Self-Interest & A Banking Moral Hazard

Self-Interest & A Banking Moral Hazard

I have not really read into or studied the financial crisis of 2008, but I remember how angry and furious so many people were at the time. There was an incredible amount of anger at big banks, especially when executives at big banks began to receive massive bonuses while many people in the country lost their homes and had trouble rebounding from the worst parts of the recession. The anger at banks spilled into the Occupy Wall Street movement, which is still a protest that I only have a hazy understanding of.
While I don’t understand the financial crisis that well, I do believe that I better understand self-interest, thanks to my own personal experience and constantly thinking about Robin Hanson and Kevin Simler’s book The Elephant in the Brain. The argument from Hanson and Simler is that most of us don’t actually have really strong beliefs about most aspects of the world. For most topics, the beliefs we have are usually subservient to our own self-interest, to the things we want that would give us more money, more prestige, and more social status. When you apply this filter retroactively to the financial crisis of 2008, some of the arguments shift, and I feel that I am able to better understand some of what took place in terms of rhetoric coming out of the crisis.
In Risk Savvy, published in 2014, Gerd Gigerenzer wrote about the big banks. He wrote about the way that bankers argued for limited regulation and intervention from states, suggesting that a fee market was necessary for a successful banking sector that could fund innovation and fuel the economy. However, banks realized that in the event of a major banking crisis, all banks would be in trouble, and dramatic government action would be needed to save the biggest banks and prevent a catastrophic collapse. “Profits are pocketed by executives, and losses are compensated by taxpayers. That is not exactly a free market – it’s a moral hazard,” writes Gigerenzer.
Banks, like the individuals who work for and comprise them, are self-interested. They don’t want to be regulated and have too many authorities limiting their business enterprises. At the same time, they don’t want to be held responsible for their actions. Banks took on increasingly risky and unsound financial loans, recognizing that if everyone was engaged in the same harmful lending practice, that it wouldn’t just be a single bank that went bust, but all of them. They argued for a free market before the crash, because a free market with limited intervention was in their self-interest, not because they had high minded ideological beliefs. After the crash, when all banks risked failure, the largest banks pleaded for bail outs, arguing that they were necessary to prevent further economic disaster. Counter to their free-market arguments of before, the banks favored bail-outs that were clearly in their self-interest during the crisis. Their high minded ideology of a free market was out the window.
Gigerenzer’s quote was meant to focus more on the moral hazard dimension of bailing out banks that take on too many risky loans, but for me, someone who just doesn’t fully understand banking the way I do healthcare or other political science topics, what is more obvious in his quote is the role of self-interest, and how we try to frame our arguments to hide the ways we act on little more than self-interest. A moral hazard, where we benefit by pushing risk onto others is just one example of how individual self-interest can be negative when multiplied across society. Tragedy of the commons, bank runs, and social signaling are all other examples where our self-interest can be problematic when layered up to larger societal levels.
Do People Make the Best Choices?

Do People Make the Best Choices?

My wife works with families with children with disabilities and for several years I worked in the healthcare space. A common idea between our two worlds was that the people being assisted are the experts on their own lives, and they know what is best for them. Parents are the experts for their children and patients are the experts in their health. Even if parents to don’t know all the intervention strategies to help a child with disabilities, and even if patients don’t have an MD from Stanford, they are still the expert in their own lives and what they and their families need.

 

But is this really true? In recent years there has been a bit of a customer service pushback in the world of business, more of a recognition that the customer isn’t always right. Additionally, research from the field of cognitive psychology, like much of the research from Daniel Kahneman’s book Thinking Fast and Slow that I wrote about, demonstrates that people can have huge blind spots in their own lives. People cannot always think rationally, in part because their brains are limited in their capacity to handle lots of information and because their brains can be tempted to take easy shortcuts in decision-making that don’t always take into account the true nature of reality. Add to Kahneman’s research the ideas put forth by Robin Hanson and Kevin Simler in The Elephant in the Brain, where the authors argue that our minds intentionally hide information from ourselves for political and personal advantage, and we can see that individual’s can’t be trusted to always make the best decisions.

 

So while no one else may know a child as well as the child’s parents, and while no one knows your body and health as well as you do, your status as the expert of who you are doesn’t necessarily mean you are in the best position to always make choices and decisions that are in your own best interest. Biases, cognitive errors, and simple self-deception can lead you astray.

 

If you accept that you as an individual, and everyone else individually, cannot be trusted to always make the best choices, then it is reasonable to think that someone else can step in to help improve your decision-making in certain predictable instances where cognitive errors and biases can be anticipated. This is a key idea in the book Nudge by Cass Sunstein and Richard Thaler. In defending their ideas for libertarian paternalism, the authors write, “The false assumption is that almost all people, almost all of the time, make choices that are in their best interest or at the very least are better than the choices that would be made by someone else. We claim that this assumption is false – indeed, obviously false.”

 

In many ways, our country prefers to operate with markets shaping the main decisions and factors of our lives. We like to believe that we make the best choices for our lives, and that aggregating our choices into markets will allow us to minimize the costs of individual errors. The idea is that we will collectively make the right choices, driving society in the right direction and revealing the best option and decision for each individual without deliberate tinkering in the process. However, we have seen that markets don’t encourage us to save as much as we should and markets can be susceptible to the same cognitive errors and biases that we as individuals all share.  Markets, in other words, can be wrong just like us as individuals.

 

Libertarian paternalism helps overcome the errors of markets by providing nudges to help people make better decisions. Setting up systems and structures that make saving for retirement easier helps correct a market failure. Outsourcing investment strategies, rather than each of us individually making stock trades, helps ensure that shared biases and panics don’t overwhelm the entire stock exchange. The reality is that we as individuals are not rational, but we can develop systems and structures that provide us with nudges to help us act more rationally, overcoming the reality that we don’t always make the choices that are in our best interest.
Should We Assume Rationality?

Should We Assume Rationality?

The world is a complex place and people have to make a lot of decisions within that complexity. Whether we are deliberate about it or not, we create and manage systems and structures for navigating the complexity and framing the decisions we make. However, each of us operate from different perspectives. We make decisions that seem reasonable and rational from our individual point of view, but from the outside may seem irrational. The question is, should we assume rationality in ourselves and others? Should we think that we and other people are behaving irrationally when our choices seem to go against our own interests or should we assume that people have a good reason to do what they do?

 

This is a current debate and challenge in the world of economics and has been a long standing and historical debate in the world of politics. In his book Thinking Fast and Slow, Daniel Kahneman seems to take the stance that people are acting rationally, at least from their own point of view. He writes, “when we observe people acting in ways that seem odd, we should first examine the possibility that they have a good reason to do what they do.”

 

Rational decision-making involves understanding a lot of risk. It involves processing lots of data points, having full knowledge of our choices and the potential outcomes we might face, as well as thinking through the short and long-term consequences of our actions. Kahneman might argue, it would seem after reading his book, that truly rational thinking is beyond what our brains are ordinarily capable of managing. But to him, this doesn’t mean that people cannot still make rational choices and do what is in their best interests. When we see behaviors that seem odd, it is possible that the choices other people have made are still rational, but just require a different perspective.

 

The way people get to rationality, Thinking Fast and Slow suggests, is through heuristics that create shortcuts to decision-making and eliminate data that is more or less just noise. Markets can be thought of as heuristics in this way, allowing people to aggregate decisions and make choices with an invisible hand directing them toward rationality. So when we see people who seem to be acting obviously irrationally or opposed to their self-interest, we should ask whether they are making choices within an entirely different marketplace. What seems like odd behavior from the outside might be savvy signaling to a group we are not part of, might be a short term indulgence that will stand out to the remembering self in the long run, and might make sense if we can change the perspective through which we judge another person.

 

Kahneman shows that we can predict biases and patterns of thought in ourselves and others, but still, we don’t know exactly what heuristics and thinking structures are involved in other people’s decision-making. A charitable way to look at people is to assume their decisions are rational from where they stand and in line with the goals they hold, even if the choices they make do not appear to be rational to us from the outside.

 

Personally, I am on the side that doubts human rationality. While it is useful, empathetic, and humanizing to assume rationality, I think it can be a mistake, especially if we go too far in accepting the perspective of others as justification for their acts. I think that there are simply too many variables and too much information for us to truly make rational decisions or to fully understand the choices of others. My thinking is influenced by Kevin Simler and Robin Hanson who argue in The Elephant in the Brain, that we act on pure self-interest to a greater extent than we would ever admit, and we hide our self-interested behaviors and decisions from everyone, including ourselves.

 

At the same time, I do believe that we can set up systems, structures, and institutions that can help us make more rational decisions. Sunstein and Thaler, in Nudge, clearly show that markets can work and that people can be rational, but often need proper incentives and easy choice structures that encourage to encourage better choices. Gigerenzer in Risk Savvy ends up at a similar place, showing that we can get ahead of the brain’s heuristics and biases to produce rational thought. Creating the right frames, offering the right visual aids, and helping the brain focus on the relevant information can lead to rational thought, but nevertheless, as Kahneman shows, our thinking can still be hijacked and derailed, leading to choices that feel rational from the inside, but appear to violate what would be in our best interest when our decisions are stacked and combined over time. Ultimately, the greatest power in assuming rationality in others is that it helps us understand multiple perspectives, and might help us understand what nudges might help people change their behaviors and decisions to be more rational.
Instagram Vacations - Joe Abittan

Instagram Vacations

An important goal of our vacations these days is to take pictures of the unique, interesting, and memorable experiences of our trip. We will go out of our way to get the perfect picture, whether it is with a celebrity, atop a waterfall, or with a plate of food at a busy restaurant where we had to wait an hour for a table. The actual experience of getting to the point where we can take our famed picture may require a long wait in a cold line, a difficult hike up a steep mountain, or a boring car ride for miles to get to a random yet delicious dinner in the middle of no where. We put ourselves through unpleasant experiences while on vacation because the remembering self wants a story to tell about the trip we took.

 

Getting back to the office, returning to school, or catching up with family after our trip is where the remembering self will be in action. Telling our friends and family that we went to the same beach as last year, sat on the shore, read, and didn’t do anything novel or exciting will make the whole vacation feel less meaningful. Perhaps we really just need a boring and relaxing break, but the remembering self doesn’t want us to have a forgettable experience.

 

So instead of the boring and uninspiring vacation where we caught up on sleep and enjoyed lounging around eating simple food, we set out for the perfect Instagram vacation. We relentlessly photograph all the interesting things we do, the famous people we can pose next to for 2 seconds, and the tasty food we eat. We give up a little of the present moment experience in order to capture a picture that we likely won’t spend much time looking at in the future. As Daniel Kahneman writes in Thinking Fast and Slow, “The photographer does not view the scene as a moment to be savored, but as a future memory to be designed.”

 

Instead of taking vacations to get away, relax, and relieve stress, we plan vacations to give us the best possible memories. “In many cases,” Kahneman writes, “we evaluate touristic vacations by the story and the memories that we expect to store.” In his book Kahneman shares research to suggest that students misremember how enjoyable a vacation was when it didn’t have unique and memorable experiences. They become less likely to say they would repeat the trip if it was enjoyable but not unique.

 

This ties in with ideas from Robin Hanson in The Elephant in the Brian. Hanson would argue that vacations are not about relaxing and taking time away from work or school. He would go further than Kahneman and say that vacations are not about memories but are instead about showing off our wealth, our connections, and how interesting we are by traveling to unique places. We pick memorable vacations because the remembering self wants to craft an interesting story about who we are and the trips we take. We want to signal something to the people around us. We want to impress them, and a boring vacation at the same beach as last year just won’t cut it, even if we would enjoy it more in the moment.
A Lack of Internal Consistency

A Lack of Internal Consistency

Something I have been trying to keep in mind lately is that our internal beliefs are not as consistent as we might imagine. This is important right now because our recent presidential election has highlighted the divide between many Americans. In most of the circles I am a part of, people cannot imagine how anyone could vote for Donald Trump. Since they see President Trump as contemptible, it is hard for them to separate his negative qualities from the people who may vote for him. All negative aspects of Trump and of the ideas that people see him as representing are heaped onto his voters. The problem however, is that none of us have as much internal consistency between our thoughts, ideas, opinions, and beliefs for any of us to justify characterizing as much as half the country as bigoted, uncaring, selfish, or really any other adjective (except maybe self-interested).

 

I have written a lot recently about the narratives we tell ourselves. It is problematic that the more simplistic a narrative, the more believable and accurate it feels to us. The world is incredibly complicated, and a simplistic story that seems to make sense of it all is almost certainly wrong. Given this, it is worth looking at our ideas and views and trying to identify areas where we have inconsistencies in our thoughts. This helps us tease apart our narratives and recognize where simplistic thinking is leading us to unfound conclusions.

 

In Thinking Fast and Slow, Daniel Kahneman shows us how this inconsistency between our thoughts, beliefs, and behaviors can arise, using moral ambiguity as an example. He writes, “the beliefs that you endorse when you reflect about morality do not necessarily govern your emotional reactions, and the moral intuitions that come to your mind in different situations are not internally consistent.”

 

It is easy to adopt a moral position against some immoral behavior or attitude, but when we find ourselves in a situation where we are violating that moral position, we find ways to explain our internal inconsistency without directly violating our initial moral stance. We rationalize why our moral beliefs don’t apply to us in a given situation, and we create a story in our minds where there is no inconsistency at all.

 

Once we know that we do this with our own beliefs toward moral behavior, we should recognize that we do this with every area of life. It is completely possible for us to think entirely contradictory things, but to explain away those contradictions in ways that make sense to us, even if it leaves us with incoherent beliefs. And if we do this ourselves, then we should recognize that other people do this as well. So when we see people voting for a candidate and can’t imagine how they could vote for such a candidate, we should assume that they are making internally inconsistent justifications for voting for that candidate. They are creating a narrative in their head where they are making the best possible decision. They may have truly detestable thoughts and opinions, but we should remember that in their minds they are justified and making rational choices.

 

Rather than simply hating people and heaping every negative quality we can onto them. We should pause and ask what factors might be leading them to justify contemptible behavior. We should look for internal inconsistencies and try to help people recognize these areas and move forward more comprehensively. We should see in the negativity in others something we have the same capacity for, and we should try to find more constructive ways to engage with them and help them shift the narrative that justifies their inconsistent thinking.
Money Isn't About Economic Security (For Most of Us)

Money Isn’t About Economic Security (For Most of Us)

Tyler Cowen started his February 28th, 2018 podcast interview with his colleague from George Mason University, Robin Hanson, with the following:

 

“Robin, if politics is not about policy, medicine is not about health, laughter is not about jokes, and food is not about nutrition, what are podcasts not about?”

 

Hanson goes on to explain that conversations are not really about imparting useful information and finding out useful things, but that conversation is likely more about showing off and signaling. When you share new information to someone, you are showing them that you are a valuable ally who knows useful things that might one day be helpful. When you share a particular piece of knowledge, you are signaling that you are the kind of person who would know such knowledge.

 

I think that Hanson’s views toward signaling are correct and deserve more attention and consideration. A lot of what we do has more to do with signaling than about the reason we would give to an observer for what we are doing. Hanson is not alone in recognizing this reality.

 

In Thinking  Fast and Slow, Daniel Kahneman writes, the following about money:

 

“Except for the very poor, for whom income coincides with survival, the main motivators of money-seeking are not necessarily economic. For the billionaire looking for the extra billion, and indeed for the participant in an experimental economics project looking for the extra dollar, money is a proxy for points on a scale of self-regard and achievement. These rewards and punishments, promises and threats, are all in our head.”

 

Money is not really about economic well-being (for most of us). Its not really about the things we can purchase or the vacations we can take. Money is really about social status. Having more of it elevates our social status, as does using it for impressive and expensive purposes. There is no objective ranking out there for our social status, but we act as if our social status is tangible and will reveal something important about our lives and who we are. Pursuing money gives us a chance to pursue social status in an oblique way, making it look as though we are doing something for high-minded reasons, when in reality we are trying to climb a social ladder and use money as our measuring stick of success.

 

Realistically, we are not going to be able to do much of anything about our signaling behaviors, especially if Hanson is correct in estimating that well over 90% of what we do is signaling. However, we can start to acknowledge signaling and chose where and how we send signals about ourselves. We can chose not to rely on money to signal something about who we are and can seek out more healthy avenues for signaling, with more environmentally friendly and socially conscientious signaling externalities taken into consideration.
Signaling Fairness with Altruistic Punishment

Maintaining the Rules of Fairness with Signaling and Altruistic Punishment

Society is held together by many unspoken rules of fairness, and maintaining rules of fairness is messy but rewarding work. We don’t just advocate for fairness in our own lives, but will go out of our way to call out unfairness when we see it hampering the lives of others. We will protest, march in the streets, and post outraged messages on social media to call out the unfairness we see in the world, even if we are not directly affected by it or even stand to gain by an unfair status quo.

 

Daniel Kahneman, in Thinking Fast and Slow, shares some research studying our efforts to maintain the rules of fairness and why we are so drawn to it. He writes, “Remarkably, altruistic punishment is accompanied by increased activity in the pleasure centers of the brain. It appears that maintaining the social order and the rules of fairness in this fashion is its own reward.”

 

This idea reminds me of Robin Hanson’s book The Elephant in the Brain, where Hanson suggests a staggering amount of human behavior is little more than signaling. Much of what we do is not about the high-minded rational that we attach to our actions. Much of what we do is about something else, and our stated rationales are little more than pretext and excuses. Altruistic punishment, or going out of our way to inflicting some sort of punishment (verbal reprimands, loss of a job, or imprisonment) is not necessarily about the person who was treated unfairly or the person who was being unfair to others. It is quite plausibly more about our own pleasure, and about the maintenance or establishment of a social order that we presumably will benefit from, and about signaling to the rest of society that are someone who believes in the rules and will adhere to strict moral principles.

 

Troublingly, Kahneman continues, “Altruistic punishment could well be the glue that holds societies together. However, our brains are not designed to reward generosity as reliably as they punish meanness. Here again, we find a marked asymmetry between losses and gains.”

 

The second part of Kahneman’s quote is referring to biases in our mental thinking, connecting our meanness or niceness toward others with our tendency toward loss aversion. Losses have a bigger mental impact on us than gains. We might not be consciously aware of this, but our actions – our willingness to inflict losses on others and our reluctance to endow gains on others – seems to reflect this mental bias. We are creating social order by threatening others with loss of social standing at all times, but only with minimal hope of gaining and improving social standing. Going back to the Hansonian framework from earlier, this makes sense. A gain in social status for another person is to some extent a loss to ourselves. Maintaining the social order involves maintaining or improving our relative social position. Tearing someone down signals to our allies that we are a valuable team member fighting on the right side, but lifting someone else up only diminishes our relative standing to them (unless they are the leader who we want to signal our alliance with). Kahneman’s quote, when viewed through Robin Hanson’s perspective, is quite troubling for how our social order is built and maintained.
Help Them Build a Better Life

Help Them Build a Better Life

It is an unavoidable reality that we are more motivated by what is in our immediate self-interest than we would like to admit. This idea is at the heart of Kevin Simler and Robin Hanson’s book The Elephant in the Brain and can be seen everywhere if you open your eyes to recognize it. I’m currently doing a dive into reading about homelessness, and I’m working through Elliot Liebow’s book Tell Them Who I am. Liebow writes about American society’s belief that people will become dependent on aid if it is offered unconditionally. In a passage from his book where he reflects on the barriers that homeless women face in obtaining services and aid, and how those barriers can often become abuse, Liebow writes:

 

“One important source of abuse lies much deeper, in a widespread theory about human behavior that gets expressed in various forms: as public policy, as a theoretical statement about rehabilitation, or simply as common sense. Whatever the form, it boils down to something like this: We mustn’t make things too easy for them (mental patients in state hospitals, welfare clients, homeless people, the dependent poor generally). That just encourages their dependency”

 

What is incredible with the sentiment in the paragraph above is how well it seems to justify what is in the immediate self-interest of the people with the resources to help those in need. It excuses inaction, it justifies the withholding of aid, and it places people with material resources on a moral high ground over those who need help. Helping others, the idea posits, actually hurts them. If I give up some of my hard earned money to help another person, I don’t just lose money, that person loses motivation and loses part of their humanity as they become dependent on the state. They ultimately drag us all down if I give them unconditional financial aid. What is in my best interest (not sharing my money) just also happens to be the economic, moral, and personal best thing to do for another person in less fortunate circumstances.

 

This idea assumes that people have only one singular motivation for ever working, making money to have nice things. It ignores ideas of feeling respected and valued by others. It ignores the human desire to be engaged in meaningful pursuits. And it denies our needs as humans for love, recognition, and basic necessities before we can pull ourselves up by our boot straps.

 

Johann Hari’s book Chasing the Scream is an excellent example of how wrong this mindset is and of the horrors that people can face when the rest of society thinks this way and won’t offer them sufficient help to reach a better place in life. Regarding drug addicts and addiction, Hari quotes the ideas of a Portugese official, “addiction is an expression of despair, and the best way to deal with despair is to offer a better life, where the addict doesn’t feel the need to anesthetize herself anymore. Giving rewards, rather than making threats, is the path out. Congratulate them. Give them options. Help them build a life.”

 

Helping someone build a life requires a financial investment in the other person, a time and attention investment, and also requires that we recognize that we have a responsibility to others, and that we might even be part of the problem by not engaging with those in need. It is in our selfish interest to blame others for the plight of society or the failures of other people. From that standpoint punishment and outcasting is justified, but as Hari, Liebow, and the Portugese official suggest, real relationships and getting beyond fears of dependency are necessary if we are truly to help people reach better places and get beyond the evils we want to see eliminated from the world. We can’t go out of our way to find all the ways in which things that are in our self-interest are good for the rest of the world. We have to acknowledge the damages that our self-interests can cause, and find ways to be responsible to the whole, and help other people build their lives in meaningful ways.
Buying Insurance

We Don’t Buy Insurance for Ourselves

Why do we buy insurance of any kind? Is it really for ourselves and our own benefit, or is there something else going on with insurance decisions? According to Venture Capitalist Chris Brookfield, as quoted in Dave Chase’s book The Opioid Crisis Wake-Up Call, there is something beyond our own self interest at play when we decide to buy insurance.

 

Brookfield is quoted as writing, “Persuading individuals to buy insurance is kind of backwards. I saw this in India all the time. Individuals do not value their own risks – their relatives and neighbors do.” 

 

Buying insurance is actually more about our loved ones and our responsibility to our community than it is about ourselves. It is about protecting the financial standing of our relatives and those who would help us if we were down as much as it is about protecting our own financial standing. The standard story tells us that insurance shifts risk from ourselves to a group of individuals, but as Brookfield continues in the book, it really shifts risks from our immediate known allies, into a broader group of people that we don’t necessarily know.

 

If I don’t have health insurance or auto insurance and die in a terrible car crash, I am not the one who will bear the costs of the accident. My loved ones and other people in the community involved with the crash (other drivers or the owners of any private property that was damaged) are the ones who will face the costs. On their own it would be hard to manage the costs, but pooled together, the costs and the risk could be shared. In a situation where my death occurs, it is other people who derive the value of the insurance.

 

I’m sure there are some insurance products that are pretty solidly just about the individual buying the isurance, but it doesn’t seem to always be that way. Buying insurance seems to be an act of signaling, as Robin Hanson discusses in his book The Elephant in the Brain. Buying insurance isn’t all about sharing risk, it is also about showing others how much you care about them and about showing the community how responsible you are.
Guidance Toward High Value Care

Guidance Toward High Value Care

In his book The Elephant in the Brain, Robin Hanson explains that a lot of medical care and healthcare services are more about signaling than about the value they bring to the patient in terms of improved health and effective management or treatment of a given condition. Healthcare has a lot of signaling, showing others that we make enough money that we can go do something for our health, pushing others to get care to show how much we value having them be healthy, and giving us or others a chance to show how much we know and understand the human body. However, not a lot of what we push people toward really demonstrates that it adds a lot of value.

 

This is a problem that Dave Chase thinks is a big contributor to our nation’s healthcare woes in his book The Opioid Crisis Wake-Up Call. Chase is critical of unnecessary services and a medical system that pushes people toward care, without providing means to ensure that the care we push people toward is actually valuable. He recounts a conversation he had with Dr. Martin Sepulveda, “indiscriminate provision of health care services – absent efforts to help people understand how to use those services – leads to voracious appetites from both patients and providers for services that add little value but add a lot of cost to the individual, company, and society.”

 

When a child runs to their mother for a kiss on a bruised knee, the kiss doesn’t actually add any value in terms of helping heal the child’s bruise. But the care provided by the mother does signal her love for her child, signals to the child that they are valuable and important, and signals to others that the child has allies who will aid them during a time of need. The example is extreme, but if you look close enough, you will see some of the same aspects at play in many of our healthcare interactions.

 

Increasing access to healthcare without helping people understand what care they should seek, without helping people understand what options they really have, and without guidance toward high value care, means that we will use healthcare in a wasteful manner. Paying providers just by the number of procedures they do, and not by how much they help patients, encourages unnecessary medical procedures. Telling patients that if they value themselves they will go to the doctor every time they feel a little off will lead to patients overusing primary care. And pushing people to the emergency room every time they say they don’t feel well could crowd our ERs and delay care for those who really need it. The problem is difficult to solve, and I want to acknowledge that it is hard to know what care is really appropriate and what is wasteful signaling. That is the point that Chase makes. Without more transparency and clarity in the system, we won’t really know what medical services we should and should not pursue, and we (along with providers) will likely overindulge in high-signaling low-value care rather than medical treatments that are really useful and meaningful.