I said last time that people do not go through life coldly calculating how to maximize their utility, that instead we rely on heuristics,” cognitive shortcuts, and we often act impulsively. The cognitive biases and logical fallacies to which people are subject came up as I discussed science vs. theology and the pseudo-science of economics, but they're important in every aspect of life.
Work, most notably begun by the psychologists Amos Tversky and Daniel Kahneman, empirically explored the decision heuristics people actually use, and uncovered many so-called biases, that is ways in which people’s decision making differs from earlier assumptions of what is “rational.” They wrote many papers. One of their best known and seminal contributions is called Prospect Theory, the main idea of which is that people tend to be more risk averse than they are acquisitive, in other words losing fifty bucks hurts more than gaining fifty bucks feels good. (This obviously doesn’t work with gambling addicts, however.)
Subsequent work by them and others has revealed many ways in which people’s spending and investing behavior deviates from what was previously considered “rational.” Not all of it is highly relevant to how people make medical decisions, so I won’t belabor it here. For now, I’ll just say that you wouldn’t see all that advertising if it didn’t work, and corporations aren’t spending the money to support your rational choice. Keep that in mind as you see what seems like 50% of all advertising being for drugs, Medicare Advantage plans, and medical provider corporations.
I should mention a component of the classical theory called “declining marginal utility.” This means that the first two or three tomatoes you buy are worth more to you than the next three, and by the time you have more than you can possibly eat before the next one goes bad, they’re basically worthless. (We’ll leave aside that the seller, probably a corporation, would like to sell as many tomatoes as possible and does not experience declining marginal utility of money.)
This idea seems basically to make sense for groceries or movie tickets,[1] but it doesn’t make much sense for medical services. Either you need something once, and you’re done; or you need it continuously, for the rest of your life. I’m not going to get a second right hemicolectomy no matter how cheap it is, and I would have been no more inclined to get the first one if it were free or even if they paid me to take it. On the other hand I’m not going to stop taking my blood pressure medications because I’ve gone long enough without a heart attack that I’m now satisfied.
We'll move on to more of the empirically ridiculous scriptural bases of economics next time.
[1] It’s actually not so simple. As I consume tomatoes or movies, I might acquire a taste for them and end up buying more rather than less. People might praise my tomato sauce so much that I end up bottling gallons of it and selling it, and buying all the tomatoes I can get my hands on. Then there are the cases of collectors and addicts. In other words these assumptions are generally intuitively appealing, but empirically half-truths at best.
No comments:
Post a Comment