Markets and Targets in the English National Health Service: Is There a Role for Behavioral Economics?

Over the past twenty years, the emphasis of reform attempts to improve efficiency within the English National Health Service (NHS) has oscillated between markets and targets. Both strategies are informed by standard economic theory but thus far have achieved varying degrees of success. Behavioral economics is currently in vogue and offers an alternative (or, in some cases, a complement) to standard economic theory on what motivates human behavior. There are many aspects to behavioral economics, but space constraints allow just three to be considered here: identity, loss aversion, and hyperbolic discounting. An attempt is made in this article to speculate on the extent to which these three concepts can explain the success or otherwise of the NHS market and target policies of the last two decades, and some suggestions are offered as to how policies might be usefully designed in the future. Arguably the key points are that people are more likely to be motivated if they identify with the ethos of the policy; the threat of losses will often provoke more of a response than the promise of gains; and the “immediate moment” matters enormously to individuals, so policies that require human action should be designed to make that moment as enjoyable (or as pain free) as possible.