How can behavioural economics help us understand decision-making during COVID-19?

Behavioural economics offers an insight into why people make the decisions they do. In a pandemic — when even apparently small decisions may involve high stakes — the discipline can provide an insight into how such choices are made, and critically asses the emotional vs logical. In this blog, we offer an overview of some of the basic concepts of behavioural economics and how these apply to the current COVID-19 outbreak…

Many countries are moving forward and easing lockdown restrictions while there are still many unknowns about the virus and how it spreads. They are proceeding with varying degrees of caution in the face of unknowns related to both where and when the virus will flare-up as well as economic uncertainty. For example, EU countries anticipating the summer tourism season have focused on easing travel restrictions and opening up the leisure sector. But already, reports from several countries highlight the reality of recurring flare-ups of the disease.

There is widespread reluctance to re-impose lockdowns, and to incur further risks to economies as well as general morale. But in economies that are driven by consumer spending, how individuals make decisions in the face of such uncertainty will have profound impacts on both the path of economic recovery as well as the course of the pandemic. Previously mundane decisions such as whether and when to go clothes shopping, visit the mall, or to go out to a restaurant or pub, now have to take into consideration risks associated with COVID-19.

The field of behavioural economics could have much to offer as policy makers face difficult choices and trade-offs in the months ahead as the world adapts to the reality that COVID-19 is not going away soon. In the UK, the government use of behavioural insights has already been widely trailed, though not without some controversy. Behavioural economics studies the influence of psychological factors on how humans make economic decisions. It extends traditional economics to better account for real people’s beliefs and biases. Nobel prize-winner Richard Thaler summarises these extensions in terms of three 'bounds' on the behaviour economists have tended to assume:

“Bounded rationality reflects the limited cognitive abilities that constrain human problem solving. Bounded willpower captures the fact that people sometimes make choices that are not in their long-run interest. Bounded self-interest incorporates the comforting fact that humans are often willing to sacrifice their own interests to help others.”

As countries and communities move from an initial phase of tight lockdown and the associated restrictions on activity — which were necessary to “flatten the curve”, slow the spread of the virus, and avoid overloading health facilities — behavioural economics can teach us, first, about how people assess risks and, second, about how they then go on to make decisions based on the risks that they’ve assessed.

Assessing risks

Fundamentally, human beings are not always good at assessing risks. To take just three examples (though there are many more):

1. Probability weighting is a key element of Daniel Kahneman and Amos Tversky's Prospect Theory, introduced in one of the most cited social science papers of all time. Probability weighting tells us that we systematically overestimate small risks and systematically underestimate large ones. But we generally get certainty and impossibility right, which means there's a discontinuity or certainty effect at the extremes. As long as the risk to individuals of catching COVID-19 remains low, we might expect this effect, on its own, to lead to an abundance of caution.

2. We make mistakes about the independence of events. One manifestation of this is in the gambler's fallacy, through which people create imaginary dependencies between independent events. For example, the gambler’s fallacy predicts a strong intuition that a black is 'due' on the roulette wheel if we’ve just witnessed a long sequence of reds. Or that, in relation to Covid-19, we’ll feel that an individual risky behaviour becomes that bit riskier with each successive occasion that we get away with it (the total risk does increase, of course, but not the risk per occasion).

3. We easily confuse the probability of seeing some piece of evidence given that a hypothesis is true (e.g. the chance that I get a positive test result, given that I have COVID-19) and the probability that a hypothesis is true given that I see some piece of evidence (e.g. the chance I have COVID-19, given that I get a positive test result), when in fact these quantities are often very different. For instance, say that there's a 0.1% rate of the disease in a population, and a test for the disease gives the right answer 99% of the time. Most people who get a positive test result during a routine screening will think it is now 99% certain they have the disease. But because the rate of infection in the population is low, the true probability in this case (which statisticians can calculate with Bayes’ Rule) is actually still under 10%.

Making decisions under risk

Behavioural economics tells us a wide range of ways in which our probability judgments tend to go awry. But even given correct probabilities, the way we use those probabilities to arrive at choices often seem to lack any immediate sense.

A key influence here is framing and, in particular, whether changes are presented in terms of gains or losses. As it happens, an illustration given in a paper by Tversky & Kahneman in Science hits rather close to home. The setup is as follows:

Imagine that the U.S. is preparing for the outbreak of an unusual Asian disease, which is expected to kill 600 people. Two alternative programs to combat the disease have been proposed. Assume that the exact scientific estimate of the consequences of the programs are as follows:

- If Program A is adopted, 200 people will be saved.

- If Program B is adopted, there is 1/3 probability that 600 people will be saved, and 2/3 probability that no people will be saved.

Which of the two programs would you favour?

On the average, programs A and B will save the same expected number of people (200), but A is a safe bet on saving exactly that number, while B is a gamble that may or may not save them all.

A big majority of respondents in the study (72%) favoured the safe option, program A. But then the researchers polled a second group, making a simple tweak to the language they used:

- If Program C is adopted 400 people will die.

- If Program D is adopted there is 1/3 probability that nobody will die, and 2/3 probability that 600 people will die.

These new programs do nothing but reframe the first set: C is identical to A, and D is identical to B. But, strikingly, this reframing utterly reversed the majority preference. Now, 78% of respondents preferred the risky program, D.

This is no fluke. One of us (GM) has replicated the result seven years in a row with students on a behavioural economics course. The reasons have to do with our diminishing sensitivity to both gains and losses relative to a reference point, which Prospect Theory captures with something called the Value Function (a replacement for economists’ usual workhorse, the utility function).

The upshot is that we’re generally risk-averse in relation to prospective gains but risk-seeking in attempts to avoid losses. The effect is extremely deep-seated: it has even been demonstrated, through some rather ingenious experiments, in capuchin monkeys by Chen & Santos.

Communicating risk

These sorts of effects are of clear relevance to leaders and governments responsible for formulating guidance and communicating to the wide public during times of uncertainty. The words and behaviour of a leader will strongly influence how a large majority of the population will make individual decisions that will have major economic and human impacts in consumer-driven societies.

With what we know from behavioural economics, how individuals actually decide what is gain and what is loss will influence these decisions.

For example, a political leader that states. “We’re open again for business”, and who accompanies that with a relaxation of social distancing measures may set an expectation that social activities such as congregating in bars, in parks, or beaches is again the norm. Thus, individuals could see not resuming these activities as a loss; and therefore, according to behavioural economics, engage in risk-seeing behaviour, not wearing masks and not respecting social distancing. The spike in cases we’re seeing in some US states, could potentially be due to this phenomenon.

On the other hand, a leader who leans too much towards caution — out of fear of seeing even a handful of new cases — may lead to people hesitant to venture out of their homes even for lower risk situations, such as going out to the park for a walk. There has been a lot of criticism of public health leaders: from their perspective, a high degree of caution will continue to be needed until the threshold of herd immunity is reached; which could be 1-2 years away. However, our economies will struggle to continue in suspended animation until then.

Therefore it is advisable for leaders to use wording and to communicate in ways that are balanced: it’s possible to be “open for business” while also assuring the population that “we’re going to double the number of testing centres” to retain the sense of caution. 

Getting this right is crucial over the months ahead as we all manage health and economic risks.

About the authors and Outsight International

Dr George MacKerron
George is a Senior Lecturer in Economics at the University of Sussex. His research is in subjective wellbeing, behaviour and the environment. He runs Mappiness, the world's largest experience sampling study, and is a co-founder of startup Psychological Technologies. George gained his PhD at the LSE, and prior degrees from Imperial College London and the University of Cambridge.

Dr Evan Lee
Evan is a trained MD and MBA with degrees from Harvard and MIT, he has dedicated his career to improving access to health. Initially practicing medicine in community health centers; for the past 20 years, he has worked across the private sector, NGO sector, and collaborated closely with UN partners to address access issues related to medicines, diagnostics, and other health technologies.

Louis Potter
Louis is one of the Co-founders of Outsight. He has a wide range of experience covering development, health, innovation, technology and research. Having worked in the field, he is well acquainted with the practical realities of delivering impact. In recent years, he has been helping organisations to improve innovation processes and outcomes. He is an experienced facilitator and has been closely involved in efforts to improve collaborations between the nonprofit, academic and commercial sectors. He is based in Lausanne, Switzerland, and received his MSc in Global Health from the Karolinska Institute, Sweden.

We believe that understanding the motivations behind behaviour is an essential part of quality strategy planning. This can apply to governments, industry or the third sector. As Outsight, we are happy to consult Outsight International provides services to its clients in an efficient and agile way using the ‘Hollywood Model’. Outsight International builds on the range of expertise offered by a network of Associates in order to deliver quality results adapted to the specific tasks at hand. If you’d like to discuss working with the Outsight team, please get in touch or follow us on LinkedIn for regular updates.

Covid-19 and mental health: An exploding global burden

An increase in the already substantial burden of disease related to mental health will put a strain on healthcare systems at risk of collapsing under the pressure of the Covid-19 outbreak.

As the world grapples with the Covid-19 outbreak, rushing to “flatten the curve” and mitigate the risks of collapsing health systems, it is imperative we turn our attention to the mental health implications of this pandemic. Many proactive measures put in place around the world have underestimated the importance of incorporating MHPSS (mental health and psychosocial support) as an essential component of any emergency response. In a recently released report, the Inter-Agency Standing Committee (IASC) for Mental Health and Psychosocial Support in Emergency Settings advise that Mental Health and Psychosocial Support (MHPSS) “should be a core component of any public health response.” The fear of being infected can not only lead to severe anxiety, but also cause individuals to avoid seeking healthcare to prevent being exposed to the virus – or, paradoxically – to present too readily at emergency centres without medical cause. As noted in an article recently published in the British Medical journal, 

“Surges of such low risk patients are often precipitated by high levels of anxiety, leading patients to identify, catastrophise, and seek help for symptoms that might otherwise have prompted little concern, and leading clinicians to refer patients to hospital at the first sign of a mild symptom developing.”

Considering the mental health impact is essential: 

• The baseline prevalence rates of mental health disorders – before the outbreak – already constitute a significant portion of the global burden of disease. 

• Under the current climate of fear, enforced social isolation, and economic devastation, mental health difficulties may be expected to increase sharply.

• This burden will have a substantial impact on already over-stretched health systems.

Baseline prevalence: the substantial global burden of mental health diseases 

The Institute for Health Metrics and Evaluation and reported in their flagship Global Burden of Disease study estimates that 970 million people lived with a mental health or substance abuse disorder in 2017. This represents a staggering 1 in 7 people (15%) globally. The ‘disease burden‘ – measured in Disability-Adjusted Life Years (DALYs) — considers not only the mortality associated with a disorder —, but also years lived with disability or health burden. Of this, mental health disorders accounted for around 5% of the global disease burden when measured in 2017 (up to 10% in several countries). We may consider these to be conservative estimates. Many difficulties go under-reported and undetected, particularly in the developing world where there is typically less awareness and more stigma around mental health issues, and fewer resources at hand to identify and treat those in need.

Mental health from a socio-ecological perspective 

Mental health disorders are complex. They take many forms. Difficulties may range from depression, anxiety, PTSD, and schizophrenia — through to substance abuse disorders. They are not only located at the level of the individual. They are increasingly understood as unfolding within the context of systems of relationships which constitute our socio-cultural environment. They are exacerbated by harsh living conditions, the erosion of mutual social support mechanisms, limited access to basic needs and services and lack of opportunities for maintaining livelihoods and education. In recent years, there has indeed been a burgeoning of theoretical models for understanding mental health disorders that situates individuals’ mental health sequelae and recovery within interpersonal, political, and social context. This ecological perspective similarly incorporates a “resource perspective”, which assumes that human communities evolve adaptively. We are deeply embedded in complex and dynamic social contexts. Equally, symptom severity is not static but fluid and changes according to a continuum of pathological reactions. 

Simply put, the social and economic environment has a fundamental role to play in mental health. We need to pay attention to the various, context-dependent, long-term, and complex social, political, and economic measures affecting the mental health of populations. Given the importance of the socio-cultural and economic environment on mental health, the anxiety, economic impact, and social isolation brought about by the Covid-19 pandemic can only exacerbate the burden. 

The mental health impact of Covid-19

Some of the key factors related to the Covid-19 outbreak and its influence on mental health include:

• Boredom linked to quarantine: risks exacerbating most mental health difficulties, including substance use disorders, anxiety, and depression.

• Frustration, anger, and powerlessness linked to quarantine: risks exacerbating domestic violence, sexual abuse and violence and childhood abuse – further linked to the increased risk of substance use disorders as a maladaptive coping mechanism. In China and Italy, cases of domestic violence have increased. Several organisations preventing violence against women and feminist collectives are sounding the alarm.   

• Social isolation and loneliness: risks exacerbating most mental health conditions, notably depression, anxiety, and substance use.

• Fear: risks exacerbating anxiety disorders, including Obsessive Compulsive Disorder and PTSD. Feeling overwhelmed by anxiety can make it difficult to cope with the new lifestyle changes that are required, or may lead to people using unhealthy ways of coping, such as substance use. Another risk related to fear is an increase in psychosomatic reactions, in other words, physical manifestations of psychological suffering (sometimes understood as conversion disorder). This again could result in an increased number of patients attending emergency centres. 

• Financial loss: risks exacerbating most mental health difficulties, including substance use disorders, anxiety, and depression. 

We have little evidence on the mental health impact of quarantine on individuals. We have even less on the impact of a global enforced quarantine on entire communities. However, this rapid review recently published in the Lancet “suggests that the psychological impact of quarantine is wide-ranging, substantial, and can be long-lasting.” Most of the studies examined in this meta-review reported negative psychological effects including post-traumatic stress symptoms, confusion, and anger. Stressors highlighted across studies included longer quarantine duration, infection fears, frustration, boredom, inadequate supplies, inadequate information, financial loss, and stigma. 

We need to be concerned for the individuals affected and for their families and communities. Importantly, we also need to be concerned for the healthcare systems at risk of collapse globally in the face of increased mental health difficulties. 

The impact on frontline workers 

A recent article published in the Lancet, exploring the lessons learnt on MHPSS in China, stated that:

“Under strict infection measures, non-essential personnel such as clinical psychiatrists, psychologists, and mental health social workers, are strongly discouraged from entering isolation wards for patients with COVID-19. Therefore, frontline health-care workers become the main personnel providing psychological interventions to patients in hospitals.”

This is a triple burden, with negatively reinforcing feedback mechanisms: 

• Healthcare workers “on the frontline” of the outbreak are particularly at risk of experiencing mental health difficulties themselves. The large body of literature on medical emergency workers in general attests to the high prevalence rates of mental health difficulties related to the stress of the job. This refers both to the nature and the amount of work, as well as the exposure to human tragedy, increasing the risk of secondary or vicarious trauma. A recently published article in Brain, Behaviour and Immunity confirms the significantly high levels of vicarious trauma among frontline workers facing the Covid-19 outbreak in China.   

• Healthcare workers are also asked to take on the double task of acting as both medical AND mental health care workers. Not necessarily within their scope of practice, they may not be equipped with the necessary tools and resources, both professional and psychological, to handle this extra load.

• Healthcare workers may see an increase in the number of people presenting with mental health difficulties. There is a significant risk of the global burden of disease related to mental health difficulties increasing. This is not only necessary in relation to the virus itself (for example, anxieties and fears around contracting the illness), but more generally related to mental health conditions globally being exacerbated by current conditions.

Physical distancing, social solidarity: moving forward together 

The crisis has catalysed countless creative examples of social solidarity, mutual aid, encouragement, and support. As global mental health experts have noted in a recent report:

“We need to encourage physical distancing along with social solidarity. And any MHPSS intervention during this time needs to include key psychosocial principles, including hope, safety, calm, social connectedness and self- and community efficacy.”

• Healthcare workers need to be armed with adequate MHPSS strategy integrated into their response activities and the systems in which they work

• Patients in quarantine should have access to mental healthcare 

• Mental health professionals should be resourced and equipped to offer support online/via tele-therapy – and paraprofessionals (such as community healthcare workers) should be trained and equipped to join them in picking up this load. Online mental health services have been successfully implemented in response to the outbreak in China, as confirmed in this report in the Lancet. 

By mapping existing MHPSS service providers and institutions, efforts can be pooled to address the global burden of mental health disorders: a substantial burden projected only to increase.

About Gail Womersley and Outsight International

Gail Womersley is based at the University of Neuchâtel, where she lectures BA and MA students in sociocultural psychology. She has worked for over ten years as a clinical psychologist and researcher with displaced communities in the Central African Republic, the Democratic Republic of Congo, Greece, Iraq, Israel, the Philippines, South Africa, South Sudan, the Ukraine, and Zimbabwe. Her recent publications include the book: “Trauma Without Borders: Working with Adversity and Resilience Among Displaced Populations” (to be published by Springer in 2021).

Outsight International provides services to the humanitarian and development sector in an efficient and agile way. Outsight International builds on the range of expertise offered by a network of Associates in order to deliver quality results adapted to the specific tasks at hand. If you’d like to discuss working with Gail and the Outsight team, please get in touch or follow us on LinkedIn for regular updates.