Agent relationships and information asymmetries in public health

The agent relationship and information asymmetry are two features of healthcare economics – but how do they apply to public health policy around processed foods?

Why is health different to other goods?

Arrow’s 1963 seminal paper helped lay the foundations for health economics as a discipline. The Nobel-winning economist talks about what makes healthcare different to other types of market goods. Two of the principal things are agent relationship – that a clinician often makes choices on behalf of a patient (Arrow calls them a “controlling agent”); and information asymmetry – that a clinician knows more than the patient (“informational inequality”). Whereas if someone is buying a new car, they make their own choices, and they might read up on the extensive information available so that they are reasonably knowledgeable about what to buy. These two factors have evolved and possibly diminished over time, especially among highly educated people in developed countries; people often have more choice over their treatment options, and some people have become ‘expert patients‘. Patients may no longer believe that the Götter in Weiß (Gods dressed in white) always know best.

Agent relationship and information asymmetry are features of healthcare economics but they also apply to public health economics. But where people accept clinicians as having more knowledge or acting as their agent, people don’t always accept advice on food from public health policy makers in the same way. People may think, “well I know how to buy a bottle of beer, or a can of coke, or a pizza”, and may not see any potential information asymmetry. Some of it might be ‘akrasia’ – they know that food is unhealthy, but they eat it anyway because it is delicious! However, few people may be aware that poor diet and obesity are the biggest risk factors for ill health and mortality in England.

People might ask “why should a nanny state agent make my food or drink decisions for me?” Of course, this is ignoring the fact that processed food companies might be making those decisions, and reinforcing them using huge marketing budgets. Consumers see government influences but they don’t always see the other information asymmetry and agent relationship; the latent power structures that drive their behaviours – from the food, drinks, alcohol industry, etc. Unsustainable food systems that promote obesity and poor health might be an example of market failure or a tragedy of the commons. The English food system has not moved on enough from post-world war 2 rationing, where food security was the major concern; it still has an objective to maximise calorie supply across the population, rather than maximise population health.

Some of the big UK misselling scandals like mortgage PPI are asymmetries. You could argue that processed foods (junk food high in salt, sugar and saturated fats) might be missold because producers try to misrepresent the true mix of ingredients – for example, many advertisements for processed foods try to misrepresent their products by showing lots of fresh fruit and vegetables. Even though processed foods might have ingredients listed, people have an information asymmetry (or at least, a deficit around information processing) around truly understanding the amount of hidden salt and sugars, because they may assume that the preparation process is similar to a familiar home cooked method. In the US there have been several lawsuits from consumers alleging that companies have misled them by promoting products as being wholesome and natural when they are in fact loaded with added sugars.

The agent relationship and information asymmetry as applied to food policy and health.

How acceptable are public health policies?

A 2012 UK poll carried out by YouGov, funded by the Adam Smith Institute (a right wing free market think tank), found that 22% of people in England thought that the government should tell people what to eat and drink, and 44% thought the government should not. Does this indicate a lack of respect for public health as a specialism? But telling people what to eat and drink is not the same as enacting structural policies to improve foods. Research has shown that interventions like reducing salt in processed foods in the UK or added sugar labelling in the US could be very cost effective. There has been some progress with US and UK programmes like the sugary drinks industry levy, which now has a good level of public support. But voluntary initiatives like the UK sugar reduction programme have been less effective, which may be because they are weakly enforced, and not ambitious enough.

A recent UK study used another YouGov survey to assess the public acceptability of behavioural ‘nudge’ interventions around tobacco, alcohol, and high-calorie snack foods. It compared four types of nudges: labelling (adding graphic warning labels to products); size (reducing pack size of snacks, serving size for alcohol, and number of cigarettes in packets for tobacco); tax (increasing the price to consumers); and availability (banning sales from corner shops). This study found that labelling was the most acceptable policy, then size, tax, and availability. It found that targeting tobacco use was more acceptable than targeting alcohol or food. Acceptability was lower in people who participated in the relevant behaviour regularly, i.e. smokers, heavy drinkers, frequent snackers.

What should public health experts do?

Perhaps public health experts need to do more to enhance their reputation with the public. But when they are competing with a partnership between right wing think tanks, the media and politicians, all funded by big food, tobacco and alcohol, it is difficult for public health experts to get their message out. Perhaps it falls to celebrities and TV chefs like Jamie Oliver and Hugh Fearnley-Whittingstall to push for healthy (and often more sustainable) food policy, or fiscal measures to internalise the externalities around unhealthy foods. The food industry falls back on saying that obesity is complex, exercise is important as well as diet, and more research is needed. They are right that obesity is complex, but there is enough evidence to act. There is good evidence for an ‘equity effectiveness hierarchy‘ where policy-level interventions are more effective at a population level, and more likely to reduce inequalities between rich and poor, than individual, agentic interventions. This means that individual education and promoting exercise may not be as effective as national policy interventions around food.

The answer to these issues may be in doing more to reduce information asymmetries by educating the public about what is in processed food, starting with schools. At the same time understanding that industries are not benevolent; they have an agent relationship in deciding what is in the foods that arrive at our tables, and the main objectives for their shareholders are that food is cheap, palatable, and with a long shelf life. Healthy comes lower on the list of priorities. Government action is needed to set standards for foods or make unhealthy foods more expensive and harder to buy on impulse, and restrict marketing, as previously done with other harmful commodities such as tobacco.

In conclusion, there are hidden agent relationships and information asymmetries around public health policies, for instance around healthy food and drinks. Public health can potentially learn from economic instruments that have been used in other industries to mitigate information asymmetries and agent relationships. If Government and the food industry had shared incentives to create a healthier population then good things might happen. I would be curious to know what others think about this!

Thesis Thursday: Ayesha Ali

On the third Thursday of every month, we speak to a recent graduate about their thesis and their studies. This month’s guest is Dr Ayesha Ali who graduated with a PhD from Lancaster University. If you would like to suggest a candidate for an upcoming Thesis Thursday, get in touch.

Title
Essays on health economics: trans fat policies, commuting, physical activity, and body mass index in the US
Supervisors
Colin Green, Bruce Hollingsworth
Repository link
http://www.research.lancs.ac.uk/portal/en/publications/-(182eadeb-a873-4d45-93bc-a987899c6587).html

What drew you to this particular topic and made you want to dedicate your PhD to it?

I’ve always been very fascinated about how people make decisions when it comes to health-related behaviors. My Mom was a doctor, so health has always been a main driver in what our family ate and what sort of values my parents emphasized. Growing up, I think we were always kind of “the weird family” in the neighborhood and in our extended family, because we often put health before cultural norms (i.e. changing traditional recipes to be healthier, avoiding all of those colorful and fun children’s cereals and candies, etc.), so I’ve been very aware and very curious about what drives health-related choices for different people. I’ve also lived in a number of very different communities, where norms about behaviors related to health varied significantly from place to place, and that variation has always been something that I’ve sort of observed and wondered about as well. So, I think these observations are what drew me to economics, as a way of understanding choices. My thesis work was somewhat of an attempt to crack the surface.

I don’t think I got the chance in my thesis to dig as deeply into the issue where health behaviors and culture meet as I had wanted, but I was lucky to get to use some of the types of data and some of the econometric tools that will come in handy as I continue to explore this area.

Your study focussed on US data, but you studied at a UK university. Was this a help or a hindrance?

I think it was definitely a challenge to work with non-UK data while studying at a UK University; for example, I didn’t find certain types of support (in terms of local workshops or having other colleagues using the same data) or familiarity that was often easily available to someone using UK data. However, my supervisors were very supportive of me and there were students in my cohort using other non-UK data so I was not alone in that regard.

One challenge that I had was that I couldn’t just ask someone who uses the data, but instead had to spend a bit of time trying to understand how other researchers in the literature used the data and then try to figure out whether or not their assumptions and ways of using the data were applicable to my work. I spent a lot of time reading data documentation files — both of my datasets (NHANES and ATUS) have really good online resources that I’m now very familiar with! I think that a lot of this being “on my own” with the data helped me to develop a feeling of confidence that I may not have had otherwise. I’m somewhat prone to second-guessing myself, so being able to learn to have confidence in my work was really valuable.

So, although challenging, overall I would say it was definitely more of a help than a hindrance.

Methodologically, what was the most challenging aspect of the research?

In my third chapter I use time use data, a two-part model, and a recursive bivariate probit model to estimate physical activity participation and duration decisions given an individual’s commuting time, with an instrument for commuting. There are some conflicting ideas on how best to use time-use data in the literature (see: Franzis and Stewart, 2010; Gershuny, 2012; Stewart, 2013) and few examples of instruments for commuting (see: Baum-Snow, 2007; Gimenez-Nadal and Molina, 2011).

I received a lot of different feedback on the best estimation approach to use. I wanted to estimate participation and intensity elasticities for individuals who do physical activity on a given day. There are a number of ways to deal with these two questions separately or simultaneously and also to deal with the large number of zeros in the data (i.e. individuals who did not participate in physical activity). At one point, I remember that I thought I had everything figured out with this chapter; and then following a conference presentation of this work, one commenter was dead set that I should be using a switching model. I hadn’t considered that approach and wasn’t familiar with it at all, so I had to go look it up, figure out what it was and whether or not it worked with what I was doing. So, just figuring out the best way to deal with my data and with the questions I was asking in this third chapter were probably the most challenging part of the thesis for me.

If you could have a decision maker implement one policy change supported by your work, what would it be?

If I could ideally have policy makers do one thing that is supported by my work, I think it would actually be a rather general thing, not related to one specific policy, but sort of related to the entire approach of policy-making. I would want policy makers to consider the groups they are targeting with more care. For example, my third chapter looks at time use among obese individuals and healthier-weight individuals and finds that many decisions, such as the decision of where to live and work, are often driven by different factors in these different groups. In general, my work suggests that different groups may be driven by different motivating factors and if we don’t understand what these are, policies might not successfully reach those who could most benefit. That being said, this probably isn’t as easy as it sounds, as there are a lot of political influences on how policy decisions are made.

If you had to do it all again (perish the thought), is there anything you would have done differently?

I think overall, I’m really happy with my experience; I had some good resources and Lancaster was a great environment for me. My PhD cohort was close-knit and faculty in my department were very approachable and supportive. If anyone is interested, I also found McCloskey’s Economical Writing and Thomson’s Guide for the Young Economist to be really helpful at various stages of the PhD.

If I could have changed one thing though, it was how I dealt with insecurity. Even in such a supportive environment, the competitive nature of academia can contribute to feelings of insecurity; I worked hard to recognize my own insecurities and fight through them, but I didn’t always succeed. So, if I could do something differently, I would like to have been less afraid to own up to not knowing something and to just keep asking questions until I understood.

I really enjoyed having the chance to talk with you about my experiences and motivation. And I hope that if anyone can find my experiences useful to them at their stage of the process, they do. Thanks again for inviting me.

Sam Watson’s journal round-up for 9th January 2017

Every Monday our authors provide a round-up of some of the most recently published peer reviewed articles from the field. We don’t cover everything, or even what’s most important – just a few papers that have interested the author. Visit our Resources page for links to more journals or follow the HealthEconBot. If you’d like to write one of our weekly journal round-ups, get in touch.

Non-separable time preferences, novelty consumption and body weight: Theory and evidence from the East German transition to capitalism. Journal of Health Economics [PubMed] [RePEc] Published January 2017

Obesity is an ever growing (excuse the pun) problem associated with numerous health risks including diabetes and hypertension. It was recently reported that eight in ten middle-aged Britons are overweight or exercise too little. A strong correlation between economic development and obesity rates has been widely observed both over time within the same countries and between countries across the world. One potential explanation for this correlation is innovation of novel food products that are often energy dense and of little nutritional benefit. However, exploring this hypothesis is difficult as over the long time horizons associated with changing consumer habits and economic development, a multitude of confounding factors also change. This paper attempts to delve into this question making use of the natural experiment of German reunification in 1989. After the fall of the Berlin Wall a wave of products previously available in West Germany became available to East Germans, almost overnight. The paper provides a nice in depth theoretical model, which is then linked to data and an empirical analysis to provide a comprehensive study of the effect of novel food products in both the short and medium terms. At first glance the effect of reunification on diet habits and weight gain appear fairly substantial both in absolute and relative terms, and these results appear robust and well-founded, theoretically speaking. A question that remains in my mind are whether preferences in this case are endogenous or state dependent, a question that has important implications for policy. Similarly, did reunification reveal East German preferences for fast food and the like, or were those preferences changed as a result of the significant cultural shift? Sadly, this last question is unanswerable, but affects whether we can interpret these results as causal – a thought I shall expand upon in an upcoming blog post.

Ontology, methodological individualism, and the foundations of the social sciences. Journal of Economic Literature [RePEc] Published December 2016

It is not often that we feature philosophically themed papers. But, I am a keen proponent of keeping abreast of advances in our understanding of what exactly it is we are doing day to day. Are we actually producing knowledge of the real world? This review essay discusses the book The Ant Trap by Brian Epstein. Epstein argues that social scientists must get the social ontology right in order to generate knowledge of the social world. A view I think it would be hard to disagree with. But, he argues, economists have not got the social ontology right. In particular, economists are of the belief that social facts are built out of individual people, much like an ant colony is built of ants (hence the title), when in fact a less anthropocentric view should be adopted. In this essay, Robert Sugden argues that Epstein’s arguments against ontological individualism – that social facts are reducible to the actions of individuals – are unconvincing, particularly given Epstein’s apparent lack of insight into what social scientists actually do. Epstein also developed an ontological model for social facts on the basis of work by John Searle, a model which Sugden finds to be overly ambitious and ultimately unsuccessful. There is not enough space here to flesh out any of the arguments, needless to say it is an interesting debate, and one which may or may not make a difference to the methods we use, depending on who you agree with.

Heterogeneity in smokers’ responses to tobacco control policies. Health Economics [PubMedPublished 4th January 2016

In an ideal world, public health policy with regards to drugs and alcohol would be designed to minimise harm. However, it is often the case that policy is concerned with reducing the prevalence of use, rather than harm. Prevalence reducing policies, such as a Pigouvian tax, reduce overall use but only among those with the most elastic demand, who are also likely to be those whose use leads to the least harm. In this light, this study assesses the heterogeneity of tobacco users’ responses to tobacco control policies. Using quantile regression techniques, Erik Nesson finds that the effects of tobacco taxes are most pronounced in those who consume lower numbers of cigarettes, as we might expect. This is certainly not the first study to look at this (e.g. here and here), but reproduction of research findings is an essential part of the scientific process, and this study certainly provides further robust evidence to show that taxes alone may not be the optimum harm reduction strategy.

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