Improving people's decision-making skills in finance and health care

an interview with 3 winners of the SABE | TFI award by Jeremy Gaunt
Posted on February 07, 2020

What do the following behaviours have in common? Saving and lending among the poorest of the poor, our inability to judge the long-term price of a purchase, and the lack of coordination found among medical staff.

The answer is that they are the chosen subjects of the three doctoral students who have won 2019 Impact Essay awards from ING's Think Forward Initiative (TFI) and SABE, the Society for the Advancement of Behavioral Economics.

Meet Rolando Gonzales Martinez from Bolivia, Feidhlim McGowan from Ireland, and Domenica Romeo from Italy -- three winners whose disparate behavioural studies are all geared to improving the way we live.

“The thing that stood about their research was practicability. They were practical, actionable, and could make a difference in the way individuals and organisations make decisions.”

ING economist Ian Bright, one of the jurors

First prize went to Gonzales Martinez who spends half the year working at a bank in La Paz and the other half at Norway's University of Agder working on his PhD in International Business.

His subject -- nano-financing, or mini savings-and-loan systems, in communities at the bottom of the wealth pyramid -- had already won him a scholarship at Agder. He now hopes this new award will lead to wider understanding of bottom-up development among the poorest, many of whom do not qualify for more-institutional micro-financing.

"Nano-finance is created from the people. It is not imposed," he said, reminiscing happily about a village he visited in Uganda where pooling tiny amounts of money had bought forth a small retail juice business.

The goal, Gonzales Martinez, said was to get larger institutions and NGOs to consider and adapt their systems to encourage nano-financing.

"The award is going to be very important in dissemination," he said. "TFI is helping to make it noticeable that the research is relevant. Not only mine, but all the ones that have been awarded."

Indeed, McGowan and Romeo, who were joint second winners, also agree that the awards give them the opportunity to promote their work.

In the case of McGowan, whose doctorate in behavioural economics at Trinity College Dublin gets funding from the Irish Research Council, one goal is to provide policy makers with evidence about people's ability to estimate total costs for products that are paid for over a period of time.

McGowan notes that unlike judging distance -- a skill that has developed over millions of years since our ancestors were swinging from tree to tree -- making financial decisions is a new problem, so intuition is not a reliable guide to action. There is nothing innate yet about realising that €1 a day is actually a €365 a year expenditure, or about calculating how much extra a three-year car deal is going to cost you versus a one-off payment.

"If people have a tendency to underestimate costs then instituting a policy where the total cost has to be visible and more salient than the monthly cost ... might help consumers make decisions," he said.

McGowan said the TFI/SABE essay allowed him to express his work and its long-term purpose in everyday terms at an early stage of the research .

"If researchers don't communicate effectively, then a lot can be lost between the lab and the public domain," he said.

Romeo's research into coordination of healthcare in Italy's Reggio Calabria province is on the face of it more localised, but she believes it could have widespread use because the problems it highlights are found across the world.

The issue at hand is that medical professionals do not share what they have found out about patients' health or what they do to deal with it. For example, only 35% of physicians in Romeo's study chose the same treatment when dealing with the exact same condition.

She hopes that her PhD in Public Economics research at the Mediterranean University of Reggio Calabria -- and its dissemination via the TFI/SABE award -- will lead to more teamwork and better coordination of healthcare.

"When health professionals cooperate, they can reduce the average length of stay in hospital and (patient) pain," she said, adding that there is also a cost dimension to not working together.

As an aside, Romeo said her research had also shown that women in her study were less likely to share the result of diagnostic test and surgery than men. Grist for further study, perhaps.

Curious to find out more about the research of Rolando Gonzales Martinez, Feidhlim McGowan, and Domenica Romeo?

Download the essays below!