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.

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

We are all behavioral economists right now (3)

 Social Preferences. An Introduction to Behavioural Economics and Experimental Research

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  

We are all behavioral economists right now

A Course in Behavioral Economics

Companion website

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.

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

 

Economic science needs humanities

 Bettering Humanomics. A New, and Old, Approach to Economic Science

The discoveries I have made by responding critically, yet as amiably as I could manage, are two:

1. There seems to be emerging a new and I think more serious and sensible way of doing economic science—quantitatively serious, philosophically serious, historically serious, and ethically serious, too, as I argue in this volume. The economist Bart Wilson and a few others nowadays call it the “humanomics,” as in the title here.4

2. But, I argue in the other volume, neoinstitutionalism, from Douglass North and Daron Acemoglu and many other economists and political scientists, is not the way forward. Scientifically speaking, its factual claims, like those of the other recent neobehaviorist fashions, such as neuroeconomics and behavioral finance and happiness studies, are dubious—or, at best, questionably founded and argued. The neoinstitutionalists, like the others, do not listen, really listen, to the evidence of humans, or to their friends’ scientific questions and objections. Substantively, they treat creative adults like a flock of little children, terrible twos, to whom we need not listen. We need, they say, merely to “observe their behavior,” omitting for some reason linguistic behavior. And then we record the behavior in questionable metrics. The children-citizens will be pushed around with “incentives,” beloved of Samuelsonian economists and econowannabes. From a great height of fatherly expertise in discerning and designing Max U institutions, the neoinstitutionalist looks down with contempt on the merely human actions and interactions of free adults.

A key book by controversial Deirdre McCloskey, this is the outline:

Part I. The Proposal

Chapter 1. Humanomics and Liberty Promise Better Economic Science

Chapter 2. Adam Smith Practiced Humanomics, and So Should We

Chapter 3. Economic History Illustrates the Problems with Nonhumanomics

Chapter 4. An Economic Science Needs the Humanities

Chapter 5. It’s Merely a Matter of Common Sense and Intellectual Free Trade

Chapter 6. After All, Sweet Talk Rules a Free Economy

Chapter 7. Therefore We Should Walk on Both Feet, Like Ludwig Lachmann

Chapter 8. That Is, Economics Needs Theories of Human Minds beyond Behaviorism

Part II. The Killer App

Chapter 9. The Killer App of Humanomics Is the Evidence That the Great Enrichment Came from Ethics and Rhetoric

Chapter 10. The Dignity of Liberalism Did It

Chapter 11. Ideas, Not Incentives, Underlie It

Chapter 12. Even as to Time and Location

Chapter 13. The Word’s the Thing

Part III. The Doubts

Chapter 14. Doubts by Analytic Philosophers about the Killer App Are Not Persuasive

Chapter 15. Nor by Sociologists or Political Philosophers

Chapter 16. Nor Even by Economic Historians

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

Economics of prevention

 An Ounce of Prevention

I look at prevention through an economic lens and make three main points. First, those advocating preventive measures are often asked how much money a given measure saves. This question is misguided. Instead, preventive measures can be thought of as insurance, with a certain cost in the present that may or may not pay off in the future. Although most medical preventive measures improve expected health, they do not save money. Various lifestyle and early childhood interventions, however, may both save money and improve health. 

Second, preventive measures, including medical and lifestyle measures, are heterogeneous in their value, both across measures and within measure, across individuals. As a result, generalizations in everyday  discourse about the value of prevention can be overly broad. 

Third, health insurance coverage for medical preventive measures generally should be more extensive than coverage for the treatment of a medical condition, though full coverage of preventive services is not  necessarily optimal

Well, and Joseph Newhouse says:

At one time, it was common to hear arguments that clinical preventive services were not insurable because they were “not a random variable and hence not an ‘insurable risk’” (Zweifel and Breyer 1997). Zweifel and Breyer give the example that “it is hardly conceivable that a health insurer would ever cover  expenditure on items such as . . . atomizers that help to prevent respiratory disorders;” a similar point could be made about a flu shot or mammography. There are, however, both economic efficiency and behavioral arguments for many preventive measures.

It may be arguments, but not so much incentives in private insurance market. For example, why vaccines have been bought by governments?. That's all. A misguided article.

  

Behavior design

 Reset: An Introduction to Behavior Centered Design

A hot topic :

There are over 100 change theories in health psychology alone, and the field of behavioral economics has over 100 “nudges” for inspiring behavior change as well (just to mention the two most prominent fields dealing with this topic). This book is about a new, generic way of approaching behavior change called Behavior Centered Design (BCD).

Behavioral economics of markets

 The Community of Advantage. A Behavioural Economist's Defence of the Market

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.

Escaping Paternalism Rationality, Behavioral Economics, and Public Policy

 

Escaping Paternalism
Rationality, Behavioral Economics, and Public Policy

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.

Book choice

Behavioral Economics: The Basics

Promoting Healthy Behaviours

Behavioral Economics and Healthy Behaviors
Key Concepts and Current Research

A reference book on the topic that tries to put theory into practice. A work in progress.

PS. From now on, a new Telegram channel ECONSALUT 

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

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!

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?