What do diabetics and bagels have in common? Almost nothing. However, the market for bagels might be useful for testing ideas about health care reform.

I imagine that the market for diabetic care is about a thousand times more complicated than the market for bagels. So why not use the bagel market to experiment with hair-brained payment schemes think tanks propose to inflict on unsuspecting patients?

Here's the argument: a) if a payment scheme doesn't work for bagels, it probably has no chance of working for diabetics either; b) the social cost from being wrong is far less if we are experimenting with bagels; and c) just as the FDA requires drug companies to experiment first with rats, we should require policy wonks to try their ideas out on some relatively simple, inanimate product – and a bagel is just as good as any. Continue reading »