Monday, April 7, 2008

"Carrots and Sticks"

One of my biggest pet peeves is when people suggest that the government use "carrots and sticks" to achieve some objective, without specifying what particular "carrots" or "sticks" the government should use. A perfect example comes from Jason Furman's article on reducing the budget deficit, in which Furman suggests that the next administration control health spending by, among other things:

[Using] a combination of better clinical guidelines, carrots, and sticks to reduce Medicare spending in high-spending areas.
I think you'd be hard-pressed to find a policymaker or economist who doesn't think we need to control health spending in general, and Medicare spending specifically. But the question is, how do we do it? Saying we need to use "carrots and sticks," without more, is like saying we need to use "public policy." It's completely useless.