Category: Behavioral Economics

95% Is NOT 100%!!!

We saw this one coming and talked about it a few weeks ago. Behavioral Economists tell us that as human beings, we try to make our decisions easy. For example, we use “heuristics” as shortcuts for decision making. When numbers are involved, we frequently round them up or down. We level rather than sharpen.

SO. When the Pfizer and Moderna vaccines were approved, we were told that they were 95% effective. Many of us were so pleased by this high efficacy rate that we coded that as “Works for everybody, all the time,” and off we went to party hearty. In a previous blog, I predicted that this would reach out to bite us. Now it has. Check this out. What you see is that, as we should have expected, a relatively tiny percentage, .008% to be precise, of fully vaccinated patients have developed COVID. The vaccine is not a magical talisman, but it is working pretty darn well.

Bottom Line. Want to see people level again? Watch this! Anti-vaxxers will see the headlines on these “vaccine failures,” and point to them as yet another reason, besides the J&J clotting “pause,” not to get vaccinated. 

Sometimes, Behavioral Economics not with-standing, it pays to use actual numbers rather than to round. We might wind up making slower, but better, decisions that way.  

If I Were You V2.0

Check this out. You may recall the riff I did a week or so ago on the dangers of using the phrase, “If I were you, I’d….”

Scroll forward a week. Here’s Seth Godin making exactly the same point, but as one would expect from this guru, he goes well above and beyond my humble insights. More specifically, Seth explains the reason we tend to assume people will do what we would do under a particular set of circumstances. If everybody acts just like we do, it makes life a heck of a lot more predictable.

Bottom Line. As always, Seth pegged it. Making life predictable, as the Behavioral Economists taught us with their “heuristics,” is a major driving force in all of our lives.

I would take that thought to the bank…If I were you!!!

Should We Scare Them???

Check this out. What you will see is a continuation of the riff, started in my previous post, on the topic of how to create impactful public health messages. Translated, how do you mount a communications campaign that gets people to do something important for their health?

Yesterday we talked about the important role that “community leaders” can play in getting the masses to accept your public health message. Today’s URL carries you to the CDC’s elements for their anti-smoking campaign. Check out one or two of the videos offered at the top of the landing page. What you will see are the ravages of smoking-induced cancer, asthma, etc. as presented by the affected patients themselves. Compelling? They are to me! But how about to the masses?

Study after study has demonstrated that scary statistics, e.g. increased death rates, don’t do much convincing. Behavioral Economics teaches us that recipients of such messages simply employ “heuristics,” decision rules, to tune such negative information out using the “Yeah, but it won’t happen to me” line of reasoning. But how about these personalized vignettes, shared by people with holes in their throats wearing oxygen masks? How impactful are they with the average Joe/Josephine?

Bottom Line. Creating public health messages that work is not an easy task. As demonstrated over the past two posts, such messages need to be carefully customized based on such considerations as the behavior in which we want the message’s recipients to engage/not to engage, and the (sub)culture of which the recipients are members. Credibility is the name of the game here. 

My friends, there is a body of knowledge that speaks to such issues. It’s called “Health Psychology.” There are many good textbooks on this behavioral science.  During the pandemic era, where so many health outcomes are being determined by populations complying/not complying with public health messages, you might like to go read one. Or maybe even two.

Behavioral Economics And Covid-19

Check this out. What you will see is a fascinating little piece on how cognitive “Biases” (Remember Kahneman’s Thinking, Fast And Slow?) have screwed up our response to the pandemic. Not just one bias mind you. Four!  

The first is the identifiable victims effect. Quite simply, decision makers are more likely to act to save a life if they can put a face to it. If they can imagine the person in peril as their spouse or child. The story of the pandemic has been one of depersonalization. Huge numbers. No faces. No action!

Then there is the optimism bias. Not much explanation is required here. Human beings are wired to predict better outcomes (See the President’s prediction that the pandemic will “magically disappear by Easter” for reference!) than could possibly be legitimated by observable facts.  

Third is present bias. We are all hardwired to place greater emphasis on effects in the here and now than on long term outcomes. Immediate gratification makes up a lot of who we are and what we do.  

And last but not least there is omission bias. Decision makers would rather let people try to figure out whose fault something left undone was than have fingers pointed at them specifically for having done something wrong. 

And there you have it. The story of COVID-19 in America, 2020.  

Bottom Line. A problem I have always had with Behavioral Economics is that, at the end of the day, that “science” is just a bunch of labels. Kahneman’s “heuristics” and “biases” don’t really cause anything. They are just descriptions of human decision-making propensities that are the result of thousands of years of psychological evolution.  

So, what is their value here? Awareness! Hopefully, as decisions continue to be made that have major influences on the impact of COVID-19 on the U.S. population, simply making decision makers aware of these biases will help them to avoid some of the bad decisions that can result from yielding to them.


Why Toilet Paper???

Check this out. What you will see is a humorous analysis by a practicing physician of why, of all the things they could be hoarding in the face of COVID-19, are people hoarding toilet paper. Don’t spend too much time thinking about this, but there are some general principles to be learned here, many derived from some of the principles of Behavioral Economics.  

As I read the post, the things that jumped out to me are the related  notions that people need to feel like they are in control, and feel that they are doing something. When they hear that toilet paper may become unavailable, they can feel like they have accomplished something if they go out and score some TP. Something to check off the list at a time when not many things can be done that actually matter. Just sitting and waiting for the other shoe to drop doesn’t feel right. And toilet paper is cheap, doesn’t need to be refrigerated and is so bulky that it looks like you have really built up a significant store of something.  

This piece also got me thinking of all of the news reports we have seen about people waiting in line for hours to be tested for the virus. The head scratcher for me here is that if you test negative, so what? It doesn’t mean that you can’t get the virus tomorrow, or even today from the person standing behind you in line. AND. If you test positive, there are no drugs to treat the virus. You just go home and wait until the virus passes, or until you get to the point where you can’t breathe and need to be put on a ventilator.  

And then there is the record high sales of guns and ammunition during the last month. Huge, all across the country. Oh, I get it. People are afraid that somebody is going to come to their house to steal their toilet paper! 

Bottom Line. So, what is the big point here? I’m thinking about Dan Ariely’s book, Predictably Irrational. A classic Behavioral Economics tome. Don’t look for people to behave rationally, the book explains, but look for their irrationality to follow predictable paths.  

Good words to keep in mind as we go through the next few months!

Calm Also Has A Coefficient

Check this out. What you will see is the usual pithy insight that Seth Godin brings to us daily. Read this piece carefully, and think about it. The wisdom here? Lots of people, cable news stations in particular, make money by selling panic. Be it elections, pandemics or hurricanes, bad news is profitable news.  

His recommendation for dealing with all of this? Cut the cord with these fear mongers. No need to be constantly checking news feeds. Five minutes a day is enough to get the big stories.  

Bottom Line. As he always does, Seth got me to thinking. What accounts for this narcotic-like addiction that most of us have for moment-by-moment updates on stories that are likely to scare the hell out of us? Several bodies of knowledge provide the answer here. A major principle of Behavioral Economics is that people are risk averse. A bet needs to have a possible reward of $1.00 if the downside is the loss of $.50. Evolutionary Psychology also teaches us that humans are programmed to avoid danger, and to make rapid judgments as to whether a new situation is threatening. SO. We are seeking constant updates so that we can “keep an eye on” potential existential threats.  

Seth’s point? We are not on the savannah with our ancestors anymore, scanning the horizon for wild beasts. In 2020, it is more adaptive to stay calm and do the work that is necessary.  A darn good point, especially in the first quarter of 2020!  

Left Digit Bias

Check this out. What you will see is a somewhat scary but very important article on “biases” that can influence physician behavior and actually, in some cases, cause physician errors.

So, what’s a “left digit bias?” It is the tendency for many doctors to give the left-hand digit in a patient’s age undo consideration in making treatment decisions. This bias, for example, has been shown to cause doctors to be more likely to perform coronary bypass surgery on a multiply-compromised 79 year old than on an otherwise healthy 80 year old.  

Other biases? Sure. There are plenty of them. Racial bias. Gender bias. You know what they are, and likely how they work. But how about “Recent Experience Bias?” Here, a physician might have had hundreds of successful cases of patients using a particular drug. BUT. If one patient has a side effect with that agent, research has found that the doctor is significantly less likely to prescribe the drug for the next case he encounters.  

Bottom Line. All this sounding a little familiar to anybody? Yup, it is Behavioral Economics being applied to treatment decisions. Biases, heuristics, cognitive short cuts. The whole ball of wax.  

Think about that for a second. Now that we recognize what is going on here, I have two “What do we do about it?” questions. 

First, how we take advantage of knowing this in our pharmaceutical marketing efforts?

Second, what do we do to reduce the number of “errors” that these biases are causing???

Nudges vs. Shoves

Damn this is a good article! Check this out. What you will see is the Nuffield Ladder. It provides a graphic illustration, literally, of the eight levels of intervention that Behavioral Scientists and governing bodies can put in place to encourage people to make healthy choices. All of this, of course, grows out of Thaler and Sunstein’s seminal book, Nudge, which is the Behavioral Economics guidebook on how we can become “choice architects,” guiding people to make the right decisions in life. Important stuff.

At the lowest level of intervention, we can do nothing at all. Duh! We just sit back and monitor the situation and see what happens. At the highest level of intervention, we can pass regulations and eliminate choice. Want to make sure that kids stop vaping in 2020? Take the damn Juuls off the market!!! And make advertising of vaping products illegal. You will, of course, still have the black market, but what the heck.

In between doing nothing and eliminating choice, you can do things like guide through incentives, guide through disincentives, guide through social pressure, etc.  

Peter Ubel, the physician author of this article, goes on to maintain that even the eight levels of the Nuffield Ladder do not go far enough in explaining the intervention options open to the choice architect. SO. He goes on to explode each of these levels, showing meaningful and important variations in each.

Bottom Line. So, who cares about any of this stuff anyway? First Answer:  Anybody looking for real meaning in the application of Behavioral Economics to the real world,  rather than just to academic experiments. Second Answer:  Anybody empowered to make/assist in “Public Health” decision making. 

Think about it!

Caveats Concerning Behavioral Economics

Check this out.  What you will find is a very well-reasoned and important piece penned by Koen Smets, the “organization development adviser” pictured here.  

As you know, Behavioral Economics has become a really big thing within the hallowed halls of many pharmaceutical companies. Consultants pushing BE principles have been scoring especially big with marketing and marketing research departments, many of whom have come to believe that these principles will help them to understand their customers better and to market to them more effectively.

No doubt, Behavioral Economics constitutes an important step beyond classical economics in understanding how people make decisions. BUT, as Koen sagely points out, we must interpret its principles with great care. For example, among the many misinterpretations he debunks is the belief that many people hold that BE principles like biases and heuristics, cause people to do things. Or explain their behavior. Rubbish. Think about it. How would that actually work? It wouldn’t. Biases and heuristics are just labels for behavior that people exhibit.

Smets also debunks the perception that there are a multitude of Behavioral Economics interventions, “nudges,” that individually have huge impacts on human behavior. He points out that if this were actually true, it would be like having an aquarium filled with piranhas. The behavioral nudges would cancel each other out, just as the piranhas would busy themselves eating each other.  

One of the most surprising and bothersome “debunkings” pertains to some of the “experiments” that have been conducted to support the principles of Behavioral Economics. Hundreds of them! Reported across all the books that make up the BE literature. Only problem, Smets points out, is that typically small sample sizes were utilized, the researchers were biased to interpret the results in a particular way, AND attempts at replicating the results of many of these studies have failed. Miserably.  

As I read this article, I was also impressed with the fact that BE deals only with “one off” decisions. It does not deal with longer terms, habitual behavior. This is sort of unfortunate, since habitual behavior actually makes up the majority of what we do every day.

Oh, and “Just one more thing” as Detective Columbo used to say. But it is an important thing. Reading this piece reminded me that ALL of the Behavioral Economic books have a very negative view of human behavior. We’re irrational, lazy, selfish and misguided. We bring to our behavior all kinds of “biases” and try to sleaze in our decision making by using “heuristics.” Somehow, Behavioral Economists seem to believe that there is an absolute standard against which our behavior should be judged, and up against which we are failing. Miserably. I am voting “no” on that belief!

Bottom Line. Sometimes I tell you to simply skim one of the URL’s that I refer you to. Not this time. There is a lot of important information in this article. Read it. Think about it. Behavioral Economics has made major steps to take us beyond Classical Economics and its “rational man” model of human behavior. HOWEVER. Its contributions are often wildly misunderstood and overestimated! 

Behavioral Economics And The Practice Of Medicine

Check this out. What you will see is a family physician’s very practical recounting of how to avoid two biases, originally uncovered by Behavioral Economists, that are frequently encountered in the practice of medicine.

More specifically, he focuses on the biases of “availability” and “recency.” People are more likely to overestimate the risk of things with which they are very familiar and things that have happened to them lately. Conversely, they underestimate the risk of events that are not right in their face. What to do? Simple! Two things. First, the physician must remember herself, and remind her patients, of actual data concerning risk levels. Second, the doctor must lean on her team to make sure that all of the staff, and all of the patients, are sufficiently grounded in reality to avoid succumbing to these biases. Bottom Line. How clever of a PCP to figure this out. To do so, he needed to be in touch with both the theories of Behavioral Economics and the practicalities of medical practice. BUT. He laid out only two of the multitude of biases and heuristics that are doubtless at work in physicians’ and patients’ minds on a daily basis. AND. This is not just an academic curiosity, but a phenomenon that can lead to bad treatment decisions, poor patient compliance, etc.  I’m thinking this topic requires some further thought. And practical guidance to physicians and patients alike as to how to deal with these biases so that they don’t have negative impacts upon healthcare.