Behavioural economics of health

  • Created by: Frankgrim
  • Created on: 25-04-19 15:29

Mossialos and Costa-Font - GM

  • 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 
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Robert Shiller – narratives

  • 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 
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Loewenstein - emotions

  • 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.  
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Benjamin Handel and Joshua Schwartzstein - limited

  • 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  


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

  • Narratives are stories that people tell themselves and each other to make sense of human experience 
    • Sense making 
    • Rationales or justifications 


People tend to view death as a results of cuases

- Died from smoking

- Died of a broken heart

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Emir Kamenica Financial incentives

  • 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 


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

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Michael Sandel – the moral limits of markets

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


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

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Richard Thaler - Saving

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


  • 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
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Joan Costa Font - Healthy environments

  • 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 


  • Changing packaging affects diet
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Kranton - identity economics

  • 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 


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

  • 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)


  • 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
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Joan Costa Font - anorexia

  • Obsession with self-image contributes to anorexia 
  • The weight of peers affect the likelihood of anorexia 
  • Self image is correlated with body weight  
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Bharadwaj , Pai, Sziedelyte - stigma and mental

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


- 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

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Sunstein - how Change happens

  • 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 
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Brennan and Pettit - the Economy of Esteem

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


  • 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
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  • 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
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Loewenstein and Chatter 2017 – putting nudges in p

  • '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 
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Johnson and Goldstein, Do defaults save lives?

  • Defaults have a significant effect on organ donation 
  • Most public policy has a no action default 
  • Opt out not significantly different from no default
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Christopoulou, Jaber, Lillard (2013)

  • 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 
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Sunstein 2017 Nudges that fail

  • 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 

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Gneezy, Meier, Rey Biel

  • 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 

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DellaVigna and Malmendier (2006)

  • 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) 

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Biases that affect diet

  • 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 

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Sunstein – Nudges Vs shoves

  • 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  

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Volpp 2008 – Financial incentive approaches for we

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 

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Costa Font – Institutionalisation aversion

  • 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  

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Costa Font- longevity optimism

  • 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 

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Tennyson and Yang – LTC insurance

  • 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  
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Zhou‐Richter, T., Browne, M. J., & Gründl, H. (201

  • 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 
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Hawkley, Louise C and John T Cacioppo

  • 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 
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Cutler and Glaeser

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 

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