20
Sep
10

Covert Goods

I had this random idea and so gave it a pretty random, but I think descriptive, name.

Most economic goods are provided at an efficient level because people can see their value. Pretend that I have a chemical that will make your life much better by imperceptibly changing circumstances so that things go your way. You will barely catch the train rather than barely missing it, the cute girl you like will be single rather than in a relationship, and job opportunities will come knocking at your door. Such a chemical obviously has significant value.

Pretend I’m trying to sell it to you, would you buy it? Probably not because my product is indistinguishable from fake product that did nothing. Even if you bought it and good stuff started to happen, you would have no reason to attribute your luck to my product. It could just be luck.

Healthcare is like this. Because we don’t know what is best (on complex medical questions) or what our life would be like WITHOUT the surgery we got, we have know we of knowing whether we should buy the surgery. You may have an ill-advised surgery in mind for me, and I might pay you to do it based on my trust of you. My life afterward might be great or terrible (think, a successful surgery to head off a disease or illness means that your life will go on AS IT DID BEFORE WITH NO PERCEPTIBLE CHANGE), but since I can’t compare it to what my life would have been like without the surgery and I know that, I’m going to be very suspicious of buying such surgeries (that’s why it’s really important that we trust our doctors as an institution).

But there are some economic goods whose purpose might be to convince the person that the service was unnecessary. I’m thinking here of an experience I’ve had lately as an editor. I think I’m usually pretty helpful in revising a paper, that is, my comments are usually useful. But comments are rarely implemented by the target writer unless one is accommodating and sly. The best way to get important changes made is to convince the writer that they thought of the idea themselves; a good editor leads a writer to the realization that something is wrong with the piece at hand. Any other tactic provokes resistance.

But notice how interesting this is. If the best editor is the one that gets the writer to change things on his own, then the writer, BY DESIGN, will basically never think the editor is contributing anything. The writer will think that he thought up everything on his own and that the editor has been superfluous and unhelpful.

This means, economically, that there may be some services (what I’m calling covert services, because to be successful, they must come across as not a service at all), that there is almost no demand for, even though they are really worthwhile, just as there would be no demand for my magic potion, even though it would be highly valuable.

Another way of putting it is that these covert goods would not be provided at a socially optimal level.

Interestingly, society as a whole seems to have gotten around this by recognizing some of these goods and singling them out for endorsement. Teachers always tell you how good it is for someone else to read your paper, yet most people never follow this advice, probably because they cannot discern any help from seeing an editor or another student for the reason I’m putting forward here. But still, over time, pressure from teachers and professional organizations like newspapers has done a good job spreading the word.

I wonder if there are other covert goods, as I’m calling them here?

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