I've decided to do a series called Economics in the News to keep whoever is reading this blog (probably no one right now) posted on current economic events/thought. Today's post is responding to the article Economics Behaving Badly by George Loewenstein and Peter Ubel that ran in the New York times on Wednesday. Read the full post for a summary of this article and my reaction to it.
First of all, it's good to see behavioral economics in the New York Times! This article, however, argues that solutions based on behavioral economics are being overused, and politicians are using behavioral economics to avoid powerful, but painful solutions based on traditional economics.
One example they give is a fuel consumption bill recently passed in New York state. Based on research indicating drivers can more easily gauge the amount of gas they use if it is presented to them in gallons-per-mile (as opposed to the traditional miles-per-gallon), the bill requires car dealers to post the gallons per mile for all cars they sell. Loewenstein and Ubel argue that while this should help reduce gasoline consumption a little, it will not get the job done. Instead, gasoline should be taxed so that buying a gallon of gas more accurately reflects the true cost of gas (market price of gas plus additional cost of pollution and dependence on foreign oil).
I have to say, they make a good point. Many people have reduced their gas consumption in recent years due to environmental consciousness, but many others do not care about the environment! A high tax on gasoline would give SUV-owners a reason to cut back on gas, and create competition among car companies to make more fuel-efficient cars.
I don't agree as much on the article's other examples. The authors think that to combat the nation's obesity epidemic, junk food should be taxed and corn should not be subsidized. I think that this is more of an education and cultural issue; people need to learn how to go shopping, buy healthy foods, and cook rather than going out to eat all the time. Even if taxes make McDonald's more expensive, people will still eat there if they don't know how to cook.
Overall, even if behavioral economics is over-relied upon, it still has important insights to add to economics and public policy, explaining things like why people under-save for retirement, eat fatty foods, don't exercise, and more.
Stop by again soon!! Tomorrow I will not be posting, as I am working tonight until 2 am, then tomorrow I'm working 11:30 to 7, and then Anna and I are hosting a bicycle progressive for our birthdays! So maybe I'll try to get some pics of that, and post them next week sometime. Also, congress just passed financial reform! Big-time news for the economy, and I'll be on top of that next week too.
Later,
Cy
How do you give people the incentive to learn how to cook? If eating out is cheaper and easier in the short run than cooking at home, how do you get them to do it for the long term benefits?
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