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Paula Atienza

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Negative economic shocks at birth and in early childhood: do they affect adolescents’ cognitive and educational development? Behavioral Economics Blog

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Friends of the Behavioral Economics Blog, this week we present the paper “The effects of negative economic shocks at birth on adolescents’ cognitive outcomes and educational attainment in Malawi”, by Kämpfen, F.; Zahra, F.; Kohler, H. P. and Kidman, R. (2022), in which authors conduct a study to find out how the economic and social impacts we receive at birth or in early childhood affect the cognitive and educational development of adolescents, specifically in the context of Malawi.

Prenatal and early childhood conditions are critical to long-term human capital development. Previous studies have shown that both extreme and subtle shocks, in utero and during the early months and years of childhood, can have lasting effects on children’s later educational performance and health.

These negative impacts can affect children through biological and social pathways that determine educational and cognitive outcomes. For example, prenatal and postnatal undernutrition can impair brain development. In addition, it can reduce the investment parents make in maternal, infant, or both maternal and infant nutrition, and thus affect long-term cognitive outcomes. 

All of this helps to form a small environment in which poor fetal and infant cognitive development takes place, setting the stage for later development.

There is little evidence on how multiple and frequent negative shocks, common in households in low-income country contexts, affect children and adolescents. And there is even less evidence located in sub-Saharan Africa. 

Thus, authors ask several questions: do multiple negative shocks affect adolescents’ educational performance?; do the effects differ by gender?; and do investments in nutrition and education mediate the relationship between economic shocks and adolescent cognitive outcomes?

Before explaining how the study was conducted, a brief review of the existing literature is in order. 

Studies establish that the prenatal environment can affect the fetus, with short- and long-term consequences for its health. This is based on the assumption that human capital development is linked throughout the life course. A shortage of investment during this critical period, for example, as a result of negative shocks that harm a household, can be harmful for later decades. 

Thus, children with unfavorable prenatal or early childhood conditions may not only suffer worse outcomes in later periods of their lives in multiple areas, but may also have a lower return on the investment made in them because of their disadvantages. 

Gestational and early childhood shocks can affect through biological and social pathways. For example, these shocks can result in low birth weight, which is associated with poorer health in childhood and adolescence. On the other hand, in the social domain, parental preferences may determine investments in child health and education in response to a shock. 

The analysis is based on the Adverse Childhood Experiences (ACE) project of the Malawi Longitudinal Study of Families and Health (MLSFH). Data were collected from rural areas, specifically from three districts in Malawi: Mchinji, Rumphi, and Balaka, which relative to other districts in the area, are not among the most disadvantaged, but are at the midpoint. The sample included a total of 1,559 adolescents, for whom information is available on whether their household experienced economic shocks in the year they were born. 

Authors found that two or more moderate economic shocks in the year of birth negatively affect adolescents’ educational and cognitive outcomes, although there is not the same pattern for boys as for girls, with a greater disadvantage for the latter. 

The study supports the policies aimed at alleviating social, gender and educational inequalities in Malawi and sub-Saharan Africa in general. Although the gender gap has been narrowed in recent years, overall elementary school completion remains low. Despite apparent gender equality in education, dropout pathways are also highly gendered: boys often drop out for work, girls for pregnancy. 

Evidence of the detrimental impact on cognitive development should imply greater investment in the health and well-being of pregnant mothers, while an educational investment should also be contemplated to improve school conditions for children. 

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Master of Science in Behavioral Economics, a 100% online program that you can take in Spanish or English. Ask us about our grants!

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Is behavioral economics useful for improving data protection in social media? Behavioral Economics Club

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Friends of the Behavioral Economics Club, this week we present the paper “The role of behavioural economics in shaping remedies for Facebook’s excessive data gathering”, by Mäihäniemi, B. (2022), in which the author talks about the usefulness of behavioral economics applied to data protection in social networks’ context.

Social networks can exploit users’ online behavior using data collection techniques, it is a reality. 

Rather than competing for better consumer protection, these companies often seek to attract and exploit consumers by exploiting their weaknesses, such as overconfidence and optimism. 

Naturally, this is not the case for all companies, and some do, in fact, offer greater privacy options as a differentiating factor. However, the vast majority do not work this way. 

Data is collected through the provision of free services that allow large companies to gather information about users’ online behavior. 

This concept we have, as users, that companies offer us their services for free, is misleading, as consumers pay for these services in other ways. One of them is by providing this information.

Although extensive data collection has become the accepted business model for most, it does not seem to be the best for the welfare of users; in fact, in specific situations, it is a problem, for example, an abuse of exploitation of market power that does not respect data protection. 

The main issue is voluntary consent to data collection in the context of a dominant company, and the problem of lack of user self-determination, which may diminish consumer choice and, consequently, consumer welfare.

Excessive data collection is evident, for example, when a fully personalized experience on social networks or mobile apps depends on users’ consent to the collection of their data on third-party websites. Such collection is problematic for several reasons: for example, it could be seen as exploitative abuse under competition law, as dominant companies take advantage of consumers’ vulnerability to collect valuable data. 

Currently, users ignore the low level of privacy protection and allow excessive data collection by major online platforms. In return, they receive personalized services from them. But the fault does not lie entirely with consumers, as companies exploit a number of cognitive heuristics and biases that are specific to consumers. 

The article aims to identify the circumstances that support excessive data collection and argues that those who possess the information exploit heuristics that lead to cognitive biases and take advantage of the power and information asymmetries that consumers face. 

Behavioral economics forms the theoretical basis of the article, as both heuristics and information biases and asymmetries have been extensively researched by behavioral experts. You can refer to the original article for more information on this. 

When users face dominant intermediaries, users deliver their specific and personalized data, however, such data collection often occurs in a questionable way. What’s more, the harm caused by data collection is difficult to understand; some users may not even know that their data is collected outside of the platform. 

How can behavioral economics help the law design remedies that increase the transparency of online platform operations in relation to excessive data collection? 

Several proposals are offered. For example, the possibility of data portability. This would reduce switching costs and could lead to greater competition between platforms. The right to portability would guarantee users effective and immediate access to their data generated while using the dominant platform. However, this does not seem to be the most appropriate according to experts. 

On the other hand, the most important means to address the power and information asymmetries between these platforms and their users would be to use consent as a way to increase the transparency of data collection. For example, separate consent may be required to collect different data if this collection is unnecessary for the core services that the user accepts when using the platform.

Finally, the idea of an “opt-out regime”, in which users do not automatically agree to surrender their data, has also been proposed. However, this solution fails to eliminate the power asymmetry.

The author recommends further research on how behavioral economics can be applied in this context, as research on the effects of social networks on human behavior, society and justice is still very limited. 

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Master of Science in Behavioral Economics, a 100% online program that you can take in Spanish or English. Ask us about our grants!

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Does financial education make it easier to stop smoking? Behavioral Economics Blog

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Friends of the Behavioral Economics Club, this week we present the paper “Predictors of Counseling Participation Among Low-Income People Offered an Integrated Intervention Targeting Financial Distress and Tobacco Use”, by Tempchin, J.; Vargas, E.; Sherman, S. and Rogers, E. (2022), in which authors carry out a study in which they propose a special method to reduce tobacco addiction, in which they combine concepts like financial education, health and long-term objectives.

Smoking was first identified as a public health threat in the United States almost 60 years ago. Since that time, tobacco addiction and the number of people who occasionally smoke a cigarette has declined by almost 30%. 

However, smoking rates among people with low or very low incomes remain high. 

Currently, people over 18 years of age living at or below the poverty line are twice as likely to smoke as those who have better economic conditions. 

Part of this may be because people with a wealthy and stable economic situation can afford access to personalized and effective treatment to overcome their tobacco addiction.

Although several interventions have been shown to be effective in the short term, there are many that fail in the long term for those at greatest risk and vulnerability. 

Having a low income is usually an indicator of more complex problems. One of these is poor financial health or education. This is a social determinant and actually affects many more areas of life apart from people’s economic status. It is someone’s ability to manage their expenses, cover their needs, minimize and recover from financial crises, minimize their debts and generate wealth. 

Poor financial health or training is associated with poor physical and mental health, overall well-being, and is one of the greatest sources of chronic stress among adults in the United States. 

In people with lower incomes, stress in general and financial stress in particular, are very significant barriers to long-term smoking cessation. 

In addition, behavioral economics research suggests that financial deprivation induces people to focus on their most immediate and survival needs, leaving them without the emotional and cognitive resources necessary to resist immediate gratification and prioritize goals that are deferred and whose benefits will be seen in the non-immediate future, such as quitting smoking. 

Interventions with financial incentives are quite common in studies in the field of behavioral economics and generally have a positive effect. That is, providing a temporary monetary reward for quitting smoking is effective in increasing abstinence rates in the short term. 

But what about the long term? Small monetary rewards for quitting smoking do not remedy structural financial difficulties, nor do they help people not to return to the addictive habit over time.

A trial has been conducted this past year that demonstrated that a smoking cessation intervention incorporated money management training and education and, although only half of the people enrolled attended the sessions, 85% of them completed the training and were successful in quitting smoking. 

Based on this trial, authors decided to conduct a similar study themselves, involving 208 New York adults with household incomes below the federal poverty line who had smoked at least one cigarette in the past 30 days.

Up to nine individual counseling sessions in financial education were offered, and all participants also received a program that included smoking cessation training.

The results showed that the rate of attendance at the interventions, and the success of the interventions, increased as the age, education and income of the participants increased. This finding is of concern, because then, the younger people are, the less education they have, and the lower their income, the greater their likelihood of having a tobacco addiction. In other words, when vulnerability increases, the risk of smoking increases. 

On the other hand, it seems that other factors such as being an immigrant, having high levels of psychological distress or anxiety disorders, being unemployed, having low levels of literacy, or very little motivation to quit smoking also contributed to increase the risk of addiction. 

Authors point out the need to devote more efforts and resources to research on smoking, since, as we have pointed out in the first lines, it is one of the most serious health problems that currently affects millions of people around the world.

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Master of Science in Behavioral Economics, a 100% online program that you can take in Spanish or English. Ask us about our grants!

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Are strangers just enemies we have not yet met? The ingroup bias and intergroup relationships. Behavioral Economics Blog

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Amigos del Behavioral Economics Blog, esta semana presentamos el artículo “Are strangers just enemies you have not yet met? Group homogeneity, not intergroup relations, shapes ingroup bias in three natural groups”, by Dogan, G.; Glowacki, L. and Rusch, H. (2022), in which authors carry out a study with different non-Western ethnic groups to better understand how the ingroup bias works in intergroup relationships. 

In this week’s article we are going to focus on a bias that affects us in many different contexts: the ingroup bias.

In many societies and environments, people tend to favor members of their group over others. However, especially in non-competitive environments, or without salient group identities, most people are able to care positively and genuinely about the well-being of others. 

Cooperation between in- and out-groups is primarily driven by expectations of future reciprocity, which supports the view that cooperation between in-group individuals shapes their group identity. 

Out-group threat, in turn, increases in-group cooperation, positively affecting, as we have already noted, group identity. 

Despite these data, little is known about the ingroup bias in members of natural groups experiencing conflict with each other and with others. In particular, there is a lack of literature comparing the behavior of groups, different ones, with or without enmity toward each other, with unidentified outsiders. 

In this article, authors address these ideas using empirical evidence obtained from an experiment with natural groups, from Ethiopia, whose group identities are their defining feature of daily life, and affect their intergroup relations. 

How the relationship between two or more groups is constructed and how it is constructed can also shape how the ingroup bias manifests itself: if we are talking about two or more groups that have a neutral relationship, concern for members outside the group may exist, being interested in their welfare; whereas, if the groups are rivals, this is unlikely. 

For example, there is strong affinity-based rivalry with political groups or sports clubs, increasing favoritism for one’s chosen party or club. 

In addition, ingroup bias may be greater in groups that are ethnically and culturally heterogeneous from each other. 

An important characteristic of most research on social groups is that it focuses on Western, industrialized, wealthy and democratic societies, where group identities and rivalries are not a defining feature of everyday life. 

For this reason, authors decided to carry out their study with people belonging to the most important natural groups inhabiting the South Omo Valley in Ethiopia. Two of these groups, Daasanach and Nyangatom, have been enemies for many years. Their conflicts are often motivated by the desire for revenge, they are very distinct groups that even have their own institutions, a strong group identity, rigid boundaries, and the right to self-government at the local level. The third chosen group, Highlanders, has a neutral relationship with the other two, but this one is very different from them: the members of this group are ethnically heterogeneous without a cohesive cultural identity. 

In the task assigned to people from these three groups, two players had to decide whether to expropriate the possession of a third passive player, “the victim.” The idea was to observe how the Daasanach and Nyangatom groups behaved with the third group, Highlanders; but also to make different combinations for richer findings. 

Initially, each player had 10 tokens, and the two active players had to decide whether to distribute equally between them the third player’s endowment, or to distribute among the three, or to leave his endowment intact, among many other possibilities. 

The results support theories that conceive the ingroup bias as a concern for the welfare of one’s own group members, with little or no concern for other groups, even when we are talking about groups with a neutral relationship without conflict. 

It appears that group homogeneity increases the effect of the ingroup bias, exhibiting greater concern for those with whom you live and are part of your closest circle. 

When evaluating the results, authors find that they differ somewhat from studies conducted in Western contexts. In the latter, it seems that the participants had greater consideration for people belonging to other groups than in the present study. 

Authors believe that this occurs because the group identities of the ethnic groups in this study are stronger, stronger, and have more rigid boundaries, as well as marking their daily lives. 

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Master of Science in Behavioral Economics, a 100% online program that you can take in Spanish or English, with special grants for readers of the Behavioral Economics Blog.

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How does the perceived environmental impact influence appliance choice? Behavioral Economics Blog

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Friends of the Behavioral Economics Blog, this week we present the paper “How does information on environmental emissions influence appliance choice? The role of values and perceived environmental impacts”, by He, S.; Blasch, J. and van Beukering, P. (2022), in which authors carry out a study to know how the fact of having information about the environmental impact generated by our actions affects our appliance choice. 

Private residences account for 27% of total electricity consumption worldwide. The main uses of this percentage of electricity are heating, household appliances, water heating, space cooling, cooking and lighting. 

In the context of the European Union, household appliances and electrical appliances that are responsible for performing these functions, mostly have an energy label that follows a specific framework created by the EU.

With this labeling, the EU aims to provide clear and simple information on energy-related products, so that consumers can make informed choices and, consequently, reduce their energy bills while contributing to mitigating climate change. 

To this end, public authorities and academics have made efforts to provide real and constantly improving information on energy labels. 

One of the many ideas behind this labeling is that one of the best ways to encourage investment in energy efficiency is to directly communicate the link between energy efficiency and carbon emissions. According to the knowledge deficit model, individuals may have a reluctance to engage in pro-environmental behavior due to a lack of knowledge about a specific environmental problem, or about ways to address it. 

Providing information on environmental emissions is one way to fight the knowledge deficit, as it establishes a direct link between energy efficiency and environmental impact and may facilitate individual efficiency investment decisions. 

Most existing studies demonstrate a positive impact of environmental signals (such as labels) on the adoption of energy efficient devices, although the effectiveness varies between individuals. 

However, previous studies on energy labeling have rarely investigated the psychological factors of individuals that produce this variability in label effectiveness. As research in environmental psychology suggests, the way individuals process environmental information may also be affected by the individual’s values. These values reflect the individual’s overall goal in life and may affect information processing, as well as influence whether individuals pay more or less attention to environmental information, and how they interpret it. 

Personal experiences, such as experiences in extreme weather conditions, can lead to a high level of risk perception and concern, ultimately resulting in pro-environmental behaviors. Theoretically, having experienced adverse environmental events suggests psychological proximity between the problem and the individual, which may increase the likelihood of supporting climate change mitigation and taking action. However, the empirical evidence is inconclusive. 

To investigate the effectiveness of energy labels, authors conducted an online questionnaire to nearly 1,000 subjects.

Overall, the results reported no significant effects on environmental emissions from the labels. However, providing information on carbon emissions may potentially encourage investment in energy efficiency among individuals with relatively high environmental values who are concerned about climate change. 

Additionally, authors found that providing information on carbon emissions along with other pollutant emissions may increase the likelihood of choosing more efficient appliances among individuals with high environmental awareness. 

However, information on carbon emissions alone does not show significant effects. It would seem that it would be the attitudes and energy saving habits of individuals that would contribute most to energy efficiency decisions. 

Encouraging investment in energy efficient appliances and providing information on air pollutants may be useful strategies when individuals intentionally seek detailed information on which appliances to purchase. 

It is worth noting that authors conducted their study in the context of the Netherlands, where residents are relatively aware of the problems associated with climate change, but are not highly concerned about air pollution, so they encourage other experts to conduct studies in different contexts where the findings may differ. 

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Master of Science in Behavioral Economics, a 100% online program that you can take in Spanish or English, with special grants for readers of the Behavioral Economics Blog.

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Behavioral economics and cannabis use: do teenagers and adults that consume cannabis behave the same? Behavioral Economics Blog

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Friends of the Behavioral Economics Blog, this week we present the paper “Age differences in the behavioral economics of cannabis use: Do adolescents and adults differ on demand for cannabis and discounting of future reward?”, by Borissova, A.; Soni, S.; Aston, E. R.; Lees, R.; Petrilli, K.; Wall, M. B.; Bloomfield, M. A. P.; Mertzani, E.; Paksina, A.; Freeman, T. P.; Mokrysz, C.; Lawn, W. and Curran, H. V. (2022), in which authors carry out a study to know how adolescents and adults behave regarding cannabis use, investigating, precisely, the aspects of demand and future rewards discount. 

Cannabis is one of the most widely used recreational drugs worldwide. Approximately 3.8% of the world’s population used it in the past year. 22.5% of 15-year-olds in England, and 28% of 15-16 year olds in the United States, reported using it in 2020. 

It has been noted, in numerous studies, how early onset of cannabis use appears to be related to higher frequency of use in adulthood. In particular, initiation of cannabis use before the age of 18 years has been associated with a higher prevalence of cannabis use disorder within 12 months of first use. In other words, cannabis use before the age of 18 years poses an increased risk of persisting into adulthood.

We have already mentioned several times why adolescence represents a particularly vulnerable period for human beings. It is a stage of psychological development that involves changes in executive functioning involved in decision making and impulse control. 

Cannabis has a wide range of effects on cognition, and therefore, exposure to this drug during early adolescence may adversely affect cognitive development. 

Differences in cannabis use behavior and decision-making between adults and adolescents can be examined through behavioral economics, as proposed by the authors, since psychological and economic concepts are applied to help and shed light on the decision-making process of individuals. 

From behavioral economics comes the concept of “reinforcer pathology”, which helps to understand the functioning of addictions. This concept refers to the fact that problematic substance use can arise from a very high valuation repeatedly given to a reinforcer, that is, a drug, as well as an excessive preference for immediate rewards over delayed rewards, even if the latter are more beneficial. 

The latter is called “delay discounting”, and refers to the reduction in the value of a reward as the delay in receiving it increases, since immediate rewards are more highly valued. Cannabis use has been associated on multiple occasions with a very pronounced delay discounting, so understanding it may be a very important factor in understanding adolescents’ risk for developing an addiction disorder. 

Authors then set out to investigate how adolescents and adults who use cannabis behave in terms of demand for the drug and delay discounting. To do so, they gathered 274 participants and surveyed them. The participants were divided into several groups: a group of adolescents aged 16-17 years and a group of adults aged 26-29 years who claimed to have used cannabis 1-7 days per week in the last 3 months, and a control group who claimed not to have used cannabis more than 10 times in their lifetime. 

Those who used psychotropic medication, had a history of psychotic disorders and used any other drug more than twice a month, especially during the last three months, were excluded. 

Some of the results obtained were in line with what was expected. People using cannabis had more pronounced delay discounting than people in the control group. There were no differences between adolescents and adults in terms of delay discounting, contrary to what the authors expected, and there was also no interaction between age group and cannabis use. 

Regarding cannabis demand, adolescents had lower price sensitivity than adults, and higher consumption at zero price. This surprised the researchers, as it does not seem logical that, if adolescents earn less money, they would have less sensitivity to the price of the drug than adults. 

Authors conclude the study by recommending further research in this field, as the problem of cannabis and its use is an interesting and still largely unknown topic. Furthermore, the application of behavioral economics is strongly recommended to better understand how addiction mechanisms in general and cannabis use in particular work. 

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Master of Science in Behavioral Economics, a 100% online program that you can take in Spanish or English, with special grants for readers of the Behavioral Economics Blog.

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Principles of behavioral economics applied to tobacco use. Behavioral Economics Blog

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Friends of the Behavioral Economics Blog, this week we present the paper “Behavioral Economics and Tobacco Control: Current Practices and Future Opportunities” by Littman, D.; Sherman, S. E.; Toxel, A. B. and Stevens, E. R. (2022), in which authors think about how we could apply the seven basic principles of behavioral economics to prevention campaigns of tobacco use. 

Improving tobacco control and treatment remains a medical priority. Despite progress in recent years, smoking remains the leading preventable cause of death in the United States, causing 480,000 deaths annually and $300 billion in related economic losses.

Current behavioral and medical treatments have been successful, but not enough. To address the considerable health burden (even worse now as we continue fighting against Covid-19), there is a continuing need to develop better tobacco use control and prevention interventions. 

By combining elements of economics and psychology, behavioral economics provides a framework for designing novel solutions to help smokers quit when traditional interventions have failed to do so. 

The principles of behavioral economics, according to Dawnay and Shah, would be “other people’s behavior matters”, “habits matter”, “people are motivated to do the right thing”, “one’s own expectations influence behavior”, “people are loss averse”, “people are bad at calculating”, and “people want to feel involved and effective”. In total, 7. 

However, the full list of principles has not been widely used in the field of tobacco control and treatment or prevention. The vast majority of related studies focused on financial incentives and few were devoted to other principles. Therefore, this is what the authors propose: to expand the potential application of the 7 principles to tobacco control and treatment. 

In a quick compilation of behavioral economics articles applied to tobacco prevention and treatment, 198 articles out of 230 were about financial incentives. But what about the other possibilities?

The authors mention that other people’s behavior matters. That is, when making decisions, people tend to model their own behavior based on those around them. The extent of influence of others’ behavior also relates to who has the most influential personality. The ingroup bias suggests a predilection for modeling the behavior of those with a shared social identity. Even celebrities would influence normal people. 

Future research could evaluate the performance of campaigns by influential people who have quit smoking and their results, which may encourage viewers to follow their path.

The second principle mentions that habits matter. Behavior is habitual and we always follow routines. Relying on habits reduces the mental energy required to complete tasks, even if the habits are not efficient or healthy. Habits provide opportunities for behavior change, first by using current ones, and also by creating new ones.

Future research may evaluate replacing cigarettes with e-cigarettes, for example, so that the habit of smoking continues, but harm is reduced. 

Authors also mention that people are motivated to do the right thing. The perception that an action is carried out for the public good or for the good of others influences behavior. Appealing to people’s sense of altruism can be an effective and efficient approach to behavior change.

On the other hand, there is the idea that one’s own expectations influence behavior. This happens because people want their actions to be in line with their values and commitments. Engaging openly with friends, family and even strangers may increase the extent to which behavior change occurs, which could be used in this context. 

The fifth principle is that people are loss averse. Behavioral economics research suggests that losses produce more emotional reactions than gains. Developing and testing interventions that change the framing of economic incentives to exploit this principle could be interesting, focusing not so much on gaining something, but on losing it. 

On the other hand, people tend to be bad at math. Many studies suggest that humans have a poor understanding of probability and statistical concepts in general, which helps explain the popularity of playing the lottery. To exploit this lottery’s appeal, smokers could be told what they could have won if they had completed an action related to quitting smoking, for example.

Finally, the seventh principle: people want to feel involved. Classical economic theory posits that giving people more choices results in better decisions, as long as it doesn’t become overwhelming. Balancing the two ideas, increasing self-efficacy by helping smokers understand their options for quitting and emphasizing their ability to quit, makes people more likely to quit for good. 

Authors encourage the continued development of projects dedicated to the treatment of smoking from behavioral economics, as they believe that it provides very good ideas to achieve positive results for such a representative problem for the health of people around the world. 

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Master of Science in Behavioral Economics, a 100% online program that you can take in Spanish or English, with special grants for readers of the Behavioral Economics Blog.

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Biases that should be considered in project management. Behavioral Economics Blog

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Friends of the Behavioral Economics Blog, this week we present the paper “Top Ten Behavioral Biases in Project Management: an Overview”, by Flyvbjerg, B. (2021), in which the author explains a series of biases related to cognition, politics and power, that he considers fundamental to bear in mind in project management. 

Since the early work on biases by Tversky and Kahneman in the 1970s, the number of biases identified by behavioral scientists has skyrocketed in what has been called “a behavioral revolution” in economics, management, and the social and human sciences. 

In this article, the author gives a description of some behavioral biases that he considers particularly important in project planning and management, so if you are a project manager, you should pay attention! 

The biases chosen by the author are those that, from his point of view, are most likely to trip up project planners and managers, negatively impacting project outcomes if the biases are not identified in advance and addressed early. 

The author argues that behavioral biases are not limited to cognitive biases alone, but that “political biases” also come into play. 

For him, behavioral economics in its current form focuses too much on cognitive psychology: economic decisions are taken into account too much in psychological terms, the author believes that more attention should be paid to political, sociological and organizational perspectives. 

Political biases, therefore, would be those arising from power relations, particularly important for big decisions and projects. For decision making in hierarchical organizations, involving office politics, sales techniques, economic funds, etc., political biases would be very useful. 

Some of them are the illusion of control, the conservatism bias, the normality bias, the topicality bias, the neglect of probability, the cost-benefit fallacy… among many others. The author decides to focus on some of them, although here we will not be able to name all of them, if you want to know more, we recommend reading the original article. 

On the one hand, we have the optimism bias, which is cognitive, and refers to the tendency of people to be overly optimistic about the results of planned actions. 

In optimism clutches, people are not aware that they are being optimistic. They overestimate the benefits and underestimate the costs. They involuntarily misrepresent success scenarios and overlook the potential for mistakes. As a result, plans are unlikely to yield the expected benefits. 

Another interesting bias is the uniqueness bias, which psychologists have identified as the tendency of individuals to see themselves as more unique than they really are, e.g., uniquely intelligent or attractive. 

This bias is particularly interesting in project management, because project planners and managers are systematically “primed” to see their projects as unique and different. This bias tends to prevent these managers from learning, because they think, precisely, that they have little to learn. And this, research has shown, leads managers to be affected by this bias performing worse than others. 

By seeing things from this perspective, planners focus on the specific circumstances and components of the project they are developing and look for evidence in their own experiences, to the detriment of the final project. 

This bias increases the underestimation of risk, leading to risk-taking that probably would not have been accepted if the actual probabilities had been known. 

There is also the planning fallacy, which the author classifies as a subcategory within the optimism bias, which arises from individuals producing plans and estimates that bear little resemblance to reality. It is the tendency of individuals to, on the one hand, underestimate the costs, schedules and risks of planned actions, and, on the other hand, overestimate the benefits and opportunities of actions, creating risks for projects. 

The author also mentions anchoring, which is the tendency to rely too much or “anchor” on one piece of information when making decisions. Anchoring feeds into other biases, such as availability bias and topicality bias, which induce people to anchor on the most readily available, easily accessible information, as well as the most recent information. This results in the underestimation of probabilities in general, and therefore of risks in particular. 

The author names other interesting biases, but we have made a small selection here. He also recommends further research on the subject, since biases affect human beings in all facets of their lives and, therefore, knowing about them is not only useful for business or interpersonal relationships, but also for oneself. 

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Master of Science in Behavioral Economics, a 100% online program that you can take in Spanish or English, with special grants for readers of the Behavioral Economics Blog.

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Exploring the use of “nudges” to improve prevention of STD transmission in men. Behavioral Economics Club

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Friends of the Behavioral Economics Club, this week we present the paper “Exploring the use of nudges to improve HIV and Other Sexually Transmitted Infection Testing Among Men Who Have Sex With Men”, by Aung, E. T.; Fairley, C. K.; Chow, E. P. F.; Maddaford, K.; Wigan, R.; Read, D.; Taj, U.; Vlaev, I. and Ong, J. J. (2022), in which the authors ask the question of whether nudges, which belong to behavioral economics theory, could be useful when it comes to improving prevention of ITS. 

Several health organizations recommend that people who are sexually active and, above all, have multiple sexual partners be screened for HIV and other sexually transmitted diseases. 

Regular screening for STDs plays an integral role in the control of pandemics of this type, because early detection of infections helps to reduce morbidity and onward transmission, as well as the negative effects of the disease for the person who contracts it. 

As a study population for the current paper, the authors chose gay and bisexual men (and, in general, men who have sex with men). 

The Australian Periodic Gay Survey reported an increase in HIV testing between 2016 and 2020, however, there was a decline in the number of tests in 2021.

The authors believe that the most effective way to increase early detection of HIV and other STD infections is to use behavioral economics strategies effectively. Why?

Well, because the decision to obtain an HIV test is identifiable with economic theories, as it involves making decisions taking into account benefits (early treatment of STDs) and costs (the time it takes to get tested, difficulties in accessing clinical services, test anxiety…). 

Thus, the authors put forward the idea of “nudges,” which, basically, is a discipline that is designed to influence behavior in a predictable way, increasing the benefit to the individual and the community at large. 

Nudges are attractive policy options because they can be very effective, maintain the individual autonomy of those being nudged, and can often be achieved at low cost. 

A very famous and effective form of nudging, if done correctly, is message development. These can be framed so that the same decision or choice can be presented using positive, negative, and/or other framing. Due to the principle of loss aversion, this can change the attractiveness of each of the options presented within the message. This, applied to STD transmission, is something that few studies have explored. 

This study was conducted with the help of the Melbourne Sexual Health Center, which is a mental health clinic in Victoria, Australia. This clinic uses a computer-assisted self-interview system that all clients register upon arrival at the clinic. They are also briefly asked about their sexual history in that self-interview.

In addition, they are asked if they would like to receive a reminder every three months advising them to be screened as a routine process, specifically, if they would like to receive the reminder by SMS. Between 80% and 90% of the men chose to receive a reminder. 

This entire process was repeated with 309 clinic users over 18 years old who agreed to participate and receive reminders.

These reminders could be formulated in different ways. First, in a neutral way (“your next checkup is due, call to schedule an appointment”), in a personalized way (“hello, ‘name’, your next checkup is due, please make an appointment”), following social norm (“your next checkup is due, most people get tested when they receive this message, please make an appointment”), positively (“you should have your next checkup, to stay healthy regular testing is recommended, please make an appointment”) or negatively (“you should have your next checkup, not testing regularly could harm your health, call for an appointment”). 

Participants had to choose which of all the forms they preferred for their reminder message. 

The study showed that they preferred neutral, personalized, positive messages over negative or social norm messages. The majority of participants also preferred the SMS message over an email. 

Most men in the study already received SMS reminders from before and in a neutral way, so it was not surprising that the most popular message was such a message. This may be because of the exposure effect, i.e., people like things they are familiar with. However, younger men preferred the positive message, so it would be appropriate to use it for people in the newer generations. 

The key to the nudges is to make it easy for people, which is ultimately what we should focus on. 

Authors recommend taking the results with caution, as the experiment was conducted in Australia, and may not be a globally representative population. 

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Master of Science in Behavioral Economics, a 100% online program that you can take in Spanish or English, with special grants for readers of the Behavioral Economics Blog.

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Repetition-induced truth effect: is it altered when economic incentives appear? Behavioral Economics Blog

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Friends of the Behavioral Economics Blog, this week we present the paper “Monetary incentives do not reduce the repetition-induced truth effect” by Speckmann, F. and Unkelbach, C. (2022) in which the authors carry out an experiment to know whether the introduction of financial incentives affects when it comes to distinguish between a lie and a truth, specifically, considering the repetition-induced truth effect. 

People see, read and hear many different events and statements every day (news, social networks, conversations…) that they may doubt or believe.

Apparently, people use repetition as a signal to lean one way or the other when it comes to making a decision about the veracity of what they hear. Therefore, they tend to believe statements that are repeated more, compared to statements that are repeated less. 

This phenomenon is known as the illusory truth effect, truth by repetition, or simply the truth effect.

In a paper by Hasher in the 1970s, participants were presented with a total of 60 statements. Half of them were false and half were true. The participants were exposed to them in two sessions. During each of these, 20 of the 60 statements were repeated, and the remaining 40 were newly introduced. That is, 20 of the 60 statements were shown in the two sessions. After the presentation phase in each session, participants were asked to rate the validity of each statement. The participants judged the repeated statements as more valid and credible than the new statements, which demonstrated the basic truth effect. 

The effect has gained more prominence in recent years, as it may serve as an explanation for people’s belief in conspiracy theories, misinformation and fake news, due to the frequent repetition of false information on the internet and social networks. 

In this study, the authors investigate what happens if, when a decision has to be made, economic incentives must be taken into account. That is, what happens when, when choosing between qualifying a statement as true or false, a certain amount of money is gained or lost, depending on whether one gets it right or wrong. 

In other words, they asked whether the repetition-induced truth effect persists if participants’ decisions are highly financially incentivized. 

The fact that incentives diminish the truth effect would suggest that the real-life impact of repeating information is not as critical as it seems. 

However, if monetary incentives do not reduce the truth effect of repetition, it would underline the relevance of the phenomenon in real life. At the theoretical level, it would show that people potentially consider repetition as a valid cue for making their decisions. 

In the experiment, the authors used 120 statements, 60 of which were true and 60 false. They recruited a total of 321 people. They divided them into three groups: the high-incentive group (they could earn up to 12€), the medium-incentive group (they could earn up to 6€), and a final group with no incentives. However, all three groups were told that they could earn a maximum of €4. 

For each statement, they had to indicate whether they considered it true or false. They did not know this, but for each correct answer they would receive €0.10 and for each false answer they would lose €0.10, and could never get negative results. 

Although some participants could receive up to €12 and others up to €6, it seems that the incentives did not substantially influence the repetition-induced truth effect. 

Using an exploratory contrast, the authors found a slight difference in the truth effect between the “no incentive” conditions and the “with incentive” conditions: participants showed a slight reduction in their tendency to judge repeated information as true, but the effect was very small in size, so it is not considered strong evidence. 

Significant differences occurred, however, when it came to response time. Being shorter, it seems logical to think that participants were motivated to answer correctly as often as possible to increase their gains. 

The results are consistent with others obtained in previous literature, and illustrate the robustness of the repetition-induced truth effect by showing that, even when adding direct consequences to truth judgments, there is no change in people. 

Thus, the data support existing cognitive explanations of the repetition-induced truth effect, with potential implications for real-world phenomena that have been explained for some time now, such as belief in fake news, conspiracy theories, among others. 

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