Published this month, the feature from USDA's Economic Research Service (ERS) suggests behavioral economics - or consumer psychology - could aid in the understanding and modifying of consumption habits, where standard economics has failed. It comes in response to the growing realization that the divide between consumers' awareness and implementation of dietary guidance shows no sign of diminishing: almost 90 percent of consumers surveyed in 2005 knew that diet and exercise influence health, yet most Americans are still choosing diets out of sync with dietary guidance. According to the ERS report, economists usually address the issue by examining the usual economic suspects: prices, income, dietary information and time preferences. But this may not necessarily provide policymakers with any attractive options to reverse the trends, wrote the agency. In contrast, behavioral and psychological studies indicate that people regularly behave in ways that contradict some basic economic assumptions, seen, for example, in responses to changes in income, or to information processing. "Incorporating such idiosyncrasies into economic analysis of consumer behavior can expand our understanding of what motivates food choices and health outcomes. This can help us think of new ways to encourage all people to choose more healthful diets," wrote the report. Some of the methods based on consumer psychology identified by ERS as ways to improve dietary habits include the use of prepaid cards in grocery stores and schools. According to the agency, a prepaid 'healthy card' might, for example, preclude purchases of certain snacks, desserts or sodas. This method could prove appealing to consumers, said ERS, as studies have shown that people prefer to pay for things at a flat rate rather than on a per item basis. It also prevents impulse purchases of products that consumers know are unhealthy but that tempt them anyway. In schools, the system could be also be used to encourage consumption of healthy foods, for example by allowing parents and students to specify what portion of a student's total bill should be spent on fruits and vegetables. In a similar vein, another method identified by ERS is the pre-ordering of food, through online grocery shopping. Observational studies of time-inconsistent consumer preferences have revealed that some form of "commitment mechanism" can help improve long-term well-being. Consequently, pre-ordering food would allow consumers to commit to their purchasing decisions before being tempted with less healthful food options, said ERS. Another commitment mechanism would be to allow grocery shoppers to specify that certain less healthful foods be ineligible for purchase with their own prepaid cards. Portion sizes or the packaging format of products also plays on people's psychology, providing them with a pre-conceived indication of 'appropriate' consumption volumes. Introducing intermediate packaging within larger packaging, for example, could be one way to indicate an appropriate 'stopping point' for consumers. This is already seen on the market in certain products, such as individually wrapped sets of cookies within a bag. Similarly, a greater variety of the same type of products has been shown to result in higher consumption levels. This could be used to promote consumption of healthy products, such as a wider variety of vegetables in a single salad. Another idiosyncrasy of consumer choice frequently observed in experimental studies is that individuals do not value gains in the same way as they value losses. This means that people are ultimately more likely to go for a default option. In terms of food choices, consumers are more likely to choose a side of French fries over salad when the former is the status quo. "Making the default option more healthful could help us make healthier choices," claims the report. The methods presented in the report can easily be adapted to a number of USDA nutrition programs, such as the food stamp or school meal programs, said ERS. However, it noted that "this exploration of new ideas is by no means a recommendation or endorsement of them". "A thorough analysis of costs, benefits, and potential impacts would be needed before any strategy could be considered as a policy option," it said. To view the report, click here.
