I’m joining the chorus of fans of Tim Harford‘s new book, The Undercover Economist. There’s something good on practically every page, and though I furrowed my brow in skepticism every few pages, too, that’s a pretty good batting average. As a bonus, the writing sparkles, and the cover is practically ripped from the arresting pages of Pulp Hero.
My favorite part so far is Tim’s discussion of “keyhole surgery” and its broader policy relevance:
Keyhole surgery techniques allow surgeons to operate without making large incisions, minimizing the risk of complications and side effects. Economists often advocate a similar strategy when trying to fix a policy problem [You’re being awfully generous here, Tim! – BC]: target the problem as closely as possible rather than attempting something a little more drastic.
How, then, can we fix health care?… [I]s there a ‘keyhole’ solution, which could fix health care without sacrificing the ability of patients to decide how much they value their own eyes?
Harford’s keyhole solution: health savings accounts and catastrophic insurance, a la Singapore. Though I think Harford greatly exaggerates the practical importance of adverse selection – and neglects the fascinating evidence of advantageous selection – he’s one of the rare people who uses economics to reach new ideas, instead of abusing it to rationalize what he would have thought anyway. Bravo, Tim.
READER COMMENTS
PJens
Nov 6 2005 at 10:44am
To paraphrase Rodger Lowenstein, from A. King’s post of OCT 30,… The drawback to HSA’s, remember, is that people are imperfect savers.
To change the current health care payment system, responsibility must be returned to the recipient of the care. A good first step toward doing this is to tax all employer provided health insurance premiums. On second thought, double tax on the employer paid insuarnce. The company ought to pay tax on the premiums and the lazy slep who won’t shop for insurance ought to pay a tax too. To encourage people to save more (for anything, HSA’s, 401’s etc) postitive and negative incentives can be used.
I also point out that more than one “keyhole” may be needed to solve any given problem.
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