An Introduction to Behavioural Economics for Health

There’s no doubt that there’s been fervent interest in behavioural economics in the last couple of years among social marketing and policy practitioners. Both the UK and NSW Governments have developed insights teams dedicated to finding new ways to ‘nudge’ citizens to be healthier, greener and more civic-minded.  So how can behavioural economics help with program design and campaign development?

Social marketing is about changing behaviour – behaviour that is driven by rational and irrational desires.  The rational part of our decision-making process can be influenced by increasing knowledge (e.g. presenting the facts about skin cancer), increasing efficacy (e.g. healthy cooking classes or QUIT hotlines) and through legislation and subsidies (e.g. seat-belt laws, tobacco tax).

However, extensive academic research has found that people are often “predictably irrational”.  When making decisions we take mental short cuts.  We’re influenced by the desires and distractions of the moment. Knowing how people will behave irrationally can provide guidance on how interventions can be structured to influence healthy behaviours.

Below are three common decision errors, which have major implications for healthy behaviours:

Present bias

Present bias is the tendency to focus on the immediate benefits or costs of a situation and undervalue future consequences.  An example is postponing a session at the gym to watch TV; or undervaluing the long-term harms of tanning to look good now.

Researchers are now looking at a range of tools to help manage present bias.  These include offering small incentives immediately after a ‘desirable’ behaviour has been done. One example is a pilot scheme in the UK where mothers from disadvantaged neighborhoods are given food vouchers worth around A$340 if they breastfeed for the first six weeks of their child’s life.

Because the use of incentives is very effective at motivating one-time behaviours (e.g. getting a vaccination or attending a screening), it is now being evaluated as an effective motivator for habit formation (e.g. exercising everyday).

People who commit to making a change are more likely to do so.

The use of ‘contracts’ and commitment devices to pledge to a certain behaviour or goal are also very effective. These devices leverage the desire to be (or to appear) consistent with what we have committed to doing.  Once we have made a choice (e.g. pledge to give up drinking for a month or to run a marathon), we will encounter personal and interpersonal pressure to respond in ways that justify our earlier decision.

This is especially powerful when the pledge or commitment is made in public, such as social media, as people are pressured to be consistent with their earlier commitments.

Status quo bias

Status quo bias is the tendency to choose a ‘path of least resistance’ in our decision-making.  An example of this is in western European countries that have an ‘opt in’ policy for organ donation, that is, the default is non-participation, donation rates tend to be close to just 10%. In contrast, in countries with an ‘opt out’ policy, in which citizens are automatically enrolled as organ donors unless they actively choose to opt out, organ donation rates are typically 98%–99%.

It’s important to consider the ways in which choices or options for programs are structured. The choices which social marketers want people to choose, whether it’s to recycle or take the right medication, needs to be the choice which requires the least amount of cognitive energy to choose.

Loss aversion

Loss aversion is the tendency to put much greater weight on losses than gains. Studies have shown that a loss has roughly twice the disutility of an equivalent dollar gain. Knowing this decision bias can help frame messages and structure the way incentive programs work.

Be Mindful that . . .

While behavioural economics has the potential to make programs and policies more effective, as with any concept or intervention, there are limitations.  The tools presented by behavioural economists are part of a possible solution, and should not substitute for public policies, infrastructural projects, or programs that increase knowledge and efficacy.

We also need to consider the social determinants which affect health and the decisions people make, while looking to policies that will deal with the underlying contributors to poor health, such as poverty, inequity and illiteracy.

As described by Loewenstein and Ubel, behavioural economics should “complement, not substitute for, more substantive economic interventions.  If traditional economics suggests that we should have a larger price difference between sugar-free and sugared drinks, behavioural economics could suggest whether consumers would respond better to a subsidy on unsweetened drinks or a tax on sugary drinks.”


Disclaimer: Charissa has written this post as an independent contributor.  This post reflects only Charissa’s views and not those of her employer or clients.

Interested in learning more?  Dr Kevin Volpp, the Founding Director of the Center for Health Incentives and Behavioural Economics at the University of Pennsylvania will be the keynote speaker at the Incentivising a Healthier Australia Forum in  Sydney on Thursday 6 March 2014.  Or, you could always  Contact Us

Crime, Justice and Social Determinants

It has been said that all wars begin long before the first shot is fired.  So it is with crime.  The causes of crime are not to be found in the justice system.  They arise well before.  And so the solutions cannot rest on the justice system alone.

The social determinants of crime are broadly similar to the social determinants of health which are reflective of living and working conditions.  These in turn hinge on the availability of work, adequacy of education and access to health services.

There is an established domino effect on a child’s health and education outcomes, and consequential societal outcomes, notably crime, where there is economic and social deprivation.  A child’s health and education is in turn singularly dependent on affordable access to services and resources.  But there is a disparity of affordable access between communities.

A 2009 Australian Human Rights Commission report identified a number of ‘high stakes’ communities in Western Australia.  Large proportions of young men from these communities are cycled through prison and then returned.  This can lead to further destabilization of those communities.

Moreover the high imprisonment rates from residents of such communities contribute to community break down, elevated crime rates and high incarceration rates.

Logically, preventative funding and improved accessibility of services in these localities will change the behavioural dynamic of both the community and the individuals residing there.  Overseas evidence indicates that the result is the emergence of safer and more confident communities.

Crime is a burden on the whole of our society.  It impacts our lives through loss of property, increased insurance premiums, and, when there are assaults, the need for medical intervention.  It also requires the diversion of scarce government resources to support the justice system.  As reported in the West Australian newspaper, since coming to power the Barnett Government has spent $655 million expanding the capacity of the prison system.  The daily cost of housing a prisoner reached $191 a day in 2011-12 with each prisoner spending an average 217 days in custody.

People want to see  ‘justice done’ and in response governments of both persuasions have invested heavily in the judicial and corrective services systems.  Western Australia’s incarceration rate is now above the national average.  More alarmingly, Aboriginal Australians are incarcerated at ten times the rate of non-Aboriginal Australians.  This ranks as the highest for any ethnic grouping in the world.  It’s time for change.

Imprisonment rates per 100,000 of population by ethnicity[1]


based on ethnicity


White 130

Black 680

Mixed 370

Asian 180

Chinese 50

United States of America

 based on ethnicity


White 412

Hispanics 742

Blacks 2,290

Western Australia

 based on overall population



Western Australia



Imprisonment rate for adult Aboriginals 2,483


 based on overall population






Imprisonment rate for Adult Aboriginals 1,720

As a 2010 parliamentary report highlighted that the effectiveness of prison as a deterrent is called into question when:

  • The high, if not worsening, recidivism rates for particular groups of offenders are examined;
  • The increasing cost to our justice system and therefore the taxpayer, is accounted for

A collaborative interagency response is needed

If we as a society are to change the behaviours that are integral to many of these issues a high level of interagency collaboration is needed.  Without it, the ‘wicked problem’ that is the ongoing root cause of crime in high risk communities will remain unaddressed.

This root cause includes all the issues of Aboriginal disadvantage, including dispossession from land, cultural alienation, social dysfunction, family dysfunction, poor standards of health, higher than average levels of mental illness, high levels of substance abuse, domestic violence, poor school attendance rates, poor employment participation rates, poor standards of housing and overcrowding, and racism.  Assuming that sustainable change is what we’re chasing, the ‘building blocks for targeted interagency intervention endorsed by COAG are perhaps not a bad place to start.  These ‘building blocks’ include a focus on;

  • Early Childhood
  • Economic Participation
  • Governance and leadership
  • Health
  • Safe communities, and
  • Schooling or education

As the tombstones of many government interventions attest, single agency intervention alone is insufficient.  Agencies must be empowered and incentivised to intervene within a collaborative framework.

Ironically, this does not simply require a behavioural intervention in the targeted communities.  It needs a change in the behaviours of existing departments and service providers whose KPI’s , funding and reporting structures are strongly vertical.  A ‘wicked problem’ indeed.

[1] Adapted from the Community Development and Justice Standing Committee Report No ^ ‘Making our Prisons Work’ 2010

Photo courtesy Flickr User kIM DELram