Evidence-based economics going mainstream

Misbehaving. The making of Behavioral Economics

Once upon a time there was a scientific discipline created under the assumption that people choose by optimizing and that choices were rational (unbiased).

This premise of constrained optimization, that is, choosing the best from a limited budget, is combined with the other major workhorse of economic theory, that of equilibrium. In competitive markets where prices are free to move up and down, those prices fluctuate in such a way that supply equals demand. To simplify somewhat, we can say that Optimization +Equilibrium = Economics. This is a powerful combination, nothing that other social sciences can match.

All these core premises of economic theory began to be under scrutiny four decades ago, with the contributions of Kahneman and Tversky on Prospect Theory and what we call right now  "Behavioral Economics". Richard Tahler in his new book "Misbehaving. The making of Behavioral Economics" describes the whole history with the privilege of being on the forefront since the very begining. That's why this book is of interest. Last year another book appeared on the same topic, with a formal view: Behavioral Economics, a history. Thaler's book is of much more interest, though you can skip some details on anecdotes from several chapters. His focus on financial issues is understandable, as long as he has done most of this work in this area. However, other issues deserve more attention.
Anyway, a must-must read book. Just in the final chapter he focuses on changing the title, and he talks about evidence-based economics, rather than behavioral economics. For a health economist, this option sounds closer, since evidence-based medicine had a similar development four decades ago.

Much has changed. Behavioral economics is no longer a fringe operation, and writing an economics paper in which people behave like Humans is no longer considered misbehaving, at least by most economists under the age of fifty. After a life as a professional renegade, I am slowly adapting to the idea that behavioral economics is going mainstream. But the process of developing an enriched version of economics, with Humans front and center, is far from complete.

PS. NYT review.
PS. Misbehaving site.
PS. On Bitcoin creator: "some even suggest Nash could be Satoshi Nakamoto himself". Glups?

Our irrational behaviour

The Behavioral Economics of Health and Health Care
Irrationality in Health Care: What Behavioral Economics Reveals About What We Do and Why

Thomas Rice provides an overview of behavioral economics in health in a recent article in Annual review of public health. More or less the same things we already know with some concrete messages. A good starting point for those that want to take first steps in this discipline. The summary:

People often make decisions in health care that are not in their best interest, ranging from failing to enroll in health insurance to which they are entitled, to engaging in extremely harmful behaviors. Traditional economic theory provides a limited tool kit for improving behavior because it assumes that people make decisions in a rational way, have the mental capacity to deal with huge amounts of information and choice, and have tastes endemic to them and not open to manipulation. Melding economics with psychology, behavioral economics acknowledges that people often do not act rationally in the economic sense. It therefore offers a potentially richer set of tools than provided by traditional economic theory to understand and influence behaviors

Right now behavioral economics is still a promise, let's wait until we can really apply it widely.
Thomas Rice says in this respect:

 With the exception of Kahneman & Tversky’s prospect theory, which was developed more than 30 years ago, there has been little in the way of bringing the various tools and policies of behavioral economics under one umbrella. As a result, most of the applications seem to be ad hoc. More development of an overarching theory could aid those interested in designing new interventions when it is clear that traditional economics remedies are insufficient

Regarding the book on Irrationality in Health Care, I haven't had the opportunity to have a look at it. I leave here the reference and 23 anomalies . Maybe in the book there is the answer to solve them.

PS. For those interested in an introductory course, on March 11th starts at Coursera:  A Beginner's Guide to Irrational Behavior

Unbiased Bioethics

 Good Ethics and Bad Choices. The Relevance of Behavioral Economics for Medical Ethics

A book on how behavioral economics challenges some of the most fundamental tenets of medical ethics.

Go to Chapter 2: Bad Decisions? What Behavioral Economics Means for Patient Autonomy, Decision Quality, and Well-Being. Great topic. 

The predominant ethos in medicine and medical ethics is to assume that patients are capable of making autonomous decisions that promote their own personal goals and values so long as they are properly  informed of the options and their risks/benefits. Behavioral economics and the examples of decisional heuristics and biases discussed in the previous chapter significantly challenge this assumption.  Behavioral economics shows that patients’ decisions can fail to be autonomous or to improve their well-being in ways beyond the usual ones that clinicians and bioethicists worry about (e.g., poorly informed consent, coercion, weakness of will). Specifically, in this chapter, I will argue that behavioral economics demonstrates that patients’ decision-making is often at risk for being (1) nonautonomous or autonomy impaired, (2) of poor quality, and (3) harmful to patients and their interests

A must read.

Els biaixos cognitius

Behavioral Economics: Policy Impact and Future Directions 

Sabem que les nostres decisions i comportament estan afectats per biaixos cognitius persistents. La psicologia i l'economia del comportament han aportat el material suficient que ho mostra. La dificultat és com es poden traslladar aquests coneixements a situacions concretes, i llavors entra el problema de com afecta l'entorn, i així entrem en territori d'incertesa.

Ara l'acadèmia de ciències nordamericana ha publicat un informe que resumeix l'estat de la qüestió. I en una de les conclusions, diu:

The very strong evidence that complex cognitive, social, behavioral, and contextual factors influence judgment and decision making means that behavioral economics concepts are indispensable for advancing scientific understanding of policy-relevant human behavior and for the design of public policies. Behavioral economics has produced invaluable evidence about why people act in seemingly irrational ways, how they respond to interventions, and how public  policy and practice interventions can be designed to modify the habitual and unconscious ways that people act and make decisions

Per tant segons ells el paper de l'economia del comportament serà cada vegada més rellevant per a les polítiques públiques. Han passat molts anys i crec que l'aplicació és molt ocasional, veurem.

Behavioral health insurance choice

Behavioral hazard in health insurance
Can Consumers Make Affordable Care Affordable? The Value of Choice Architecture

Behavioral Economics is still a great promise for health economics. Anyway, in health insurance some materials are already available. Today I'll bring two articles on the choice of health insurance policy.
Some insights:

People do not misuse care only because the price is below the social marginal cost: they also misuse it because of behavioral biases—because they make mistakes. We call this kind of misutilization behavioral hazard . Many psychologies contribute to behavioral hazard. People may overweight salient symptoms such as back pain or underweight non-salient ones such as high blood pressure or high blood sugar. They may be present-biased (Newhouse 2006) and overweight the immediate costs of care, such as copays and hassle-costs of setting up appointments or filling prescriptions. They may simply forget to take their medications or refill their prescriptions. Or they may have false beliefs about the efficacy of care (Pauly and Blavin 2008).

The key message from the first article:

Incorporating behavioral hazard alongside moral hazard changes the fundamental tradeoff between insurance and incentives. With only moral hazard, lowering copays increases the insurance value of a plan but reduces its efficiency by generating overuse. With the addition of behavioral hazard, lowering copays may potentially both increase insurance value and increase efficiency by reducing underuse. This means that having an estimate of the demand response is no longer enough to set optimal copays; the health response needs to be considered as well. This provides a theoretical foundation for value-based insurance design, where copays should optimally be lower both when price changes have relatively small effects on demand and when they have relatively large effects on health. We show that ignoring behavioral hazard can lead to welfare estimates that are both wrong in sign and off by an order of magnitude.

"Avoidable copayments" , that's it. And about the second:

We examine how well people make these choices, how well they think they do, and what can be done to improve these choices. We conducted 6 experiments asking people to choose the most cost-effective policy using websites modeled on current exchanges. Our results suggest there is significant room for improvement. Without interventions, respondents perform at near chance levels and show a significant bias, overweighting out-of-pocket expenses and deductibles. Financial incentives do not improve performance, and decision-makers do not realize that they are performing poorly. However, performance can be improved quite markedly by providing calculation aids, and by choosing a ‘‘smart’’ default. Implementing these psychologically based principles could save  purchasers of policies and taxpayers approximately 10 billion dollars every year.

That's a lot. glups!

L'horitzó individual i social

La cultura de la innovación de los jóvenes españoles en el marco europeo
Indentity economics

Els esdeveniments succeeixen a una velocitat més elevada que la que podem copsar. Pot ser una frase tòpica, però ara pren més força que mai. La gent es pregunta quan sortirem de la crisi i jo responc que podem fer-nos una altra pregunta, "què fas tu per sortir de la crisi"?. Ara direu, els contestes amb una altra pregunta, molt hàbil per la teva part. Es molt conegut això. Fins i tot en Kennedy ho deia fa gairebé 40 anys:

"Ask not what your country can do for you - Ask what you can do for your country"

Resulta que el que en aquest moment ens cal són dues coses alhora, governants de nivell i ciutadans responsables. Sense governants de nivell ningú serà capaç de generar confiança ni impulsar els comportaments individuals com ho fa la cita. Sense ciutadans responsables, és a dir aquells que consideren que al costat d'un horitzó individual a la vida també hi ha un horitzó col.lectiu, serem incapços de progressar. I malgrat totes les mancances de la democràcia nostra, anar a votar és una mostra de responsabilitat.
També hi ha un altre àmbit en el que ens cal reflexionar, i és quina és la nostra capacitat individual de crear valor en el nou entorn, com podem ser capaços d'innovar i contribuir a la creació de benestar econòmic. Resulta que en Victor Pérez-Diaz ha fet un llibre suggerent i també un article. Hi ha molt de material, algunes qüestions conegudes relatives a l'educació, però jo sobretot m'he quedat en el capítol de l'horitzó individual i social, destaco:

Una diferencia crucial en las personas y en las sociedades reside en la amplitud o la pequeñez de su horizonte vital. Ello tiene repercusiones muy notables en su capacidad para cultivar su inteligencia, que, normalmente, será tanto menor cuanto más reducido sea su horizonte, aunque no necesariamente será así si la amplitud mayor va ligada a mayor confusión. También, para desarrollar las virtudes de su fortaleza y su templanza, que tendrán que probarse en un terreno
más duro y arriesgado cuanto su horizonte sea mayor, con efectos positivos o negativos según las circunstancias. En cuanto a cuál sea su virtud de la justicia, ésta puede corresponder a la apertura a un mundo de mayor equilibrio, o de mayor caos, que puede ser percibido como una especie de jungla en la que todo estaría permitido.

Es fácil que en una sociedad compuesta por individuos semejantes, esos mismos individuos se sientan impulsados a tomarse en serio su papel de ciudadanos. En este caso, estaríamos ante una sociedad con un alto grado de conciencia cívica, es decir, de interés por la cosa común, lo cual es un requisito indispensable para formular, decidir y aplicar una política ambiciosa de ciencia e innovación.

 Fixeu-vos com en Victor Perez-Díaz tanca el cercle de la cita de Kennedy, afegint-hi un aspecte fonamental de cohesió social, d'identitat. Justament el mateix èmfasi que ja no es fa tant sols des de la sociologia, sino també des de l'economia per part d'Akerlof . Al seu llibre Identity Economics hi ha material per a la reflexió seriosa i potser fins i tot pot representar nous camins dins l'economia. Destaco:

Economics—for better or for worse—pervades how policy makers, the public, and the press talk and think. Modern economics follows Adam Smith’s attempt in the eighteenth century to turn moral philosophy into a social science designed to create a good society. Smith enlisted all human passions and social institutions in this effort. In the nineteenth century, economists began to build mathematical models of how the economy worked, using a stick figure of a rationally optimizing human with only economic motivations. As economics evolved into the twentieth century, the models grew more sophisticated, but Homo economicus lagged behind. This began to change when Gary Becker developed ways to represent a variety of realistic tastes, such as for discrimination, children, and altruism. Fairly recently, behavioral economics has introduced cognitive bias and other psychological findings. Identity Economics, in its turn, brings in social context—with a new economic man and woman who resemble real people in real situations

Ens trobem doncs en un moment delicat, de redefinició d'horitzons a la vista de les noves realitats. En l'àmbit de la salut ens convé també emfatitzar que els ciutadans han de ser conscients que la responsabilitat davant la salut és compartida, és individual i social alhora. En l'exercici d'una llibertat individual responsable envers la salut podem ser capaços també d'assolir millor salut poblacional. I també, un govern responsable que vetlla per les prioritats ciutadanes i l'interès general ha de ser capaç de respondre a aquest repte democràticament.

Health behaviors and behavior change

 Behavioral Economics and Public Health

Health behaviors and practices constitute the foundation of good physical and mental health. The leading contributors to the global burden of disease include tobacco smoking, low-quality diets, alcohol abuse, physical inactivity, and obesity. Accordingly, encouraging people to adopt—and maintain—healthy behaviors is a major objective of public health. 

Today I recommend this book and this is what you'll find inside:

Chapter 1: An Introduction to Behavioral Economics and Public Health. Christina A. Roberto and Ichiro Kawachi

Chapter 2: Intertemporal Choices for Health. Justin S. White and William H. Dow

Chapter 3: Maintenance of Healthy Behaviors: Forming and Changing Habits. Dennis Rünger and Wendy Wood

Chapter 4: Emotions and Health Decision-Making: Extending the Appraisal Tendency Framework to Improve Health and Health Care. Rebecca Ferrer, William Klein, Jennifer Lerner, Valerie Reyna, and Dacher Keltner

Chapter 5: Social Norms, Beliefs, and Health. Brent McFerran

Chapter 6: Communicating for action: the importance of memorability and actionability. Jason Riis and Rebecca K. Ratner

Chapter 7:Nudging Individuals Toward Healthier Food Choices with the 4Ps Framework for Behavior Change. Zoë Chance, Ravi Dhar, Michelle Hatzis, and Kim Huskey

Chapter 8: Incentivizing Health Behaviors. Kristina Lewis and Jason Block

Chapter 9: Slim By Design: Moving from Can't to CAN.Brian Wansink

Chapter 10: Applying Behavioural Economics in a Health Policy Context: Dispatches from the front lines. Michael Sanders and Michael Hallsworth

Chapter 11: From Choice Architecture to Policy Infrastructure: Multi-Level Theory and the Political Economy of Health Behaviors. Frederick J. Zimmerman

Nudging and public policy

 Psychology and Behavioral Economics. Applications for Public Policy

This is a textbook on applied behavioral economics for public policy issues. In chapter 5 you'll find the health section and this is the summary:

Where people live, what they eat, how careful they are about taking their medications, and even what they do in their spare time are very much related to the quality of their lives and their health-related outcomes. While our genetic makeup accounts for a signifcant portion of our health outcomes, we know that health is also heavily infuenced by what are known as social determinants: education, wealth, neighborhood safety, housing, and health literacy, among many others. Throughout the day, we face many decisions that have a direct or indirect impact on our health and quality of life. Many of these choices can be infuenced toward healthier options by behavioral interventions.

This chapter presents behavioral insights and interventions that have a high potential to impact the health of community members, reduce disparities, and improve their overall quality of life. These insights and interventions range from increased medical adherence to improved nutritional choices using nudges, regulations, provision of information, or rewards for positive behaviors

 

Behavioral contagion

Under the Influence: Putting Peer Pressure to Work

So much has been written on behavioral economics and nudging, and I always think about the implications. Robert Frank in his new book provides new insights to understand the behavioral contagion among all of us. He says:

The argument I will defend in this book, implicit in several of the examples already discussed, is summarized in the following seven premises:
1. Context shapes our choices to a far greater extent than many people consciously realize.
2. The influence of context is sometimes positive (as when people become more likely to exercise regularly and eat sensibly if they live in communities where most of their neighbors do likewise).
3. Other times, the influence of context is negative (as when people who live amidst smokers become more likely to smoke, or when neighboring business owners erect ugly signs).
4. The contexts that shape our choices are themselves the collective result of the individual choices we make.
5. But because each individual choice has only a negligible effect on those contexts, rational, self-interested individuals typically ignore the feedback loops described in premise 4.
6. We could often achieve better outcomes by taking collective steps to encourage choices that promote beneficial contexts and discourage harmful ones.
7. To promote better environments, taxation is often more effective and less intrusive than regulation.

Among behavioral scientists, the first five of these premises are completely uncontroversial. It is only 6 and 7 that provoke disagreement. Regarding 6, even when everyone acknowledges that behavioral contagion causes harm, as in the smoking example, it is often hard to reach consensus on collective actions that would modify the contexts that shape our actions. In part, the difficulty is that individual incentives and collective incentives often diverge so sharply. But objections to premise 6 are also rooted in the long American tradition of hostility toward regulations generally. Nor can there be any presumption that regulation always improves matters. Markets sometimes fail to deliver optimal results, but government interventions are also imperfect. Premise 7 is controversial simply because many people dislike being taxed. Yet a moment’s reflection reveals that the only interesting questions in this domain concern not whether we should tax but rather which things we should tax and at what rates. Whether you’re a small-government conservative or an expansive progressive, tax revenue is necessary to pay for valued public services.

A must read. The book has clear messages for professionalism in Medicine and for pandemics.

L'economia del comportament i l'obesitat

Eating Behavior and Obesity Behavioral Economics Strategies for Health Professionals

Sabem que majoritàriament els indicadors de salut dels catalans que empitjoren, tenen relació amb els comportament, amb els hàbits saludables. I que l'obesitat es troba al capdavant.
Entendre què cal fer és crucial. Però malauradament tenim visions i estratègies de curta volada. Ara acaba d'aparèixer un llibre que ofereix noves perspectives tot introduint l'economia del comportament davant el problema de l'obesitat. Diu:

There are two ways of thinking about influencing behavior. The first is based on the standard rational model. That is, infl uencing what people consciously think about by increasing knowledge and awareness (known as the refl ective system ). This aproach assumes that the individual is a rational agent who surveys the situation to see what the various options are and then does a quick cost-benefi t analysis of those options in order to choose. The second approach is to alter the context within which people act (known as the automatic system ). This type of intervention is similar to the “nudge” outlined by Thaler and Sustein (2008), which often involves small changes to the choice environment. For example, one intervention tried to encourage school children to make healthier choices without alienating students by reducing their perceived choices. In a school cafeteria, what kids choose depends on the order in which the items are displayed.

 Els que llegiu aquest blog ja sabeu que m'hi he referit anteriorment en termes genèrics. Però aquest llibre esdevé més interessant perquè mostra amb molta precisió un canvi de perspectiva. Destaco una conclusió del primer capítol:

Rational food decisions often involve trade-off between short-term gains of sensory pleasure and longer term gains of health and wellness. Findings from behavioral economics research suggest that even when people are motivated to make healthy choices, external constraints in the decision-making process can prevent them from choosing optimally. Most of us prefer immediately gratifying short-term pleasure over our long-term goal of eating healthy. Errors in choices arise from systemic decision biases, emotion, and the limits of cognitive capacity.

Atesa la importància de "l'epidèmia" potser caldria que més d'un hi fes una ullada. Encara que també vull anunciar que el capítol d'implicacions per a la política (el 12) és molt fluix. Us caldrà doncs una mica d'imaginació i reescriu-re'l vosaltres mateixos.

 No us perdeu les friky-fotos de Diane Arbus al Jeu de Paume

(suggerit per un lector del blog i que em plau compartir amb valtros)

PS. Les retallades són notícia a la CNN, (confonen Catalunya amb Espanya, treball periodístic de nivell...)

Escaping Paternalism Rationality, Behavioral Economics, and Public Policy

 

Escaping Paternalism
Rationality, Behavioral Economics, and Public Policy

Conflicts of interest (in medicine)

I would like to attend this seminar:

Professor George Lowenstein
Behavioural Economics and Conflicts of Interest

“A conflict of interest is a clash between an individual’s professional responsibilities and their personal, typically financial, interests. Traditional economics has not shed much light on conflicts of interest, perhaps in part because it has not recognized the importance of professionalism as a motive in human behaviour. In this talk I will present results from a variety of studies that examine the behavioural economics of conflict of interest. Focusing mainly on conflicts of interest in medicine, some of the research shows how people who care deeply about behaving in a professional fashion can be corrupted by economic incentives. Other research shows how disclosing conflicts of interest, far from helping the recipient of information, can backfire, helping the advice-giver and hurting the advice recipient.”

Lecture Theatre 3, Cambridge Judge Business School. Tuesday 25th February 5-6.30pm. No need to register but arrive early in order to get a seat.

Unfortunately, I can't attend. Any info will be appreciated.
You may follow events on Behavioral Economics, here.

PS. Our public expenditure on health on 2012 gave ground, and was close to 5 years before: 2007. Such expenditure over GDP is still at 2008 position: 5,3% , while our GDP per capita (27.442€) is  at levels before 2006 (!). Therefore we are spending on health (more than) proportionally to our GDP historical trend, however our GDP has shrinked a lot. And we maintain distance to OECD average health expenditure (6,69%) although our per capita GDP is 2,7% larger. That's all right now, it's an issue of months.

PS. Interesting post by Josep Maria Via.

Deirdre McCloskey en estat pur

 Beyond Positivism, Behaviorism, and Neoinstitutionalism in Economics

Índex del darrer llibre de Deirdre McCloskey deixa ben retratats molts economistes:

Introduction The Argument in Brief

Part I. Economics Is in Scientific Trouble

Chapter 1. An Antique, Unethical, and Badly Measured Behaviorism Doesn’t Yield Good Economic Science or Good Politics

Chapter 2. Economics Needs to Get Serious about Measuring the Economy

Chapter 3. The Number of Unmeasured “Imperfections” Is Embarrassingly Long

Chapter 4. Historical Economics Can Measure Them, Showing Them to Be Small

Chapter 5. The Worst of Orthodox Positivism Lacks Ethics and Measurement

Part II. Neoinstitutionalism Shares in the Troubles

Chapter 6. Even the Best of Neoinstitutionalism Lacks Measurement

Chapter 7. And “Culture,” or Mistaken History, Will Not Repair It

Chapter 8. That Is, Neoinstitutionalism, Like the Rest of Behavioral Positivism, Fails as History and as Economics

Chapter 9. As It Fails in Logic and in Philosophy

Chapter 10. Neoinstitutionalism, in Short, Is Not a Scientific Success

Part III. Humanomics Can Save the Science

Chapter 11. But It’s Been Hard for Positivists to Understand Humanomics

Chapter 12. Yet We Can Get a Humanomics

Chapter 13. And Although We Can’t Save Private Max U

Chapter 14. We Can Save an Ethical Humanomics

Acknowledgments

Is it possible to internalize externalities of risky behavior?

Risking Your Health. Causes, Consequences, and Interventions to Prevent Risky Behaviors

Behaviour Change

Today I bring a World Bank Report and a UK Parliament report, both on behaviour. The first is closely related to developing countries, though the same messages are for developed ones. I don't know who exactly is paying the bill for such risky behaviours. Measures to internalize externalities are not so easy to implement, though the document explains some of them.
The second report is an introduction to behavioral economics for politicians. I'm convinced that we do need to know more about this, although there is no unifying theory and prescriptions are fuzzy by now.

PS. Today we can confirm that Google scans your gmail messages.
PS. Today we can also confirm again that internet is an unsafe network
PS. Bloomberg on behavioral finance.

We are all behavioral economists right now

A Course in Behavioral Economics

Companion website

We are all behavioral economists right now (2)

 Psychology and Behavioral Economics. Applications for Public Policy

Chapter 5. Health behavior and decision-making in healthcare  

The end of marginal revolution

Richard Thaler was awarded with the Nobel Prize some days ago. If you follow this blog you'll know his works on behavioral economics and nudging. Since many years I've been interested in this perspective, though it has still more to deliver.
Today I would suggest you to read JM Colomer blog. He has written an excellent post on him and its impact on economic science. Selected statements:

Marginalist microeconomics held that we could understand collective outcomes by assuming that they derive from free interactions among homines economici.
A first big counter-revolution was the reintroduction of institutions in the basic analysis, especially since the 1980 and 1990s (including by Nobel laureates related to the social choice and public choice schools such as Kenneth Arrow, James Buchanan, Ronald Coase, Douglass North, Amartya Sen, Thomas Schelling, Leonid Hurwicz, Roger Myerson, political scientist Elinor Ostrom, Oliver Williamson, and others).

The second is the reintroduction of realistic observations about people’s motivations and behavior, including emotions. This has been based on psychology, on the background of huge progress in neuroscience (while pioneers include political scientist Herbert Simon and psychologist Daniel Kahneman). That Richard Thaler professes at the University of Chicago, once the temple of the neoclassical school, shows the depth of the change.

Now we know again that the three pillars of social analysis are, together with people’s calculated self-interested choices, emotions and institutions, as Hume and Smith masterfully had already established.

And this is the return to the roots of economics with a new toolkit.

Parov Stelar

Prioritising population health or the economy (2)

  The Pandemic Information Gap. The Brutal Economics of COVID-19

Joshua Gans has updated his former book on covid economics. And says:

Pandemics are an information problem. Solve the information problem and you can defeat the virus. There is a big difference between knowing someone you interact with is infectious and having to make a guess as to whether that person is infectious. In the former case, you can act and limit the interactions. In the latter case, you have to take a risk. And, in evaluating that risk, what we care about is not just whether you become infected but also whether you might pass that infection on to others.

 The difference between perfect knowledge and no knowledge is what causes an infectious disease to have an impact on social and economic interactions. With perfect knowledge, some people get sick, they are isolated, and life is (for most of us) essentially unchanged. With no knowledge at all and no interventions to prevent infections, then for COVID-19, at its peak, about 21 million people in the United States alone would likely be infectious at one time. With no restrictions on activity, the probability that you interact with one of the infectious people on a given day is 21 million divided by 327 million (the US population), or 6.4 percent.4 However, suppose you interact with only 10 people per week. In that situation, the probability that you are able to avoid any of those infected people is about 50-50. When going to public spaces, you may interact with over a hundred people per week. In that case, your probability of avoiding an infected person becomes close to zero. In other words, perfect knowledge allows you to avoid all infected people. No knowledge makes it near certain that you will encounter at least one infected person.

 Without knowledge of how many people are infected and whether particular people are carriers of thecoronavirus, we are forced to take drastic actions.

True. Pandemics are an information problem but information will never be perfect and complete. Uncertainty sorrounds us. And pandemics are more than an information problem. Because you may know who is infected, and not "act and limit interactions". Therefore, emotions, incentives and expectations count. We do have also a behavioral problem. And if it is behavioral, it has ethical implications. And finally, that's life, decisions with or without information and behavioral and ethical implications of such decisions.

Anyway, a useful introductory text.

Book choice

Behavioral Economics: The Basics

Thinking and deciding

World Development Report 2015: Mind, Society, and Behavior

Our decision making patterns are based on multiple foundations. The new WB report summarises them in three sources: automatic, social and mental models.  In chapter 8 you'll find applications to health. Some of them may be naive, while others potentially useful. There is a trial and error process in all this stuff because of cultural implications. If there is a particular area to focus on, it is on health communication for behavioural change. There is a lot to learn from behavioral economics:

Understanding that people think automatically, interpret the world based on implicit mental models, and think socially allows policy makers to make major strides in improving health outcomes. Individuals sometimes value information highly (for example,
when seeking curative care), but at other times providing information is not sufficient to get people to change behaviors that undermine health. Framing effects that make social expectations and social approval more salient can sometimes encourage individuals to seek preventive care and adhere to treatment when they otherwise would not, even though the individual benefits exceed the individual cost.

PS. My former posts on nudging

PS. Post by BIT.

PS. TE on poor behavior.

PS. Excellent "30minuts" documentary about the Snowden's massive information leak ever. (Only until Dec 28th)