Austrian economics

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Free Market Solution to Obesity?

1:14 PM, Apr 5, 2011 • By EMILY SCHULTHEIS

Over the weekend, the Wall Street Journal had a fascinating article on a new book entitled, XXL: Obesity and the Limits of Shame, by Neil Seeman and Patrick Luciani. These Canadian scholars have managed to devise a solution for obesity based on the free market philosophies of Friedrich Hayek and his Austrian cohorts:

Perhaps the answer to obesity is to spend money not on the producers (of gyms, diets, surgery, vegetables) but on the consumers. Drawing a direct analogy with the effect of vouchers in the education system, Messrs. Seeman and Luciani suggest "healthy-living vouchers" that could be redeemed from different (certified) places—gyms, diet classes, vegetable sellers and more. Education vouchers, they point out, are generally disliked by rich whites as being bad for poor blacks—and generally liked by poor blacks. A bottom-up solution empowers people better than top-down government fiat.

So instead of spending large sums on ads to shame us into better eating habits, spend the money on vouchers handed out to the overweight and let them find whatever provider of goods or services best meets their particular dieting needs. After all, the root causes of obesity are multifarious and new ones are being added all the time—such as diet sodas, gut bacteria, genes, sleep apnea, leptin levels, medication, depression, poverty and peer pressure. So the solutions need to be multipronged, too. What works for you may not work for me.

Now, it's true that this idea may not work any better than the fixes Americans have been desperately trying for years--we are, after all, currently in the middle of Biggest Loser Season 11! But maybe it's worth a shot. Economist Tyler Cowen, however, is skeptical of Seeman and Luciani's proposal.

The Austrians: Strange New Respect?

The Austrians: Strange New Respect?

Some unexpected appreciation for a marginalized school of economics.

9:56 AM, Apr 7, 2010 • By MATTHEW CONTINETTI

Martin Wolf asks his readers their opinion of the Austrian school of economics (whose most famous adherent in this country is Ron Paul):

I think we can say that conventional neo-classical equilibrium economics did a poor job in predicting the crisis and in suggesting what should be done in response. We can also say that neo-Keynesians pointed out some important precursors of the crisis, in particular, the destabilising role of huge private sector financial deficits in countries with large external deficits, such as the US, and the Keynesian view certainly played a big part in the post-crisis response, as did that of Milton Friedman.

Yet some would argue that economists working in the Austrian tradition were more nearly right than anybody else. In particular, they have argued that: inflation-targeting is inherently destabilising; that fractional reserve banking creates unmanageable credit booms; and that the resulting global “malinvestment” explains the subsequent financial crash. I have sympathy with this point of view. But Austrians also say - as their predecessors said in the 1930s - that the right response is to let everything rotten be liquidated, while continuing to balance the budget as the economy implodes. I find this unconvincing. Mass bankruptcy is extremely costly. Moreover, it is impossible to separate what is healthy from what is unhealthy during a general economic collapse triggered by an implosion of the financial system.

This isn't an endorsement by any means -- but it's interesting to see the Austrians get some credit from one of the most famous economic journalists in the world. (Be sure to read the comments following Wolf's post for a fascinating discussion.)

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