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.