13 November, 2007

Sometimes free is better.

There is a nice survey of recent work in "social marketing". Let's say we want to distribute, say, mosquito nets in sub-Saharan Africa because we think they are a good idea (massive health benefits at low cost) and we are paternalistic white-man's-burden types. We can either set up the distribution network ourselves and hand them out for free or we can attempt to create a market for the mosquito nets so that they are bought and sold voluntarily by those we want to assist. The virtue of the latter is that these structures will persist beyond our intervention. The virtue of the former is that it turns out empirically that making people pay for these sorts of aids decreases their use significantly.

There is a good theoretical argument for giving drugs away based on externalities. If you take a drug for, say, worms, that decreases your chance of getting worms, but also decreases *my* chance of getting worms. I can free ride to some extent by not taking the drug and letting everyone else pay the costs. Thus, too few people take it and it should be subsidized.

On the other hand, if people are not buying drugs or nets even when they are available, perhaps they do understand the benefits and simply think that something else is more worthwhile. In that case, we might be wrong about our paternalistic urges.

5 comments:

Cassady said...

I definitely see your point about incentives and such, I just still feel like there is something positive about creating a new market in a developing economy.

I don't actually know, I'm just speculating. Is there a feasible or realistic way to provide the necessary incentives to get everyone to cooperate without some sort of ridiculous coercion?

Elliot said...

No.

spencer said...

While I certainly agree that there is something positive about creating a market, you have to make a choice. Either (according to one study) you give nets away for free and 75% of people use them or you set up a market an only 19% of people use them.

Giving things away for free is not ridiculous coercion. Neither is setting up a market.

Cassady said...

I wasn't saying that giving them away was coercion. I'm ALL for giving them away wherever they are needed. I'd rather see direct, effective aid than scheming any day.

I was just wondering why the market system couldn't be more effective, and without forcing anyone's hand. Incentives, Spence, incentives.

spencer said...

I think the conclusion of the study was not that the market system did not provide nets and medicines but rather that no one wanted to pay for them.

So either they did not understand the benefits of the nets or they did and judged them to be less worthwhile than something else they could spend their very limited resources on.