Why Don’t People and Institutions Do What They Know They Should

David Cutler of Harvard has a nice thought provoking paper on the same.

He says people know many things which work and are useful but still do not implement them. Same stands for institutions and firms:

He begins quoting an example from a hospital which implemented a system which lowered number of deaths. Knowing this evidence, hospitals in US still did not implement the system. It was not expensive and would have saved many lives.

Apart from this many other examples:

  • American automobile firms never found a way to match the quality practices of Japanese automakers, despite a willingness of Japanese firms to share best practices;
  •  Only 69 percent of Americans always wear a seatbelt when they drive, even though 95 percent of Americans believe that a seat belt would help them in an accident;
  • Three-quarters of Americans prescribed a drug for a chronic condition have stopped taking the medication by one year later. Even when the drug is free, long-term adherence is low.
He says social sciences has tried to look at answers but are not really satisfying. Answers have come from beh eco, sociology which apply in some cases but fails in others:

Behavioral economists have examined individual propensities to engage in different actions. Why do people not save for retirement or give up smoking? A major theme of that research is that people are prone to procrastination. People do not take their medications because the cost of not taking today’s pill is trivial, if one will start taking pills tomorrow. This theory is relevant in some settings; there are demonstrated successes getting people to save more by reducing the ability to procrastinate. But the theory is not right in all settings. When queried, hospital managers rarely announce that they will start infection control operations next month. Rather, they assert that they are already doing the best they can – the Alleghany General experience notwithstanding.

In sociology, the peer effects literature confronts similar questions. People wear their seatbelt if others around them do as well. Again, this theory has strengths. Smoking is clearly a social action, and so too are obesity and mood. But the theory fails in other settings. Alleghany General Hospital did not get better because like-minded people came to the conclusion that it had to change or because of peer interactions. It improved because the Chief of Medicine imposed changes. Further, the change had to be continually monitored and stressed, or gains made one month were at risk of being undone.

In organizational behavior, there is a large focus on principal-agent problems within the firm. The firm’s manager wants to do something new, but does not want to create new problems while addressing existing ones. There are a variety of strategies that firms might use to surmount this issue. Organizational behavior specialists study the combination of hiring, compensation, and promotion processes that lead to better and worse outcomes. The question then becomes why some firms successfully tackle the problem and others do not. Aside from a specific person, what is different about Alleghany General relative to the thousands of other US hospitals that still have high rates of hospital-acquired infections?

He says more scientific inquiry is needed. He says three areas could be looked into:

First, we need to better understand how people view their social environment. Some people are motivated by the desire to fit in with others – they ‘go with the flow’ as much as possible. Others have a strong moral compass to always do what they perceive as right.

Second, we need to understand the processes of group decision-making. When people in an organization disagree about the best strategy, how are decisions made? Initial decisions are often made in a top-down setting – witness Alleghany General – but they are sustained by a culture of individual belonging and empowerment.

Third, we need to conduct experiments to understand different theories of behavior and test different interventions. The most influential studies in economics have come from interventions – changes in the information people possess, the incentives they face, or the environment they operate in.

Interesting thoughts…

We keep trying to look at new ways to resolve problems whereas solutions already exist. May be if we could just look at existing solutions and work on their implementation, lives would be much better…

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