Behavioural economics of health

• Perceptions of risks and benefits associated with GM endogenous and simultaneously determined' 

• Other factors

  • loss aversion,
  • low saliency of scientific communication of benefits compared with risks,
  • gender and age affects the sources of information that people access 

• Narratives are repeated, so spread 
• Models narratives as spreading like viruses, where new narratives are spread because they are novel. After a while, the teller recognises that the narrative is no longer novel, so ceases to share.  
• But, do not provided empirical evidence to suggest a causal link 

• Emotional states affect preferences 
• Hot and cold states elicit different decisions 

• Viceral preferences – cocaine addiction:
  

  • Lead people to take decisions that are not in their self interest 
  • People underestimate their effect on their decisions 
• People fear things that they know aren't dangerous and don't fear things that they know are dangerous.  

• Individuals inefficiently allocate time to learning 
  

  • Don't spend enough time on big decisions or important evidence 
• Providing more information will not be effective if the mental gap relates to processing, not availability  

Example

• Parents choose to pay more for branded drugs, health staff don't, because they know they are the same 

Examples

People tend to view death as a results of cuases

- Died from smoking

- Died of a broken heart

• Traditional economics suggests a fairly linear relationship between  
• Some findings that motivation can be reduced by financial incentives 

• Three explanations 

  • Contextual inference – the incentive signals something about the nature of the tasks (enjoyment, risk etc.) 
  • Loss aversion 
  • Choking- experimental evidence, potential issues when generalising 
• Incentives that are too small can be counterproductive 

Examples

- some find that blood donations go down when a financial incentive is offered

• Financial incentives crowd out other motivations such as reciprocity 
• Nuclear reactor in a Swiss village 

Examples

- Blood donation goes down when a financial incentive is offered (Titmus)

Individuals are bad at saving

• They are myopic- present bias
• they are bad at calculating how much they need
• they are bad a choosing a good plan

Examples

• Save more tomorrow- increases savings in time with pay rises, so people never get used to the money
• social care - people don't save enough and receive a poor standard of care as a result

• Social determinants are important 
• Research suggests increasing access to fruit and veg and lack of time are of limited importance 
• Food packaging is important – framing, clear information 
• Culture is important 

Example

• Changing packaging affects diet

• Identity economics = People's preferences are affected by their identities 
• Groups at different levels within society shape differing norms 
• In the short run, identites are fixed, in the long run they are maliable 
• Identities are shaped by the desire for the esteem of membership and acknowledgement by groups 

Examples

• Young people may start smoking or drinking in order to express the fact they identify with nihlist sub cultures such as punk or grime

• Payoffs from actions are affected by identity 
• Third parties, by altering identity related norms, can alter these pay offs 
• Some identities are freely chosen, others are not 

• Actions lead to externalities in relation to the identity of others 
  

  • When people contravene identity norms, they undermine the identity of others (externality)
    

Examples

• Identifying with particular sub cultures and adopting associated health behaviours relates to identities that are chosen
• Certain races and cultures are associated with particular health behaviours - e.g. arabic groups smoke Shisha, but don't drink

• Obsession with self-image contributes to anorexia 
• The weight of peers affect the likelihood of anorexia 
• Self image is correlated with body weight  

• People are more likely to under report mental health than other illness 
• Stigma can affect health seeking 
• (Stigma is the opposite of esteem) 

Examples

- Failure to seek mental or social care support may mean that people do not get the support they need

- something similar may be true with HIV

• How people really feel and the norms that govern how they think they should feel can counteract 
• We follow norms subconsciously, they are enforced by an implied social cost of not following them 
• Sunstein identifies the role of norm entrepreneurs in shifting norms: 
  • namers, 
  • confrontationalists,
  • illuminators,
  • conveners,
  • celebrities 

• A significant motivation of human behavior is the desire to be esteemed by others  
• Esteem cannot be purchased, it can be earnt or promoted 

Examples

• People in weight watchers may put in more effort in order to gain esteem from the group
• Individuals may become anorexic in order to restore esteem
• Individuals may pursue sport and fitness in order to gain esteem

• Evidence that providing financial incentives to induce blood donation leads to less high quality blood being donated in the US
  • motivates unhealthy
  • crowds out the altruistic healthy

• 'nudges provide behavioral solutions to problems that have generally been assumed to originate from limitations in human decision making, such as present bias.  
• Actually, nudges can be used for problems with conventional cuases and vice versa 
• Also, the two can combine 
• Payments can be framed as losses or gains, individuals can be paid individually or as a groups 

• Defaults have a significant effect on organ donation 
• Most public policy has a no action default 
• Opt out not significantly different from no default
  

• Minority cultures persist 
• Partly about cultural leaders 
• Partly about parental choice to socialise 
• Smoking culture has been driven by profit maximising firms and shifting scientific evidence.  
• Culture is a product of familial norms and outside social influence 

• When rejecting a nudge is cheap, and when choosers believe that doing so will reduce significant error costs, a nudge will be ineffective. 
• Why defaults work 
  • Procrastination and inertia  
  • Defaults are signals 
  • Loss aversion
    
• Reasons they fail 
  • Some nudges produce confusion in the target audience 
  • Some nudges have only short term effects 
  • Some nudges produce reactance – sometimes people rebel against bans  
  • Some nudges are based on an inaccurate understanding of what choice architecure will affect choices taken 

  • Some nudges produce compensating behaviour 
    

•  

• Financial incentives can be interptreted as a signal about the good 

• Payments shouldn't be too small 

• Ciggarettes are already expensive but this has little effects 

  • But people allocate spending into different mental accounts 

  • Incentives to attend cessation classes and quit were found to be effective in the short run, but ineffective in the long run  

• Diet and exercise 

  • One people may overpay for gym membership is as a self control mechanism 

  • Paying people to go to the gym 8 times, increased attendance after the 8 visits 

• People over pay for gym subscription, compared to pay per use 

• Commitment device, to reduce marginal cost of attendance to zero in order to encourage them to attend  

• (perhaps also optimism bias about how many times they will attend) 

• (perhaps similar to people over paying for a low excess on their health insurance) 

• (an example of a gym in europe in which people pay if they do not attend, as a commitment device) 

• People have problems of self control when choosing food 

• People pay attention to defaults 

  • People are loss averse (up to here) 

• People categorise income into mental accounts 

• People undervalue fixed costs relative to variable costs- people spend off pre paid cards easier than with cash 

• Food decisions are often based more on emotion than rational thought- impulsive, particularly when system 2 is strained 

• External cues can have a major effect on the food selected, the amount consumed, and the eater's perception of how much was consumed 

• Libertarian paternalism – nudges preserve freedom of choice  

• Choice preserving approaches makes sense because of heterogeneity 

• Public officials make mistakes 

• Nudges do not deprive people of the ability to choose  

Different ways of designing financial incentives for weight loss 

• Deposit system – loss aversion 

• Penalties that occur immediately/regularly - present bias 

• Lottery – people are attracted to small probabilities of large rewards 

• People react to small wins and losses – the fail to integrate them 

• People prefer 'aging in place'  

  • People rarely moved back home after institutional care 

  • People prefer known environments 

• Previous findings on whether individuals that are institutionalised have higher wellbeing are mixed 

• This paper uses surveys to measure WTP 

• Paper completed in Spain where there's a high preference for family care 

• 70% would be prepared to pay, some of the 30% were due to lack of funds 

• WTP approx E300 per month to avoid institutionalisation 

• WTP approx E250 for homecare  

• Classic risk biases 

  • Over estimate high probability low cost events 

    • Higher estimation of likelihood of disability in old age for society than for self 

  • Over estimate involuntary or inequitable events  

  • Optimism – including in relation to longevity 

• Cumulative bias 

• Optimism bias 

• Availability bias 

  • More accurate estimates of longevity than disability because more information available 

• Over estimate of disability 

• No over estimation of longevity 

• Healthier individuals are less likely to perceive high disability and longevity 

• Female and younger respondents are perceive a higher risk of disability in old age at a population level, but not at an individual level  

• Catalan study 

• Measuring is tricky, because people generally struggle to assign numbers to probabilities 

• Availability bias in LTC expectations and insurance 
• Previous care giving leads to stronger intentions to purchase insurance 
• American study  
• Very few people buy LTC insurance, even in the US 
• Optimism bias is a factor  

• Demand for LTC insurance is low due to low risk perception 
• The more aware adult children are of the risk, the more likely it is that insurance is purchased  

• German study 
  

  • Children are at financial risk if parents can't afford LTC 

• Test the effect on demand of exposing children to data on average risk and cost 
  

  • Change is larger for those who estimate most wrongly 
• Presence of adverse selection is undermined by the fact that higher risks are more likely to acquire insurance 
• In the US, people mistakenly believe Medicare covers LTC 

• Loneliness leads to fear, which worseness physical and mental health 
• Associated with dementia 

• Reviews have found interventions that work 

  • Opportunities for interaction 
  • Social support 
  • Social skills 
  • Maladaptive social cognition 

While workplace smoking bans make it 5% more likely for a person to quit smoking altogether, the effect is reversed when they are married to a smoker