In 2005, economist Steven Levitt and journalist Stephen Dubner published “Freakonomics: A Rogue Economist Explores the Hidden Side of Everything.” The book is a collection of Levitt’s musings about applying traditional economic theory to nontraditional subjects. For example, the first chapter starts by analyzing cheating and applying it to teachers, sumo wrestlers and a bagel store.
I had not thought about the book until a morning news commentator referred to it on a recent broadcast. Coincidentally, it was the same morning that newspapers around the United States ran headlines announcing that the number of uninsured has supposedly declined drastically since 2013, thanks to the Patient Protection and Affordable Care Act (PPACA).
On Aug. 12, the New York Times trumpeted the headline, “Number of Uninsured Has Declined by 15 Million Since 2013, Administration Says.” The article explained that this, “…decline occurred as major provisions of the Affordable Care Act took effect. The law expanded coverage through Medicaid and through subsidies for private insurance, starting in 2014.”
All of this reminded me of another quasi-economic theory with the homonymous name of “Freeconomics.” The example most often cited is that of master marketer King Gillette. Gillette was trying to shave with a straight razor that was so worn that it could not be sharpened. Frustrated, he conceived of the disposable razor blade. After failing (miserably) to market his new invention, he finally hit on a winning strategy of giving away the handles with a few sample blades. Once people tried it and liked it, he reasoned, they would have to come back to purchase the blades. The rest, as we now know, is history.
While you never want to credit brilliance for that which might just be dumb luck, the folks who conceived PPACA might have had King Gillette’s Freeconomic model on their mind.
Some of the decrease in uninsured may be attributable to small improvements in the economy; the vast majority of the change is likely due to the carrots and sticks written into the law.