Lecture 4 - Risky Health Behaviours

Question 1

National Center for Health Statistics Data (2017)

Most prevalent NCDs over time

Answer 1

Most prevalent NCDs over time
1) Diseases of the heart
2) Malignant neoplasms
3) Cerebrovascular disease

Question 2

IHME (2017)

Top 3 deaths by risk factor

Answer 2

Top 3 deaths by risk factor
1) high blood pressure
2) smoking
3) high blood sugar

Question 3

What is high healthcare spending in the US attributable to?

Answer 3

Modifiable risk factors
- high BMI
- dietary risk
- smoking
- alcohol
- drugs

Question 4

What is Grossman’s model of health capital?

Answer 4

Health is a stock that yields an output of healthy time
- people gain utility from health
- people receive an endowment of health capital at birth (depreciates with age and can be raised through investments)
- people invest in healthy by combining market goods/services and time
- ability to invest in health depends on skills, knowledge and education
- consumption and investment in health are constrained by time, income and prices (TIP)
- people invest in health behaviours until supply=demand

Question 5

What is optimal participation?

Answer 5

Marginal costs (both of purchasing and non-monetary cost to health) equals marginal benefits (instantaneous pleasure from consumption)

Question 6

What is marginal utility?

Answer 6

Change in utility

Question 7

Utility is determined by current and past consumption. What are reinforcement, tolerance and withdrawal?

Answer 7

• reinforcement: the more you partake, the more you want to partake
• tolerance: the more you partake, the lower future utility
• withdrawal: positive marginal utility of current consumption

Question 8

What is the theory of rational addiction?

Answer 8

Many irrational/unhealthy behaviours are consistent with individual utility maximisation.

Individuals understand their choices, but still make them because gains from activity (utility) exceed costs

People will engage in unhealthy behaviours when the discounted lifetime benefits (discounting future, more weight on present) exceed the respective costs

Question 9

What does the utility of an addictive good depend on? (3)

Answer 9

1) current consumption of addictive good
2) stock of past consumption
3) current consumption of other goods

Question 10

What are the key critiques of the theory of rational addiction?

Answer 10

1) Do individuals appropriately forecast future costs (and consumption) in advance? There are various empirical challenges and counter arguments.
2) Does future behaviour usually coincide with current desires regarding the behaviour? Time inconcistency, preference reversal and different selves suggest not.
3) Is the theory applicable to non-addictive goods? Auld and Grootendorst (2004)

Question 11

Auld and Grootendorst (2004)

Answer 11

• Did a falsification test using time-series data for milk, oranges and egg consumption
• Based on their tests using the theory of rational addiction these goods were addictive
• Suggests that theory is flawed

Question 11

What is time inconsistency & preference reversal, and different selves?

Answer 11

• time inconsistency and preference reversal: plan to do something in the future but change your mind (for the theory of rational addiction to hold true there can;t be any time inconsistency)
• different selves: at different points in time we make different choices

Question 12

What is the equation for price elasticity of demand?

Answer 12

PED = ((Q1-Q0)/(Q1+Q0))/((P1-P0)/(P1+P0))

Q1 - quantity in current period
Q0 - quantity in previous period
P1 - price in current period
P0 - price in previous period

Question 13

What does 0>PED>-1 and PED<-1 mean?

Answer 13

0>PED>-1 : inelastic, change in price has relatively small effect on quantity, necessities

PED<-1 : elastic, change in price has relatively large effect on quantity demanded

Question 14

Gallet and List (2003)

Answer 14

Found that tobacco was a necessity for everyone but teens for which it was a luxury (PED = -1.43)

Question 15

Do health behaviours influence other health outcomes?

Answer 15

• correlational studies provide limited information
• potential reverse causality between poor health outcomes and unhealthy behaviour
• can’t randomly assign people to treatment and control groups with unhealthy behaviours being the treatment, unethical
• solution: could exploit exogenous variation in unhealthy behaviours using a natural experiment with instrumental variable approaches

Question 16

Do health behaviours influence healthcare use and cost?

Answer 16

• cost of illness studies fo not provide causal information
• quasi-experimental approaches by McGeary and French (2000) show that chronic drug use increases the probability of emergency room visits for 30% for females and 36% for males
• Cawley and Meyerhoefer (2012) found that obesity increased annual medical costs by over $2.5k

Question 17

What are quasi-experimental approaches?

Answer 17

Used to estimate the causal impact of an intervention on a target population without random assignment

Question 18

Do health behaviours influence educational performance?

Answer 18

• Renna (2007); binge drinking decreases the probability of graduating highschool by 5% for women and 15% for men
• There is mixed evidence on the link between obesity and educational outcomes

Question 19

Do health behaviours influence labour market outcomes?

Answer 19

• Problem drinking negatively affects probability of employment (Terza, 2002)
• Alcohol dependency negatively affects probability of employment (Johansson et al, 2007)
• Marijuana and cocaine use negatively affects probability of employment (DeSimone, 2002)
• Chronic drug use negatively affects probability of employment (French et al, 2001)
• Mixed evidence on obesity and labour market outcomes
• Fictitious job applications were sent to real job postings, one with the original photo of the applicant and one manipulated to be obese. Applications with weight manipulated photo had a lower response rate for job interviews (6% for men, 8% for women) (Rooth, 2009)

Question 20

Do health behaviours influence income and earnings?

Answer 20

• moderate alcohol consumption increases income by 10% but smoking decreases income by 25%
• generally there is an obesity income penalty for females; weight gain of 65lbs lowers wages 9-18% amoung white females (Cawley, 2004)

Question 21

Do health behaviours influence crime?

Answer 21

• higher alcohol taxes and age regulation decreases crime rates (Carpenter and Dobkin, 2010)
• cocaine prevalence is linked to higher homicide rates (Fryer et al, 2005)
• underage alcohol consumption increases the probability of vandalising property, stealing and committing any illegal act (French and Maclean, 2006)

Question 22

What is the case for government intervention in unhealthy behaviours, from public health and economic perspectives?

Answer 22

• Public health perspective: government should act to reduce unhealthy behaviours, regardless of the presence of market failures
• Economic perspective: government should fix market failures. Socially optimal levels of unhealthy behaviours are when marginal societal benefits equal marginal societal costs

Question 23

What are the market failures of unhealthy behaviours?

Answer 23

• incomplete information about health consequences
• incomplete info about risks of addiction
• not considering externalities like risk imposed on to other people (e.g. second hand smoke)

Question 24

Do taxes improve health behaviour?

Answer 24

• Raising taxes generally improves health behaviour, especially got cigarettes and alcohol (Cook and Moore, 2002)
• Summers (2018) argues we should tax “bads” instead of labour, income and production
• There are issues with tax regressivity since low-socio-economic status is more likely to engage in unhealthy behaviours
• Increasing taxes could lead to increased smuggling (Chaloupka and Warner, 2000)
• Task Force for Fiscal Policy for Health (2019) found that increasing taxes helped avert deaths related to tobacco and alcohol but sugary drinks to a lower extent

Question 25

What are Pigovian taxes?

Answer 25

• Tax market activity with negative externalities to increase the total cost to offset the social cost.
• Results in socially optimal levels of unhealthy behaviours where marginal social benefits = marginal social costs

Question 26

Do financial incentives improve health behaviour?

Answer 26

• Even small incentives to reward healthy behaviour may be effective (Cawley and Ruhm, 2011)
• Success of the intervention depends on the structure (Volpp et al, 2006)
• Vouchers raised compliance to reinforcement therapy by 30%, and the higher the value of the voucher the more immediate and larger the effect (Lussier et al, 2006)
• Mixed evidence on cash for weight loss (Cawley and Ruhm, 2011)
• Incentives help promote smoking cessation (Sigman and Patrick, 2012)
• Incentives are effective for infrequent behaviours (e.g. vaccinations) (Marteu et al, 2009)

Question 27

Richard Thaler

Answer 27

• Said people don’t know why they do things because they have a reflective side (logical) but also an automatic side (driven by emotions, impulses, habits) which is fast
• If we make subtle changes to the environment or choice architecture we can influence behaviour without restricting choice. Take advantage of psychological and cognitive biases
• “If you want to get someone to do something, make it easy. Remove the obstacles” - Richard Thaler

Question 28

Marteau et al (2011)

Nudges

Answer 28

Smoking
- Nudge: make non-smoking more visible through media campaigns (‘majority do not smoke and smokers want to quit), keep cigarettes, lighters and ashtrays out of sight
- Regulate: ban smoking in public places, increase price
Alcohol
- Nudge: serve drinks in smaller glasses, make lower alcohol consumption more visible
- Regulation: duty, raise minimum age of purchase
Diet
- Nudge: designate sections of supermarket trolleys for fruit/veg, make salad the default side option instead of chips
- Regulation: ban food ads in media for children, ban trans fatty acids
Physical activity
- Nudge: make stairs more prominent in public, make cycling visible as a means of transport
- Regulation: increase duty on petrol, car drop-off exclusion zones at schools

Question 29

What does PED = -1.22 mean? PED = 1.22?

Answer 29

PED=-1.22 means a 1% fall in price increases demand by 1.22%

PED=1.22 means a 1% rise in price reduces demand by 1.22%