Entries Tagged 'Uncategorized' ↓

In today’s Real Time Economics section of the Wall Street Journal appeared a piece entitled “Thaler on Nudging People to Make Better Choices” that is certainly worthy of comment.The net of the piece speaks of an upcoming book entitled “Nudging” in which Dr. Richard Thaler, professor of Economics at the University of Chicago, along with co-aughor and law professor Cass Sunstein, also at the University of Chicago, write about linguistic phrases which “nudge” people into “better choices.

The writer begins with a common issue we all face in the market place, statements though true, are positioned for greatest favor. A salad, as an example in the article, is labeled 98% fat free rather than simply saying 2% fat. Though both are accurate, and the latter more succinct, the former is most commonly used, and this is the result of a great deal of thought and research. In the end, 98% fat free is more enticing to those who seek to limit their fat intake, and this positioning goes on all around us, all the time. Most often it is relatively harmless, though not always. Consider this response by the author when asked of their consulting services acquired by the Obama campaign.

Thaler: There are several ways in which the Obama campaign employs nudges. For example, the idea of automatic enrollment is used in several domains such as his health-care plan, and of course, his reluctance to have a mandate is in line with our philosophical approach.

As a response to the nature of Obama’s plans for heathcare, it seemed clear that people were “reluctant” to anything that forces them into a healthcare plan they do not want, hence the replacement phrase: “automatic enrollment”.

There is something profoundly unappealing about this. Perhaps in March of 1971 one could say that I had been “automatically enrolled” and simply nine months later found myself in Vietnam. I don’t for a minute regret my service, but we were more honest back then and simply called it the draft.

Now, Obama is not the first to use such approaches to persuasion, though his gift of delivery may make him more effective than most, the challenge lies in knowing when you’re being played. In many cases such linguistic positions, or nudges as preferred by Thaler and Sunstein, are relatively benign and only mildly manipulative. However, in matters of socializing the single largest sector of the American economy, the purposeful use of ambiguous language is dangerous.

In the end of the healthcare debate it breaks down to individuals being treated. If you get heart disease and need surgery, no one can step in on your behalf, you have to do your self. In this, as economists would tell you, you are the residual claimant. Only you and your loved ones bear the cost of the consequences of a medical treatment. Yes, the monetary costs may be shared by many and we as a society have lots of work ahead of us to make certain that we manage those costs well, but no one can do your dying for you hence you have a legitimate voice in how best that trip can be managed.

It is certainly not my intent to be “political” on this blog and I don’t expect this to have been an exception, though it might seem so. The issue here remains one of improving efficiency in healtcare, and treating the discussion with sober, respectful clarity and candor.

Little frustrates a consumer than to purchase a product only to find out shortly thereafter that a newer version, with more capabilities is just released and the price is the same. For most of us, this is just an inconvenience, but consider this: what if you are about to have a knee replaced. Not so insignificant an event. It is painful, requires exceptional surgery and risk, followed by months of rehab. How then would feel if the same were to apply, but the new product, a new and improved knee, would last twice as long as the one you just had implanted.

The Federal Drug Administration (FDA) provides oversight into new products that enter the healthcare arena. This is a valuable service, but not one without its costs as demonstrated below.

During the decade of the 90’s the number of Premarket Approvals (PMA’s) were cut by over two thirds of the average for the decade before. By 1992, the first year of the Clinton administration, only ten products made it through the FDA process. For the remainder of the decade the average was one third less than the decade before, and only slightly improving thus far this decade.

What is missing in the numbers above the blue bars, are the number of products not approved and in the end, delayed.  Hidden also are products who’s financial risk of trying to bring to market have been crowded out by the time-valued risk of trying.  Some of these products are knowable, some are not.  Still there is a cost, as to how dear that cost, there is only speculation.

There is little time to reflect on the relative merits of this “crack down” or possible fear of investment due to the threat of nationalization (the blue bars reflect the first three years of the first Clinton administration), still there is a human element. It boils down to this. Our healthcare economy includes lots of researchers, innovators and manufacturers looking for ways to improve healthcare through technology. The question we have is do we want that innovation quickly or slowly. If we are to listen closely to those advocating national healthcare, the “enemy” to be controlled are pharmaceuticals and the vague argument that technology is causing the rise in healthcare costs.

A chest x-ray costs more than a close listen with a stethoscope, and Aspirin and a cane is cheaper than a knee replacement. Technology is not the problem for healthcare but rather a solution, and getting it more quickly is better than more slowly.