Superfreak – incentives and externalities in personal health

January 20th, 2010 by Doug Keare Leave a reply »

Picking up on the thread from my last two posts (Supersize me- NOT and Micro-inverventions – smaller is better), I thougSuperFreakonomics - Discussions on Personal Health, etcht it was very interesting to read Steven Levitt and Stephen Dubner’s book SuperFreakonomics, which shed a different light on the problem of personal health behaviors for me. Throughout the book, the authors discussed incentives and externalities (the uncompensated costs of one’s actions that affect others, not themselves). In regards to  adopting “risky” health behaviors, most people generate more externalities than one would usually acknowledge. For example, there are:

  1. Higher health costs for co-workers if you are in an experience-rated or self-insured arrangement
  2. Increased work for co-workers if you are less productive or absent due to conditions, which could be either controlled or avoided altogether by healthier behaviors
  3. Reduced function as a parent, spouse, child, friend if you are hindered by poor health
  4. Reduced presence/time for loved ones if you are to die prematurely due to avoidable causes
  5. Increased stress, anxiety or friction among loved ones who are trying to get you to adopt healthier behaviors and improve your health

Some of these, particularly the ones that affect friends and family, hit pretty close to home for many people and

therefore become internalized by the actor. These are commonly cited as inspirations, motivations, or reasons for taking action to modify a behavior. In the grand economics of personal health, forgoing the donuts is a pretty small price to pay to avoid the prospect (cost) of checking out early and leaving a couple of kids without a parent.  I’ll call these type 1 externalities.

What I’ll call type 2 externalities are ones where the only effects are on society or work groups as opposed to loved ones or family (for example items 1 and 2 above). These will likely require companies or governments to take action to compel people to internalize these effects. Recently I heard Bill White, who was, at the time, the mayor of Houston, speak on corporate health and wellness. He stated in plain terms that employees who are not taking care of themselves are taking money from  their co-workers, and that companies, in the interest of fairness, should start making employees aware of this fact and use it to drive peer pressure or even benefit plan design. We think this is one way to skin the cat, but that it is still only the first step toward getting people to want to, and be able to, tackle their behaviors.

To the extent that people are motivated to do something for either type 1 or type 2 reasons, they still need the ability to do so, and they need triggers to spark the desired changes. We’ve designed Vive with a number of means for giving people the ability to structure change into their day, and to trigger the actual desired behaviors. We also support peer interaction in the workplace through challenges and sharing which can turn “peer pressure” into “peer fun” as people tackle simple health challenges together for the individual and common good.

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