Thursday, September 19, 2013

A Surprisingly Cost Saving Program--Based on Incentives

Here is an interesting story from NPR about what happens when a simple change in incentives is brought to a population.  The gist of the story is this.

In Cardiff, Wales, a lot of people were reporting to the emergency department with injuries and not reporting to the police.  The hospital did gather information about the location of the injuries and what caused them.  The leaders and people in the local area noticed how much of a toll the violence and injuries were taking on the population.  The hospital changed one thing to help police.

It did not report names.  It only reported locations of incidents and types of injuries.  The police took it from there and focused their prevention and enforcement efforts in areas that were hot spots.

The effect--spending of less than $400,000 saved over $11 million in medical and legal expenses.

That is pretty amazing.  There are a few things to think about.

First, what actually happens to the resources that are freed up?  In other words, what else are they used for?  Hopefully something more productive, but they don't really say in the story.

Second, why does such a simple incentive work?  Hospitals could not report names.  And it is somewhat amazing to think that individuals are actually sufficiently rational to choose whether to engage in violence in bars and pubs as a function of the likelihood of being caught.

Of course, this is not the first study to show that people respond to incentives--even about crime prevention.

Perhaps the idea of using simple changes in incentives with for public health measures--where the possibility of enforcement is understood, not everyone gets caught, but there are significant penalties for those who do--could encourage better public health oriented behaviors.  

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