Umair Haque / Bubblegeneration
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Design principles for 21st century companies, markets, and economies. Foreword by Gary Hamel. Coming January 4th. Pre-order at Amazon.


 
Thursday, November 25, 2004


Hyperconsumption

"...Plagued by a series of ailments -- including a heart attack, cancer, pancreatitis, and a diseased gallbladder -- Mr. Selby has had to shell out tens of thousands of dollars. In the process, he has learned to shop for health care the way other Americans shop for cars. He haggles over prices. He asks for discounts if he pays upfront. He goes to different hospitals, scouting out their best offer, and then pits them against each other.

If he still can't get what he wants, he goes to the top, appealing to hospital executives. "A lot of people in a hospital don't know what to do when someone says they want to pay cash," Mr. Selby says.

Mr. Selby has already done what millions of Americans may soon be doing, as companies shift to "consumer-driven" health-care plans, and health-savings accounts."

A killer example of the morality (and mechanisms) of the marketplace extending into every sphere of life. What's interesting is the irrationality of hyperconsumption - in this case, we can gauge the risk of health of deterioration exactly: it's equivalent to the gains from haggling.

But clearly good health is worth far more than the price of this risk - otherwise people would be crashing cars, smoking heavily, and shooting each other more than they generally do. So we can only conclude that, in this case, like any other form of hyperconsumption, preferences are nonlinear and strange things like preference reversals happen - there's diminishing marginal utility to gains from haggling (or novelty, if you put this in the context of mall shopping). So the question is - is this a preference shift which happens when market mechanisms take over, or are people always this irrational about the marginal value of health?

Link (Sub).

-- umair // 1:34 PM // 0 comments


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