Why Thaler's Nobel Prize in Economics Matters in Diabetes Care

Getting people to change their behavior is hard. For companies working to scale behavioral change to millions, finding algorithms to get millions to change their behavior and improve their health is the holy grail. Some are startups and some are established giants in tech or pharma; these days, many are working together to prevent diabetes or obesity, or manage the disease once it is diagnosed.

Many have drawn inspiration from today’s winner of the Nobel Memorial Prize in Economic Sciences, University of Chicago’s Richard H. Thaler, PhD, a pioneer in the field of behavioral economics. His 2008 book with Harvard legal scholar Cass Sunstein, FBA, Nudge: Improving Decisions About Health, Wealth, and Happiness, shows how social policies can prompt people to make small changes with profound effects, but not take away people’s choices.

The concept of nudges has been applied to a host of current behavioral digital health technologies, both on the market and under development, that seek to encourage people to make healthy food choices, exercise more, and get more productive sleep. In the March issue of Evidence-Based Diabetes Management™, Virta Health’s Mike Payne, MBA, MSci, used Thaler and Sunstein’s idea as a jumping off point to discuss the best way to pay for nudges in the healthcare system.

“Health and medical services that provide continuous, on-demand care, or ‘nudges’ to behaviors associated with chronic disease, are proliferating, often facilitated by information technology and accompanied by published clinical results,” Payne wrote. He concluded, as others have, that the best way to pay for this type of healthcare intervention is to reward providers for results, since funding each nudge would be impractical. Such models will require improved technology, agreed-upon clinical standards for payment, and above all, willingness to try something new.

Increasingly, healthcare experts recognize that innovative ideas for changing behavior will be key to chipping away at the $245 billion annual cost of diabetes in the United States. An article calling for more work on how behavioral science could inform and improve the Diabetes Prevention Program appeared in Diabetes Care the same year as the original National Institutes of Health study. Behavioral science is at the heart of several leading digital health companies involved in diabetes prevention, including Omada Health and Noom Inc.

Thaler’s work is key because he has shown not only that people behave irrationally—they eat unhealthy food even though they are already overweight—but that their unhealthy, irrational choices are predictable.

The book Nudge drew on the work of an previous winner of the Nobel Prize in Economics, Daniel Kahneman, a Princeton psychologist whose work centers on the idea that human reason is prone to systematic errors, and to understand these errors people must be aware of their biases and address them.

In sum, both have the same message: people are human, and they don’t always do what makes sense or what’s good for them.

"I think the most important impact [of my research] is the recognition that economic agents are human and economic models have to incorporate that," Thaler said during an early morning news conference. He said his current work involves figuring out how people make choices among health plans.