The Rise of “Nudge” and the Use of Behavioral Economics in Food and Health Policy

The Mercatus Center just published a short piece I wrote on the the application of behavioral economics to food policy.  Here are a few excerpts:

“The rising popularity of applying behavioral economics in policymaking—or the creation of policies that “nudge” people into changing their decisions—might seem a bit odd to a food company executive. After all, advertisers and marketers have been using psychological insights for decades to encourage consumers to buy and pay more. Yet a number of bestselling books on the topic of behavioral economics have been published in the last decade, such as Nudge, Predictably Irrational, and Thinking Fast and Slow, and insights from the field are increasingly influencing policy discourse. So while behavioral economics might be seen as simply the merger of economic and psychological insights, it must also be partially understood as an attempt to influence the way government interacts with citizens. While marketers use psychological insights to boost company profits, advocates of the nudge argue that these same insights might be used by government to increase consumers’ well-being.”

and 

“It is commonly argued that governments should be allowed to enact paternalistic policies and nudge consumers because businesses do it all the time—such policies would supposedly level the playing field. It is of course true that we are constantly bombarded by advertisements and private nudges. But there is a crucial difference between government and private-business nudges. That difference is the role that competition plays in encouraging businesses to respond to consumers. When we are bamboozled or misled by a company in a way we ultimately dislike, we stop buying its product or find a new supplier. This knowledge often (though not always) constrains companies that fear the loss of reputation that might come from undertaking actions that work against their consumers’ desires. These same incentives prompt entrepreneurs to develop better alternatives. Government, with its power to mandate and coerce, lacks the intense competitive pressures provided by the profit motive. None of this is to say that people might not come to accept and appreciate certain forms of government paternalism (who among us now bristles at seat belt laws?), it is only to say that the fruitful application of behavioral economics to food policy is much more complicated than is often supposed. ”

I also point out what I think is a key asymmetry: behavioral economic results are almost always used to advocate for more regulation and intervention, but at least some behavioral economic results could be interpreted to have the opposite implication.  I also give an assessment on how behavioral economics can be fruitfully used by governments and companies alike.

The Science of Taste

This article by David Owen in National Geographic is chock full of interesting tidbits on the science of taste and flavor.  

For example, why many kids hate broccoli?

“The aversion to bitter foods is inborn too, she said, and it also has survival value: It helps us avoid ingesting toxins that plants evolved to keep from being eaten—including by us.”

The idea that many of us were taught as kids - that there are taste buds on different parts of the tongue that signal different flavors - is flat wrong:

“It’s true that in some people the receptors for particular tastes may be more concentrated in certain areas on the tongue, but all of them are found all over, and a Q-tip dipped in lemon juice will seem sour no matter where you dab it. (The receptors sit on the surface of taste cells, which are bundled together in taste buds.)”

and

“Although the tongue map doesn’t exist, there may be a taste map in the brain . . .”

That is, taste is about more than what hits our tongue.  

“Taste receptors alone don’t produce tastes; they have to be connected to taste centers in the brain. In recent decades scientists have discovered receptors identical to some of those on the tongue in other parts of the body, including the pancreas, intestines, lungs, and testes. We don’t “taste” anything with them, but if, for example, we inhale certain undesirable substances, the bitter receptors in our lungs send a signal to our brains, and we cough.”

Interestingly, most chefs are taught very little about the science of taste and flavor.

“Stuckey teaches a course at the San Francisco Cooking School called “The Fundamentals of Taste.” “Most culinary schools don’t teach students how to taste before they start to cook,” she said. “They jump right in with, like, knife skills. But how can you possibly start an education around food without the building blocks of flavor?” She and her students do an exercise in which they make barbecue sauce. Most of the ingredients she provides are ones you would guess: tomato sauce, tomato paste, sugar, honey, liquid smoke, paprika. But there’s also a tray of ingredients whose predominant taste is bitter: coffee, cocoa, tea, bitters. “It’s not really intuitive, because you don’t think of barbecue sauce as bitter, but if you taste it before and after you add a bitter ingredient, you realize that bitter changes the whole gestalt”

All these complex interactions make it tough when we decide to vilify an ingredient - say sugar or fat - because ingredients have complex interactions in term of smell, taste, mouth feel, etc.  In fact,, we can trick our brain into thinking something is sweeter than it actual is:

“Bartoshuk told me that increasing the concentration of sweetness-enhancing volatiles in certain foods may make it possible to reduce their sugar content without making them taste less sweet. But she worries about unintended consequences. “As soon as we can produce a sweet experience that has no calories, isn’t toxic, and has no nasty characteristics—what will that mean for the brain?””

The whole thing is interesting.  

(HT Bailey Norwood)

Why do children in richer households tend to have healthier diets?

The disparity in diets among rich and poor households has been widely discussed.  One possible explanation, also much debated and discussed, is the assertion that healthy food is more expensive than unhealthy food.

This paper in the journal Social Science and Medicine by Caitlin Daniel suggests a different sort of economic explanation for differences in dietary patterns.  Here's the abstract 

“This article shows how an interaction between economic constraints and children’s taste preferences shapes low-income families’ food decisions. According to studies of eating behavior, children often refuse unfamiliar foods 8 to 15 times before accepting them. Using 80 interviews and 41 grocery-shopping observations with 73 primary caregivers in the Boston area in 2013–2015, I find that many low-income respondents minimize the risk of food waste by purchasing what their children like—often calorie-dense, nutrient-poor foods. High-income study participants, who have greater resources to withstand the cost of uneaten food, are more likely to repeatedly introduce foods that their children initially refuse. Several conditions moderate the relationship between children’s taste aversion and respondents’ risk aversion, including household-level food preferences, respondents’ conceptions of adult authority, and children’s experiences outside of the home. Low-income participants’ risk aversion may affect children’s taste acquisition and eating habits, with implications for socioeconomic disparities in diet quality. This article proposes that the cost of providing children a healthy diet may include the possible cost of foods that children waste as they acquire new tastes.”

The Cost of Others Making Choices for You

The journal Applied Economics just released a paper entitled "Choosing for Others" that I coauthored with Stephan Marette and Bailey Norwood.  The paper builds off our previous research that aimed to study the value people place on the freedom of choice by trying to explicitly calculate the cost of others making choices for you (at least in our experimental context).  

The motivation for the study:

“It is not uncommon for behavioural economic studies to utilize experimental evidence of a bias as the foundation for advocating for a public policy intervention. In these cases, the paternalist/policymaker is a theoretical abstraction who acts at the will of the theorist to implement the preferred plan. In reality, paternalists are flesh-and-blood people making choices on the behalf of others. Yet, there is relatively little empirical research (Jacobsson, Johannesson, and Borgquist 2007 being a prominent exception) exploring the behaviour of people assigned to make choices on another’s behalf.”

The essence of the problem is as follows:

“When choices are symmetric, the chooser gives the same food to others as they take for themselves, and assuming the recipient has the same preferences as the chooser, the choice inflicts no harm. However, when asymmetric choices occur, an individual receives an inferior choice and suffers a (short-term) welfare loss. Those losses might be compensated by other benefits if the chooser helps the individual overcome behavioural obstacles to their own,
long-run well-being. However, the short-term losses that arise from a mismatch between outcomes preferred and received should not be ignored, though they often are, and this study seeks to measure their magnitude in a controlled experiment.”

What do we find?

“We find that a larger fraction of individuals made the same choices for themselves as for others in the US than in France, and this fraction increased in both locations after the provision of information about the healthfulness of the two choices. ”

and

“What is interesting is that the per cent of paternalistic choices declined in both the US and France after information was revealed, with a very small decline in France and a considerable decline in the US. The per cent of indulgent choices also declined after information, so the effect of information was that it largely reduced asymmetric choices. Information substituted for paternalism. After information, choosers selected more apples for themselves and more apples for others, such that there was less need for paternalism to increase apple consumption.”

Experimental Auction Summer School 2016

Applications are now being accepted for a summer school on Experimental Auctions that is organized by organized by Maurizio Carnavari and co-taught with Rudy Nayga and Andreas Drichoutis.  This will be our 5th installment.  In the past we've had the summer school near Bologna Italy, but last year we venturing out to Crete, Greece with great success.  This year's course is scheduled from July 5 to July 12, 2016 in Catania, Sicily.

Experimental auctions are a technique used to measure consumer willingness-to-pay for new food products, which in turn is used to project demand, market share, and benefits/costs of public policies. Two weeks ago, I got to meet with a company in Amsterdam, Veylinx (see my previous mention of them here), who is using the method in an online format at a commercial level for marketing research. The content of the course is mainly targeted toward graduate students or early career professionals (or marketing researchers interested in learning about a new technique).  You can find out more and register here.

Here's last year's class in Crete.

And, of course, one shouldn't forget what is perhaps the most valuable part - the after-class networking and brainstorming sessions!