Monoculture of risk

On Aug 28, 2005, at 11:50 PM, Hughes, James J. wrote:

>
> In the meantime we have that wonderfully successful, publicly funded,
> coercive program “water flouridation” which significantly responsible
> for the decline in dental caries.

Yes, and asbestos makes a great fire-retardant. And DDT kills
mosquitos very effectively.

Many risks don't manifest themselves until after long exposure. And
most new advances have both costs and benefits.

Now, so far, the consensus appears to be that long-term fluoride
exposure doesn't have great health risks. However, that forced
fluoridation appears to have been a net good does not mean that it
was a wise policy.

For example, what if some regulatory busybody back in the 20's had
specified the use of asbestos as insulation in fire codes? What if
it turns out that the anti-fluoridation activists are right, and
fluoridation causes say, decreased intelligence in children? (1) Or
Alzheimers? What if fluoridation has negative effects on only a
subset of the population, not covered by the studies done to date?

If you force everyone to use a new safety measure, then you force
everyone to endure the same risks. You've created a monoculture of
risk. And just as in crop monoculture, a single mistake in judgement
or an unforeseen cost can have devastating consequences for everyone
in the population.

If allowed to choose, on the other hand, some people will take the
risk, but others won't. If it turns out that some new advance has
unforeseen costs, then only those people who voluntarily chose to
take the risk will have to bear the costs.

Moreover, even if we have complete and accurate risk information, we
may still face trade offs. Is an 80% reduction in cavities worth a
1% decrease in IQ? Who has the greater incentive to preserve your
own health and wellbeing? To make the right risk trade-offs? You?
Or some nameless bureaucrat?

Individuals have a lot more information about their values and risk
preferences than regulators do. For example, I may be much more
tolerate of my kids getting cavities than of potentially reducing
their intelligence. If individuals get to decide for themselves
which risks to take, they are much better able to arrange a mix of
risks that suits their values and risk preferences than they could if
some bureaucrats (however well intentioned) decided for them.

As transhumanists, if given a choice, we're much more likely to
embrace new technology (or abandon old tech) before everyone else.
I, for one, would like to have that choice.

Chris

(1)

http://www.slweb.org/bibliography.html

http://www.orgsites.com/ny/nyscof/

Foresight Exchange code open sourced

http://www.ideosphere.com/

PRESS RELEASE:
Popular Prediction Market Software Becomes Open Source
Code Release Promotes Wider Developer Participation and Commercial Adoption

Calgary, Alberta (August 29, 2005) – Responding to the strong interest in prediction market software, Foresight Technologies today announced that it is contributing the complete Idea Futures source code to the Open Source community. Releasing the code will encourage further innovation around prediction markets and empower more firms to use this emerging technology. The software is available under Reciprocal Public License (RPL) V1.1.

Idea Futures helped birth the prediction market industry when it was first developed over a decade ago. The platform continues to power the web's first and longest-running prediction market, the Foresight Exchange. Located at ideosphere.com, the Foresight Exchange gained notoriety by accurately predicting events such as US Presidential elections, major scientific advances and the future price of gasoline.

Ken Kittlitz, administrator of ideosphere.com, comments, “I'm thrilled that other developers now have the freedom to use Idea Futures. I strongly believe that the extended availability of the source code will foster the creativity needed to open a new vista of opportunities for prediction markets.”

The Idea Futures software is currently being used by many organizations in the telephony, energy, industrial, research and political sectors to forecast events like product sales, corporate earnings, and advertising effectiveness. The most recent addition to the client roster is the Washington Stock Exchange (WSX), a market research firm which plans to launch a series of prediction markets, beginning later this year. David Perry, WSX founder, says, “We couldn't be more pleased with the decision to open source. With access to this powerful technology, the Washington Stock Exchange will be able to achieve a major competitive advantage.”

Licensing and Availability

Idea Futures can be downloaded today at http://sourceforge.net/projects/ideafutures. Commercial licenses are also available, which eliminate the need for in-house installation and customization. Additionally, Foresight Technologies offers dedicated hosting services in a secure, managed facility.

About Foresight Technologies

Foresight Technologies was founded by industry pioneer Ken Kittlitz in response to the surging interest in prediction markets. Mr. Kittlitz's ten years of experience allows Foresight Technologies to offer comprehensive prediction market solutions that cost less than proprietary closed-source systems, while offering an extensible software platform that can be customized for specific applications.

For more information – call +1 403-701-1323 or email [email protected].

One cannot look directly at either the sun or death. La Rochefoucauld, 1665.

A fascinating paper. Healthcare spending has little measurable effect on health or lifespan.

“Gender, exercise and social status, for example, can change lifespans by ten to
fifteen years or more (Lantz, House, Lepkowski, Williams, Mero, & Chen, 1998). When one
looks at medical spending, however, the usual2 finding in such studies is no effect. When
comparing nations or counties or individuals, people who get more medicine have no signif-
icant difference in health when compared to people who get less medicine.
For example, Jonathan Skinner and John Wennberg looked at five million Medicare
patients in about 3500 hospital service areas in 1990. They looked to see if people died
less in areas where, during the last six months of life, Medicare spent more on treatment.

After controlling for age, sex, race, median income, poverty, education, urbanization, and
initial health limitations, Skinner and Wennberg found that the average effect of spending
$1000 more was somewhere between increasing lifespan by about five days and decreasing
it by about fifteen days.3 Areas that kept patients in the intensive care unit one more day
on average reduced lifespan by between fifteen and seventy five days (Skinner & Wennberg,
2000).”

http://hanson.gmu.edu/feardie.pdf

Fear of Death and Muddled Thinking – It Is So Much
Worse Than You Think
Robin Hanson∗
Department of Economics
George Mason University†
August 2005
Abstract
Humans clearly have trouble thinking about death. This trouble is often invoked to
explain behavior like delays in writing wills or buying life insurance, or interest in odd
medical and religious beliefs. But the problem is far worse than most people imagine.
Fear of death makes us spend fifteen percent of our wealth on medicine, from which we
get little or no health benefit, while we neglect things like exercise, which offer large
health benefits.
One cannot look directly at either the sun or death. La Rochefoucauld, 1665.
Any animal that uses emotion to focus its attention must have a healthy fear of death.
When something death-related appears in its environment, the animal must focus on iden-
tifying and responding to possible threats. Humans have inherited this fear of death, but
human intelligence allows many new ways for environmental cues to suggest death to us. So
humans must manage their wandering thoughts, to avoid triggering this fear too often.
We usually do not feel very afraid of death, and we are not aware of thinking about death
much. But apparently we are just not very aware of how much the fear of death directs our
thinking. Scholars assure us that subconscious death fears are a powerful influence on our
thinking (Becker, 1973).
Psychologists have even found that weak death cues, like standing next to a Mortuary or
watching an autopsy video, measurably change our thinking. In the presence of such death
cues we tend to reward heros and punish prostitutes more. We tend more to favor those
who praise our religion and nation, and to favor those who criticize others. We become
more reluctant to treat flags and crucifixes casually. We think we are better drivers, and
that others agree with us more. We try harder to divert attention from our less attractive
features and group affiliations (Soloman, Greenberg, & Pyszczynski, 2000). We believe more
in the supernatural (Norenzayan & Hansen, 2006). (People with high self-esteem, oddly
enough, are mostly immune to these effects.1)
Ah yes, the fear of death, you say. As someone who reads books like “Death and Anti-
Death,” you feel familiar with this concept. You sometimes feel the fear yourself, and you see
that people often delay long before arranging for life insurance, wills, or HIV tests (Kopczuk
& Slemrod, 2005). You may have seen people pushing to do “everything possible”, even
harmful things, for a dying loved one because they could not accept the inevitable. If you
are an atheist, you may think that religion and supernatural beliefs exist primarily to help
people deal with death fears (Atran & Norenzayan, 2004). And if you have an unusual
medical belief, such as in cryonics or life extension, you may invoke the fear of death to
explain the hostility and disinterest you face.
But you probably think that this is about as far as it goes. Sure, among “primitive”
cultures, or the less educated around you, a desperate need to feel control over death may
lead to an overconfident trust in fairy tales and quack cures. But you know that your tales
and cures are supported by the clarity of science and statistics. You live in a rich society
with an advanced understanding of biology, enabling powerful technologies of medicine and
public health, allowing a vast improvement in health and lifespan. The modern medical
miracle, at least, is no mirage. Right?
Sorry to be the bearer of bad news, but, well, maybe you should sit down. Are you sitting
now? O.K., then let us just see how deep this rabbit hole goes. Yes, our society understands
a great deal about biochemistry and the mechanisms of life. This allows us to generate
reasoned hypotheses about causes of our deaths and interventions that might prevent such
deaths. But biological systems are far too complex for us to have much confidence in such
hypotheses. Fundamental principles cannot tell us why exactly any one person dies, or what
would have prevented that death. To confirm or refute such hypotheses, we must look at
who actually lives and dies in the world around us.
But we do look at who lives and dies in our world, do we not? Well individual doctors
have long justified their confidence in the cures they recommend by pointing to their personal
experience seeing patients live and die. Yet many medical historians now say that through
most of human history people would on average have been healthier if they had completely
avoided doctors. So clearly our doctors’ informal experiences can not by itself assure us
that we are avoiding fairy tales and quack cures. You may know someone whose health
dramatically improved after being treated. But usually even untreated people get better
eventually, and you probably also know people whose health dramatically declined after
being treated. Personal anecdotes just do not help much here.
But our doctors rely on scientific studies, not just informal experience, right? Well, in
1
I suspect this behavior was functional for our distant ancestors. By believing more in themselves, the
supernatural, and their nation or religion, our ancestors could credibly signal their ability and loyalty, which
might inspire their neighbors to help more to prevent death.
2
fact the vast ma jority of what doctors do is not based on specific scientific studies. For most
things that doctors do there are no studies, and when there is a study most doctors have not
even heard a summary of the study. Actually, doctors mostly just copy what the doctors
around them do, and try a few new things out on their own. This produces huge practice
variation, where similar patients are treated very differently by doctors in different regions
(Welch, Miller, Welch, Fisher, & Wennberg, 1993).
O.K., this may be true about treatments like surgery, bed rest, and so on, but for drugs
at least regulation forces doctors to attend to studies, right? Well, it is true that doctors can
only prescribe drugs approved by government regulators. However, once a drug has been
approved to treat any condition, doctors are free to use that same drug to treat any other
condition, regardless of what studies say.
How about when regulators approve drugs to treat specific conditions? At least we know
those treatments are more than fairy tales and quack cures, right? After all, drug companies
have to produce not just any study, showing some possibly misleading correlation, but a
blind randomized clinical trial. That is, patients must be randomly assigned to treatments,
must not be told what treatment they are getting, and statistics must then determine if any
differences are “significant.”
Even then three serious problems remain. First, drug companies often do a bunch of
trials, but only report the trials that make their drug look good, invalidating the usual
statistics. Second, drug companies usually run best case trials, on patients most likely to
benefit and under doctors most likely to make good choices. The fact that the best patients
under the best doctors benefit may not say much about how ordinary patients and doctors
will fare. Third, patients can often tell if they are getting the drug being tested instead of
a sugar pill, because most drugs tested have side effects, such as dizziness or dry mouth.
Patients who experience side effects are then assured that they are getting the real treatment,
producing a placebo effect (Kirsch & Sapirstein, 1998).
Well, sure, you can always be skeptical if you try hard enough. But is there any concrete
reason to think that we do not typically benefit from medical treatment? Actually, for
decades researchers have worked to measure the average health effects of medicine. Some of
these studies look at correlations out in the world, seeing if people who get more medical
care tend to be healthier, all else equal.
Correlations-in-the-world studies see many apparently large influences on health, includ-
ing age, gender, exercise, social status, urban location, smoking, sleep, and even church
attendance. Gender, exercise and social status, for example, can change lifespans by ten to
fifteen years or more (Lantz, House, Lepkowski, Williams, Mero, & Chen, 1998). When one
looks at medical spending, however, the usual2 finding in such studies is no effect. When
comparing nations or counties or individuals, people who get more medicine have no signif-
icant difference in health when compared to people who get less medicine.
For example, Jonathan Skinner and John Wennberg looked at five million Medicare
patients in about 3500 hospital service areas in 1990. They looked to see if people died
less in areas where, during the last six months of life, Medicare spent more on treatment.
2
Random errors and bad statistical modeling assumptions should and do give a few contrary results.
3
After controlling for age, sex, race, median income, poverty, education, urbanization, and
initial health limitations, Skinner and Wennberg found that the average effect of spending
$1000 more was somewhere between increasing lifespan by about five days and decreasing
it by about fifteen days.3 Areas that kept patients in the intensive care unit one more day
on average reduced lifespan by between fifteen and seventy five days (Skinner & Wennberg,
2000).
Of course all these correlations-in-the-world studies have flaws. It is never entirely clear
what is the cause and what is the effect, and one can always think the results would have
changed had more variables been included in the study. This is why randomized trials are so
important; randomization controls for everything. And it turns out that we have at least one
large randomized trial on the overall health effects of medicine: the RAND health insurance
experiment.
In the late 1970s, most of 5816 non-elderly adults4 from six U.S. cities were randomly
assigned for three to five years to one of two conditions. Either they had free health care, or
they had to pay a substantial fraction (ranging from 25 to 95 percent) of their health care
costs. People with free health care had more doctor and hospital visits, and those with free
care spent about 75% more than those who paid nearly full price. While this sample was
too small to see effects on death rates, the plan was to look at a general health index based
on over twenty health indicators (Newhouse & Group, 1993).
The bottom line: no significant difference in general health was seen between those with
more health care and those with less. And since this was a randomized, but not blind, clinical
trial, this no-effect result includes any placebo effects, suggesting that free care would look
even worse without placebo effects.
Breaking the data down by four subgroups, the closest result the RAND experiment
found to being significant was that free medicine made initially-well poor people sicker (6%
significant). Breaking the data eighty ways by health indicators, the RAND experiment
found these 5% significant results: free health care produced better vision from free eye-
glasses, fewer decayed and more filled teeth in kids from free dental care, and lower blood
pressure from regular testing.5 Free care also induced more restricted-activity days, when
people could not follow their normal routines. In high risk people, free care made their acne
and hearing worse.
Thus while there may be health benefits from wearing eyeglasses, filling decayed teeth,
and regularly checking blood pressure, the RAND experiment found no net health benefit
from all the other health care that having free care induced people to get. While some
subgroups may have benefited, either those groups were very small, or other subgroups
suffered harms of a similar size.
The RAND experiment and all the other correlations-in-the-world studies only speak
3
To convert risk ratios to lifespans, I use the estimate that risk ratios double roughly every decade.
4
They included more poor people than a random sample would contain.
5
After the experiment some researchers put together a “risk of dying” index based on smoking, cholesterol
and blood pressure. They found no significant effect overall (between eight months longer and three months
shorter lives), but for a certain high-index group lifespan increased by about a year (3% significant).
4
directly to the health effects of “marginal” medical care, i.e., the care that the studies saw
some people get and other people not get. But the RAND experiment does give us some
clues about the health effects of common care, the care that everyone in their experiment got.
Common care (the first 60% of spending for those with free care) and marginal care (the last
40% of spending for those with free care) had the same fraction of “inappropriate” hospital
admissions and care-days, as judged by doctors reviewing cases, and also the same fraction
of ma jor and catastrophic disease presentations, relative to moderate and asymptomatic
manifestations.
Thus it is clearly not the case that marginal care is known to doctors to be less useful and
more frivolous, while the serious situations where doctors know medicine is very valuable are
usually in common care. In fact, doctors do not seem to see a difference between common
and marginal care. So, if common care is much more useful on average than the useless-on-
average marginal care, it must because each patient somehow knows something that doctors
cannot see about when he really needs to see a doctor. Now how likely is that?
But what about those miracles of modern medicine we have all heard so much about.
Did not the introduction of antibiotics, for example, dramatically reduce death rates for
key diseases? Well, not much actually. If you look at graphs of death rates versus time
for those key diseases, you usually cannot see any change in the trend near the dates when
famous treatments were introduced to “cure” those diseases (McKinlay & McKinlay, 1977).
Lifespans have more than doubled in the last century or so, and medicine cannot claim credit
for much more than a year or so of that increase (Bunker, Frazier, & Mosteller, 1994).
If medicine for treating individuals is not quite the miracle we have heard, does public
health make up the difference? Have not we all heard how the introduction of modern water
and sewer systems greatly improved our health? Well, a century ago the U.S. cities with the
most advanced water and sewer systems had higher death rates than the other cities. Also,
we can look today at how individual water sources and sewer mechanisms correlate with
death rates. Even in poor countries with high death rates, once we control for a few other
variables like social status we usually find that water and sewer parameters are unrelated to
death rates (Lee, Rosenzweig, & Pitt, 1997).
Well we must live longer now for some reason, right? Yes, and in fact in the developed
nations it seems that age specific death rates have fallen at a steady exponential rate for at
least a century (Lee & Carter, 1992; Tuljapurkar, Li, & Boe, 2000). But the fact is that we
do not know why we now live so much longer.
Most of the obvious theories have serious problems, you see. For example, exercise,
smoking, social status, and urban living appear to have large effects on individuals. But the
time trends for exercise, urban living, and smoking have been in the wrong directions for
them to explain increasing lifespan. And since social status is usually thought be relative to
contemporaries, so it is hard to see how average social status can increase with time.
Finally, while biggest advances in nutrition, medicine, and public health seem to have
occured during the first two thirds of the twentieth century, death rates have fallen just
as fast during the last third of the twentieth century. Perhaps some new influence rose
in important just as those other influences became less important, but if so it seems a
5
remarkable coincidence that the total rate of improvement has remained pretty steady.
Everything I have told you here has long been well known among the people who specialize
in studying these things. None of this is particular new or controversial to them. And yet
most of it is probably news, perhaps even shocking news, to most of you. Why is this?
The fear of death is a powerful influence on our thinking, even if we are not often conscious
of it. Our society, like all others before it, has a strong need to feel in control of death, even
if we must embrace fairy tales and quack cures to gain that sense of control. The idea that
we mostly do not understand and cannot control death is just not a message that people
want to hear. The message that medical miracles can control death, in contrast, is a message
that people do want to hear.
So we now spend 15% of our national income on medicine, even though half of that
spending has been clearly demonstrated to be on average useless, and even though we have
good reasons to doubt the value of most of the other half. Furthermore, we seem relatively
uninterested in living longer by trying the things that our evidence suggests do work, like
gaining high social status, exercising more, smoking less, and living in rural areas. Such
apparently effective approaches to increasing lifespan just do not have the magic allure of
conquering death via medical miracles. We know that exercise will not save us when we are
dying, in the way that we hope that medicine might.
Unfortunately, even if you believe everything that I have said, your behavior will probably
not change much as a result. You will still spend nearly as much on medicine for yourself
and your family, and spend much less effort on the more effective ways to increase lifespan.
After all, your family would consider it the worst kind of betrayal if you did not provide
them with all the medicine that your doctor recommends (Hanson, 2002). Alas, the problem
of the fear of death muddling our thinking is so much worse than we imagined.
References
Atran, S., & Norenzayan, A. (2004). Why minds create gods: Devotion, deception, death,
and arational decision making. Behavioral and Brain Sciences, 27, 713–770.
Becker, E. (1973). The Denial of Death. Free Press, New York.
Bunker, J. P., Frazier, H. S., & Mosteller, F. (1994). Improving Health: Measuring Effects
of Medical Care. Milbank Quarterly, 72 (2), 225–258.
Hanson, R. (2002). Why Health Is Not Special: Errors in Evolved Bioethics Intuitions.
Social Philosophy and Policy, 19 (2), 153–179.
Kirsch, I., & Sapirstein, G. (1998). Listening to Prozac but Hearing Placebo: A Meta-
Analysis of Antidepressant Medication. Prevention & Treatment, 1 (2a).
Kopczuk, W., & Slemrod, J. (2005). Denial of Death and Economic Be-
havior. Tech. rep. 11485, National Bureau of Economic Research.

http://papers.nber.org/papers/w11485.

6
Lantz, P., House, J., Lepkowski, J., Williams, D., Mero, R., & Chen, J. (1998). Socioeconomic
Factors, Health Behaviors, and Mortality, Results From a Nationally Representative
Study of US Adults. Journal of the American Medical Association, 279 (21), 1703–1746.
Lee, L., Rosenzweig, M., & Pitt, M. (1997). The effects of improved nutrition, sanitation, and
water quality on child health in high-mortality populations. Journal of Econometrics,
77, 209–235.
Lee, R. D., & Carter, L. R. (1992). Modeling and Forecasting U. S. Mortality. Journal of
the American Statistical Association, 87 (419), 659–671.
McKinlay, J., & McKinlay, S. (1977). The Questionable Contribution of Medical Measures
to the Decline of Mortality in the United States in the Twentieth Century. Milbank
Quarterly, 55, 405–428.
Newhouse, J. P., & Group, T. I. E. (1993). Free for Al l? Lessons from the RAND Health
Insurance Experiment. Harvard University Press, Cambridge, Massachusetts.
Norenzayan, A., & Hansen, I. G. (2006). Belief in Supernatural Agents in the Face of Death.
Personality and Social Psychology Bul letin.
Skinner, J., & Wennberg, J. E. (2000). How Much Is Enough? Efficiency and Medicare
Spending in the Last Six Months of Life. In Cutler, D. (Ed.), The Changing Hospi-
tal Industry: Comparing Not-for-Profit and For-Profit Institutions, pp. 169–193. The
University of Chicago Press.
Soloman, S., Greenberg, J., & Pyszczynski, T. (2000). Pride and Prejudice: Fear of Death
and Social Behavior. Current Directions in Psychological Research, 9 (6), 200–204.
Tuljapurkar, S., Li, N., & Boe, C. (2000). A universal pattern of mortality decline in the G7
countries. Nature, 405, 789–792.
Welch, P., Miller, M., Welch, H. G., Fisher, E., & Wennberg, J. (1993). Geographic Variations
in expenditures for physicians’ services in the United States. New England Journal of
Medicine, 328 (9), 621–627.
7

Hail to the King

Bruce Campbell came to Raleigh today! He's touting his new book “Make Love The Bruce Campbell Way” and a new movie “Man With The Screaming Brain”. Books were made available for sale at the front of the theater. Buying a book earned you a numbered ticket to the book signing. Bruce signed books for a couple of hours. I was number 147. Prior to the 9:30 p.m. showing he answered questions from the audience. He talked about his adventures making the Screaming brain in Bulgaria. You want to know what kind of cheap Bulgaria is? “Sci-fi channel cheap”. Wild packs of dogs roam the streets. You think I'm kidding. I carried dog food with me to work. Every morning I gave them the food. After they were done, they looked at me like “You're lucky this time.” I asked him what would suprise people who were not in show biz. He said that they would be surprised that most people in show biz don't care about movies. He said Saving Sarah Congo. Guy who did photograph for Empire of Sun, based on a book by Michael Crichton, And the monkeys stunk.

Robert J. Shiller: "Housing prices could fall 40 percent."

August 21, 2005
Be Warned: Mr. Bubble's Worried Again

By DAVID LEONHARDT
ABBY JOSEPH COHEN, the Goldman Sachs strategist then making a name for herself as Wall Street's optimist in chief, sat directly to Alan Greenspan's right. One chair away was Robert J. Shiller, a largely unknown Yale economist.

As they ate lunch in a stately dining room at the Federal Reserve that day in December 1996, Mr. Shiller argued that the stock market had risen to irrational levels. In a soft, Midwestern-tinged voice, he asked Mr. Greenspan, the Fed chairman, when the last time was that somebody in his job had warned the public that the stock market had become a bubble.

Mr. Greenspan listened without giving his opinion, and Mr. Shiller went home assuming that he had been farther away from Mr. Greenspan than Ms. Cohen in more ways than one. Three days later, however, driving his son to school in the family Volvo, Mr. Shiller heard on the radio that stocks were plunging because Mr. Greenspan had asked in a speech whether “irrational exuberance” was infecting the markets.

“I may have just started a worldwide stock-market crash,” the professor told his wife, Virginia, who accused him of delusions of grandeur.

Today, nine years after his lunch with Mr. Greenspan and five years after the markets finally did crash, Mr. Shiller is sounding the same warning for real estate that he did for stocks. In speeches, in television and radio interviews and in a second edition of his prophetic 2000 book, “Irrational Exuberance,” he is arguing that the housing craze is another bubble destined to end badly, just as every other real-estate boom on record has.

These, in short, are his second 15 minutes of gloom. He predicts that prices could fall 40 percent in inflation-adjusted terms over the next generation and that the end of the bubble will probably cause a recession at some point.

Despite being a boyish-looking 59-year-old academic economist with a halting speaking manner, he has become the bugaboo of the multibillion-dollar real-estate industry. Its executives, like many Wall Street economists, say that low interest rates and a growing population will keep house prices rising, even if future increases are smaller than recent ones. On Monday, the National Association of Realtors reported that the median home price climbed to $208,500 in the second quarter, up 14 percent from a year earlier.

“Shiller is predicting the mountain goes into the sea,” Robert I. Toll, the chief executive of Toll Brothers, a home builder, said in a recent interview, without having been asked about the economist. “He's selling himself.”

To Mr. Shiller, though, it is a question of history, not salesmanship. Most people have never looked at decades and decades of home prices, because such data have been almost impossible to find. Stock-market charts often go back almost a century. Housing charts typically start sometime in the distant decade of the 1970's.

But Mr. Shiller has unearthed some rare historical housing data for other countries. Using old classified advertisements, he was then able to fashion a chart for the United States that goes back to the 19th century.

It all points to an unavoidable truth, he says. Every housing boom of the last few centuries has been followed by decades in which home values fell relative to inflation. Over the long term, the portion of income that families spend on their shelter stays about the same.

Builders become more efficient, as they are doing today. Places that were once sleepy hinterlands, like the counties south of San Francisco or a patch of desert in southern Nevada, turn into bustling centers that take pressure off prices elsewhere. Even now, the United States remains a mostly empty nation.

“This is the biggest boom we've ever had,” said Mr. Shiller, who bought into the boom himself in 2002, with a vacation home near one of Connecticut's Thimble Islands. “So a very plausible scenario is that home-price increases continue for a couple more years, and then we might have a recession and they continue down into negative territory and languish for a decade.

“It doesn't even attract that much attention,” he continued. “There will be many people thinking it was a soft landing even though prices may have gone down in real terms by 40 percent.”

MR. SHILLER begins his story 400 years ago, in the country that helped invent the idea of a bubble. In 1585, workers in Amsterdam began to dig a canal through the city. It became known as the Herengracht, or gentlemen's canal, for the fashionable row houses that soon sprang up on its banks. Merchants moved into many of them, and the canal remains one of the city's finest addresses today.

In recent years, a Dutch economist named Piet M. A. Eichholtz heard about a book from the 1970's that traced the Herengracht's history, including records of every sale. But his efforts to track down a copy failed – until he was browsing through a secondhand bookstore in Amsterdam almost a decade ago, not long after Mr. Shiller's lunch with Mr. Greenspan, and stumbled across one.

It had all the details Mr. Eichholtz wanted.

To translate the sales into an index of prices over the years, Mr. Eichholtz turned to a method invented by Mr. Shiller and a colleague. The United States government uses the same process for its best-known measure of house prices, which is published every quarter by the Office of Federal Housing Enterprise Oversight, the chief regulator of Fannie Mae and Freddie Mac.

The beauty of the method is that it does a better job of capturing the experience of homeowners than a simple average of house prices does. That average can rise when a bunch of new McMansions get built, even if existing houses have become no more valuable. The Shiller index, by following the same set of houses over many years, tracks the actual financial return that houses produce for their owners.

On the Herengracht, those returns have often been fantastic for 25 or even 50 years at a time. Home prices soared in the first half of the 17th century, around the time of the tulip mania. But they came crashing down in the 1670's, when the prime minister was killed, and partially eaten, by a mob of angry Dutch, and the country nearly disintegrated. Prices lagged inflation during the Napoleonic wars but surged after William became king in 1814 and the country industrialized.

Again and again, the cycle repeats itself. But there is essentially no long-term trend, beyond a general rise in house prices that roughly matches gains in peoples' incomes. As Amsterdam became a global city and its population exploded, demand for homes increased – but so, too, did supply.

PRICES have hardly become more stable over the last 400 years; in fact, they've jumped up and down more in the 20th century than they did during the 18th and 19th. Only the 17th century, that time of cannibalized prime ministers, was more volatile.

“A whole lot of the price increases you see in houses is imaginary, because it's just inflation,” said Mr. Eichholtz, a professor at Maastricht University. “People say, 'I have a house. It protects me against the economic imbalances or misfortunes of the country.' The big lesson is that real estate does not give you the protection that people think it does.”

A history of Norwegian house prices that Mr. Shiller has found shows the same pattern. As does his index of American house prices, until the blastoff of the last decade. In chart form, it looks eerily similar to the stock chart from his 2000 book.

But this is actually a happy story in many ways. Over the long course of history, families have not been forced to devote an ever-larger chunk of their money to the roof over their heads. They instead can afford better health care, new technologies and – as Mr. Shiller pointed out during lunch this month at a steakhouse in midtown Manhattan – leisurely restaurant meals.

Still, history is easy to forget during times like these. Mr. Shiller says that a steady shift toward freer markets around the world has caused people to think much more about the importance of what they own. The best description, he said, comes from President Bush, who often talks of “an ownership society.” (Mr. Shiller has tried, without success, to find out who in the White House had coined the phrase.)

When his undergraduates were reading through old newspapers, they found that stories about house prices were once confined to the back pages of business sections. Today, real estate often seems to be topic A in the national conversation.

Many people have made huge profits from selling homes, and many more have paper profits. When people get together with friends, they want to find a subject that makes others happy, Mr. Shiller says, and real estate fits the bill, just as stocks did in the 1990's.

“It's very much like studying a disease epidemic. It's a contagion,” Mr. Shiller said. “When it goes in an up direction, it's very impressive. But it can also work in the down direction.”

This psychological approach has been at the core of his work for years. In the 1970's, when his wife was studying psychology, he would soak up the discussions that she and her fellow graduate students had over dinner at the Shillers' house in Delaware. A decade ago, his beliefs about herd behavior led him to his lunchtime conversation with Mr. Greenspan.

Mr. Shiller takes no credit for the phrase “irrational exuberance.” He does not remember using it during the conversation. He recently searched through his daily diary, which he keeps on a computer, from the early 1990's and found only one phrase that was at all similar. In 1991, he used “overexuberant” to describe an exercise that had left him feeling sore.

His good friend, Jeremy J. Siegel, an economist at the University of Pennsylvania, stumbled upon a 1959 quotation from Fortune magazine in which Mr. Greenspan discussed “over-exuberance” in the financial community. The phrase is probably his. He may even have to dust it off again soon. He recently called some local markets “frothy” but emphasized that there was no national bubble.

Even so, Mr. Shiller has little company for his radical notion that house prices could fall by 40 percent. Many economists say that interest rates are low enough and demand for housing in big urban areas is high enough to keep from prices from falling very far. Mr. Shiller himself confesses to some doubt.

“I don't have any certainty,” he said. “I have a lot of humility” about any prediction.

“We do have a shortage of land in the prestige areas, and so there is a potential for them to go up,” he added. “But I just know that the trend over the last century has been for new prestige areas to appear.”

If he is right, the Herengracht also looks due for one of its occasional corrections. Prices there have doubled, even accounting for inflation, over the last decade or so. It almost seems like they might never fall again.

RALEIGH: Bruce Campbell to sign books, show movie, August 22nd

Raleigh, NC
Monday, August 22, 2005

N.C. State Univ Bookstore & Mission Valley Cinema
Make Love the Bruce Campbell Way signing at 5:00pm
Man with the Screaming Brain screenings at 9:30pm & 11:30pm
All Events at Mission Valley Cinema, 2109-124 Avent Ferry Road, Raleigh, NC 27606

http://www.bruce-campbell.com/appearances/index.htm#0822

Elvis, the Robo-Kitty

Elvis the Cat lost the use of his hind legs in a tragic auto accident. So his owner, Carlo Bertocchinni, built him a mobile robotic platform. Now Elvis the Cat is Elvis, The Robo-Kitty (Quicktime).

Demi Moore gives hope to dorky kids everywhere…

Demi Moore, age 8(?):

Click the link to see more celebrity kid photos.

Your Mama

Kennedy's Your Mama (Quicktime) is catchy, if creepy.

Floating Russian Nuclear Reactors

I had no idea floating reactors were this far along: Russia plans to export floating nuclear power plants to the third world.