What is Unique about Behavioural Economics?

Ivo Vlaev

SECTIONS

1. Theories of behavioural choices2. Behavioural Frameworks3. Intervention Examples

What makes you choose this insurance policy?

What makes you pick that stock?

What makes you choose to have that extra drink?

”Traditional” explanations

Because it makes you FEEL good

Because of you BELIEVE it is possible

Because you PREFER it over the alternatives

Economic theory of rational choice is used for understanding behaviour as utility maximisation

Traditional approaches in public health also describe the causal “inner” states (beliefs, desires, etc.)

If not good enough then find more causal states...

and more ...

Then add some external factors too...

Still only ~ 3%-28% variance explained...

see Webb & Sheeran (2006) for a review

What we have learned over > 50 years of research in behavioural economics?

“People know the price of everything, but the value of nothing” Oscar Wilde

“It turns out that the environmental effects on behaviour are a lot stronger than most people expect” Nobel Laureate Prof Daniel Kahneman

“Information & information processing are complements” Colin Camerer

The environment triggers the automatic system

• Controlled

• Effortful

• Rule-based

• Slow

• Conscious

• Rational

Reflective System

• Uncontrolled

• Effortless

• Associative

• Fast

• Unconscious

• Affective

Automatic System

A toy model of the automatic mind

I1 I4

I2I5

I3

It

I6

£5 £50

Constructing our preferences

Constructing our beliefs

Men inferred that they are at higher risk of heart diseaseafter recalling fewer risky behaviours

(Alter & Oppenheimer 2006; Rothman & Schwarz 1998)

Economics

Preference-

matching

Salop (1979)

Brynjolfsson et al. (2003)

Psychology

Choice

conflict

Tversky & Shafir (1992)

Dhar (1997)

Choice

overload

Iyengar & Lepper (2000)

Constructing our choices

SECTIONS

1. Theories of behavioural choices2. Behavioural Frameworks3. Intervention Examples

Determinants of Behaviour

Capability

Behaviour

Opportunity

Motivation

Fishbein et al.“Factors influencing behaviour and behaviour change”

(Handbook of Health Psychology, 2001)

Determinants of Behaviour

COM-B (Susan Michie et al UCL)

An amusing but powerful nudge at Schiphol Airport

• Image of black fly etched onto urinals led to ‘spillage’ declining by >80%

• Published in March 2010

• Operating framework for

applying behavioural

insight to public policy

• Behavioural Insights

Team established in the

Prime Minister’s Office

Paul Dolan, Michael Hallsworth, David Halpern, Dominic King, Ivo Vlaev

SECTIONS

1. Theories of behavioural choices2. Behavioural Frameworks3. Intervention Examples

Prospect Theory: Application

Messenger

Advisor’s Expertise

• People learn from experience to pay more

attention to advisors who have given good

advice in the past.

• Consumers are more influenced by better

advisors

• Advisors have less influence on more

experienced and knowledgeable consumers

Advisor’s Trustworthiness

• People take more advice from trusted advisors

• Greater trust in advisors judged to have:

– Similar values

– Shared goals

– Similar intentions

• Being of the same sex and age increases the

attention paid to an advisor

Advisor’s Personality

• Consumers are more influenced by confident

advisors irrespective of advice quality

• Dissenting advisors are discounted unless

they are historically better than the consensus

• People are better at taking advice when

advisors are more distinct from one another

Would you donate 29p a day (for a year)?

Would you donate £106 (for a year?)

0

20

40

60

80

100

Yes No

0

20

40

60

80

100

Yes No

71% 29% 37% 63%

Incentives: loss aversion

Social Norms

Defaults

Opt-in

Opt-out

Check the box if you want to participate in the organ donor program

Check the box if you don’t want to participate in the organ donor program

Defaults

Check the box if you want to participate in the organ donor program

Check the box if you don’t want to participate in the organ donor program

Defaults

Defaults

Opt in Opt out

Percentage of adults registered as organ donors

Do Defaults Save Lives? Science 21 November 2003 Eric J.

Johnson and Daniel Goldstein

Salience: reducing clinic non-attendance

through SMS reminders

• Most common reason given in UK is forgetting appointment

• Systematic review of telephone and SMS reminders found that they

significantly improved attendance (Hasvold 2011)

• Cochrane Review on SMS messages for behaviour change in

general concluded that they have positive short-term behavioural

outcomes (Fjeldsoe et al. 2009)

Field experiment to improve reminders

• East London trust (3 hospitals) where SMS already used

• September 2013 – April 2014, >20,000 SMS message sent

• Five different types of appointment

• Rheumatology

• Gastroenterology

• Ophthalmology

• Cardiology

• Neurology

NHS REC: 13/NW/0508

Different messages used

Name Message

ControlAppt at [hospital] on [Sep 16] at [10:00am]. To cancel or

rearrange call the number on your appointment letter.

NumberAppt at [hospital] on [Sep 16] at [10:00am]. To cancel or

rearrange call 02077673200.

NormWe are expecting you at [hospital] on [Sep 16] at [10:00am]. 9

out of 10 people attend. Please call 02077673200 if you need to

cancel or rearrange.

Costs We are expecting you at [hospital] on [Sep 16] at [10:00am]. Not

attending costs NHS £160 approx. Call 02077673200 if you

need to cancel or rearrange.

0

2

4

6

8

10

12

14

Control Number Norms Costs

DN

A R

ate

Message

DNA rate reduced by 3.4% points (29%)

3.4

%

poin

ts 1,300 fewer DNAs

if applied to all

viable

appointments over

whole trial period

8,000 fewer if

applied over one

year in same

location

320,000 fewer if

applied nationwide

Priming – community level intervention

15

46.933

21.6

Control Olfactory Male eyes Female eyes

HHC

olfactory vs

control

p<0.001

male eyes vs

control

p = 0.038

HHC improved in presence of aroma

and male eyes (but not female!)

Affect

Commitment

African American women signing a behavioural contract, were

more likely to reach their exercise goals (Williams et al. 2006).

Exer

cise

go

al

Ego: Encouraging people to join the organ

donor register

Ego: nudging to join the organ donor register

1 Control 2 Norm

3 Norm + Pic 4 Norm + Logo

5 Three Die 6 Nine Live

7 Reciprocity 8 Action