Transactions costs are involved in most small-scale activities we engage in. Living in a country, and coping with its institutions, also involves transaction costs.
U.S. bureaucracies seem more flexible than the ones I’ve dealt with in wealthy foreign countries. On the other hand, much less seems to be taken care of for the average citizen in the U.S. than elsewhere-it requires tremendous knowledge and investment of time to get the best deal out of health insurance, Social Security and so many other publicly- or commonly-provided benefits. In wealthy foreign countries, the average citizen is not at much of a disadvantage compared to a knowledgeable, wealthier citizen. In the U.S., I wonder how the average guy can cope with institutions (or if he can). As in so many areas, we Americans have created a system that allows great flexibility, but that also advantages the better-off. Have we made the right choice in this apparent trade-off?
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Oh David, how KIND of you to look out for the average guy who simply can’t compare to your intellect. How EVER does he manage to get his pants on in the morning?
… are you serious …?
Yes, the American system is hard to navigate, but that is rarely indicative of the intelligence or effort of the individual. We have allowed our system to be gamed by corporations and the like to deliberately making the system as convoluted as possible so as to take advantage of people. Wasn’t this SPECIFIC TOPIC talked about in Freakonomics, where they looked at how information asymmetry was traditionally exploited in various fields and that those within the fields are railing against legitimate attempts to close the gap?
Why do doctors threaten to sue sites that want to offer user-generated ratings and reviews? Why do realtors make every effort possible to keep buyer and seller apart?
The “plight” of the “average man” is just David’s way of feeling superior. The system is hard, and harder for some than others, for various reasons. But instead of pitying those poor people who just can’t get it, maybe we should stop kicking the chair out from under them and develop a truly free-market system where consumers and producers are both empowered?
What happens with health insurance is that the average guy doesn’t get the best deal. He checks the most likely looking box on his employer’s forms at the last possible minute in the annual enrollment process, with HR breathing down his neck for the paperwork. And in the short run, this is an economically sensible decision because the choices are complicated (and inadequately explained) and many employers change insurance plans every year, so the odds of using the plan for anything other than routine needs are small.
If you really want a time-consuming lifestyle, try being poor in the U.S. Between taking the bus and waiting in line for services, being poor is a full-time job in itself.
Crust –
Health insurance companies aren’t a “US bureaucracy” per se, because they aren’t part of the government.
If you think they are complicated now, just wait until this bill passes!
I think it advantages those who are willing to learn to work the system. After all, that is why we have lawyers and why they invented legalese.
I graduated in the top 10% of my high school class. I have a master’s degree. I scored an 800 on my math SATs.
It absolutely BAFFLES me how people manage to buy homes and do their taxes.
I have a 401k account, a Roth IRA account, stock options and grants from my employer, stock holdings worth a few grand via at least one trading website, school loans, a car payment each month, a bank account with my debit & credit cards, and an online savings account.
There is no way I can keep track of all of that at once. Smith Barney could steal $5,000 from me tomorrow – just pull it out of the balance of my 401k or Roth IRA or something – and I’d never know it was gone. I don’t even know who I owe my student loan repayment to… all I know is I pay them $170 per month, and they pull it right out of my checking account. I *think* the balance is $10k or so, but if I somehow managed to log into their website (assuming someone told me what it is) and I saw I owed $13k, I wouldn’t be surprised and I wouldn’t complain.
Stop and Shop could randomly charge my credit card $52.64, or $111.09, on a day I never even went there, and there’s probably an 80% chance I would never notice.
And this is before we even get into the fact that I have NO idea what a mutual fund is, what a bond is, or what the hell Smith Barney is doing with my money. The financial system is so utterly complicated and ridiculous, I think it only serves to keep the number of people who “understand” it very low, so they can continue to take advantage of those who don’t.
This system seems to favor the young, which is troubling. With all the updates in technology being applied to the process of acquiring information, the older generation seems to be at an extreme disadvantage.
re 2. keith
in singapore, nobody i know uses any software to do personal taxes. tax accountants are for business owners and the very, very wealthy. the regular guy logs in a website, verifies his income and tax reliefs, and logs out. it’s a 10-minute job every year. there are many things we complain about in this country, but i’m thankful for the simplicity in tax submission.
(oh yes, we don’t hv many options to “optimise tax” too)
The psychology of more choice is bad, is when an uninformed decision maker has to make a choice, concerned whether they made the right choice, hence people have their ‘usual’ at restaurants, i prefer to try and see, test and now with the advent of the internet and the ability to easily find reviews and evaluations of any product; being uninformed is not an excuse. I agree, why do we need ten choices for ketchup, and in that we shouldn’t limit our choices for healthcare. I think we need to be reasonable here, simplify choices, auto insurance has thirty different factors, NOBODY complains about auto insurance, why we understand the coverage were getting at each increment and what all of it covers normally, if we really want to adjust healthcare and make it, to where all option choices, are labeled the same, like with auto insurance, life insurance, etc. Make choices conform to a preset system and make it easy to compare, take the teeth out of comparisons. let us build our healthcare option, al la carte.