminating them is asserted.

I'd say the problem here is that the discussion takes as granted the assumptions that EU efforts since I arrived in Europe (1989) have been basically sound and just need to be tweaked a bit. The possibility that the Euro was a mistake, that the 1992 single market was a mistake, and the stability and growth pact was an insane mistake are not considered. The discussion is limited to a proposal whose effectiveness is not asserted by its author, just on the grounds that the many policies which have worked in other continents are just ruled out and unmentionable in decent society.

* vedete quanto sono non anglo-sassone

Politico End Zone Dance

The cover article of politico is a concession by Blake Hounshell that he was wrong and that I and many others were right.

I enjoy a little end zone dance in comments

The case is overwhelmingly convincing. Also none of the critical evidence is new. As you now are no longer a russiagate skeptic, you should concede that you were foolish in February. All the (100% convincing) arguments you present here were valid then and made by many many people (including me in a twitter tiff with you).

You still insist on your personal definition of the word collusion to mean ... well I don't know what but it has nothing to do with the dictionary definition "secret or illegal cooperation or conspiracy to deceive others" or common usage.

Nothing in the definition or common usage implies that collusion must be competently executed to be collusion nor must it be well organized, effective or successful. The assertion that the Trump campaign was not competent enough to collude is a catagory error. It was convenient to Republicans some of whom are shameless enough to use a plainly invalid argument when they have no valid argument.

You should have stuck to the dictionary definition and note that collusion does not imply competent collusion. Alternatively, you could have avoided the word -- there is no need to use it except in the context of the Sherman antitrust act. In this, you (and many others) meekly followed Donald Trump who insists on inserting the word (written with a sharpie) whether or not it is relevant. It is not relevant to this article, but, you too, won't let it go.

As is often the case, a supposedly neutral journalist (you) allowed political operatives to redefine a word for their convenience. Now that you admit that you were wrong, you should also admit that you should have known (or seek another field of work) and that you shouldn't have allowed someone to redefine a word, and insist that no discussion of the topic can omit the conveniently redefined word.

Also, I told you so. You should have been able to understand my argument and should have been convinced back when I explained things to you in February.

Kung Fu Monkey Nobel Prize

I just learned that Quinnipiak U polled asking people whether Donald Trump deserved a Nobel Prize for his Singapore summit. I honestly thought that this was a great opportunity for Kung Fu Monkey to score again. Kung Fu Monkey is a blog where a dialogue was posted in which one of the bloggers confidently asserts that 27% of US adults are insane reactionaries. That was the fraction who voted for Alan Keyes against Barack Obama. It is impressive how in many polls roughly 27% take an absurdly right wing position. It is striking how many times it is exactly 27$. Now, for the first time, I went looking for a Kung Fu Monkey crazification factor 27%. First try. No peaking and lo and behold

"President Trump does not deserve the Nobel Peace Prize, voters say 66 - 27 percent."

I've also noticed that a similar fraction of self identified Republicans do not take the crazy right wing position. They have a Fu Kung Ape sanity factor. This time, close but only one perfect hit

"Republicans say 58 - 29 percent that Trump deserves the Nobel Prize"

Basically almost all non crazy Republicans are now calling themselves independents. Self identified Republicans are insaaane.

Posters in Casa Padre Brownsville Texas

I am appalled by the Trump administration policy of separating parents and children just because they crossed the border without permission. Like many people I was shocked when the staff of the Casa Padre youth shelter (or jail) in Brownsville called the cops on Senator Merkley when he tried to oversee the (contractors of) the exutive branch. Finally, like many people I was shocked even a bit more to learn that there is a huge poster of Donald Trump on a wall of Casa Padre.

But reading the post, I learned some more. First the shelter (or jail) was operating for a while. I think since the wave of minors who showed up unaccompanied while Obama was president. Most of the residents (or inmates) are there because they arrived at the border without adults not because they were (depravedly) separated (by sadistic subhumans like Sessions). The place is now over crowded, because of the Trump administration policy.

As to the posters (or murals). There are posters of Trump, Obama, Kennedy, Eisenhower, Lincoln and ... Zachary Taylor. I suspect there are many others (Taylor and Lincoln don't fit well together). The Obama poster is accompanied by the quote "My fellow Americans, we are and always will be a nation of immigrants. We were strangers once, too. " and a Spanish translation.

In a generally good article on how Trump got nothing out of Kim in Singapore, David Nakamura, Philip Rucker, Anna Fifield, and Anne Gearan make a false claims "Deals reached between Washington and Pyongyang under Presidents Bill Clinton, George W. Bush and Barack Obama collapsed after North Korea conducted additional missile and nuclear tests." This implies in particular that the deal reached between Washington and Pyongyang under President Bill Clinton collapsed after North Korea conducted additional missile and nuclear tests. which is a totally false claim. the deal reached under Clinton collapsed when Bush decided to abandon it, because North Korea had bought centrifuges from Pakistan. Bush said this meant that the fact that spent nuclear fuel contaning plutonium was under seal was irrelevant, since N Korea would just enrich uranium.

Later, after N Korea broke the seals and began extracting plutonium, he declared that N Korean exploration of possibly enriching uranium was no big deal & they were going back to the deal. Then N Korea tested a nuclear bomb.

The known facts are totally consistent with the possibility that the Clinton - Kim Jong Il agreement would have lasted and prevented N Korea from developing a bomb if Bush hadn't treated Clinton as Trump treats Obama.

In any case, the assertion of historical fact made by Nakamura, Rucker, Fifield, and Gearan is undeniably false. It shows a determination to give a Ballanced assessment of Clinton and Bush even if the facts are different -- N Korea detonated at least once nuclear device while Bush, Obama and Trump were president and did not detonate a nuclear device while Clinton was president. This is a relevant fact which is contradicted by their false claim which was clearly made to Ballance the very different cases of Clinton and Bush

update: Unsurprisingly, Jennifer Rubin lies more vigorously. She makes definite specific totally false claims.

in 1994 when “Pyongyang committed to freezing its illicit plutonium weapons program in exchange for aid” and again in 2005 when North Korea “pledged to abandon ‘all nuclear weapons and existing nuclear programs’ and return to the Non-Proliferation Treaty.” The bland statement that Trump obtained seemed almost identical to these past, useless agreements with vows to undertake “complete denuclearization of the Korean peninsula” and commit to a “lasting and stable peace.” That sounds like the same pablum we’ve gotten before.

This is utter nonsense. Following the 1994 agreement, North Korea places spent fuel (containing plutonium) under seal and allowed inspections. No one contests that the effort to make a plutonium bomb was stopped cold. No one denies that, after Bush decided to break the agreement, North Korea made a plutonium bomb. The entire case against the 1994 agreement is taht it is about as easy to make a bomb by enriching uranium as by extracting plutonium. This is absolutely false and utter nonsense. I don't blame Rubin for her scientific ignorance. But I will not let her get away with claiming that the detailed specific enforceable 1994 agreement is at all similar to the one page of pablum written in Singapore.

This is nonsense. Now I understand that columnists are allowed to express their own opinions. Howver, the Post also allows them to invent their own facts. A case might possibly be made against the 1994 agreement, but Rubin's case is based on demonstrably false assertions of fact.

Also George Will claimed that Obama tried to pack the DC appeals court by expanding it -- this is a total falsehood. He attempted to fill normal vacancies caused by normal retirement. If the post were a legitimate journalistic enterprise, they would retract the claim of fact which is absolutely demonstrated falze by the fancy mathamatical trick called "counting". But that's another column on another issue. It is only related because both cases show that, even if they have no respect for Trump, two Conservatives at the Post have little respect for historical fact.

Lost in cyberspace.

Danger Will Robinson danger. I am currently locked out of twitter, which is convinced I may be a 'bot. Twitter machines keep politely telling me that to reactivate my account I should click and they will send a number as a text message to my cell phone and I can tweet once I type in that number. At the same time my evil phone company won't deliver text messages -- I've reached some monthly limit for my data plan even though I never send or receive text messages (problem is I left my phone on while on a car ferry where they provide service charging a huge number of quatloos per minute).

I think this is one of the best things that ever happened to me. I suddenly have huge amounts of time and energy. I assume that no one has been checking my semi defunct blog. (hi no one)

Also twitter is definitely addictive. I recognize withdrawal symptoms (from nicotine addiction) and I am feeling them.

John Donne, the 1980 Census, and a Journalist whom I wouldst cite if I recalledest his name

I have a fond memory of reading either The Washington Post or the late lamented dead tree Newsweek back in the 1970s. The article discussed that fact, due to times which had been changing, the Bureau of the Census had added a new category "person of the opposite sex sharing living quarters". Kidz theez dayz won't believe that there had been no need to count live in boyfriends and girlfriends back in 1970. Evidently at the Census they immediately started using the acrony POSSLQ (pronounced posselqueue) This lead a journalist (whose genius exceeds my limited memory) to reflect on how the great poets could have benefited, if they had access to this linguistic innovation, & then to rewrite the first stanza of "The Bait" by John Donne as follows (and I fair use both geniuses)

Come live with me, and be my love,

And we will some new pleasures prove

In short there isn't anything I wouldn't do

If you would be my POSSLQ

Dire Straits-Sultans Of Swing Gayageum ver. by Luna

Voodoo Child-Jimi Hendrix / Gayageum ver. by Luna

Trade without trust using block-chain technology

I wrote about this at angrybearblog, but I think I might have joked too much and besides I was ignorant then.

The question is whether there is some feature of blockchains which makes the technology useful if no one trusts anyone else.

I am responding to a brilliant skeptical essay by Kai Stinchcombe. There is an implicit challenge in the essay.

There is no single person in existence who had a problem they wanted to solve, discovered that an available blockchain solution was the best way to solve it, and therefore became a blockchain enthusiast.

I want to try to meet this challenge here in this post. There is a strong hint here (sadly criminal but it doesn’t have to be).

Same with Silk Road, a cryptocurrency-driven online drug bazaar. The key to Silk Road wasn’t the bitcoins (that was just to evade government detection), it was the reputation scores that allowed people to trust criminals. And the reputation scores weren’t tracked on a tamper-proof blockchain, they were tracked by a trusted middleman!

So the challenge is how to have trade without a trusted middleman ?

I think the key aspect of blockchains which is useful for this purpose -- every transaction involves at least three agents, two who contract with each other and a third who makes the block (solving the proof of work problem). This third party is not known to the first two. Furthermore, her claim to have made a valid block is checked by the other blockmakers (called miners in the case of bitcoin). This means that there is a third party who is identified ex post but not when the contract is created and who does not have to be trusted (because her work can be checked). This can be very useful for designing incentive contracts for the other two parties.

Basically, the idea is that if one party asserts that the other has broken the contract or cheated, then the cryptocurrency involved is awarded to the block maker who records that accusation. This makes it possible for each party to punish the other, but does not create an incentive for false accusations -- because the party which gains if there is an accusation is unknown to the accuser so no collusion is possible.

I will describe this in the case of sale of a good or service. Agent A wants to buy the good. The algorithm is:

A describes the good and makes a bid to pay for it listing two dates T1 and T2, three quantities of cryptocurrency which A claims to own X1, X2 and X3, and a fourth quantity X4. T1 is the date the good must be delivered.

Agent A can offer this payment to a specific agent B or can make a general bid that any agent can accept by posting X4.

The bid and acceptance are a tentative draft transaction.

update: They are recorded in the blockchain in the block made by block maker 1 who then owns X2 cryptocurrency end update:

At any time between T1 and T2,Agent A can post a complaint saying the good was not delivered or it was of unacceptably low quality. A complaint is any text which refers to the tentative transaction and includes the word "complaint".

if no complaint is posted by A and T2 has passed, then Agent B can spend X1 and X4 is returned to agent B (the seller), the block maker gets X2, X3 is available again to the to the buyer.

If A files a complaint, then the bid, acceptance and complaint are recorded in the blockchain by block maker 2. The block maker2 owns X1+X3+X4 so the buyer and seller lose all of the posted cryptocurrency.

The quantities X1,X2, X3 and X4 can be positive, zero or negative. Typically X2,X3 and X4 will be small positive numbers. If A has a reputation for not complaining without good reason, then X3 can be zero or even negative (A can propose a contract in which A gets a money back if not satisfied guarantee, it is fairly likely that no seller will accept this offer, but the algorithm allows it).

An alternative parallel use is the advertisement with guarantee. Agent B offers to sell a good for price X1 plus fee X2, deposit required from the buyer X3 and promising to pay additional penalty X4 if the buyer who accepts the offer posts a complaint. If anyone accepts the offer and has X1 + X2+X3 then the contract is just as above. It doesn't matter whether a seller makes an offer and a buyer accepts or a buyer makes a bid and the seller accepts. Again agent B can make the offer to a specified agent A or can make a general offer which can be accepted by anyone who has X1+X3 cryptocurrency

I think this pretty much solves the problem of how can we trade without (much) trust. If the buyer loses an additional X3 for complaining, then the buyer does not have an incentive to file false complaints. I must assume that some peoplea are willing to pay a tiny fee to penalize a seller who doesn't deliver. X3 will be a number worth something like 1 Euro. This means that misbehavior is only punished (by people who pay a small fee to do so) if people get angry when they are cheated. People who don't get angry when cheated can participate in the system, but they are bluffing -- making a threat to complain even though they will never actually complain. People who gain a reputation as wimps who don't complain when cheated will be cheated until they learn to avoid using the techology. That is, agents can develop reputations, and they can be valuable (compared to being a new participant) or costly.

The fee for filing a complaint X3 is freely proposed by the agents. A trusted seller may be able to get buyers after setting a fairly high X3 to prevent nuisance complaints and posting X4 = 0. A trusted buyer can get the good posting X3 = 0 (or maybe even less if really trusted). The 4 parameters make it possible for people to trade even if no one trusts them or to gain an advantage if they are trusted.

The key to the proposal and the reason it must involve blockchains is that penalties are paid to the block maker who records the complaint. The identity of the block maker is not known to the agents until the block recording the complaint is made. Agents have no reason to care about the block maker and no way to collude with the block maker. Since the block maker is just checking public information, the block maker does not have to be trusted. The block makers must check that agents have the cryptocurrency they post (as they currently do for BitCoin etc), that a bid (or offer) was made, that it was accepted, and, in the case of the block maker who records complaints, that a complaint was or was made by a published time T2. As usual, the block makers must also solve proof of work problems.

Throughout I am assuming agents' have a secret key so no one but agent A can file a complaint. I stress that agent A is not required to present any evidence that the complaint is valid. Any reference to the contract which includes the word "complaint" and is sent out by agent A counts as an official final complaint.

The buyer and seller may communicate privately to make sure they agree on what B promises to deliver to A. A sensible seller may wish to do this before accepting a bid. These communications have no effect on the final ownership of cryptocurrency.

The problem with the proposal is that the contracts are potentially vulnerable to renegotiation. A dissatisfied buyer and a seller both lose if the buyer files a complaint so relative to that they gain if the seller gives the buyer some of her money back in exchange for no complaint (this would be a private transaction hidden from the other participants in the system). I do not think this is a problem. The reason is that they buyer can not sign a contract renouncing the right to complain. A dissatisfied buyer may take half her money back then complain being angry both at the poor good or service and the attempt to renegotiate. Also a seller who tries this may get a reputation as a crook.

The problem is the dishonest buyer who theatens to complain and demands a refund or else. This is not likely to be a huge problem as the threat is a bluff. Actually complaining is costly to the buyer. A reputation for making such threats is costly to the buyer. A reputation for giving in to such threats is extremely costly to the seller.

If the buyer can present proof to the seller that the good was no good, then that proof and a threat might cause renegotion. this would not be a problem at all; the block maker would end up with less wealth as no complaint is filed, but the buyer and seller have reached an agreement based on evidence both consider to be convincing.

I think the system works without trust. It does require two things. One is that most people generally tell the truth if they don't have an incentive to lie. The other is that people who genuinely feel they were cheated are angry and willing to pay a small fee to punish the person who cheated them. I think both of these assumptions about psychology are highly plausible and supported by solid experimental evidence.

update2: I think I just rediscovered the concept of a smart contract (note I definitely didn't know what smart contracts are (or will be if none now exist) when I wrote the older post). I think my proposal differs from other smart contract proposals in a few ways which I will now explain.

First, I think the standard idea is that the seller gets X1 if some proof of fulfilment of the contract appears in the blockchain after the block recording the contract. In my proposal, the seller gets X1 if T2 passes without a complaint. In the standard proposed smart contract, a contract recorded in the blockchain without any additional proof of fulfilment works as escrow -- neither party can spend the cryptocurrency until they agree on who owns it. My honest guess is that people won't like a deadline T2 and will not use my proposal. But I think it is useful. The reason is that it limits renegotiation. If a buyer threatens to complain unless she is given a partial refund (and the seller thinks the complaint would be invalid and the threat is an attempt at fraud by renegotiation which I will call "Trumping") then the seller can call the bluff by doing nothing until T2 passes. If control the cryptocurrency is in escrow until the parties reach agreement, then dishonest buyers can Trump (that is do what Donald Trump regularly did). A reputation for threatening to complain and then actually complaining is costly to the buyer (like Trump such buyers will end up dealing only with people who enforce contracts with violence), so I think threats which are bluffs will actually be called.

The other thing that might be unusual about my proposal is that the buyer has final authority to keep cryptocurrency from the seller without having to offer any proof. Block makers just have to check if there has been a complaint. I think this is an important advantage. I think it is essential that it is easy to see if a proposed block is a valid block. Blockchains are maintained not just by the agent who mines the new block and gets a reward, but also by many other agents who verify new blocks and add them to their copies of the blockchain just to keep their blockchain updated so they can keep competing to make the next block. This means it is important that verifying blocks is easy and almost all of the work involved in making a block is solving the proof of work problem. Sellers may collect and communicate extensive information about the production and delivery of the good or service in order to convince buyers that they have done a good job. But there is no need to record this information in the blockchain. I would suggest that, if collected, it be sent privately to the buyer.

Finally, I have payment to seller if there is no complaint. An equally simple proposal would transfer X1 to the seller if the buyer reported satisfaction before T2 (say with a reference to the contract and text including the word "satisfied"). That isn't important. What is important is that they buyer promisees to sacrifice X3 to a block maker in order to penalize the seller for bad performance.

The Relative Price of Housing and Subsequent GDP growth in the USA

(pdf of this post available here) The great recession of 2008-9 followed an extraordinary house price bubble. The sluggish was characterized by a very slow recovery of residential investment. Oddly, the extensive revision of macroeconomic models which implied a very low probability of great recessions has not involved a focus on housing. Instead it has focused on financial frictions – essentially it is assumed that the 2008-9 recession was extraordinary because a major financial crisis occurred. Dean Baker dissents (as he often does) arguing that the severity of the recession could have been predicted given the massive decline in housing prices and earlier estimates of the effect of home equity on consumption. This note attempts to being to assess that claim. It also asks if it is possible to forecast GDP growth over the medium term. Finally it is part of the Rip Van Keynes series, because I will use an empirical strategy which has been out of fashion for at least four decades – basically an ad hoc OLS regression (sometimes I even include an exponential trend).

The basic result is that if the relative price of housing is high (compared to an exponential trend) then GDP growth over the following 5 years is low (compared to an exponential trend). Aiming to test out of sample forecasting, I start using 20th century data only.

-7.52 is a fairly impressive t-statistic.

Lnindex L20 is the logarithm of the ratio of the all transactions house price index to the consumer price index lagged 20 quarters. Gdp5 is the growth of the logarithm of real gdp over the past 5 years. Quarter is the calender quarter up to the 4th quarter of 1999 = 1999.75. The data were downloaded from Fred and are described in what might be generously considered a sort of data appendix. One point must be mentioned here – the all transactions house price index is available only starting in 1975, so the first useful observation is growth of GDP from 1975q1 to 1980q1.

The series are quarterly, so the dependent variable is a moving average of changes summed over 20 quarters. In the crudest attempt to deal with this, I calculate Newey West standard errors with 19 lags. These would be valid if log GDP were a random walk with drift (the constant) and trend (growth slowdown).

This regression is at least a hint that 8 years before the great recession began, there was already evidence that extremely high relative price of housing was likely to be followed by low GDP growth. Because the regression is, at best, barely presentable, I focus on out of sample forecasting. pgdp5 is the fitted value which can be considered a forecast of real gdp growth over the following 5 years.

Out of sample the forecasts and outcomes are positively correlated. The correlation of pgdp5 and gdp5 over 2000q1 through 2018q1 is over 0.86. Out of sample forecasts of GDP growth over the following 5 years seem to be quite useful. This may be simply due to the estimated trends. The following regression shows that forecasts of deviations from trend are correlated with deviations from trend.

This is a test of out of sample forecasting performance. It is, to put it mildly, rather more successful than out of sample tests of long term macroeconomic forecasts usually are.

This is a test of out of sample forecasting performance. It is, to put it mildly, rather more successful than out of sample tests of long term macroeconomic forecasts usually are.

The data are, perhaps, more usefully summarized with a graph. Figure 1 (finally) is a scatter of the logarithm of the relative price of housing and GDP growth over the following 5 years.

This ignores even the deterministic trends. Also the whole sample is graphed. Notably while some periods show extraordinarily high relative prices of housing and extraordinarily low subsequent real GDP growth, the GDP growth does not look anomalous. The computer is not surprised by the severity and duration of the great recession given the early 21st century housing bubble.

Here are the time series. L20.lnindexm4 is lnindex lagged 20 quarters – 4.0 (the base years for the all transactions housing price index and the CPI are different).

Notice that the first observation for the index lagged 20 quarters is 1980q1 because the index is available from 1975q1 on.

Here are the series of outcomes and forecasts. The only anomaly is that the great recession was so mild. The computer forecast 5 year gdp growth as low as -10% and it never actually was less than zero. Still this is unusually successful out of sample forecasting of medium term gdp growth.

Robustness Checks

The deterministic trend in the regressions reported above is especially utterly out of fashion. If a time series is integrated (non stationary with a stationary first difference) then there will be spurious mean reversion of deviations from a deterministic trend. T-like statistics from regressions of one integrated series on another do not have a t-distribution. These concerns explain my strong focus on out of sample forecasting. A more standard approach to a nonstationary series is to difference it and hope the resulting series is stationary. So I consider the change in the ratio of the all transactions housing price index to the consumer price index over 5 years index5 = ln(indext /CPIt) – ln(indext-20/CPIt-20). This means that I lose 10 years of data, 5 for the growth of GDP and 5 for the growth of the relative price of housing and the first useful observation is GDP growth up until 1985q1. With a mere 60 quarters of data I get

The out of sample correlation is lower being only 0.37. The scatter is much less impressive (although it does look appealingly like a pouncing cat). Basically, the computer expected a major boom to follow the extreme decline in housing prices from 2006 to 2011.

The decline in the relative price of housing from 2006 on was unprecedented and the simple regression is no more able to forecast the resulting recovery than any other method.

Another robustness check is to use a different series for housing prices. The standard series is the Case-Shiller index, but it is only available from 1987 on making estimates with 20th century data and 5 year lags pointless. Instead, I used an index even cruder than the all transactions house price index. The median price of new homes is available from 1963q1 on. This series can’t be interpreted as a price index as no correction is made for changes in the quality of houses. This makes it much more necessary to include a time trend and much less likely that detrending will really yield a stationary series. That said, the results are similar to those obtained with the all transactions house price index.

lmedian L20 is the log of the ratio of the median price of a new home to the consumer price index lagged 20 quarters.

The correlation out of sample in the 21st century of the predicted 5 year gdp growth and actual 5 year gdp growth is greater than 0.66.

Finally, I consider the growth over 5 years of the log of the ratio of the median new house price to the cpi -- median5

This gives the smallest coefficient and t-statistic, but the computer remains convinced that the variable is hugely important. Again the 21st century correlation of forecasts made using the 5 year difference and outcomes is lower than that of forecasts made with levels and a trend and outcomes. The correlation is just 0.3847 . This is still pretty good for medium term macroeconomic forecasts. Again the problem is that the dramatic decline in house prices from 2006 to 2011 causes the computer to forecast an boom.

Mechanism

It isn’t hard to make at least a plausible guess as to the path from high relative housing prices to low subsequent GDP growth. Housing prices appear to be mean reverting and declining house prices cause low demand through three well known paths. First residential investment depends on the relative price of houses, because the profits of builders depend on those prices. Second consumption is affected by wealth including home equity. Finally, home equity loans relax liquidity constraints.

In fact, there is strong evidence that the relative price of housing is mean reverting and that a reduction is correlated with low contemporaneous GDP growth

In fact the OLS coefficient on lnindex L20 (the 5 year lagged log relative price) is roughly equal to the 2SLS coefficient, suggesting that other pathways might not be too important.

Conclusions

A high relative price of housing is correlated with low subsequent GDP growth over the following five years. This makes it possible to forecast 21st century 5 year growth rates using coefficients estimated with 20th century data. The data suggest the obvious path: mean reversion in housing prices and a negative effect of declining house prices on demand. The extremely simple regression suggests that a great recessin should have followed the extraordinary early 21st century housing bubble. In fact, the model dramatically over estimates the severity of the forecast recession.

Given the extreme ease of forecasting medium term GDP growth, it is odd that so much attention is devoted to models which give useful forecasts only a few quarters out. It is also odd that a huge literature focused on quite different mechanisms was developed after the great recession. But the oddest thing is that, in spite of the very clear evidence, macroeconomists often ignore residential investment and housing prices.