Daniel Tversky and Amos Kahneman are considered the fathers of behavioral economics. Their ideas have been shaping economic theory consistently since 1979, when they published their initial research. For those of us in the business of promoting organizational health and well-being, their work has far-reaching implications, particularly as it relates to patient behavior change. And it can also be a useful tool when seeking support from leadership for new initiatives.
Before Tversky and Kahneman, economics was dominated by several theories, but all were grounded in the belief that people are basically rational. If they have accurate information and decent incentives, they will make the right decision. Health benefit strategies -- even as recently as 3-5 years ago – assumed this to be true. But this concept failed time after time. We learned, for example, that the value of rewards diminishes over time, and that the magnitude of the reward doesn’t predict its power to motivate. It became obvious that rewards and rational thinking did not overcome inertia.
Enter Tversky and Kahneman. Their research showed that people are predictably irrational. Decisions are affected by present bias, loss framing, emotions, social context and inertia. Modern day behavioral economics was born.
How do we integrate their theories into our everyday work? We can start by linking to heuristic processes that enable a person to discover or learn something for themselves. To inspire change at the individual level, we need to attack these barriers:
- Status quo. Use defaults to achieve a desired behavior. There is excellent research specific to health care that shows defaults have greater success.
- Present bias (myopia). If you use rewards, make them frequent and immediate. One single large award has diminishing value.
- Limited bandwidth. Make things simple, limit the number of choices.
- Loss aversion. Frame rewards in terms of losses rather than gains. Tversky and Kahneman’s research showed that losses -- perceived or real -- have twice the value of gains.
- Social norms. Compare relative performance. Provide comparisons to their peers: “People like you achieved XXX”. Take a look at OPower’s experiment when people compared energy usage to a neighbor, power consumption fell by 2%.
While you may be familiar with many of these concepts, there’s likely room to use them in a more targeted way to improve wellness or care management program compliance, plan selection and provider choice. Include the concepts in our regular discussions, quote the research and apply it to projected outcomes. They also apply to your discussions with leadership. When gaining support for a new idea is difficult because of inertia and barriers, you might shift your argument away from what’s to be gained with a new program or strategy. Focus on “loss aversion” and make your points in the context of what the organization stands to lose if they choose not to act.
 Tversky, Daniel. Kahneman, Amos. (March, 1979). Prospect Theory: An Analysis of Decision Under Risk. Econometrica, Volume 47, Issue 2, 263-292.
 Aysola, Tahirovic, Troxel, Volp et al. (2016). A Randomized Controlled Trial of Opt-In Versus Opt-Out Enrollment Into a Diabetes Behavioral Intervention. American Journal of Health Promotion, Vol. 32(3) 745-752