Monthly Archives: July 2008

Becker and Posner on Obesity and Externalities

Becker and Posner discuss in a recent post if it is justified for intervene in the fast food industries by introducing bans on trans fats or by requiring fast food chains to post on menus the calorie content of the food they serve as New York City as recently done.

I found particularly stimulating Becker’s critical take on whether it is appropriate to view obesity as imposing an externality on others. Here’s an excerpt from Becker’s post:

The so-called externality results from the fact that greater obesity raises taxes on others because the medical bills of the obese are partly paid by general taxpayers due to subsidized medical care. As Posner points out, this argument may be weak because obese adults die earlier than others and in this way obesity saves medical costs. However, even if true, I am uneasy about such externality arguments. Typical true externalities occur when actions by one individual or firm directly harm others, as when pollution by a company worsens the health of inhabitants, or when a drunk driver crashes into another car and injuries or kills the driver and passengers of that car.

But the alleged “externality” with regard to obesity is due only to the government’s subsidy of medical expenditures, so that it is a case of one government intervention- justified or not- causing another intervention-control of eating. It is not a path of intervention causation that most people would be comfortable with in many situations. For example, since the government subsidizes the medical care of children of poorer parents, a mechanical application of this type of externality argument would say that this justifies governmental control over the number of children that poor parents can have. Additional children of these families create an “externality” by raising taxes on others to pay for the medical costs of these children. Many similar examples can be given where government regulations and other government programs cause certain types of behavior that raise taxes or subsidies and adversely affect taxpayers, even though there would be no externality from this behavior in the absence of the government programs.

An Austrian View on Nudge

Gary Galles on the Ludvig von Mises Institute site takes an Austrian, critical view at Thaler’s and Sunstein’s argument, presented in their book Nudge, that governments can increase economic welfare by paying greater attention to choice architecture. Choice architecture can help alter people’s behavior in a predictable, desirable way without restricting the options available or significantly changing economic incentives. Galles writes:

“While those interested in liberty should read those and other careful considerations of the theory behind Nudge, there is another fatal but overlooked flaw in the book’s argument. They begin by assuming that people’s current choices reflect the results when they are left alone to make them (i.e., reflecting self-ownership and voluntary market choices). That is why any shortcomings must be the fault of irrational individuals, who need paternalistic nudges to improve things. However, our current savings, organ-donation, and health choices are not those of free individuals; they are the choices made in large part because current government policies — taxes, regulations, mandates, etc. — impair incentives. They are government failures presented as market failures.”

Read Galles’ article

Behavioral economics podcasts and webcasts

Here is a list of lectures and interviews on behavioral economics, which can be used as additional materials for teaching.

Summer school on Energy and Climate Policy Modeling with GAMS/MPSGE

4th Ruhr Graduate Summer School in Economics “Energy and Climate Policy Modeling with GAMS/MPSGE” September, 8th-12th, 2008, University of Duisburg-Essen, Essen, Germany. The registration deadline is August 15, 2008.
The workshop provides an introduction into partial and general equilibrium models for the state-of-the-art impact assessment of energy and climate policies. Drawing on basic microeconomic theory, the course will follow model-based peer-reviewed publications in international journals to cover contemporary issues in energy and climate policy such as the promotion of renewable energies, the phase-out of nuclear power, the implementation of environmental tax reforms or the design of international emissions trading schemes.

The primary target audience is professional economists and PhD students who want to do energy and climate policy analysis with real data based on microeconomic theory. However, the concepts, tools and data sets can be used for the analysis of a wide range of economic issues such as for example in public finance of the evaluation of trade liberalization policies.

More information at

Summer school: Why isn’t ethics a behavioural science?

Summer school “Why isn’t ethics a behavioural science?” in Trento, Italy from 25. September 2008 to 28. September 2008
Deadline for application 20. August 2008
Further information at:

Below a description:

As in every summer, the Laboratory for Social Responsibility, Ethics and Rational Choice of the Department of Economics at the University of Trento, and Econometica (Inter-University Centre for Economic Ethics and Corporate Social Responsibility) organize a summer school on game theory, social norms and institutions.

This year’s summer school will continue on this tradition. The idea behind the school is that our understanding of the role of social preferences in shaping social norms and institutions will be enhanced if we manage to integrate three sides of the current research. First, the theory of bounded rationality and learning in games. Second, the more sophisticated approach to people’s preferences pioneered by behavioural economists, which incorporates altruism and spitefulness, a taste for reciprocity, feelings of guilt and shame and other moral emotions.
Finally, the experimental research on the way in which flesh-and-bone individuals make their decisions in strategic situations.”