Friday, January 29, 2010

why banks aren't lending (the FDIC lottery for assets), making healthcare cheaper and some incredible links on behavior

I've added a new blog to my "read every day no matter what" list (currently at 5 - mankiw, cowen, pettis, krugman (usually to disagree), and now Eric Barker, as well as a number of newspapers), and he has a LOT of cool news and links! Most of these are hat tipped to Eric Barker, although some are my own discoveries.
I haven't done a links post in a while, and I've come across some biggies in the interim.
Just like taxes cause people to work less, fear of malpractice lawsuits are an expected cost that prompt doctors to work less. Since we're already crushingly short of most types of doctors, and especially competent ones, this gives more to the idea that tort reform would be a very intelligent step in bringing down costs. Not only would there be less "excess testing" but also more supply of doctor time, which would be very valuable in driving down medical costs.
The other problem with overregulation, populism and punishment: it creates uncertainty that can cripple the investment decisions of an economy.
"Highly trustworthy individuals think others are like them and tend to form beliefs that are too optimistic, causing them to assume too much social risk, to be cheated more often and ultimately perform less well than those who happen to have a trustworthiness level close to the mean of the population.  On the other hand, the low-trustworthiness types form beliefs that are too conservative and thereby avoid being cheated, but give up profitable opportunities too often and, consequently, underperform.  Our [empirical] estimates imply that the cost of either excessive or too little trust is comparable to the income lost by foregoing college."
The effect is unsurprising, but the magnitude is stunning.
Experts make the best decisions not when they overconsider, and not in a split second, but when they spend time not consciously thinking about their decisions. It's a good idea to sleep on a problem, etc.
betting on fun things makes them less fun.  (I'd bet you, however, that betting on non-fun things makes them more fun)
Incentives provide yet another reason why banks aren't lending. If having excess capital means you get the deposits of a failed bank for free, why would you lend? The only lenders are going to be those who are about to fail, would never be given deposits and need the interest income.

No comments:

Post a Comment