People, Policy, and Behavioral Economics
How can behavioral economics be harnessed for public policy?
The field of behavioral economics has received increasing attention in public policy. Behavioral economics studies the gap between how people are expected to rationally behave and how people behave in actuality. According to “In Focus: Using Behavioral Economics to Advance Population Health and Improve the Quality of Health Care Services,” some questions that can be asked are:
“Why do many people fail to exercise in spite of the well-known benefits of doing so, while others skip medications that could prevent serious illness and improve their quality of life? Why do some physicians stick to their usual care practices despite ample evidence of better approaches? And why have pay-for-performance programs not always succeeded?”
Insight to this question can perhaps be found in the article “How Behavioral Economics Can Produce Better Health Care,” which states:
“People don’t always make decisions — even hugely important ones about physical or financial well-being — based on careful calculations of risks and benefits. Rather, our behavior is powerfully influenced by our emotions, identity and environment, as well as by how options are presented to us.”
The implications for behavioral economics in public policy are fascinating. The field shows us that even the creation of the most well-intentioned policies would benefit from consideration of how people actually behave in reality, in order for them to move closer towards their intended effect. The following reads shed more insight into the intersection of public policy and behavioral economics:
The Behavioral Economics of Health and Health Care. “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…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.”
Health Insurance Coverage and Take-Up: Lessons from Behavioral Economics. “Choice overload, lack of understanding, and misperceptions of risk can make it hard for people to decide optimally, but this is not the only, or even the most, significant type of behavioral barrier to optimal coverage: individuals might also find it difficult to act optimally or to implement their decisions…people sometimes postpone activities with immediate costs and tend to give too much weight to losses and gains in the present versus similar losses and gains in the future (Laibson 1997). This type of present-biased preference implies that people will delay incurring costs even if doing so will reduce their welfare in the long run (O’Donoghue and Rabin 1999).”
Behavioral Insights for Health Care Policy Report. “A basic problem with access to American health care is that a significant share of people eligible for subsidized health insurance coverage fail to enroll. One-third of eligible adults do not claim Medicaid benefits, and studies have shown that half of those who qualified for coverage from marketplaces established by the Patient Protection and Affordable Care Act (ACA) failed to sign up, opting either to forgo insurance entirely or to enroll in unsubsidized individual plans outside of the exchange…millions of individuals may forgo potentially valuable insurance coverage because they are unaware of programs, are uncertain that they are eligible, or feel overwhelmed by complex bureaucratic procedures.”
If you have any other reads/resources that you particularly like, please feel free to share below.