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How the placebo effect goes beyond medicine — Pop Economics

How the placebo effect goes beyond medicine

by Pop on April 27, 2010

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Why expensive wine tastes better

I like wine, but I won’t pretend I’m anything of a connoisseur. I can barely tell the difference between different kinds of wine, let alone vintages and vineyards. There’s no way I could tell the difference between a $15 bottle and a $100 bottle.

But apparently, if I’m like most people, I enjoy expensive wine better. In 2007, Hilke Plassmann and a group of CalTech and Stanford economists ran an experiment. A group of expert wine tasters were told to try five different wines and rate their enjoyment. The catch was that the researchers actually only gave them three wines to taste. For one tasting, a duplicated wine would have a $10 price tag and for a second, it would have a $90 price tag.

First, it was notable that the experts couldn’t tell that they were being given the same wines twice. They always rated the $90 bottles superior to the $10 bottles, even though they were actually the same wine. But even more notable, when the researchers scanned the pleasure centers of the tasters’ brains, they found it became more stimulated when the tasters tried the $90 bottle. It turned out that the tasters got pleasure not just from the actual taste of the wine, but from the expectations that sipping from a $90 or $10 bottle gave them.

Or take another experiment, run by an economics professor from Cornell. In this one, they gave restaurant visitors a free bottle of wine and told them it was from North Dakota. Not only did the visitors drink less wine than they did when told it was from California, they ate less food too.

Expectations are as good as the medicine itself

In case you’re not familiar with the origins of the placebo effect, let me give a quick rundown for you. Doctors have observed the “placebo effect” since the 1700s, when they first started to notice that patients responded to the confident or pleasing demeanors of the doctors just as often as they responded to the treatments themselves. (Ironically, I bet the placebo effect was more effective than plenty of the “treatments” doctors used back then. Leeches anyone?)

In Latin, the word “placebo” translates to “I shall please.” Since the “placebo effect” can have decidedly un-pleasing consequences…does it ever help when the doctor tells you “this won’t hurt a bit” before a shot?…doctors started using the term “nocebo” to describe negative psychological consequences in the 1960s.

And since their discoveries, the placebo and nocebo effects have been studied to death. Brand name drugs work better than generics, yes. But did you know that a regular white pill works less than a colored pill? Or that a colored pill is less effective than a colored pill with a little letter stamped on it? Our subconscious has apparently not only decided that brand names are best—it’s actually ranked the effectiveness of a drug by how fancy it looks.

Or how about this one, which is surely a thorn in the side of medical researchers. In tests of new drugs, it’s common to give a “control group” with an ailment a placebo to compare against the group actually receiving the drugs. Medical test subjects know this. Well, according to a study, simply telling a group that it’s possible they’re receiving a placebo is enough to reduce the effectiveness of the real drug. Talk about a nocebo effect. (Actually, technically a “nocebo” (Latin for “I will harm”) would be a negative effect of a placebo, not a negative effect of telling someone you gave them a placebo. But give me a little literary license here.) (Also, excuse the double parenthetical.)

The placebo effect in economics

I wouldn’t go as far as to say that the Obama administration has actually done this, but several economists have at least talked about using the placebo effect to regulate the economy. That is, instead of spending a trillion dollars to implement complex economic policies that few people understand, why not spend a fraction of that on policies people do understand and tell them how great and powerful the new policy is?

George Mason University economist Tyler Cowen, author of the excellent Marginal Revolution blog, wrote a guest post for The Economist arguing exactly that.

He wrote:

First, to the extent that the real problem is fear, this militates in favour of placebo policies. By that I mean initiatives which appear bold and have great symbolic value, but which don’t necessarily cost us very much. I haven’t seen us make a major attempt to identify such proposals, but it is unlikely that an $800 billion stimulus fits the bill. I would sooner beef up automatic stabilisers, and aid to state and local governments, and claim that this, along with some regulatory changes, will help the economy.

But, shh, don’t tell anyone. Remember, that reduces the effect.

Putting it into practice

Sadly, unless you’re able to truly trick yourself into believing something, I don’t think you can regularly use the placebo effect on yourself. But if there’s any message to take from this story, it’s that setting expectations for others can have a dramatic impact on their enjoyment or lack of enjoyment of whatever you’re giving them.

For wine, that doesn’t have to mean lying about a bottle’s price. Instead, you can simply talk up the wine’s origins—say that the wine shop keeper recommended it, or that you’ve enjoyed the wine before. If you’re serving lamb, and it was imported from New Zealand, say that it was imported from New Zealand, and that the country is known for its sumptuous lamb dishes (it is). I’m convinced that this is why you can’t just buy “eggs” from Trader Joe’s. They’re always “farm-fresh eggs” or, even better, “delicious farm-fresh eggs”.

Parents, don’t just give your kids medicine. Tell them how much better it will make them feel. Some studies have shown that the demeanor of the doctor greatly heightens or lessens the effectiveness of a drug. And maybe letting them watch all those Tylenol commercials isn’t a bad thing.

I’ve always been a fan of setting expectations low and surpassing them. But maybe this upsets that theory. Can you think of other areas where setting great expectations has helped you?

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{ 7 comments… read them below or add one }

Chelsea April 27, 2010 at 10:10 am

This is quite a tangent, but another “placebo effect” strategy at Trader Joe’s is that the cashier (at least at my store) ALWAYS comments on how good one of the items in your cart is. And sometimes they mention that the organic version is even better. It’s friendly service, sure, but it probably has a similar impact.

Rob Bennett April 27, 2010 at 2:50 pm

I read an amazing article a few months ago about a researcher who has shown that the entire effect of anti-depressants can be explained through the Placebo effect. This guy’s research has been hushed up. People tell him that he is mean because the reality is that the people who take the anti-depressants really do get relief. Who is he to come along with his research and deny them that?

Rob

K Smith April 28, 2010 at 5:13 pm

Placebo policies are not new. They have been around for decades.

The old standbys are monetary policy and fiscal policy. But they are losing their effectiveness as placebos because more and more of the public recognize them for what they are – fancy words for fraud and theft.

The challenge is coming up with new ones. The latest?

“Deficits add to…savings.” Warren Mosler, President – Valance Co.

“All we owe China is a bank statement. ” Marshall Auerback, Senior Fellow – Roosevelt Institute and Warren Mosler, President – Valance Co.

“Selling government bonds… is mistakenly called borrowing.” Yeva Nersisyan, Doctoral candidate in economics – University of Missouri

“Banks can lend essentially without limit.” Stephanie Kelton, Associate Professor – University of Missouri

“(G)overnment debt — Treasury securities — are nothing more than savings accounts.” and “Interest on the debt is not … an obstacle to increased federal spending.” Randall Wray, Professor of Economics – University of Missouri

When those who are considered to be economic experts say savings is the same as debt, deficits add to savings, we don’t owe money to China, bonds are not debt instruments, banks can engage in limitless lending, and our government can spend without regard to market rates, it’s time for new experts.

Or better snake oil salesmen.

Darin May 1, 2010 at 11:25 am

I like the way you pulled this information together. I’ve been intending to write about several books that cover topics like this (Predictably Irrational, How We Decide, The Paradox of Choice, Nudge…), but it seems they all are covering the same research. A topic-oriented approach like this one is probably better.

The point about governmental policy and placebos is particularly disturbing. My son keeps getting his dander up about how “stupid” some current policies are. I have to keep reminding him that stupid is probably not the right word. If you assume that the STATED goal of a policy (like the bailout or health care reform) is the REAL goal, then yes, they might be stupid. If you assume that the actual goal of the policy makers is something else, then perhaps not.

A do-nothing placebo policy designed to assuage our fear is one thing, but a do-something-else policy with results masked (or created) by the placebo effect and slipped in through the chinks of our national fear is something else entirely.

Broke by Choice May 3, 2010 at 12:28 pm

People believe what they want. I am a fan of store brands for many items in my home and my friends like to give me a hard time about it. To hush them up I purchase the name brand the first time, then I refill with the store brand. They are none the wiser and they no longer give me a hard time. This isn’t a new concept, parents do this to their kids all the time.

Chris September 15, 2010 at 10:39 pm

I was just wondering about this tonight, and when googling found your post. Very well written. However, one thing I would note is that perceptions should always exceed expectations when it comes to a customer believing they’ve gotten a good value. So there is a limit to how much you can stress something is “farm fresh” or rather, amazingly powerful, before it diminishes the perception of the good or service by setting the bar too high.

The placebo effect is probably seen more through the idea that we are wealthy on paper when in fact we’re not. The idea that our homes were banks that we could tap into through re-financing, when in fact the value of our homes were based on the market, and when the public woke up and realized what true value was, the paper wealth was eroded and homeowners found themselves underwater on their loans.

We’ve seen the placebo effect–it was done by Alan Greenspan throughout his 18.5 years. When he spoke, the market jumped based on minor inflections in what he said. Now we’ve gotten wise and Ben Bernanke can’t seem to make anyone feel reassured, only more concerned.

But that’s just my own two cents. :) Still, great article!

Ronald March 21, 2011 at 6:04 pm

If you wonna find out more about the placebo effect, watch the movies (and audio presentations) of Dr. Bruce Lipton (writer of ‘The biology of Belief’), for instants, on youtube… I know for years that the conventional theory on disease is wrong and this doctor has proof for it. Of course conventional medicine won’t know about it, because it would mean that the medical industry would go bankrupt. The placebo effect explains why people get ‘cured’ of cancer, etc., by natural means (alternative therapies)…

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