Tackling Obesity with the Concepts of Behavioral Economics

Tackling Obesity with the Concepts of Behavioral Economics

Introduction
In the Western world, obesity is a continuous problem and it is getting more severe. It has recently been estimated that, for example, in the United States obesity costs the society approximately $190.2bn, or 20.6 percent of total U.S. health spending, annually. Given that for most people obesity is a disease caused by their lifestyle, the society should try to find ways to reduce and prevent obesity. It is generally agreed upon that obesity and all of its related health risks are much easier to prevent than to cure once materialized. This puts the focus of the fight against obesity in the important field of child- and youth obesity and its prevention. School lunches form a considerable part of a student’s daily calorie and nutritional intake and those should be taken into consideration as an important factor to prevent obesity. Our paper argues that by utilizing to our advantage the new tools offered by the recent trends in behavioral economics such as framing and the power of the default option, we can significantly impact food consumption choices and help to prevent obesity by directing people to make healthy choices. Our focus will be on school lunch programs as they are both an important factor in preventing child obesity and also an arena where the society and the government have a lot of power to affect the choices that people make by appropriate system- and mechanism design.

Theoretical context
The power that the default option holds over us has been known or at least acknowledged for a long time. However, it has not been until the recent years and decades that societies and companies have actively started to take advantage of this basic characteristic of the human nature. There have also been many academic studies produced in the field of behavioral economics to strongly support the theory that human beings have an irrational tendency to stick with the default option that we are offered even in the absence of any transaction costs for a substitute. This tendency to choose the default option is also called “status quo bias” and stems from loss aversion which is an implication of the prospect theory developed by Kahneman & Tversky in 1979. According to prospect theory and loss aversion, people base their valuations of gains and losses around a reference point formed usually by the current state of affairs. And, those losses are valued more highly than gains of comparable size. This implies that just merely deviating from their reference point, which is usually formed by the default option offered, generates losses in value, and if the gains from deviation are not high enough, people choose not to deviate. The robustness of this phenomenon has been validated with much empirical research. For example, Johnson & Goldstein (2003) researched the effect of having an “opt-in” or “opt-out” organ donor program in European countries and found that when the default was to be a donor, 18% of the subjects chose to donate their organs. In contrast, when the default option was not to be a donor, 97.4% chose not to donate their organs. This kind of behavior can have huge implications for the process of choosing a school lunch as most people will be biased to choose the first, or default option, if there is one offered. Certainly, when we talk about food, individual tastes will create variance that could be biased towards choosing unhealthy foods rather than healthy foods. However, with appropriate meal planning and framing this problem could be overcome.

Framing is another concept stemming from loss aversion and is closely related to status quo bias. Indeed, the power of the default option comes from being framed as the default. Interestingly, framing can also be used to affect choices in other ways than framing something as a default. For example, in a choice situation between two goods A and B, adding a third good C, which is very similar to good B but strictly inferior, usually shifts demand the relative demand between goods A and B more towards good B. In this new decision making situation adding a third good makes people unconsciously to consider the subset of choosing between goods B and C. As C is strictly inferior to B, people will choose B over C in this subset, amplifying option B’s attractiveness compared to option A. Considering the field of obesity prevention and school lunches, this effect can be used favorably by adding multiple healthy offers instead of having only one. The inferior healthy options can help to shift demand from unhealthy options towards healthy options by increasing the attractiveness of the superior healthy option.

Practical implementation
Healthy food as the default option on the menu
Given that people are more likely to choose default options, the school canteens can design their lunch menus to make the healthy food as the default option. To make it the default, the students are given pre-paid campus cards that can be used to buy only healthy food. If the students would like to switch from the default to unhealthy food, they have to pay by cash. The students know that the healthy food option is the special meal that the school has chosen for them for their health benefit. Therefore, they are aware of the switching cost of deviating from the default option. Moreover, using pre-paid card to pay for healthy default option and cash for unhealthy options also makes the student more likely to choose the default according to the mental accounting concept, as it relieves the pain of paying associated with paying with cash. If the students could not decide what to eat, they are more easily influenced by what has been decided for them to minimize their costs. Additionally, the pre-paid card could also be designed to represent a healthy life style such as using green color as the background. Furthermore, the pictures of food should be taken into account as well. For instance, the default option has a more attractive high quality picture and the unhealthy option could have a less attractive one.

Framing: adding a dominated option to the menu
A similar set of healthy foods that is less attractive than the default healthy option can be included right beside the default healthy set on the menu to make the default more attractive compared to the unhealthy options. For example, the default healthy meal comes with fresh fruit juice whereas the inferior basic meal only comes with purified water. In this case, while looking at the menu, the students would unconsciously compare the two healthy options together, thus the superior one has a higher chance to be chosen. In the absence of the dominated healthy option, students just compare the healthy one with the unhealthy one, whereby personal taste preference may play a big role. Although as mentioned above, we have made the healthy choice more attractive through default and mental accounting, students might still consider unhealthy food more appealing partly because they feel like eating junk food gives them high utility regardless of the switching costs. Adding the dominated option can positively affect the perception of the taste of the superior healthy option, thus a higher utility from eating it. Therefore, the dominated option can further reinforce the attractiveness of the healthy default option in terms of the taste. Below is an example menu that effectively demonstrates our idea of what should be offered and how it should be represented for the school kids.

Conclusion
Obesity, and problems associated with obesity, is a severe problem especially in the prosperous Western world. To overcome the problems that societies face, because of this unfortunate phenomenon, authorities have to start paying attention to the causes of it. As unhealthy diet is most often the reason for overweight, governments should aim to steer the consumption habits into healthier direction. The easiest way to permanently alter people’s food consumption habits is to familiarize them with healthy food from early on. If one is already in school constantly exposed to healthy life style and food, one is likely to continue eating healthy food even after leaving school. Thus, tackling obesity can be achieved by using the behavioral economics concepts like framing and default option discussed above.

References:
http://news.yahoo.com/obesitys-health-costs-double-earlier-estimates-200...

Kahneman, Daniel and Tversky, Amos. "On the Psychology of Prediction." Psychological Review, July 1973, 80(4), pp. 237-51. . "Prospect Theory: An Analysis of De-cisions Under Risk." Econometrica,

Johnson, Eric J. and Goldstein, Daniel G. "Do Defaults Save Lives?" Working paper, Cen-ter for Decision Sciences, Columbia Univer-sity, 2003.