Jul 2, 2015
Markets are powerful decentralized optimization engines - it is known. Liberals see the free market as a kind of optimizer run amuck, a dangerous superintelligence with simple non-human values that must be checked and constrained by the government - the friendly SI. Conservatives just reverse the narrative roles.
In some domains, where the incentive structure aligns with human values, the market works well. In our current framework, the market works best for producing gadgets. It does not work so well for pricing intangible information, and most specifically it is broken when it comes to health.
We treat health as just another gadget problem: something to be solved by pills. Health is really a problem of knowledge; it is a computational prediction problem. Drugs are useful only to the extent that you can package the results of new knowledge into a pill and patent it. If you can't patent it, you can't profit from it.
So the market is constrained to solve human health by coming up with new patentable designs for mass-producible physical objects which go into human bodies. Why did we add that constraint - thou should solve health, but thou shalt only use pills? (Ok technically the solutions don't have to be ingestible, but that's a detail.)
The gadget model works for gadgets because we know how gadgets work - we built them, after all. The central problem with health is that we do not completely understand how the human body works - we did not build it. Thus we should be using the market to figure out how the body works - completely - and arguably we should be allocating trillions of dollars towards that problem.
The market optimizer analogy runs deeper when we consider the complexity of instilling values into a market. Lawmakers cannot program the market with goals directly, so instead they attempt to engineer desireable behavior by ever more layers and layers of constraints. Lawmakers are deontologists.
As an example, consider the regulations on drug advertising. Big pharma is unsafe - its profit function does not encode anything like "maximize human health and happiness" (which of course itself is an oversimplification). If allowed to its own devices, there are strong incentives to sell subtly addictive drugs, to create elaborate hyped false advertising campaigns, etc. Thus all the deontological injunctions. I take that as a strong indicator of a poor solution - a value alignment failure.
What would healthcare look like in a world where we solved the alignment problem?
To solve the alignment problem, the market's profit function must encode long term human health and happiness. This really is a mechanism design problem - its not something lawmakers are even remotely trained or qualified for. A full solution is naturally beyond the scope of a little blog post, but I will sketch out the general idea.
To encode health into a market utility function, first we create financial contracts with an expected value which captures long-term health. We can accomplish this with a long-term contract that generates positive cash flow when a human is healthy, and negative when unhealthy - basically an insurance contract. There is naturally much complexity in getting those contracts right, so that they measure what we really want. But assuming that is accomplished, the next step is pretty simple - we allow those contracts to trade freely on an open market.
There are some interesting failure modes and considerations that are mostly beyond scope but worth briefly mentioning. This system probably needs to be asymmetric. The transfers on poor health outcomes should partially go to cover medical payments, but it may be best to have a portion of the wealth simply go to nobody/everybody - just destroyed.
In this new framework, designing and patenting new drugs can still be profitable, but it is now put on even footing with preventive medicine. More importantly, the market can now actually allocate the correct resources towards long term research.
To make all this concrete, let's use an example of a trillion dollar health question - one that our current system is especially ill-posed to solve:
What are the long-term health effects of abnormally low levels of solar radiation? What levels of sun exposure are ideal for human health?
This is a big important question, and you've probably read some of the hoopla and debate about vitamin D. I'm going to soon briefly summarize a general abstract theory, one that I would bet heavily on if we lived in a more rational world where such bets were possible.
In a sane world where health is solved by a proper computational market, I could make enormous - ridiculous really - amounts of money if I happened to be an early researcher who discovered the full health effects of sunlight. I would bet on my theory simply by buying up contracts for individuals/demographics who had the most health to gain by correcting their sunlight deficiency. I would then publicize the theory and evidence, and perhaps even raise a heap pile of money to create a strong marketing engine to help ensure that my investments - my patients - were taking the necessary actions to correct their sunlight deficiency. Naturally I would use complex machine learning models to guide the trading strategy.
Now, just as an example, here is the brief 'pitch' for sunlight.
If we go back and look across all of time, there is a mountain of evidence which more or less screams - proper sunlight is important to health. Heliotherapy has a long history.
Humans, like most mammals, and most other earth organisms in general, evolved under the sun. A priori we should expect that organisms will have some 'genetic programs' which take approximate measures of incident sunlight as an input. The serotonin -> melatonin mediated blue-light pathway is an example of one such light detecting circuit which is useful for regulating the 24 hour circadian rhythm.
The vitamin D pathway has existed since the time of algae such as the Coccolithophore. It is a multi-stage pathway that can measure solar radiation over a range of temporal frequencies. It starts with synthesis of fat soluble cholecalciferiol which has a very long half life measured in months.  
The main recognized role for this pathway in regards to human health - at least according to the current Wikipedia entry - is to enhance "the internal absorption of calcium, iron, magnesium, phosphate, and zinc". Ponder that for a moment.
Interestingly, this pathway still works as a general solar clock and radiation detector for carnivores - as they can simply eat the precomputed measurement in their diet.
So, what is a long term sunlight detector useful for? One potential application could be deciding appropriate resource allocation towards DNA repair. Every time an organism is in the sun it is accumulating potentially catastrophic DNA damage that must be repaired when the cell next divides. We should expect that genetic programs would allocate resources to DNA repair and various related activities dependent upon estimates of solar radiation.
I should point out - just in case it isn't obvious - that this general idea does not imply that cranking up the sunlight hormone to insane levels will lead to much better DNA/cellular repair. There are always tradeoffs, etc.
One other obvious use of a long term sunlight detector is to regulate general strategic metabolic decisions that depend on the seasonal clock - especially for organisms living far from the equator. During the summer when food is plentiful, the body can expect easy calories. As winter approaches calories become scarce and frugal strategies are expected.
So first off we'd expect to see a huge range of complex effects showing up as correlations between low vit D levels and various illnesses, and specifically illnesses connected to DNA damage (such as cancer) and or BMI.
Now it turns out that BMI itself is also strongly correlated with a huge range of health issues. So the first key question to focus on is the relationship between vit D and BMI. And - perhaps not surprisingly - there is pretty good evidence for such a correlation  , and this has been known for a while.
Now we get into the real debate. Numerous vit D supplement intervention studies have now been run, and the results are controversial. In general the vit D experts (such as my father, who started the vit D council, and publishes some related research) say that the only studies that matter are those that supplement at high doses sufficient to elevate vit D levels into a 'proper' range which substitutes for sunlight, which in general requires 5000 IU day on average - depending completely on genetics and lifestyle (to the point that any one-size-fits all recommendation is probably terrible).
The mainstream basically ignores all that and funds studies at tiny RDA doses - say 400 IU or less - and then they do meta-analysis over those studies and conclude that their big meta-analysis, unsurprisingly, doesn't show a statistically significant effect. However, these studies still show small effects. Often the meta-analysis is corrected for BMI, which of course also tends to remove any vit D effect, to the extent that low vit D/sunlight is a cause of both weight gain and a bunch of other stuff.
So let's look at two studies for vit D and weight loss.
First, this recent 2015 study of 400 overweight Italians (sorry the actual paper doesn't appear to be available yet) tested vit D supplementation for weight loss. The 3 groups were (0 IU/day, ~1,000 IU / day, ~3,000 IU/day). The observed average weight loss was (1 kg, 3.8 kg, 5.4 kg). I don't know if the 0 IU group received a placebo. Regardless, it looks promising.
On the other hand, this 2013 meta-analysis of 9 studies with 1651 adults total (mainly women) supposedly found no significant weight loss effect for vit D. However, the studies used between 200 IU/day to 1,100 IU/day, with most between 200 to 400 IU. Five studies used calcium, five also showed weight loss (not necessarily the same - unclear). This does not show - at all - what the study claims in its abstract.
In general, medical researchers should not be doing statistics. That is a job for the tech industry.
Now the vit D and sunlight issue is complex, and it will take much research to really work out all of what is going on. The current medical system does not appear to be handling this well - why? Because there is insufficient financial motivation.
Is Big Pharma interested in the sunlight/vit D question? Well yes - but only to the extent that they can create a patentable analogue! The various vit D analogue drugs developed or in development is evidence that Big Pharma is at least paying attention. But assuming that the sunlight hypothesis is mainly correct, there is very little profit in actually fixing the real problem.
There is probably more to sunlight that just vit D and serotonin/melatonin. Consider the interesting correlation between birth month and a number of disease conditions. Perhaps there is a little grain of truth to astrology after all.
Thus concludes my little vit D pitch.
In a more sane world I would have already bet on the general theory. In a really sane world it would have been solved well before I would expect to make any profitable trade. In that rational world you could actually trust health advertising, because you'd know that health advertisers are strongly financially motivated to convince you of things actually truly important for your health.
Instead of charging by the hour or per treatment, like a mechanic, doctors and healthcare companies should literally invest in their patients long-term health, and profit from improvements to long term outcomes. The sunlight health connection is a trillion dollar question in terms of medical value, but not in terms of exploitable profits in today's reality. In a properly constructed market, there would be enormous resources allocated to answer these questions, flowing into legions of profit motivated startups that could generate billions trading on computational health financial markets, all without selling any gadgets.
So in conclusion: the market could solve health, but only if we allowed it to and only if we setup appropriate financial mechanisms to encode the correct value function. This is the UFAI problem next door.