Few theories have grabbed my imagination the way behavioral economics has, and I’m not alone in that. One of the big stories when President Obama was elected was that his administration was going to use behavioral economics to painlessly solve a variety of problems. Last week, economics professors George Loewenstein and Peter Ubel wrote an op-ed for the New York Times throwing some water on the idea that we can nudge our way into solutions for big problems. Here’s the conclusion:
Behavioral economics should complement, not substitute for, more substantive economic interventions. If traditional economics suggests that we should have a larger price difference between sugar-free and sugared drinks, behavioral economics could suggest whether consumers would respond better to a subsidy on unsweetened drinks or a tax on sugary drinks.
But that’s the most it can do. For all of its insights, behavioral economics alone is not a viable alternative to the kinds of far-reaching policies we need to tackle our nation’s challenges.
For what it’s worth, studies show that taxes are more effective than subsidies in changing people’s behavior.
Why people who are against health insurance reform can go to hell
I know a lot of people are unhappy with health care reform, either because it didn’t provide a public option, or because they’re OK with how health insurance works in this country right now. The truth, though, is that it doesn’t work. Tonight we got an email from the patron of one of our favorite restaurants. Her husband is the chef, but has been diagnosed with cancer, and now they’re putting on a series of benefits to pay his medical bills. This is from their Web site, friendsforhamid.blogspot.com:
If you live in the Raleigh, North Carolina area, you should really consider attending one of the benefits. Hamid and Holly are incredibly nice people and they run a great little restaurant.
The other point, though, is that the health care reform bill will, in time, eliminate both of the problems they’re facing financially. Holly wouldn’t have been forced to take a second job just to get insurance (she is already incredibly busy running a restaurant on her own), and there wouldn’t be a lifetime maximum on her health insurance. It’s bad enough that Hamid is fighting cancer, but our broken, awful health insurance system puts them in a position to face financial ruin as well. If you’re OK with that, it just means that you haven’t known anyone in a similar situation.