Comments on: A simple Coasian test for some kinds of economic bollocks

By: dcpi

dcpi — Sun, 15 Jan 2006 16:50:34 +0000

This debate is so typical of economists who convert the concrete into the abstract. It seems that it will only take a few dollars or tens of dollars in donations from everyone who is upset by this case to create a fund for the terminally ill indigent in need of ventilators.

So who is going to create the fund for us to donate to? Post the name of the charity and I will donate my $75 (or $175) so no hospital is put in this Hobbesian situation.

Rather than argue about how to spend our neighbors’ funds we should put our own money where our mouths are.

By: Walt Pohl

Walt Pohl — Sat, 14 Jan 2006 19:58:51 +0000

Russ: Do you think maybe it has something to do with the fact that physics has earned that kind of respect, and economics has not? Or do you also feel that only sociologists should comment on sociology.

By: Ray

Ray — Sat, 14 Jan 2006 13:53:25 +0000

Keith, Landsburg was talking about the choices that poor people would make. If they are poor people, they are not in a Rawlsian state.
Second, Daniel’s agument is that Coase’s theorem says that if the trade-off of ventilator insurance was optimal, it would apply whether people were being asked if they wanted to buy such insurance or if they were being asked to sell a right. If people value a ventilator differently depending on whether it’s something they think they already have or something that they have a chance to buy, then they don’t really have a well-ordered set of preferences.

By: Russell Nelson

Russell Nelson — Sat, 14 Jan 2006 07:05:46 +0000

It’s funny how many people objecting to Steve’s post obviously have no clue about economics, and yet they feel qualified to object to his conclusions. Amazing. When people do this in the realm of physics, we call them cranks and we laugh at them and ignore them.
-russ

By: Keith

Keith — Fri, 13 Jan 2006 21:52:15 +0000

Daniel, Landsburg wasn’t doing what you claim, and that’s pretty clear in his piece. He’s saying that in the Rawlsian state, the woman would not have bought ventilator insurance (or would have sold it).

When one looks at the facts of the case, the hospital was wrong. The woman did not want to be kept alive indefinitely. She just wanted to be kept alive long enough to see her mother one last time. Generally, the cost of keeping her alive long enough to do that would be low, the cost of such “temporary ventilator insurance” would be low, and just about anybody would buy it (or not sell it).

By: Daniel

Daniel — Fri, 13 Jan 2006 17:50:06 +0000

Keith: if you are proposing to hold such an auction in a Rawlsian state of uncertainty, then I would say go for it. What I am entirely against, is holding the auction in some particular state of the world and then presenting it as if it were the result of one held behind a Rawlsian veil.

I thought that Freakonomics was an extraordinarily slippery book and will post a long and strident denunciation of it the minute I finish writing it.

By: Keith

Keith — Fri, 13 Jan 2006 17:31:52 +0000

And actually, I think Landsburg’s Armchair Economist is better (and more intellectually honest) than Freakonomics, which I also liked.

I thought Levitt engaged in some simplistic explanations and ignored some important research to avoid confusing or offending people.

By: Keith

Keith — Fri, 13 Jan 2006 17:29:01 +0000

Well, Walt, I guess we have convergence, then.

Just hold a reverse auction on who wants to forgo ventilator insurance, and both Davies and Landsburg would be happy, yes?

By: alexandre

alexandre — Fri, 13 Jan 2006 17:28:44 +0000

Landsburg’s argument is not convincing. But considering the case “is it right to unplug people who are about to die with no chance of survival, except if they pay?” I find it difficult to answer clearly. After all : – Many people die in hospitals, and many of them die because doctors decide that more work on them is a waste of resources. Even without talking of euthanasia, we can consider as a normal thing that at a given moment, when there is no more hope and they are about to die, people are “unplugged” – because it already happens every day. – Now suppose that a person is about to die, and someone (or him) tells the doctor “don’t unplug : I will pay the hospital whatever it takes”. Does the hospital accepts the money or has to say no?
“the hospital has to say no” is a strange answer :After all, if the person pays enough, it is not a waste of medical resources : it can even provide some good (the hospital can use the money to buy a new respirator, that will be used on later patients for example). It can be said that it is a pareto-improvement that the hospital accepts this offer.
But accepting this offer means that people are unplugged unless they pay enough… and that is exactly the rule that we consider abhorrent.

Other question : in a country in which, whatever their pain, people are never unplugged until their death; A man in dying pain tells the doctor “I am in pain, please unplug me, I will pay you very well”. It is exactly the same kind of unjust treatment : only people who pay enough have the right to be unplugged when they want it. But this unequal treatment is less shocking than “you are unplugged unless you pay”. I don’t have a good answer for these paradoxes, but I find them disturbing.

By: Walt Pohl

Walt Pohl — Fri, 13 Jan 2006 15:10:28 +0000

Keith: You have completely misunderstood Daniel’s argument. His argument is that if you offered people $75 to forgo the right to a ventilator, they would turn it down. Ergo, Landsburg’s argument about poor people’s revealed preferences does not hold. Daniel doesn’t dodge the question: he attacks Landsburg’s argument head-on.

By: Elton

Elton — Fri, 13 Jan 2006 14:59:59 +0000

It was astonishing to read Landsburg’s fatuous, smarmy article, and then google him and find out he’s apparently a published and respected (in some quarters) economist. Mindlessly controversial indeed.

Oh, and that link to San Francisco mayoral candidates being given the replicant test was excellent. Thanks simstim.

By: Keith

Keith — Fri, 13 Jan 2006 13:37:12 +0000

Actually, Landsburg’s right, and Davies is making a dishonest argument by asserting an initial right to a ventilator. Davies just dodges the question.

Given that the right to a ventilator incurs costs, would people prefer to use those costs on ventilator insurance or would they prefer to have some other right?

More to the point, should the right to a ventilator be part of the social contract or shouldn’t it? And Landsburg’s right. If people have better uses for resources than ventilator insurance, then it shouldn’t.

However, people’s atavistic and primitive response to Landsburg betrays another human tendency; that when somebody is hurt, we have a natural tendency to want to help them. This is a very healthy thing at the individual level. At the social contract/insurance level, however, this instinct leads to a social contract and social insurance far more extensive than people actually want or prefer. In short, I would have more faith in left-liberalism if liberals could appreciate Landsburg’s point.

By: kaw

kaw — Thu, 12 Jan 2006 22:21:33 +0000

Relevant here is Frank, Gilovitch, and Regan’s article (Journal of Economic Perspectives (1993, 7[2]: 159-171; at JSTOR for those of you with subscriptions) on whether exposure to the self-interest model (i.e., studying economics) generates self-interested behavior. Obviously, it’s a tough question to answer definitively because of selection effect problems. But even if the evidence isn’t up to the task of demonstrating a causal relationship, it pretty clearly shows a correlation between studying economics and acting selfishly. E.g., economics professors donate less to charity than comparably paid professors in other disciplines, economics students default at a higher rate in the Prisoner’s Dilemma, etc.

By: John Emerson

John Emerson — Thu, 12 Jan 2006 19:34:24 +0000

CORRECTION: “Walt, even the nice economists, DeLong for example….”

By: steve kyle

steve kyle — Thu, 12 Jan 2006 19:28:27 +0000

What rot. The whole thing is completely bogus.

He is asking people who DONT need a ventilator how much money they need now to be happy to not get a ventilator IF they need one decades in the future and IF they cant afford one by that time.

Here is a question for you. IF I dont become a millionaire by the time I am 60 and IF I start wanting a yacht by then, how much money do you have to give me now to make it OK to FORBID me to have one at that point?