Overview of Behavioral Economics - World Health Summit

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Why Do People Make “Bad” Decisions?• Uninformed Decision Making vs. Irrational Decision Making• Economic rationality assumes a framework in which a personcarefully weighs the costs vs. the benefits of any given decisionSpecifically, discounted expected internal costs vs. benefits• Irrational Decision Making?People wouldn’t be capable of using this type of measureddecision rule (even with correct information)• Similarly, some people may have time-inconsistent preferences:“Pay $1 now or $2 in 1 yr?” vs. “Pay $1 in 5 yrs or $2 in 6 yrs?”Saying “I’ll quit smoking tomorrow”Especially problematic when something’s addictive.4
Economic Policy Implications of “Bad” Decisions• So, if someone is making an arguably “bad” decision, is it a poorlyinformed one or an irrational one?• The implications for appropriate government policy interventionsare therefore different• For Uninformed Decision Making by a rational person:Improve information about the costs of unhealthy behavior(e.g., US Surgeon General’s 1964 report, posting of calories)Incorporate the external costs (relative to internal costs)(e.g., excise taxes on tobacco and alcohol)• But these are common issues in traditional economic framework:“public goods” and “externalities”5
Page 1 and 2: World Health Summit Partner Symposi
Page 3: Why Do People Make “Bad” Decisi
Page 7 and 8: Behavioral Economics Examples: Fina
Page 9 and 10: Two Main Takeaways• Don’t be to

Overview of Behavioral Economics - World Health Summit

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