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Paying people to be healthy

02 MAY 2008 – Can economic incentives improve health? The World Bank is funding an experiment in Tanzania to pay young people to avoid STDs: as long as they show up for tests with negative results they get cash payments. This builds on past experiments with conditional cash payments in poorer countries that have shown promising results in improving education, child nutrition and health. But paying people for safe sex moves into more controversial matters - many people hold strong moral intuitions that sex and health are values that mustn't be tainted by money.

In an editorial, the Financial Times wonders "Are the funders saying young Tanzanians cannot be trusted to do what is good for them without a bribe?" The answer from decision-making psychology is clear: no, people often fail to correctly recognize what will make them happy, and even when they do they often fail to act accordingly. We have many cognitive biases that make us both short-sighted and irrational. But in the case of paying for health, other biases (such as the tendency to go for monetary rewards regardless of the happiness outcome) may actually be quite helpful.

If there is anything economics has shown to be reliably true it is that people respond to incentives. Positive incentives are not coercive: they do not reduce the range of possible action and it is possible to choose to forego them. Creating positive incentives for good behaviour is likely to work much better than coercion or negative incentives, which seems to be the favoured approach across EU. There might be opportunity costs that make people feel bad about having to choose, but at least in this case the benefits of the program appear quite large compared to the possible regrets. One could argue that it commodifies something that should be left non-economic, but most anti-STD programs will either medicalize or moralize sexual behaviour. The biggest risk is that the program is implemented in a way that does not fit the local culture or (more likely) runs into western ideological opposition. After all, ideological and moral purity is often seen as more important than actual health outcomes - especially in other people.

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