Vasectomies are on the rise. What would a behavioral economist think about that?

Reader Christopher Daggett points to a New York Times piece about the recent jump in vasectomies related to the economic downturn.

In Southern California, Planned Parenthood says that compared with last year’s first quarter, requests for vasectomies were up more than 30 percent in the first three months of this year.

“I’ve been in practice for 30 years, and I’ve never seen a spike like this,” Dr. Goldstein said. “Many of my clients work in finance and say they feel anxious about the expense of an added child.”

Daggett finds this behavior peculiar. “To avoid the costs of pregnancy in an economic downturn, (men) opt for a costly procedure that is even more costly to reverse,” he writes. “Many are not getting the most bang for their buck–there are cheaper alternatives for birth control.” Only if the objective is to become permanently sterile, do vasectomies make economic sense. But Daggett thinks most men are overreacting, opting for the procedure out of an availability bias for miserable recent economic news, and ignoring the long term cycles of economic growth.

It’s hard to disagree with this assessment. But there is a behavioral economic explanation for why a man might opt for a vasectomy in a period of economic turbulence. Usually, behavioral economic explanations tend toward human mistakes. But in this case, men might not be making mistakes at all. Huh?

Let’s say a man is frightened by the economic news. He knows that eventually the economy and the stock market will return to their former levels (the Great Depression lasted a long time, but not forever). But he is not sure when, and more importantly, he is not sure what kind of a job or income he will have when it does. What he does know is that kids are expensive–on average, about $260,000 per child for a middle-income family, and much more for a Wall Street one.

One of the insights of behavioral economics is that people do not value changes in probability in a linear fashion. In other words, the value of altering probability from 50 to 51 percent is not the same as going from 99 to 100 percent. Similarly, what people would demand to allow the probability of an event shift from 0 percent to 1 percent, is not the same as what they’d require if it moved from 50 to 51 percent. Essentially, people value certainty, and are willing to pay premiums to achieve it.

Outside of abstinence, no form of birth control is 100 percent effective. But vasectomies are about a close to a sure thing as you can get. Their failure rate is about .02 to .1 percent (assuming they are done properly); quite low compared with the 1 to 3 percent failure rate with condoms, and even the .1 to 1 percent failure rate of various female contraceptives like the Pill, IUD, or NuvaRing. For certain men, the possibility of relying on female contraceptives may not be possible, making vasectomies even more attractive relative to condoms.

It’s important to note that vasectomies do not permanently prevent men from having children. So while a man may be concerned about the economy, he does not have to make a final decision about children. Now, having a vasectomy and reversing it is not cheap. The vasectomy part costs about $500-$1,000, which is often paid for by insurance. The reversal is an out-of-pocket cost, that runs, on average, $10,000. That buys a lot of condoms or birth control prescriptions. But it is still peanuts compared to the financial cost of raising a child. From a behavioral economist’s perspective, that $10,000 is what many men are now willing to pay to reduce uncertainty about fertility on the order of .1 to 3 percentage points. And remember this: The price of a vasectomy was $10,000 when the economy was booming, so in relative terms, it looks like a more attractive insurance policy in turbulent times.

Given survey responses to economists about what people say they are willing to pay (or accept) to reduce (or take on) risk, $10,000 could be reasonable. Usually, these amounts are far apart, For instance, in a 1983 study Richard Thaler found people were willing to pay $800 to reduce the probability of death from a hypothetical disease to 0 from .001 percent. On the other hand, they demanded $100,000 to accept a similar change in probability from 0 to a .001 percent chance of death. The cost of getting and reversing a vasectomy seems high, but depending on individual financial situations and reference points, in a volatile, changing economic landscape, it may suddenly look like a good deal.

2 Responses to “Vasectomies are on the rise. What would a behavioral economist think about that?”

  1. Vasectomies are on the rise. What would a behavioral economist think about that? « Nudge blog Says:

    […] Continue reading the post here. Possibly related posts: (automatically generated)Qutting smoking can be as contagious as startingHigh rate of dementia found in men who had vasectomiesWe’re going to reap exactly what we sowWhat People Earn – 2006 […]

  2. Anonymous Says:

    Also, some women may decide they want to have a child regardless of the man not wanting to, and so if only female birth control is relied on, the woman could decide to ‘sabotage’ its effectiveness (accidentally-on-purpose ‘forget’ to take the pills, for example).

    So if a man wants to be totally confident that he won’t end up paying for a child when he can’t afford to, without being abstinent, a vasectomy is the only method that would be totally reliable for him.

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