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A magazine of forecasts, trends, and ideas about the future

March-April 2009 Vol. 43, No. 2


 
 

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 Book Review

Too Free for Our Own Good?

Free Market Madness: Why Human Nature Is at Odds with Economics — And Why It Matters by Peter A. Ubel. Harvard Business Press. 2009. 240 pages. $26.95.

In a free market, it’s much too easy to make choices that endanger our health and wealth, observes Peter A. Ubel, a primary-care physician, in Free Market Madness. In a free market, we are free to overeat, smoke, drink excessively, ruin our credit, and not save enough for retirement.

Inundated by eye-candy ads, we buy products that harm our health and make spending decisions that carry severe long-term consequences, such as losing our homes by defaulting on mortgages.

“We humans are too easily manipulated by other humans,” Ubel says. “We are too easily seduced by the multitude of choices we face in our fast-moving market economies.”

Not coincidentally, he says, the country with the highest rate of obesity in the industrialized world — the United States — is also the country that has the largest proportion of its GDP spent on advertising. Obesity is much lower in Europe, where governments regulate food ads more aggressively.

“Such regulations have been shown to statistically predict the rate of obesity in any given country,” Ubel writes.

He argues that it’s not always people’s own decisions to drink, eat, and spend. Studies indicate the human will is a lot more malleable than we would like to think. Ubel offers this evidence:

Finite self-control. Exerting self-control in one area of life leaves less self-control available for other areas. One study seated test subjects in front of plates of cookies and required that they not give in to eating them. Afterwards, participants attempted to solve difficult math problems. They gave up more quickly than members of a group who did not have to undergo the first exercise. This explains why obesity rates are highest among low-income groups: The stresses of dealing with poverty leave little will power for eating right or exercising.

Default bias. We are partial to the default option — what we get if we take no action. Countries in which hospitals harvest organs from the deceased unless the families request otherwise have significantly higher rates of organ donors than countries that count on individuals to volunteer to donate. This passivity spells trouble for retirement savings, which require that people choose to set money aside.

Social pressure. Smoking and overeating are contagious. If one of your friends gains weight, you will be more likely to gain weight. People who associate with smokers will be more likely to take up the nicotine habit in turn. This is no surprise to most parents, who know that, once one child has a new toy, every child at school wants it.

Where will is weak and threatens the public’s health, Ubel argues, governments can help citizens choose more wisely with policies of “soft paternalism” that encourage good decisions but don’t coerce them.

“I hope and believe that the government can help us tackle a problem like obesity without causing us to slide toward a cholesterol-free police state,” Ubel writes.

Soft paternalism could take the form of tax rebates to people with healthy body weights and subsidies of healthy foods, matched with taxes on unhealthy foods.

“Some people, faced with the higher price, would shift to a cheaper alternative,” he writes. This approach would engage consumers’ interest through ad campaigns that play to emotions, and not just their intellects. “Such an approach would go beyond boring statistical displays of calorie information or tedious data about carbohydrates and fat calories, to labeling food with evocative images that create aversions to foods that aren’t healthy.”

It would also provide citizens with the resources necessary to adopt healthy lifestyles: designing neighborhoods and park systems that make it easy for people to walk or play outside, subsidizing fitness centers and transit to and from them, and encouraging employers to create opportunities for employees to exercise during work hours.

This approach could promote wise financial decisions as well. It could encourage employers to make retirement accounts the default option so that employees automatically have retirement savings. It could mandate better information about financial transactions, such as adjustable-rate mortgages and rent-to-own deals.

“Free markets fail if consumers don’t have easy access to important information relevant to their purchasing decisions,” Ubel writes.

At times, officials might take firmer approaches: ban vending machines from schools, require restaurants to cut trans fats from their recipes, and limit aggressive marketing practices like children-friendly advertising or the direct-to-consumer advertising of pharmaceuticals.

“Carefully calibrated restrictions on our freedom are a small price to pay for a happier, healthier populace,” Ubel concludes. — Rick Docksai

 

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