Too many options hurt the United States – 02/03/2021 – Paul Krugman

Dan Patrick, the vice governor of Texas, is clearly what my father would call “a play.”

At the start of the pandemic, he made headlines saying that older Americans should accept the risk of death so that younger ones can “go back to work.” More recently, he suggested that Texans who had $ 17,000 utility bills after the February freeze could only blame themselves for “not reading the fine print.”

Isn’t it funny how politicians who denounce liberal elitists laugh at ordinary Americans when they are faced with problems?

But another thing struck me about Patrick’s interpretation of huge electricity bills: that we have become a country where families can go bankrupt if they don’t carefully study something so mundane, usually routine, than their electricity contract?

And electricity is not the only example.

As The Times’ Margot Sanger-Katz documented, many people end up in big financial debt because they chose the wrong health insurance – but even experts struggle to figure out what the best plan is. Using an “off-the-grid” healthcare provider can also result in huge medical bills.

Wait, there is more. One of the causes of the 2008 financial crisis was the proliferation of new financial arrangements, such as interest-only loans, which seemed like good business but put borrowers at enormous risk.

What these stories have in common is that they are snapshots of a country where many people have too many options, in a way that can do great harm.

It is true that basic economics and conservative ideology say that more options is always a positive thing. Milton Friedman’s famous and influential 1980 television series extolling the wonders of capitalism was titled “Free to Choose”.

The spread of this ideology has transformed the United States into a country where many aspects of life that were only part of the background today require potentially fatal decisions.

You don’t get a company pension, you have to decide how to invest your 401 (k) retirement fund. When you are 65, you are not simply subject to government health insurance, Medicare; you also need to decide which Medicare Advantage plan to purchase.

You don’t just get phone service and power, you also have to choose from a wide range of alternatives.

Perhaps the most important part of this expansion of options was good. I don’t miss the time when all home phones were owned by AT&T and customers couldn’t trade in their own devices.

But the discussion that more options are always good rests on the premise that people have a more or less unlimited capacity to properly take care of all aspects of their lives – and the real world is not like that. People have children to raise, jobs, lives to live and a limited capacity to process information.

And in the real world, too many options can be a big deal.

The lesson from “subprime” mortgages, health insurance, and now electricity in Texas is that sometimes people with a lot of options will make bigger mistakes than they thought possible. But that’s not all. Too many options make room for predators who exploit our human limitations.

Before the risky mortgage crisis, Edward Gramlich, a Federal Reserve (central bank) official who unsuccessfully warned of the dire potential, asked, “What are the riskiest credit products sold to less sophisticated borrowers?” ? The question, he suggested, “is self-explanatory: less sophisticated borrowers may be drawn into accepting these products.”

Likewise, there is clearly a lot of profitability in the medical bills, the victims, in disproportionate numbers, the least able to understand what is going on.

On top of that, I might suggest that too many options have a psychological impact on many Americans, even when they don’t end up experiencing disaster.

A growing body of research suggests that the costs of poverty go beyond the difficulties low-income families face in meeting their basic needs. The poor also face a heavy “cognitive burden” – the constant need to make difficult choices that the rich do not face, such as buying food or paying rent.

Because people have limited “bandwidth” to deal with complex problems, the financial burdens on the poor often degrade their ability to make good decisions on other matters, sometimes leading to self-defeating life options.

What I’m suggesting is that a society that turns what should be routine concerns into all-or-nothing decisions – a society where you can ruin your life by choosing the wrong utility company or the wrong health insurance. – imposes similar cognitive difficulties ranging from poverty to poverty. middle class.

And all of this is unnecessary. We are a rich country – and the citizens of other rich countries are not afraid of going bankrupt because of medical bills. It wouldn’t be too difficult to prevent Americans from being duped by mortgage lenders or losing their savings due to fluctuations in wholesale electricity prices.

So the next time a politician tries to sell a new policy – usually deregulation – by saying it will increase options, beware. Having more alternatives isn’t necessarily a good thing, and in the United States we probably have more than we should.

Translation by Luiz Roberto M. Gonçalves

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