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Behavioral Economics and Health Promotion Arnošt Klesla Faculty of Economics, University of Economics, Prague Abstract: The health conditions of 60+ age group are fundamental for healthy aging policies’ successful implementation, whilst the most important single factor lies in healthy lifestyle of the aforementioned group. Health promotion is being defined as the rational application of health lifestyle principles by any individual, in order to prevent illness. Health itself is a part of human capital and provides time for its productive utilization. Everyone can support its own health in two ways, according to Grossman’s health-demand theory. Actively supporting, investing and accepting healthy lifestyle or consuming the health care in passivity. Spread of the non-communicable diseases (NCD) demands acceptation of the healthy lifestyle. Keeping of its rules prevents behavior with bounded rationality. Its analysis as well as the analysis of the irrational choice provides behavioral economics. An effect of self – confidence, framing and lack of self-control introduces efficient tools for state programs and other interventions. They also represents shift from bio-medical to socio- economic concept of health promotion. Key words: health promotion, lifestyle, behavioral economics, non- communicable diseases NCD, health promotion programs JEL classification: I 15, I 18, I 19 1 Europe and other continents in trouble U.S. and other Western economies face major concerns in addition to global financial crisis. Population in Europe and USA is aging rapidly. Liquidity problems are starting to occur among various pension funds in these countries. The ratio of working pensioners is decreasing. The share of population older than 64 year in 15 - 64 age groups will probably grow from current 20 to 30 percent in 2020 and above 35 percent in 2030 in the Czech Republic. There is an even worse current state in the Western European countries and Japan (MPSV, 2011). Figure 1 Population diversification by age in Japan, Germany and Czech Republic. Source: MPSV ČR, 2011 Government usually reacts by the extension of retirement age and extension of the retirement age limit. However, social and health care systems' face a new challenges. Sustainability of this system depends on the problem of Healthy Ageing, except of other significant problems. Health conditions in the age category 60 + are fundamental for success of this policy. Overall health status of the 60 + generation in the Czech Republic is not satisfactory in this regard. Only 132 000 (2.7%) pensioners (60 +) is still active as a full or half time workers. Active work and health in 60+ age Total amount of time available for productive activities is determined by health conditions in the productive age (19 – 64). Health itself is being defined as a part of human capital. (Stock of health capital) (Grossman, 1972). Poor health conditions constitute handicap for older applicants on the Czech labor market. Good health in 60+ results from the successful management of health factors (determinants) from childhood. The lifestyle is considered to be the decisive factor in this regard. The standard health determination model set the 50 – 60 2 validity to the factor of lifestyle. The health care influences only 15 – 20 percent of individual’s health with the similar influence as environment and genetically preconditions. The lifestyle is being decisive for a good health.. It emphasizes giving up smoking and other drugs, reduction of alcohol consumption, health nourishment and regular physical exercise. Lifestyle of the majority of European population does not promote health (sedentary lifestyle, smoking, alcohol and drugs addictions etc.) That leads to rapidly growing disease incidence 1 in correlation with age. The chronicle diseases as the outcome of unhealthy lifestyle in young and middle age represents the majority of it. Figure 2 Chronicle diseases incidence in age groups in the CR (2011) Podíl osob s dlouhotrvajícími zdravotními problémy podle věku a pohlaví, 2011, v % Zdroj: ČSÚ - VŠPS Muži 42,7 Ženy 40,1 42,7 32,8 35,8 23,4 25,8 16,2 18,7 11,5 5,7 4,8 8,1 6,6 11,5 12,4 35-39 let 40-44 let 8,9 5,2 6,1 6,5 15-19 let 20-24 let 25-29 let 30-34 let 45-49 let 50-54 let 55-59 let 60-64 let Zdroj: ČSÚ - VŠPS Source: ČSÚ, 2012 The main instrument for change of lifestyle is the concept of Health Promotion. Health promotion is the process of enabling people to increase control over, and to improve, their health (Ottawa Charter 1986). The main objective of the concept of health promotion is to improve the health by promoting desirable behavior, the healthy lifestyle. The bio-medical approach followed by the psychosocial approach dominated the programs and interventions practice in the recent years. The socio-economic concept is being pushed ahead during the second decade of the 21st century. People tend to submit to economic conditions and consumer culture. The principal-agent biases as well as emergence of new medicines and treatments cause the false idea of individual health as the sole responsibility of medical practitioners (Stieglitz, 1987). Modern medicine leads to health lifestyle underestimation, supported by various systems of health insurance. People therefore tend to irresponsible behavior towards their own health. This kind of behavior is often described as moral hazard in areas of banking of insurance. Economic interpretation of human behavior in terms of health promotion 3 The two basic approaches to individual health may be described as Investors and Consumers, according to the concept of health capital and the demand for health (Grossman, 1972). The Investor accepted healthy lifestyle. He prefers health and ability to work throughout the life. He is efficient, does not spend time by diseases because he lives healthy and fully utilizes prevention. He is active and healthy to the old age. The Consumer focuses only on treatment, does not follow a healthy lifestyle and is not efficient. He prefers the consumption of other goods. Spend time by treatment and suffers by diseases in old age. Therefore soon loses the ability to work. Figure 3 Variants demand for health in order of individual preferences A – Investor B – Consumer r+ r+ Hi Hi Source: Grossman, 19721 The y axe represents capital cost values r, raised by age-increased depreciation of health. The x axe represents health stocks Hi, constantly renewed by the Investor during its life or in the higher age by the Consument. Different health demand curves show different economic approach of both behavior models to individual behavior. Investor pays for the consumption of healthy lifestyle for its whole life and prevents its natural decline. On the other hand, the Consumer pays for other goods until the higher age. Not until he loses significant amount of health, he invests to it.. Different shape of curves and differences in demand functions are caused by differences in healthy lifestyle and keeping of its rule in accordance with health promotion concept. Real development of illnesses and working inability in the Czech Republic. 1 The y-axis shows the value of the cost of capital r, plus the increasing age wear δi health. The x-axis shows the supply of health Hi, the investor recovers continuously throughout life, and consumers to the elderly. 4 The statistical data proves the aforementioned hypothesis. Czech employees’ health statistics Incapacity for Work (IfW) by age. Figure 4 Communicable disease 30.0 24.2 25.0 20.0 10.6 10.0 5.0 0.0 dýchací poranění trávicí močové 14.8 15.0 8.9 8.9 7.9 7.4 7.6 7.6 3.1 4.9 3.9 3.7 3.6 3.8 3.5 3.4 3.4 2.2 1.7 1.5 1.3 1.2 1.3 1.3 1.2 1.1 -24 -29 -34 -39 -44 -49 -54 -59 -64 Source: ÚZIS Figure 5 Non-communicable diseases (NCD). 10.0 9.2 8.2 8.0 6.8 6.0 5.8 4.2 4.0 2.0 0.0 4.6 5.2 oběhové 5.9 2.5 0.4 0.4 0.5 0.7 0.9 1.3 0.2 0.2 0.2 0.3 0.5 0.8 pohybové 7.6 3.1 novotvary 1.3 diabetes, š.žl 1.8 0.9 1.0 -24 -29 -34 -39 -44 -49 -54 -59 -64 Source: ÚZIS The worst among NCD are musculoskeletal diseases MSD (measured by IfW) Figure 6 Development MSD in years 2007 - 2010 Source: ÚZIS 5 Tendencies and consequences Communicable diseases (respiratory) do not affect workers' health in older age. People have learned to use prevention and behave like investors. Incidence of Non-communicable diseases (musk. cardiac, cancer, diabetes) increases with age. NCDs disqualify older employees on the labor market. Despite that, people invest just a little in this area. There is only a few investors against NCD in the Czech Republic. The NCDs cannot be cured, consequences can only be alleviated. That represents a substantial factor unrecognized by the public, except of the fatal diseases such as cancer. Dramatically deterioration of the quality of life and raise of the living expenditures in the group of patients suffering by diabetes mellitus represents fundamental argument for keeping the healthy lifestyle. Why people do not behave rationally in all cases of the health promotion? People prefer health (Investor), but cannot preserve this preference in all situations (Consumer). Standard economics cannot explain this discrepancy. According to Becker et al (1988) for example smoking is rational choice because it offers best utility to the individual. This problem can be explained by behavioral economics analysis It is based on the combination of neoclassical economy and theory of preferences (Becker, 1993) with psychological approach to bounded rationality as represented by behavioral economy (Kahneman et al 1991). Bounded Rationality - cornerstone of behavioral economics Bounded rationality leads people to wrong decisions - the more mistakes you made, the more you got into the role of Consumer. The concept of Health Promotion does not offer comprehensive solution. It is currently based on medical approach to people and customs (bio-medical paradigm). Adult humans are neither children nor patients in the 21st century. We do not want to hear again and again that we shall not smoke, shall not eat junk food, and need to exercise regularly. Economic rules of people's behavior (irrationality) need to be understood to design efficient Health Promotion programs. In terms of behavioral economics, smoking is not a bad habit, but the consumption of specific good with specific utility of the individual. The solution cannot be found imposing of warning signs for instance on tobacco. The negative interventions show only a minimal efficiency. Real solution lies in employment of behavioral economic tools in the programs of health promotion and healthy lifestyle. For instance the so called loss aversion effect can be used to solve the problem of smoking. Refers to people's 6 tendency to strongly prefer avoiding losses to acquiring gains. Smoker has to accept better substitute such as an e-cigarette. Behavioral economics - examples of solutions Effect of self-confidence explains careless attitude of Czech population to their own health. Especially young people are confident of the strength of their health. Underestimate the risk factors, (smoking, alcohol, drugs) and do not pay attention to preventive medical examinations. Health is considered „a gift from God“and in the case of illness relies on health care. This effect explains the emergence of Consumers of health and is a major obstacle to the adoption of healthy lifestyle. Lack of responsibility for own health is explained by the Framing effect. Affects a significant part of the Czech population. Healthcare promotion is too complicated process for many people among Czech population. They prefer to pass the responsibility to the hands of doctors. This creates a comfortable feeling of reassured health and safety. Many cannot see a reason to promote their health in an active role as Investors. Lack of self-control effect is the dominant cause for explosive growth of obesity in Europe and the U.S. in recent years. Everyone wants to be slim, beautiful and healthy (and wealthy). But when we see a cake after lunch, we change our preferences and resolution to maintain body weight is lost. The cause is in the instability of preferences in time. Conclusion The authorities have to face NCD diseases in a more active way in the EU during the coming years. The concept of Health Promotion can operate more efficiently if it employs economic approaches, including behavioral economics. 7 References BECKER, Gary, S., Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education, Third Edition, The University of Chicago Press, 1993, 390 s., ISBN: 0-226-04120-4 BECKER Gary, S., Kevin MURPHY. A Theory of Rational Addiction, Journal of Political Economy 96, 1988, č.4, s.675-700 ISSN: 0022-3808. http://research.chicagobooth.edu/economy/research/articles/41.pdf ČSÚ, Zdravotní problémy populace v produktivním věku v ČR. Analýza ČSÚ [online]. 2012, s. 9 [cit. 2012- 08-02]. http://www.czso.cz/csu/csu.nsf/informace/czam050412analyza12.doc GROSSMAN, Michael. On the Concept of Health Capital and the Demand for Health. Journal of Political Economy. 1972, roč. 80, č. 2, s. 223-. ISSN 0022-3808. 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