Peter Ubel

 My Center at CBDSM regularly posts what we call the “Decision of the Month.” Our most recent DoM highlights some research I conducted with Sarah Gollust, a UM graduate student now working at Penn.

Click on this link, http://www.cbdsm.org/doms/diabetes-lobby, to find out what happens when people learn about how neighborhoods influence people’s health.

And click here, http://www.cbdsm.org/doms/archive, to see an archive of DoM’s and see how your decisions stack up against other people.

Would you rather experience a bad situation forever or for just six months? Any sane person would choose the temporary situation. And yet, according to a study I published this week, if you chose the temporary situation, you’d be more likely to suffer over the next six months-so focused on the hope that your situation would soon improve that you’d have a hard time coping with your current fate.

Many people voted for Barack Obama in hopes that he’d extricate the country from a whole array of bad situations. Now they wait, with hope, for things to improve. In the meantime, however, they are having a hard time coping with the economy, the situation in Afghanistan, and even with the drawn out process of reforming our health care system. And so they criticize Obama for not making things better, faster.

Barack Obama is being bedeviled by the dark side of hope.

In our study, Dylan Smith, George Loewenstein and I measured the happiness of people who had just undergone a colostomy surgery. Because of disease in their colons, the people had had their bowels rerouted to exit in a pouch on the side of their abdomen. For about half of the people receiving this surgery, this colostomy was permanent. But for the remaining people, the lucky ones, their doctors were confident that over the next six months, they’d be able to get their bowels reconnected. Their colostomies, in other words, were temporary.

Over the next six months, it was this “lucky” group that suffered. The people with permanent colostomies, forced to reckon with the cards they were dealt, emotionally adapted to their situation. The people with temporary colostomies, by contrast, remained frustrated by their situation, waiting impatiently to trade their cards in, so to speak, for better ones. They suffered from the curse of high expectations.

Barack Obama’s popularity has dropped significantly in recent months. Part of this drop was expected, given the height of his popularity after the election. But Obama’s popularity is also sinking because his supporters are becoming impatient. They elected Obama so he’d fix the economy, and the health care system, and the Middle East. Now Obama’s supporters are like those people with temporary colostomies: they know that improvement will take time, but that doesn’t make it easier to cope with the country’s current troubles.

A prisoner sentenced to life without parole is in a worse situation than one with only six months remaining in his sentence. But it is this latter prisoner who is more likely to attempt to escape. The anticipation of freedom, of a better life, is so strong that he can no longer wait.

The strong emotions elicited by our President are not merely a measure of his performance to date; they don’t merely arise because he has failed to resolve all the crises he inherited.

They are also evidence that, for many Americans, Barack Obama still inspires hope.

Peter A. Ubel M.D. is author of Free Market Madness: Why Human Nature Is at Odds with Economics-and Why It Matters (Harvard Business Press, 2009). The study discussed in this essay appears in the November 2009 edition of Health Psychology.

View original post and comments at Scientocracy

American presidents have been trying to reform our health care system since at least the Nixon era, but with only limited success. Past reform efforts have failed for many reasons. For starters, the U.S. health care system is complex, with the medical industry making up almost 1/6 of our economy. But perhaps the biggest obstacle to reform is a psychological one: thoughts of health-care reform too often trigger images of putting for bogey instead of putting for par.

I am referring to the psychological power of loss aversion, a phenomenon that behavioral economists have been studying for several decades now. Most of us, you see, seek to avoid losses with greater fervor than we seek to achieve equal gains. If given a 50-50 chance of either winning or losing $100, we decline. The $100 loss looms larger than the $100 gain. For similar reasons, most people express greater interest in surgical procedures that carry 90% survival rates than in ones that carry 10% mortality rates, even though these procedures are identical. Thinking about mortality triggers loss aversion. This week we even learned that loss aversion influences putting behavior among professional golfers. When putting to avoid a bogey, golfers are more aggressive than when putting for birdie, and consequently are more likely to make their putts. Few things are more motivating than the desire to avoid losses.

Which brings us back to health care reform. When President Clinton attempted an overhaul of our health care system in the 90′s, his administration correctly recognized the need to control health care costs. Without cost containment, they knew it would be impossible to expand health care insurance to the millions of people who lacked such coverage. So the Clinton administration looked for ways to increase the number of Americans enrolled in managed care plans, which at that time had achieved some success in controlling health care expenditures.

The problem with the Clinton approach was that it made Americans feel like they were losing their traditional health care. Managed care was infamous for saying no — for denying people health care services and for limiting their choice of doctors. By taking things away from people, managed care triggered loss aversion. Consequently, the American public never supported Clinton’s reform efforts.

The Obama administration is steeped with people knowledgeable about behavioral economics, who hope to keep the public from slipping into a state of loss aversion. Not surprisingly, then, the administration has enthusiastically embraced research out of Dartmouth University, demonstrating huge regional variations in medical expenditures that have not been accompanied by any variation in health care quality. According to this research, some cities in the US spend twice as much per capita on health care as other cities without experiencing any discernible improvement in health.

Obama’s people hope that Americans will perceive health care reform as a win-win opportunity, with lower health care costs through the elimination of waste and inefficiency, accompanied by more stable and secure health care coverage. But even if the administration succeeds in assuaging the fears of the general public, they face a much stiffer challenge with the health care industry. Any success they have in controlling health care costs will, after all, create losers. If we spend less money on health care in the US, then someone in the health care industry is going to take a financial hit. One person’s waste is another person’s income.

No surprise, then, that both the insurance industry and the AMA have begun pushing back against elements of the Obama plan. These groups stand to lose money under health care reform. Hospitals are likely to lose money too, as are drug companies, medical device companies, and other powerful parts of our vast health care industry. All of these groups will be motivated to fight health care reform.

The Obama administration has made a point of distinguishing its behavioral approach to economics from the more traditional approach embraced by the Bush administration. Ironically, though, it is the Bush administration that understood how to pass health care reform without triggering loss aversion. When George W. Bush decided to push for a Medicare drug plan, he recognized that the pharmaceutical industry would wield its powerful lobbying strength against his efforts if they feared a loss of income. So he crafted a plan that benefited the drug industry. Politicians on the left criticized these concessions to industry, but it is hard to imagine the drug plan passing without such concessions.

Obama should draw a lesson from his predecessor. If he causes the health care industry to perceive his health plan as a threat to their incomes, his plan will face stiff resistance. For health care reform to succeed, people in the health care industry need to keep making exorbitant sums of money for awhile. Over time, the government can gradually ratchet down health care costs. But initially, Obama needs to reduce the number of people who perceive health care reform as a loss.

The cost will be steep. But the alternative will be more costly. We cannot afford to make reform feel like a health care bogey.

Peter Ubel is author of Free Market Madness: Why Human Nature Is at Odds with Economics — and Why It Matters (Harvard Business Press, 2009), and Director of the Center for Behavioral and Decision Sciences in Medicine at the University of Michigan.

View original post and comments at Huffington Post

Last summer, New York City made a great stride toward promoting public health, by requiring chain restaurants to prominently publish calorie counts alongside their menus. This type of regulation holds the promise of improving people’s eating habits, without restricting their freedom to order whatever they want.

Theoretically, this new regulation should help consumers make better choices: they should eat fewer big Macs and more Asian chicken salads. Indeed, proponents of free markets, who normally oppose government regulation, should celebrate New York City’s new policy, because, by requiring restaurants to inform consumers about their purchases, the city has moved the restaurant business closer to Adam Smith’s ideal of a free market-one where savvy and educated consumers choose among available goods based on their cost and benefits.

As a physician who conducts research in behavioral economics, however, I am concerned that this policy won’t accomplish its goals, because it should be simple for restaurants to make their offerings attractive to even the most calorie conscious consumer.

How will they do this? By creating new items on the menu that make everything else look healthy by comparison.

When people evaluate consumer goods, they usually need some context in which to judge relevant attributes of competing products. What counts as an expensive DVD player? Best way for me to tell is by looking at other DVD players. And what counts as a low-calorie meal? Easiest way to tell is to see how many calories are in other meals.

If I was a restaurant owner and wanted to keep selling a popular high calorie sandwich to New Yorkers, I would place two new items on my menu, each with 50% more calories than the old sandwich. Maybe add on a couple slices of bacon, or a fried egg . . . anything Homer Simpson would like on his sandwich.

I expect that very few customers would thrill at the idea of these new “heart attacks on a bun.” Most will recoil. But that’s ok, because my goal would not be to attract customers to these new sandwiches. Instead I would use these new sandwiches to make my old ones look better. You see, my customer’s eyes will soon wander toward other items on the menu, and what used to be the highest calorie sandwiches will now look like veritable health-food snacks!

I have no idea whether any restaurants will employ this psychological technique. I do know that companies often make high-priced products, deluxe car models for example, in large part to sell their midrange products.

More importantly, my example highlights the kind of unconscious behaviors that could reduce the impact of New York City’s new regulations.

I hope that I am wrong, and that restaurant goers begin eating more healthfully in response to the calorie information now available to them. But if they don’t, I expect New York City will need to go further, to persuade people to eat better food.

Helping consumers make good choices often means we need to do more than simply inform them.

To read my other blogs, and to learn about my book Free Market Madness: Why Human Nature is at Odds with Economics-and Why it Matters , check out my website at: http://www.peterubel.com/.

View original post and comments at Scientocracy

With jobs disappearing faster than a major league fastball, the public is understandably irate at the damage that greed has wrought upon our economy. Financiers destroy their companies, and our retirement portfolios, and then complain when their bonuses are less than 7 figures.

The greedy behavior in recent headlines has not been limited to Wall Street. Last fall, for example, Congress uncovered the shocking details of Dr. Charles Nemeroff, Chair of psychiatry at Emory University, who had made almost $3 million in consulting fees from the same drug companies whose products he was prescribing. More disturbingly, he was responsible for evaluating these same drugs in federally funded research trials. Then in November, we learned that renowned Harvard psychiatrist, Joseph Biederman, had received hundreds of thousands of dollars from Johnson & Johnson, a company which made medications that, not by coincidence, treated the same childhood psychiatric illnesses that Biederman had become famous for publicizing to doctors.

With all of these disturbing stories, it is natural to attribute our current economic problems to excesses of greed.

Greed is indeed a prominent theme in many recent headlines, but it doesn’t explain what has been happening. Greed is a reliable constant in human affairs. Attributing the current situation to greed is like attributing someone’s headache to the fact that they have a brain. The real explanation lies not with greed, but with our failure to deal with conflicts of interest.

Conflicts of interest have played a central role in many of the disasters that have befallen our economy in recent decades. Enron and other corporate debacles a decade ago were aided and abetted by accounting firms that were providing consulting services to the same companies they were auditing, creating a situation in which the right-hand was expected to raise the alarm about financial practices being suggested or condoned by the left hand. The dot-com crisis was similarly aided by stock analysts who provided buy recommendations for companies whose stock their firms were underwriting. And now in the most recent debacle, it has emerged that credit rating agencies, entrusted to identify risky finances, were aggressively drumming up business from the same lenders whose credit they were rating.

As highlighted by publicity over the payoffs to psychiatrists, conflicts of interest have also contributed significantly to another less acute but equally serious problem plaguing our economy: the ever-intensifying problem of skyrocketing health care expenditures. Despite numerous calls for change, pharmaceutical companies continue to shower physicians with gifts, and an increasing proportion of medical school faculty obtain an increasingly large proportion of their income from industry. (Disclosure: I am an academic physician, but I have made a practice of staying independent from industry funding. That independence has come easily, given that most companies have no interest in a primary care physician who studies decision making and ethics!) As a result, the newest and most expensive interventions are enthusiastically embraced by the medical community, often before their safety and effectiveness have been firmly established.

In the face of economic turmoil, it is tempting to look for greedy villains. By the time there are villains to punish, however, it’s usually too late to fix the problem. Shooting the fox won’t restore chickens to the hen house. Instead, we need regulations to reign in the pernicious effects of conflicts of interest.

How can we do this? Beyond calls to punish perpetrators, the most common response is to call for greater disclosure of conflicts. Medical journals and medical schools, for example, have largely tried to address conflicts of interest by requiring physicians to disclose their outside income. However, disclosures are not a solution. For starters, people often don’t report their conflicts. Nemeroff famously failed to report the majority of his $3 million in consulting fees. More importantly, disclosure can cause outsiders to drop their guard – when a physician readily admits working with a drug company, other people mistakenly assume that he must therefore be being forthright about his research results.

The only way to reduce the effects of conflicts of interest is to reduce the conflicts themselves. Auditors and bond raters shouldn’t be hired by, or provide other services to, the companies they are rating. Stock analysts shouldn’t be allowed to provide buy recommendations on stocks their firm underwrite. Physicians shouldn’t be allowed to accept gifts from pharmaceutical companies.

As Obama continues to implement policies meant to avert future economic disasters, it will be essential for his administration to take a hard look at regulating the conflicts of interest that pervade our economy. Only by doing so can we get our economy back on track, and prevent another precipitous derailment.

Note: I am joined in today’s post by George Loewenstein, Herbert A. Simon Professor of Economics and Psychology at Carnegie Mellon University.

To read more of my blogs, and to learn more about my new book, Free Market Madness, check out my personal website: http://www.peterubel.com

View original post and comments at Scientocracy

Studying economics in college at the dawn of the Reagan presidency, I learned about the wonders of free-markets. The invisible hand of the market, I read, guarantees that thousands upon thousands of people–each with unique desires, abilities and values–mesh together, thereby able to achieve the balance of work and leisure, and of material and spiritual wealth, that they strive for in their lives.

In the long run, I was told, market imperfections correct themselves- eventually risky speculation is punished, foolish commercial enterprises fail, and the stock market sets the right price for company shares.

Unfortunately, to paraphrase John Maynard Keynes, in the long run we’re all dead, and some of us don’t want to wait that long for the market to correct itself.

Belief in free-markets has long been tied to unjustified faith in human rationality. But human nature is a surprising mixture of rationality and irrationality, and policies that don’t recognize the fullness of human nature are doomed to fail.

Consider the “rational” lenders who become so enthusiastic about risky mortgages. At the same time that the mathematical parts of their brains were calculating the risks of sub prime mortgages, more primitive parts of their brains were at work. Behavioral scientists, for instance, have discovered that testosterone fuels risky decision making. What happens when you mix testosterone with a young Wall Street investment banker, striving for dominance in his field and pursuing a huge year-end bonus? Is it any surprise that this male dominated industry made such poor decisions?

To make matters worse, when men win at things, like basketball games or risky investments, their testosterone levels rise even further. Not hard to imagine a vicious cycle here, a culture of risk fueled in part by hormones and reinforced when early risks are rewarded.

People can’t stop being human. We humans can’t ignore that our advanced centers of reasoning lie on top of primitive brain structures, ones we share with reptiles and chimpanzees.

To reduce the chance of future economic crises, we need sensible and careful government regulations that temper our more animal instincts. If such regulations had been in place in the last decade, we might have dissuaded more people from taking out unnecessarily risky mortgages, and we might have avoided our current economic crisis.

To read more of my blogs, and to learn more about my new book, Free Market Madness, check out my personal website: http://www.peterubel.com

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Patt Morrison of KPCC Radio in Southern California talks to me about how people make various rational and irrational decisions in their lives. CLICK HERE to listen.

A recent New York Times headline proclaimed that: “In Pain and Joy Of Envy, the Brain May Play a Role.”

May play a role?! Where else does The New York Times think envy resides? In our hateful hearts? Our covetous colons? Our jealous jejunums?

That The New York Times could doubt the centrality of the brain in human emotions shows just how far we behavioral scientists need to come to get people to understand what we do. How can we expect funders like the NIH and the NSF to invest in behavioral science when even The New York Times is unclear about whether feelings like envy reside in the brain?

This is all Descartes’ fault, of course. He persuaded modern thinkers that the mind is separate from the brain. (Although he did think that the pineal gland could potentially be the seat of the soul, if I remember my college philosophy correctly.)

Fortunately, new technologies like fMRI are slowly overcoming Descartes’ outsized influence. Ask someone to think envious thoughts, and the scanner shows which part of the brain is working. (The feeling of envy, it turns out, resides within prominent pain centers.)

To behavioral scientists, the importance of fMRI research is to show where in the brain specific emotions, thoughts and behavioral pathways reside.

To lay people, the importance is to show that such things reside…anywhere in the brain.

A colleague of mine, a behavioral scientist at the University of Michigan, recently presented the results of our Center’s research to a bunch of NIH muckety-mucks, in hopes of persuading them to continue funding our kind of research. He concluded his talk with an fMRI study, and blew away the molecular biologists who made up the majority of the audience. One of these scientists eagerly sought him out after the talk to tell him that this was the first time he believed behavioral science research had any value.

To those of you who question the value of brain imaging research, I remind you-Descartes’ legacy has not been fully vanquished. For our research to influence policy and practice, we must build our “street cred” by reminding people that our thoughts and feelings really do reside in the brain.

To read more of my blogs, and to learn more about my new book, Free Market Madness, check out my personal website: http://www.peterubel.com

View original post and comments at Scientocracy

Quick: What do you get when you mix a Nobel Prize winner with a MacArthur genius?

You get this: “The claims of some heavy drinkers and smokers that they want to but cannot end their addictions seem to us no different from the claims of single persons that they want to but are unable to marry or from the claims of disorganized persons that they want to become better organized.”

Yes, Gary Becker and Kevin Murphy, in the rich tradition of University of Chicago Economics, believe that much-if not most-of human behavior can best be understood by assuming that people are behaving rationally, to maximize their best interests.

Unemployment? A rational choice according to another Chicagoan, Nobel winner Robert Lucas: “To explain why people allocate to unemployment, we need to [know] why they prefer it to all other activities.”

Addiction? Also a rational choice. Thus, even though many addicts are miserable, this misery doesn’t mean that their use of heroin or crack is irrational. As Becker and Murphy put it: “People often become addicted precisely because they are unhappy. However, they would be even more unhappy if they were prevented from consuming the addictive goods.”

Why should any of us care that a particular school of economic thought considers human beings to be largely rational? Because this same school of thought has, by no coincidence, been home to some of the most prominent libertarian thinkers of the last century-people like Friedrich Hayek and Milton Friedman, men whose ideas have influenced politicians around the world. Convinced that people are largely rational, these influential thinkers have argues that we should severely limit the scope of government and rely on the power of free markets to maximize people’s best interests. After all, if people are largely rational-if they know what’s in their best interests and possess the willpower to act upon this knowledge-then the best any government can do is to step aside, and let them pursue the good life.

As a physician trained in behavioral economics, I cannot reconcile either my clinical experience or my research findings with a view of addiction as being completely rational. True: if the price of heroin rises dramatically, people will use less heroin. Some people won’t take up the habit. Some hard core addicts will try to cut down their use, or will switch to other drugs. In other words, there is some rationality to the behavior of drug addicts. But as readers of this website no doubt recognize, there is also some desperately irrational behavior contributing to the actions of drug addicts.

Why does this matter? Simple. The more convinced we are that human beings behave in ways that promote their own best interests, the less we should look to the government to protect our interests. If crack makes people happy, we should allow people to use it. No rules, no regulations.

If people want to take out mortgages that are beyond their means, and if lenders want to give them such mortgages, the government should step out of the way and let the market place punish anyone that makes bad decisions.

If a twenty-year-old doesn’t want to buy health or disability insurance, and experiences a crippling automobile accident, we should step aside and let her experience the consequences of her decision.

But if you, like me, believe that human nature is a mixture of rational and irrational forces-if you recognize that we consumers are often prey to manipulation by people who know our weaknesses-then you will be open to exploring ways the government can help us make wiser decisions.

Trust me; I’m not talking about big brother. I’m ecstatic to have grown up in the USA rather than the USSR (okay, my wife disputes that “grown up” part!).

But cigarette taxes? Free market enthusiasts think they are a bad idea. Tax dollars to help drug addicts go through rehab? Market evangelists don’t to approve of that either, especially if, as Becker and Murphy say, crack is making these people happier. Government dollars spent on anti-obesity programs? Why do that when, according to some Chicago-based scholars, the term “overweight” is a misnomer, since people have rationally decided how much they want to eat and exercise. In this world of perfect rationality, no one is overweight, because everybody has achieved their ideal body mass.

We need to be very careful about adding any layer of government bureaucracy to our lives. But we should be equally careful about stripping away government regulations, when such regulations promote our best interests. Our policies need to recognize that we humans aren’t always as rational and strong willed as we’d like to be.

To learn more about my new book, Free Market Madness, check out my website: http://www.peterubel.com/.

View original post and comments at Scientocracy

Quick quiz: If there are 1,000 people in a village, and 10% of them have contracted a new, awful disease called acute hotchocolitis, how many people in the village are sick?

This is not a trick question; the answer is 100. An easy question for readers of Forbes. But ask the average American, and one in three will get this question wrong.

There are many reasons we are in our current economic crisis. For one, U.S. tax policies encouraged home ownership, even among people who weren’t in a good position, financially, to take on such responsibility. What’s more, credit rating agencies fell asleep at the wheel, lulled into complacency by the other business they hoped to conduct with the very lenders they were rating.

The free market is often good at punishing bad decisions. In a free market, if you cannot afford your mortgage payments, you either have to sell your house, go into foreclosure or file for personal bankruptcy. If you quit your day job to become an actor, the marketplace will decide whether you can afford to continue chasing that dream.

But no account of the economic crisis is complete until we explore the reasons why so many consumers make so many bad decisions.

If a potential homeowner doesn’t understand things like percentages, how can we expect them to understand adjustable rate mortgages? “The mortgage starts at 5% (five what?), could rise to 7% in three years (seven what?), and if you compound (com huh?) the interest over time …”

Unfortunately, when enough people make enough bad decisions, the consequences can be dire–not just for those individuals who make the bad decisions, but for all of us.

Look at how irresponsible borrowing and lending have hurt even those among us who made wiser decisions. Caveat emptor policies–in which the buyer takes on the entire onus of a bad transaction–ignore the possibility that, if enough consumers make enough bad decisions, our economy will spin out of control.

Of course, mathematical stumblings don’t account for every unwise mortgage purchase. Instead, some consumers understood the terms of their mortgages, recognized that the mortgages were risky and still went ahead and secured the loans.

These people were susceptible to what behavioral scientists like me call unrealistic optimism: They were convinced that their interest rates would not rise; or they were confident that their salaries would rise faster than their mortgage payments; or they were certain that their house would grow in value, allowing them to sell it for a profit if their monthly payments became burdensome.

Good economic policies need to recognize that we aren’t always rational decision makers with unlimited willpower.

Instead, our decisions are influenced by a horde of unconscious forces. People named Paul, for example, are more likely to migrate to St. Paul, Minn., than other people, under the influence of what psychologists call egoistic bias. (I’m not calling that a bad decision, by the way. I grew up in St. Paul.) Or, to take a very different example: When people are told a cracker contains nine grams of “healthy fat,” they say it tastes worse than when the they are told the same cracker contains nine grams of “unhealthy fat.”

For these reasons, markets work best when policies direct consumers away from their own worst instincts.

That’s why we tax cigarettes, discouraging adults from picking up the habit. Such a policy leaves people free to smoke if they desire, while reducing the chance they will smoke in the first place.

Politically speaking, I am a flaming moderate. I am glad to be living in a capitalist society. But I also believe that when we understand the limits of human nature, we will better know whether, and how, to rein in the excesses of free markets. I hope that we not only recover from our current crisis quickly, but also that, in the meantime, we implement the kind of sensible regulations that will reduce the chance of repeating our recent mistakes.

View original post and comments at Forbes.com