With the world’s attention on the issue of climate change and the global negotiations taking place in Paris, there has never been a more important time to challenge ourselves to think differently about the future and to question the boundaries we place on our choices.
If I had to choose the single most influential idea which I learnt in 5 years of professional public health training it would be the idea of counterfactuals and the related concept of opportunity cost. Understanding this has transformed how I think about what I do as an individual, how I understand the world and what I recommend in my work. In my view it is crucial to all decision making both personal and professional. What is more because it helps us to consider the boundaries to those decisions I think it could be fundamental to creating the system change we need to address some of the our biggest problems including climate change. These aren’t complex ideas but they are woefully considered in most situations so it is useful to lay them out.
So what is a counterfactual? This is just the ‘other’ scenario(s). It could be the ‘what if?’ or if the focus is on doing something it could be ‘what if we didn’t’ or ‘what if we did something else?’.
Imagine a healthy eating project to reduce obesity runs for a year and over this period the proportion of the population who are obese increases by 2%. A quick response might be to deem it a failure and move on. But further consideration of a counterfactual situation without the project might find that a rise of 5% would have been expected. So perhaps the project helped prevent 3% of the population becoming obese. Clearly in this situation an evaluation which helped us to understand this, for example by having a control group to compare to, would be a good idea. Similarly consider a national economy, it is easy for the government to say look unemployment is down or GDP is up under our leadership but to understand the success of a policy or a government it is much more meaningful if the outcome is relative to what would could have happened instead (under the counterfactual!). Although it may be hard to establish the counterfactual with high certainty there are a range of approaches which can help understand it, for example based on natural experiment study designs or modelling.
Thinking about counterfactuals is critical for decisions related to climate change. How often do we hear we can’t do that it will cost too much without the alternatives being similarly priced. Many of those commenting on climate change often miss the fact that there are no options for the future without substantial climate change. There is no staying as things are now. This goes for our day to day lives as much as national and international policy. Some economists are now making this argument, arguing that investment in climate action now is cheaper than the cost of the impacts we will see without this investment.
This is all closely related to the idea of opportunity cost. This term describes the benefits forgone by choosing one option compared to another. I learnt about this concept in relation to the national healthcare budget in England. Let’s say you want to fund a new treatment. This has an opportunity cost because the money used to fund this treatment could also be used on other treatments. Where there is a fixed healthcare budget introducing a new treatment will displace some existing expenditure somewhere else in the system thus potentially resulting in overall harm if the new treatment is not as cost effective as displaced treatment. [As an aside this is the logic behind the threshold for approval of new drugs by the National Institute for Health and Care Excellence in the UK. Contrary to popular belief it is not a willingness to pay threshold but an estimate of the point at which the benefit of the new treatment is outweighed by the benefit forgone by the displaced treatments.]
Opportunity cost is particularly important because considering it leads to the question of what boundaries do we put on that opportunity. The healthcare budget has an explicit boundary related to health of an individual and the health budget but when we are deciding what we spend the next hour doing or our next few pounds, dollars or euros on what are the boundaries? For a business thinking about its future what are the boundaries? For a city government what are the boundaries?
At the personal level for all of us who are fortunate enough to be living a life where we don’t need to spend all our money and time meeting our basic needs there is this dilemma. How best to use our resources? How best to use our lives? This isn’t some philosophical question but is a practical one about the coins in our pocket or what we do this evening.
When talking to people about this I typically pick up a book off my bookshelf and question the value I am getting from it. Assuming I will get some value from the pleasure of reading it again at some point in the future how much is that worth? What is the opportunity cost of keeping that book? It is easy to see that the book could be turned into money if sold – perhaps a couple of pounds. But that is when the question of boundaries becomes important. What is the value of that £2? What could it do? Do I limit the options for that £2 to my personal gain? What if the £2 instead of coming to me went to a charity which vaccinated children against some life threatening infectious disease or went to a climate change campaign? Would that be more ‘valuable’ than if I spent it on something for myself? What if I spent it on a gift for someone I loved? How would their assumed increase in happiness from the present compare to the reduced risk of infectious disease experience by a child somewhere else in the world or the pleasure I’d have had if I’d spent the £2 on a nice slice of cake?
My point here is not to suggest we agonise over ever small expenditure or object in our lives. Instead I’ve come to think this is perhaps the most empowering process we can go through as individuals, as professionals, as policy makers. To recognise that many of the boundaries we put on our choices are artificial. The value embedded in every object, every pound, every moment, could change the world for the better. If you have the time to read this it means you have discretion over how you use at least some of your time. It is with this that you can help change the world. That’s why this is empowering.
But it goes further because if we consider the cumulative value embedded in all our spare time, money and stuff it’s apparent that we could, if we chose to, make change happen on a previously unimagined scale, on a scale sufficient to avoid catastrophic climate change. It is only if we allow ourselves to remove the mental barriers we have, between mine and theirs, between us and them, that we will succeed against these collective problems. If we do this we will all be better off.
PS It can be agonising if you truly take these ideas to heart. It can set you on a path of feeling you shouldn’t have any comforts or possessions beyond the most necessary. It can make you feel it’s not alright to relax in an evening rather than ‘doing something useful’. But it’s really important to value ourselves and recognise that we all need time and space for ourselves if we are to function and to enjoy our lives. Rather this blog’s intention is to encourage a sense of empowerment and possibility. If it all starts being too agonising please do step back and take some time for yourself. Caring for yourself is as important as caring for others.
PPS Although this blog is focussed on how we think about decisions I recognise most of what we do is not rational and behaviour is driven by a wide range of factors, particularly habits, environmental prompts and what the others around us are doing. I don’t think this undermines the importance of the ideas but it does mean that we need to work out how to weave these ideas into discussion of behaviour change and the heuristics we all use throughout our lives.