Thursday, October 25, 2007

Fast Funds from the Fat

Professor Tyler Cowen's thoughts have been reflected upon within this site a few times. For the non-economist he is a good mix of technical knowledge and natural narrative. He is "classically liberal" enough to appeal to certain philosophical assumptions of mine and, as a libertarian with a conservative bent, to challenge others. His latest book Discover Your Inner Economist was the inspiration of a Fast Company article Entrepreneurship: Making Money On The Obese.

Here are my thoughts on the article. The link from Fast Company to Marginal Revolution in the article was wrong. The writing was an exercise. What is in truth the third incarnation hopefully has fewer mistakes.

First off its one study and not a particularly extensive one. Second the better question is why does money even small amounts induce people to loose weight while health and social acceptance does not. I doubt its the ability to get a couple extra videos for rent. The answer to the question in the article does anyone dare is obvious - plenty Jenny Craig, Weight Watchers etc. etc. Third the two scenarios are quite different. Professor Cowen's version is negatively re-enforced. Even if it works for a few, the repeat or referred business will drop off fast. The study scenario is positively re-enforced for the participants. The company is the one paying there is no participant contribution. It is the Fast Company version that raises the questionable ethics. Under it, one it has too presume that most don't lose weight so in turn do lose money. It in fact presumes that the study is false and money does not make a significant difference. Finally, because there is now an investment to protect in a group interaction, which was not true of either Professor Cowen's version (no group) or the study version (no investment), there is the potential for sabotage because if others fail I could get more, thereby bringing in the questionable ethics and practical failing of the system. The ethical gray area of making a profit on people's negative self image. I think that's called the fashion industry. Actually the most interesting point raised is by Professor Cowen, an economist who argues, Money isn't always a useful tool in altering human behavior; anyone who's offered financial rewards to their children for doing chores can tell you that the results are mixed. Both costs and benefits it would seem are in the eyes of the beholder.

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