Tag Archives: tim-harford

Choice Architecture of Organ Donation

The sup­ply of organs suit­able for dona­tion is vastly smal­ler than the demand. To try and increase the pool of poten­tial donors a num­ber of options have been tested:

Rede­fin­ing death so ‘liv­ing’ organs can be taken from donors who have died through brain death (via Link Banana), provide incent­ives for poten­tial donors, or employ choice archi­tec­ture to get the res­ults you want.

On the lat­ter (the choice archi­tec­ture option), Tim Har­ford provides a con­cise look at the rise of soft pater­nal­ism in polit­ics and why we should be cau­tious:

For a busi­ness, the choice is not straight­for­ward, even if the aim – to max­im­ise profit without ali­en­at­ing cus­tom­ers – is simple. For a gov­ern­ment, the decision should be harder still. Gold­stein points out that 12 per cent of Ger­mans and 99.98 per cent of Aus­tri­ans are registered organ donors. Ger­mans have to opt in to the donor scheme, Aus­tri­ans have to opt out. The implic­a­tion: few people really have a strong pref­er­ence as to wheth­er to be an organ donor or not, so they stay where they’re put.

The response to this is not obvi­ous. Per­haps the gov­ern­ment should use the default to max­im­ise organ dona­tions. A more cau­tious approach would be to try to fig­ure out what people would prefer if they could be per­suaded to give it some prop­er thought. One indic­a­tion comes from research by Gold­stein and Eric John­son: in an exper­i­ment on organ dona­tion, people forced to choose one way or the oth­er acted like people who were placed in the donor pool by default. In this par­tic­u­lar case, max­im­ising the donor pool and doing what people really want seems to be much the same thing. Oth­er cases will be less clear-cut.

I, Toaster and The Economies of Production

Doing away with the divi­sion of labour and most oth­er eco­nom­ies of pro­duc­tion, Thomas Thwaites’ Toast­er Pro­ject is an exper­i­ment to “build a toast­er, from scratch—beginning by min­ing the raw mater­i­als and end­ing with a product that Argos sells for only £3.99”.

Many have men­tioned this already (Jason Kot­tke, Tyler Cowen on Mar­gin Revolu­tion, Rad­ley Balko on Reas­on), but my favour­ite com­ment­ary on the pro­ject comes from The Fin­an­cial Times’ Tim Har­ford:

The mod­ern mar­ket eco­nomy is mind-bog­glingly com­plex, pro­du­cing bil­lions of products, many vastly more com­plex than a toast­er. The com­plex­ity of the soci­ety we have cre­ated for ourselves sur­rounds us so com­pletely that, instead of being diz­zied, we tend to take it for gran­ted.

Yet as we cel­eb­rate our good for­tune to be born at a time of such aston­ish­ing mater­i­al wealth, the toast­er should give us pause for thought. It is a sym­bol of the soph­ist­ic­a­tion of our world, but also a sym­bol of the obstacles that lie in wait for those who want to change it. Wheth­er attempt­ing to deal with cli­mate change, social depriva­tion, eco­nom­ic devel­op­ment or health­care, improv­ing faults in such a com­plex sys­tem is a task best approached with humil­ity.

I believe it is oblig­at­ory at this point to men­tion Leonard Read’s 1958 essay, I, Pen­cil?

The Mars Bar Unit of Account

The fluc­tu­at­ing weight of the Mars Bar is quite a con­ten­tious issue here in the UK. Answer­ing a query as to wheth­er eco­nom­ists take this into account (and not just price fluc­tu­ations) when cal­cu­lat­ing infla­tion using the Retail Prices Index, eco­nom­ist Tim Har­ford offers some enter­tain­ing inform­a­tion regard­ing the Mars Bar unit of account.

The Mars Bar has been worthy of scru­tiny ever since the late Nico Col­chester noted in the Fin­an­cial Times back in 1981 that it was a very stable unit of account. It is a ver­it­able ingot of basic com­mod­it­ies (sug­ar, milk, cocoa) that has kept its value rel­at­ive to the price of oth­er goods such as small cars, which have cost about 20,000 Mars Bars for the past 70 years.

As Col­chester wrote,

The Mars Bar […] is a long-estab­lished bas­ket of staple com­mod­it­ies (cocoa, veget­able fats, milk solids, sug­ar) pack­aged with great con­sist­ency. […] As such it is a reli­able unit of account cer­tainly more reli­able than gold, which is prone to spec­u­la­tion and it pre­serves a remark­ably con­stant real value.

No men­tion of deep-fried Mars Bars, how­ever.

The Problems with Saving

In 2007 the aver­age Amer­ic­an saved 0.6% of their income. By Feb­ru­ary of this year that had ris­en to more than 4%, but in the 1980s it was 10%.

With this in mind, Tim Har­ford asks why are we such awful savers, and what can we do to improve the situ­ation?

Beha­vi­or­al eco­nom­ists […] have uncovered three reas­ons why people find it so dif­fi­cult to save. The first is tempta­tion: Although we often later regret it, we just can­’t res­ist spend­ing. The second is lack of under­stand­ing: Our brains can­’t quite grasp the prof­it­ab­il­ity of sav­ing. The third is optim­ism: We believe that everything will work out, even if we don’t save.

The solu­tion offered to counter tempta­tion sounds very sim­il­ar to the beha­viour Ram­it encour­ages in his read­ers:

[Research­ers at UCL] found that ima­gin­ing a future pur­chase is almost as good as get­ting it. For example, when we day­dream about buy­ing a new car, our brains respond in much the same way as when we actu­ally make the pur­chase.

We can har­ness this buzz to our bene­fit by dis­card­ing vague ideas of “sav­ing for a rainy day” and focus­ing instead on par­tic­u­lar items we need or want. […] Rein­force this con­nec­tion in your mind by open­ing a dif­fer­ent sav­ings account devoted to each of your goals: one for a new car, one for a vaca­tion, one for a child’s col­lege tuition fees.

Can Technology Solve Our Climate Problems?

After read­ing Cam­bridge phys­i­cist Dav­id MacK­ay’s much lauded Sus­tain­able Energy (free down­load avail­able), the FT Eco­nom­ist Tim Har­ford wor­ries that we are “too com­pla­cent about tech­no­lo­gic­al fixes for the twin prob­lems of cli­mate change and finite oil and gas reserves”.

Har­ford sug­gests that if we con­tem­plate the idea that tech­no­lo­gic­al pro­gress may not solve these prob­lems, we must there­fore start think­ing real­ist­ic­ally about beha­viour shift­ing incentives—specifically, high­er car­bon ‘taxes’.

Tech­no­lo­gic­al pro­gress and eco­nom­ic growth loosen the cor­set of cost-bene­fit ana­lys­is, but not the laws of phys­ics. No mat­ter how cheap and effi­cient sol­ar col­lect­ors become, there is only so much sol­ar power avail­able per square metre of land. Hydro­elec­tric energy is con­strained by the quant­ity of rain­fall and the height of reser­voirs above sea level. The most per­fectly designed wind­mill is lim­ited by the energy of the wind. It would barely be pos­sible to make the num­bers add up even if renew­able energy gen­er­at­ors were free.

To power a mod­ern coun­try through renew­able energy requires coun­try-scale facil­it­ies. […] Tech­no­lo­gic­al pro­gress will be essen­tial but, bar­ring a break­through in nuc­le­ar fusion, it will not set us on a path to an energy sys­tem purged of fossil fuels.

[…] The chal­lenge is to encour­age the right beha­viour. Cent­rally man­dated efforts will not do the trick, in part because “the right beha­viour” is not a uni­ver­sal con­stant. […]

Deal­ing with cli­mate change will need many small decisions to be made dif­fer­ently. The gov­ern­ment can­not micro­man­age these. This is why a car­bon price, wheth­er set through taxes or emis­sions per­mits, is needed. It is not so much a nudge as a shove in the right dir­ec­tion.

The full art­icle requires (free) regis­tra­tion to the FT site.