Thursday, July 15, 2010

Anything for money

Follow the money.

That could be the conclusion of an op-ed piece in yesterday's New York Times, "Economics Behaving Badly." People make irrational decisions all the time, say authors George Loewenstein and Peter Ubel, and the field of behavioral economics helps to explain why. Unfortunately, policymakers are misusing behavioral economics "as a political expedient, allowing policymakers to avoid painful but more effective solutions rooted in traditional economics"

Loewenstein, a professor of economics and psychology at Carnegie Mellon University, and Ubel, a professor of business and public policy at Duke and the author of Free Market Madness: Why Human Nature Is at Odds With Economics, pile up examples of everyday irrationality.

For instance, New York City requires restaurant chains to post calorie counts on menus. This is supposed to encourage diners to lose weight. Good idea, but it won't make people slim. Studies indicate that people consistently choose whatever food is plentiful and cheap, and as long as we continue to subsidize corn and refuse to tax junk food, obesity rates will stay high.

Or consider the inflated prices of American pharmaceuticals. Studies have repeatedly shown that "pharmaceutical industry gifts distort decisions by doctors," and yet the health-care reform act does not ban them. Instead, it requires doctors and teaching institutions to "make information about these gifts available to the public." Does anyone seriously think that informed patients will rise up and refuse to accept prescriptions from doctors who are stuffed to the gills with bribes?

In every example in Loewenstein and Ubel's article, the bottom line is money. Consumers go for whatever is cheap, whether or not it is good for them. Suppliers go for whatever makes the most money, whether or not it is good for their clients.

The authors don't extend their discussion to Congress or state legislatures, but our elected representatives have a history of voting for whatever the most generous lobbyists and campaign contributors want them to vote for, even if most of their constituents don't want it, even if the nation or state can't afford it, and even if the effects will be generally harmful.

And then, knowing that their constituents, like themselves, want to have as much money as possible, state and federal legislators vote to reduce - or at least not to raise - taxes.

Such ill advised spending without adequate resources has led my home state, California, and my state of residence, Illinois, to the brink of financial collapse (see "Illinois Stops Paying Its Bills, But Can't Stop Digging Hole"). This is not rational behavior, but any other approach - raising revenues, for example, and trimming spending - seems just too painful to consider.

After all, the sky is not falling. Yet.


Anonymous said...

But even if the sky does fall, will people change their behavior? I wonder. What does it take to change their behavior?

Anonymous said...

Lavonne, good article. I agree with most of what you have stated.
However you are VERY misinformed about Pharmaceutical Industry "gifts". These have been gone for years, the Industry instituted standards several years ago to eliminate all entertainment and gifts....even pens and pads have been totally eliminated. The only "gifts" now have to be Medically related such as Medical Text books, or they have to be specifically for patient education....the days of "wineing and dineing" Doctors passed away about 7 years ago and virtually all companies comply with this, on this particular subject you communicated something that is false. If you'd like I can point you to the Pharma guidelines which expressly prohibit the things you claim are going on.

A 10 year pharmaceutical industry employee....

LaVonne Neff said...

I wish I could agree with "Anonymous" about pharmaceutical industry gifts. I'm no expert - my comments were based on the NYT article I quoted - so I went online to study up on the topic. I learned that just last week Big Pharma decided to self-police and ban certain gifts, but not the biggest ones. Read this article - - for an overview of the pharmaceutical industry's influence on medicine, or just do your own Google search if you're interested. If indeed the industry instituted anti-gift standards years ago - and perhaps it did - it is either ignoring them or taking full advantage of all possible loopholes.

Anonymous said...

The NYT article you cite is from two years ago....not last week as you said. That was the final "nail" when companies stopped providing things that weren't medically related (pens, pads which were branded)
About 5 years prior to that Pharma banned all gifts and entertainment....I think maybe 1company does not comply. There were MAJOR abuses in the past, especially late 90s/early 2000s but I promise you....I live in this world and there has been a 180change, and yes it was needed as some of the big companies were out of line. Here are the standards.

Anonymous said...

And I wuold add just "googling" is lazy you well know you can find anything to prove your point by this method. Interview 10 MDs and 10 folks in Pharma and they will all tell you the same thing, the gifts/entertainment stopped....There is no way to get around it....

LaVonne Neff said...

Anonymous is right - the NYT article I cited above was 2 years old. My mistake. He (or she) is also right that the drug companies began self-policing some time ago (2002, to be exact).

As for Google research, there I disagree with him. Yes, it can be lazy. Mine was at least sloppy, since I mistook the date. No excuse. But Google research can also provide creditable, up-to-the-minute information when reputable sources are correctly used.

Thanks to Anonymous for providing a link to the paper on drug company standards. I am not a specialist in medical ethics, and I do not know if these standards have solved the problem of undue influence or if the problem continues in other forms. I would welcome up-to-date information or studies on current drug-company influence on American medical practice.