Sunday, October 28, 2007

Research agenda

Life is hard and most of us can use all the help we can get. Price signals are a great help. But even then, many of us are intrigued by the charms of cost-shifting. When others can be made to pick up some of the costs, many of us are ready to take on greater risks. Bastiat pointed to government as the illusion that we can all live at the expense of everyone else. Politicians in California and Florida have recently suggested that insuring those who choose to live in flood-prone or fire-prone areas might be a national project.

But it gets worse. Those who are optimistic about the scope for political action have embraced the findings of behavioral economics (e.g., many of us often do stupid things), embellished them as "internalities", and given a boost to nanny-state supporters. Jonathan Gruber wrote: "The weaknesses of the traditional model, and the enormous costs of smoking to individuals, suggest that government should play a larger role in regulating smoking in the U.S. than is suggested by the external costs of smoking alone."

For many of us, if we were to try to list some of the foolish things we have ever done, we would have our hands full. Avoiding making even more mistakes is a daily chore. But what if we were elected to do this for the population at-large?

Perhaps those who study behavioral economics should find the time to look into the self-control challenges encountered by those who seek and gain public office.