Five Clinical Practice Lessons from the Nobel Prize in Economics

Pedro Rey

The 2017 Nobel Prize in Economics was awarded to Richard H. Thaler ,from the University of Chicago, for his contributions to behavioural economics. As I have explained before, this discipline combines the teachings of economics and psychology to better understand and predict human behaviour and to help us make better decisions, especially in areas such as health, where the combination of having to take many decisions involving risk and having to share private information with people with whom our incentives are not always perfectly aligned, makes us sensitive to multitude of emotions, failures of rationality and psychological biases.

Richard Thaler’s academic career, as he states in his recently published book Misbehaving, represents the struggle to include psychological aspects in the study of economics. In fact, Thaler's fundamental mentors were not economists, but psychologists Amos Tversky (deceased in 1996) and Daniel Kahneman, who won the Nobel Prize in Economics (along with experimentalist Vernon Smith) in 2002. With the award, the Swedish Academy recognizes Thaler’s contributions to economics by incorporating three fundamental psychological aspects: indivuals’ limited rationality, social preferences and lack of self-control. Today I want to summarize five teachings of Richard Thaler that can affect clinical practice:

1. Losses affect us more than gains

The so-called prospect theory, based on results from experiments in which subjects were asked to indicate their preference between monetary losses and gains of different amounts, indicates that losses affect us approximately twice more than gains, and therefore, experiencing a loss influences more our behavior than a gain of equal value,. Therefore, our risk behaviour is more reckless when we consider that we are in a situation where we have obtained losses than when we are winning. In the field of health, this leads us to behave as risk averse when we enjoy good health, but as risk lovers, who can risk excessively taking reckless decisions, when we face a disease, which can contribute to aggravate it.

2. We don’t have clear preferences for things, and we are affected, therefore, by the way decisions are presented

As I mentioned in previous posts when talking about an epidemic like "the glass half full or half empty", the way situations are presented can affect our decisions. Thaler, for example, shows great concern about children following healthier diets, and shows in his book Nudge (with Cass Sunstein) how the order in which food is placed in school canteens can lead to students follow radically different diets. Similarly, Thaler points out that in many of our decisions we lack preferences or even references about which is the best behaviour we should follow and that, therefore, in such situations, simply indicate the socially preferable option as the "by default" can lead us to behave according to the social optimum. As an example of this, Thaler argues the radical differences that exist in the rate of organ donation between countries in which the default option at death is to be a donor and that of those countries in which one has to perform a procedure to become an organ donor. Giving a default option, while making it easy to take other options, is a good way to direct people towards a "good" decision, when they are not clear about what to do.

3. What matters to us today is not the same as what will matter to us tomorrow

Thaler's experiments clearly illustrate that human beings are "temporarily inconsistent": what matters to us today is not the same as what will matter to us tomorrow. Therefore, although we would all like to reach our old age in perfect condition, we sometimes sacrifice that future well-being for the immediate pleasure of behaving in a less healthy way. Understanding the mechanisms by which we don’t invest in our future well-being and, especially, developing non-coercive defences for us to do so are the other of Thaler's key contributions.

4. An honest use of our psychology can help better health decision making

Incorporating psychological aspects into economic decision making allows for the manipulation of situations to obtain better results. There are two means of intervention. On the one hand, as I mentioned here, a better understanding of the motivations of human beings, including psychological aspects that matter to us as the equality of distributions, the fairness of procedures or the image that we project with our actions on others and even on ourselves, must take into account incentive mechanisms which should not necessarily be monetary and that appeal to those motivations and not only to an selfish (and in many cases monetary) motivation that does not capture the great part of the motivations that drive us. On the other hand, not having stable preferences opens the door to smaller manipulations which can lead to radical changes in behaviour. The possibility of radically manipulating behaviour with small trivial changes has given rise to the movement of libertarian paternalism that, as long as it starts from a desirable goal for society, seeks to influence behaviour at a low cost and, in turn, allow full freedom of choice. This movement of libertarian paternalism is obviously very sensitive, since it lies on a fine balance between allowing freedom of choice and guiding the individual, in our case -for example- to the patient, towards the decision that best suits them. Let's say that, well understood; libertarian paternalism can be a tool of the "patient revolution" that hoists the movement of "shared decision making” by doctors like Victor Montori. On the other hand, a paternalistic abuse of psychological nudges can lead the doctor to manipulate the patient, not taking into account their decisions and directing them towards the treatment that, for various reasons, maybe of more interest to the doctor.

5. The most useful health policies may not be expensive and use psychological decision making

Using Thaler's teachings, government agencies have been created in several countries (United States, the United Kingdom, Canada, and Australia) and supranational entities - such as the European Union - known as “Nudge Units”, dedicated to designing policies using behavioural science. The idea is to use these psychological "little pushes" (nudges)  to help us make better decisions, under the idea that on many occasions, and especially in decisions that have to do with health, it’s the sum of individual behaviour that can make the implementation of policies more expensive, and that, therefore, it’s better to understand individual psychology well and to test it first in small-scale experiments than to make policies not based on evidence, or based on very general evidence that does not understand the individual psychological mechanisms. They have a good description of the trajectory of the British agency in the book Inside the Nudge Unit by David Halpern.

If you have been left with a desire to know more about why Thaler's work may be important for clinical practice, I invite you to see this presentation (thirty minutes long and in Spanish) that I recently made about his work at the Ramón Areces Foundation: