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Fighting Coronavirus with Behavioural Economics

Why cant people just follow the rules?

A look at the biases behind irrational behaviour in the midst of a pandemic

Over the past few decades, behavioural economics has exploded as a field of study, not only enriching basic economic models, but also yielding novel insights into the cognitive predispositions of humans. In fact, these insights from the study of behavioural economics can be used to design effective messages that induce behaviour compliant with limiting and reducing the spread of Coronavirus. In order to encourage such behaviour, we need to understand which behavioural biases people may be following, how they hinder the enforcement and application of regulations and recommendations, and how they can be overcome using tools of behavioural science. Such tools have been proven to be effective in promoting certain behaviours, and thus could also be used to promote socially responsible behaviours during the Coronavirus pandemic. 

The Inter-American Development Bank, headquartered in Washington DC, supports both economic and social development in Latin America and the Caribbean through the extension of preferred creditor loans to member countries. The IDB uses behavioural economics to inform its public policy recommendations, as its insights take into account how people react and shift behaviour, thereby maximising the effect of any given policy change. Thus, their behavioural insights can guide recommendations and public policy proposals for curbing the spread of coronavirus.

Humans have limited rationality and often act based on incomplete or incorrect information. Behavioural biases are those “irrational beliefs or behaviours that can influence [the] decision-making process,” and they can be exacerbated by stress, meaning they are not only more dangerous, but also amplified during the Coronavirus pandemic.[1] There are a multitude of behavioural biases that affect people’s conduct during the pandemic, and these biases dictate which recommendations they chose to follow, and to what extent they chose to follow them. The most prominent biases, and their effects with regards to the pandemic, are as follows:

Status Quo Bias:

Any current state of affairs is used as a reference point, and any deviation from it is perceived as a loss. This makes it difficult for people to change their routines. Even “small” changes such as increased frequency of hand washing or putting on a mask become difficult, as taken together, they represent a shift from normalcy, an overhauling of routine, and this deviation is perceived as a loss of utility.

Cognitive Overload:

Cognitive overload happens when information presented exceeds an individual’s ability to process it. The combination of constant news updates, the deluge of contradicting information on social media channels, and the stress of  trying to balance work, school, and social life all from home contributes to this overload, and can render even simple decision-making processes taxing, leading to mental short-outs, and reversion to default decisions, which will be discussed later.

Social norms

Social norms are the unwritten rules that govern behaviour in society. There are descriptive norms, how individuals behave, and prescriptive norms, how individuals should or are expected to behave. Social norms, together with the status quo bias, render institution of widespread changes, like social distancing in public, wearing masks outside, or greeting with elbows instead of kisses on the cheek, difficult. Instead of an individual making a choice for himself, he will be impacted by the behaviour of those around him. Thus, compliance with recommendations and guidelines is dependent on society as a whole, and not just the choices of individuals, and policy makers must pay particular attention to this.

Overconfidence and Optimism Bias

Overconfidence is the tendency to overestimate one’s position relative to the average, while optimism bias is the tendency to overestimate the probability of positive outcomes and underestimate the probability of negative outcomes. These two biases go hand and hand and result in the underestimation of the probability of contracting coronavirus. When comparing the loss from complying with social distancing measures and the perceived risk of contracting coronavirus, people underestimating this risk will be far less likely to follow guidelines, resulting in a dangerous situation for themselves and their families.

Loss aversion

Loss aversion refers to the phenomenon that for an equivalent loss and gain, the loss will be perceived as larger. In regard to coronavirus, people overestimate the “loss” associated with following social distancing procedures and undermine the “gains” resulting from following such procedures. This is exacerbated by the fact that the gain from following them, i.e., lowering chances of contracting coronavirus, is attached to a vague and intangible goal.

Availability and Representative Heuristic

The availability heuristic and the representative heuristic refer to the tendency of individuals to estimate the probability of an event based on how frequently it has occurred in the past, or how similar it is to past events, respectively. The Coronavirus pandemic is a unique event in the sense that no pandemic has taken over the entire world so rapidly and so thoroughly. There is only a handful of countries have not had active Coronavirus cases, and not a single country has been unaffected by the pandemic. Other viral outbreaks, such as SARS or the Spanish Flu, were either not as widespread or too far back in history for people to remember. The situation being so “novel” means that people have no baseline expectations and cannot reasonably estimate probability of getting sick or a sufficient amount of precautions to take.

Hassle Factors

Hassle factors are the small inconveniences that can add up to obstruct the decision-making process. While taken individually, measures to prevent the spread of coronavirus, such as frequent handwashing or putting on a mask, may be trivial. However, when a person is faced with many hassle factors, they may find it less mentally taxing to abort the decision-making process of which measures to follow and how often, and instead ignore all measures completely.

Time Inconsistency or Present Bias

While people are impatient with regards to immediate gains, they are patient with regards to gains that are realised at different moments within the future. Following social distancing measures has very little immediate perceivable effect, and if a person contracts Coronavirus, it may be impossible to say when or what could have been differently in the past to prevent it. If people could choose between wearing a mask or getting sick in one single evening, most people would choose to wear the mask. However, with the gains of social distancing measures being far in the future, people are more prone to indifference when choosing whether or not to follow safety guidelines each day.

(Cont. next page)

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