Kevin Volpp: Behavioral Economics and Healthy Behaviors

by Tom Eisenberg, who did the best job he could

On Thursday afternoon, Kevin Volpp from the Center for Health Incentives at the Leonard Davis Institute of Health Economics gave a lecture called “Using Behavioral Economics to Improve Health Behaviors” in Science Center 101. Volpp holds a PhD in Economics and an MD, as well as a joint appointment at the Wharton Business School and the University of Pennsylvania School of Medicine as an Associate Professor. He is also an attending physician at the Philadelphia VA Medical Center.

Dr. Volpp’s lecture centered largely on the idea of individual behavior being a key factor of the health of the US population. He cited the ineffectiveness of many traditional economic measures in successfully influencing people’s behavior. As an example, Volpp showed a contract from a payday lender that clearly indicated an incredibly high yearly interest rate on a loan of around 820%. Nonetheless, the contract was signed.

One limit of traditional policies, Volpp said, was that “they assume that people know what’s best for themselves.” However, there is evidence that people are categorically bad at evaluating what is best for them.

People are biased towards rewards in the present; they are bad at evaluating small probabilities and they tend to choose the default outcome of a situation. Volpp said that people also have been proven exhibit more aversion toward losses than in gains of the same amount, and finally, people are susceptible to the framing of a particular situation. He acknowledged that this type of behavior analysis leads towards “paternalistic policies, which is one approach to public policy that people find offensive.”

Volpp also discussed “nudges,” citing the popular book of the same name by Cass Sunstein and Richard Thaler. “Nudges,” Volpp said, “are ways that you could steer people toward healthier choices without making anyone worse off.” He cited the example of placing healthier food toward the front of the food displays in a cafeteria.

Volpp also addressed the issue of nutritional information being available at restaurants. Recent studies on this subject have indicated that providing nutritional information at restaurants and recommending a calorie intake have shown to be ineffective at reducing consumption. However, incentivizing convenience of ordering low calorie food, by clustering these options together at the top of the menu, seems to have a significant impact. This indicates that traditional measures of informational provision are not always sufficient to motivate changes in unhealthy behavior.

One blockade in creating effective health insurance programs has been the issue of well-behaved individuals subsidizing the costs of ill-behaved individuals. Volpp said, “If I’m a very zealous exerciser and I go to the gym all the time I pay the rates as someone who smokes two packs a day and eats a lot of red meat and just sits around.” A solution tested by some health insurers was rewarding individuals for gym visits. But Volpp criticized these programs, citing the difficulty to monitor the change in behavior.

Volpp concluded by noting three major questions in this field individual behavior and health: First, are there built-in default benefits to be had? Second, in what ways can we make information provision more precise? Third, how can we shape incentives to get people to behave in a healthy manner? While past research is promising, Volpp stressed that it’s a field with “strong conceptual beliefs but very little empirical data.”