Marginal Revolution

When does libertarian paternalism work?

Not always.  Here is the abstract from a new paper:

We develop a theoretical model to study the effects of libertarian paternalism on knowledge acquisition and social learning. Individuals in our model are permitted to appreciate and use the information content in the default options set by the government. We show that in some settings libertarian paternalism may decrease welfare because default options slow information aggregation in the market. We also analyze what happens when the government acquires imprecise information about individuals, and characterize its incentives to avoid full disclosure of its information to the market, even when it has perfect information. Finally, we consider a market in which individuals can sell their information to others and show that the presence of default options causes the quality of advice to decrease, which may lower social welfare.

I do not yet see an ungated version.  Of course anyone interested in this topic should also pursue the papers of Mario Rizzo, Glen Whitman, and Daniel Klein.

Kidney Donor Chains

Virginia Postrel has an excellent piece in the online Atlantic on the shortage of transplant organs, it includes a very good discussion of both the promise and limitations of kidney swaps and donor chains.  Imagine that Mrs. Smith and Mr. Jones each need a kidney transplant.  Mr. Smith is willing but due to an incompatible blood type unable to donate a kidney to his wife.  Similarly, Mrs Jones is willing but unable to donate a kidney to her husband.  In a kidney swap, Mr. Smith donates to Mr. Jones and Mrs. Jones donates to Mrs. Smith.  Everyone is happy.

Donor chains extend this idea.  We start with an altruistic donor willing to give to anyone - by careful arrangement it's then possible to produce many transplants.  Recently, a single donor led to a chain of ten transplants!

Despite the promise of these techniques they are being underutilized.  Amazingly, the National Kidney Registry, which coordinates swaps and chains, has donors who are waiting to give.  A clear reminder that $500 bills aren't always picked up as quickly as we would like. 

Even the maximal use of swaps and chains won't solve the crisis, however. For that we are going to need better incentives to encourage more donors.

"Markets" in everything

The deal with doctors could come at a steep price: a $250 billion fix to a 12-year-old provision in federal law intended to limit the growth of Medicare reimbursements. The American Medical Association and other doctors’ groups have sought to change or repeal the provision, and they are likely to try to extract that as their price for boarding the Obama train, people tracking the negotiations said.

Wal-Mart, the nation’s largest private-sector employer, agreed recently to support requiring all big companies to insure their workers. In exchange, Wal-Mart said it wanted a guarantee that the bill would not “create barriers to hiring entry-level employees” — in effect, code words to insist that lawmakers abandon the idea of requiring employers to pay part of the cost for workers covered by Medicaid, the government insurance plan for the poor.

“It’s kind of a give-and-take, quid pro quo kind of environment,” said Tom Daschle, President Obama’s first choice for health secretary, who remains in touch with the White House on health care issues. “I think that the stakeholders wouldn’t do this if they didn’t think there was something in it for them.”

...Over the past year, Mr. Baucus, Democrat of Montana, has strong-armed industry groups, warning them not to publicly criticize the process if they want to stay in negotiations.

Mr. Baucus, in turn, has said little about his talks with industry players. On Tuesday, he said only that he was “heartened” by how many groups were supporting the health care overhaul.

That's the NYT reporting, not The Weekly Standard.  Here is much more. 

How should I feel if Obama, or maybe Congress, threatened to re-zone my neighborhood -- unfavorably -- unless I support an active Afghanistan plan on my blog?  (Should it matter if I've incorporated the blog as a business?  As an association?  Even if there is no corporate right to freedom of speech, should there be "forced speech"?)  Should it help much if the intimidation against freedom of speech is for a benevolent end?  If Republican Presidents had done something similar?

Might it be correct to call this "evil"?  I have seen "evil" defined as "morally bad or wrong." 

Of course these deals are not unrelated to why health care reform -- if we get it -- won't in fact solve most of the major problems the sector faces.