Getting Hexed and Irrationality

I was recently hexed by a Cape Town area beggar. The man wanted a 5 Rand donation towards his fishing business. My colleague and I politely refused, and he proceeded to swear at us and proclaim that all sorts of maladies would befall us. More specifically, the said beggar predicted/wished that we would get into a car accident. Nice guy.

This was the first time I’ve ever been hexed by anyone. I have to say the episode freaked me out to the point where I did not want to get in a car for the rest of my South Africa visit. This was completely ridiculous given that:

-I knew even then that there is no way the beggar’s aspersions had any bite. After all, if this guy really had the power to hex people, he probably wouldn’t need to be asking random folks for money.
-Shortly after the episode, I was completely fine with picnicking near the edge of a cliff. This was probably much more dangerous than any car ride I have taken here so far, both because of the nice tumble I could have taken as well as the presence of aggressive baboons.

Some very interesting research in behavioral economics – a field that combines insights from economics and psychology - shows that lots of people are irrational this way. We often tend to ascribe greater risks to events that are not actually all, typically because of their unusual salience or shock value. For example, consider this interesting post-9/11 story: scared off by the horrendous terrorist attack, consumers opted to substitute driving where they normally would have flown. Flying is statistically much safer than driving, but because of the unique nature of the terrorist events (lots of people dying, etc), people perceived otherwise. As a result, there were more transport related deaths in the months following 9/11 than there would have otherwise been had people stuck to aircraft instead of cars. In my case, the hex was so weird, strange, and neurologically salient, that I gave it more credence than it rationally deserved.

Another behavioral economics nugget: a few weeks earlier, I was praised by a beggar in India for my generosity (I accidentally gave her Rs 100). She told me I’d live for 100 years, happy, in good health, and with lots of children. I thought she was nice, but I didn’t go home believing that my life was made. Yet, the Cape Town hex still bothers me as I write this. Obviously, I ascribed more disutility to potential losses than utility to potential gains. This phenomenon – the centerpiece of prospect theory - is another well known way in which human behavior deviates from the expectations of neoclassical economics.

Does behavioral economics have anything to say about health care? Absolutely. This should come as no surprise given how different health-related decisions can be than say, those made when purchasing some consumer good. Check out this paper by Richard Frank for more information. For some other extremely interesting work on Medicare, consumer choice and behavioral economics, have a look at my colleague Brian Elbel’s page (it’s a Yale link, but Brian will be joining NYU in the fall – be sure to keep track of his progress there!). Finally, if you want to learn more about behavioral econ, be sure to visit Santosh Anagol’s blog, the Brown Man’s Burden (see under "links").