MISTAH HOMO ECONOMICUS, HE DEAD:

Small Changes, Big Results: Behavioral Economics at Work in Poor Countries (Rachel Glennerster and Michael Kremer, March/April 2011, Boston Review)

As with education, poor countries have made significant gains in health. Life expectancy in virtually every country is higher now than it was in the United States in 1900, even though per capita income in many is a fraction of U.S. per capita income in that year. The invention of health technologies such as vaccines is likely part of the reason. Indeed, randomized trials in medicine have found many health interventions that can improve health at extremely low cost.

But while millions are benefiting from these technologies, their adoption is far from universal. Diarrhea kills 1.8 million children each year. Point-of-use chlorination of drinking water results in a 29 percent reduction in reported cases of diarrhea, yet less than 10 percent of households in sub-Saharan Africa use home chlorination. At least 27 million children and 40 million pregnant women worldwide do not receive basic immunizations. Mosquito nets reduce child mortality by up to 38 percent, but only 19 percent of children in areas where malaria is endemic in Africa sleep under a net. Treatment for parasitic worms, which infect 400 million school-aged children worldwide, cut school absenteeism in Kenya by a quarter, and, in the longer term, generate 20–29 percent higher earnings among those who leave subsistence agriculture for paid employment. But only 10 percent of those at risk of infection are treated.

Strikingly similar patterns of behavior seem to govern the hesitancy to adopt useful health interventions. Many consumers are influenced by small costs—both in cash and in convenience—in their decisions to invest in non-acute care.

Whether soap in India or chlorine for sanitizing drinking water in Kenya, demand for a range of non-acute treatments drops precipitously when a small price is charged. Given how cheap these products are to manufacture and how large the public health benefits of breaking the cycle of disease transmission are, why would anyone consider charging for them? One concern is that free mosquito nets will not be hung up, and free chlorine will never be added to drinking water. Some psychologists and social entrepreneurs have suggested, “If you don’t pay for it, you won’t value it.”

But there is little evidence to support this theory. Studies of demand for non-acute care as a function of price show nothing to suggest that the act of paying for something makes a person more likely to use it. Nor is it the case that those who most need a product are more likely to pay for it: those who purchase mosquito nets are no more likely to be sick at the time of purchase; families with small children, who are most likely to die from diarrhea, are no more likely to buy chlorine. But are those more likely to hang mosquito nets or remember to add chlorine to their water also the ones more likely to pay for it, thus helping avoid waste? There is some evidence in the case of chlorine but none in the case of mosquito nets.

Why are people so sensitive to the prices of non-acute health products? One possibility is that much of the health benefit flows to neighbors as transmission of communicable disease is reduced. As a result, individuals invest less than is desirable for the community as a whole. But the private benefits of chlorination or de-worming pills, for example, seem to exceed the modest costs.

One factor surely at work is lack of ready cash. In a study in Kenya, demand for mosquito nets fell less steeply with price when households were given more time to raise the funds to purchase them.

But lack of funds does not explain why adoption also drops off sharply with small changes in convenience. Researchers, again in Kenya, found that people were, on average, only willing to walk 3.5 minutes longer (round trip) to collect water from a protected spring. Similar observations have been made with regard to iron-fortified flour and HIV test results.

In some cases potential users may lack experience with a product. When offered mosquito nets at a subsidized price, Kenyans who had previously been offered free nets—and their neighbors—were more likely to pay than were those who had previously been offered them at a less-subsidized rate. Most likely, those who took free mosquito nets had a positive experience with them and were therefore more willing to pay for an additional net. This is contrary to the conventional wisdom among development workers that free distribution undermines people’s willingness to pay later.

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