aTypical Joe: a gay New Yorker living in the rural South

Friday, April 04, 2008

Dan Ariely says, “Test the stimulus package”

The author of Predictably Irrational on Marketplace last night:

The field of behavioral economics has rather convincingly shown that money given in different forms can have different effects. For example, paying for dinner in cash feels very different than paying the same bill with a credit card. And an increase in monthly salary has a different effect on a person’s spending than the same amount in an equivalent yearly bonus. [...]

We force drug companies to test the efficacy of their drugs before rolling them into the market. So shouldn’t we ask the government to first test its ideas before it invests billions of dollars of our tax money into some stimulus package?

Experiments like these aren’t easy to do. But in order to learn what is truly most effective, we must select a few possibilities. We should try them out in different markets or market sectors and compare their effectiveness over time.

For instance, I suspect that giving people a prepaid debit card will do more to rejuvenate the economy than mailing out checks, but direct deposits wouldn’t be nearly as effective. I also suspect that if we added a line on the debit card that reads “spend the government’s money” this would work even better.

SEE ALSO: Dan Ariely’s “Self-Control” credit card.