Money money money money money

June 14th, 2008 by Ben Goldacre in bad science, irrationality research | 23 Comments »

Ben Goldacre
Saturday June 14 2008
The Guardian

Like anyone with any faith in humankind, you rail against the professionalisation of commonsense: because however much the seedier targets of this column might enjoy spending their customers’ money, baubles are impermanent. We’re not interested in consumer issues. The greater crime, by far, is that quacks and miracle cure merchants disempower us; and, moreover, that we love it when they do.

A paper currently in press for the journal Organizational Behavior and Human Decision Processes addresses this issue explicitly. Participants were given a quiz on American history, with the opportunity to win cash rewards for correct answers (since we’re all simple experimental animals deep down), and the option to get advice for each question. The ‘advice’ was simply another student’s answers, perfectly likely to be wrong, and a reasonable model for self-appointed experts: it was from no great authority, and the experimenters were quite clear about this.

The participants were either offered the advice for free, or they were offered the opportunity to buy it. They were offered either option at various times, and it was made absolutely clear that the advice was of exactly the same quality, whether it was free or not. Participants were significantly more likely to follow advice they had paid for – and change their answers in line with it – compared with advice they received for free. We are suckers.

In fact, it’s already been a very good year for paying for things which should come free.

A study published in the Journal of the American Medical Association in March subjected 82 healthy subjects to painful electric shocks, offering them pain relief in the form of a pill which was described as being similar to the opiate codeine, but with a faster onset, in a lengthy and authoritative leaflet. In fact it was just a placebo, a pill with no medicine, a sugar pill, like a homeopathy pill. The pain relief was significantly stronger when subjects were told the tablet cost $2.50 than when they were told it cost 10c.

Even better is a paper published in January in Proceedings of the National Academy of Sciences. Volunteers tasted and rated five wines, each individually priced, although in fact there were only three different wines, and two were tasted twice: once labelled at $90 a bottle, and once at $10 a bottle. The results were very clear: cheap wine really does taste better simply because we are told it’s expensive.

More than that, when participants tasted the ‘more expensive’ wine, brain scans showed increased activity in the medial orbitofrontal cortex and its surrounding area, the rostral anterior cingulate cortex, in the frontal lobes. I’m pretty sceptical about the merits of this kind of brain imaging research, but I will indulge you by mentioning that the orbitofrontal cortex has previously been activated in studies looking at ratings of pleasantness of music and smells.

All the best experimental results from science make you question your prejudices, beliefs and values, reorganise your thoughts, and bin a few models. However disappointing you find their results, these studies are interesting because they suggest that there’s no telling us, and that being ripped off can, in some respects, be good for you, improving your enjoyment, and improving your pain relief: in their own way, they cast some doubt on the whiny sceptic’s moral framework of exploiters and victims. I think you’ll find (and this is very much an all purpose t-shirt slogan I’m offering you here): I think you’ll find it’s a bit more complicated than that.


Commercial Features of Placebo and Therapeutic Efficacy Waber et al.
JAMA.2008; 299: 1016-1017

Do we listen to advice just because we paid for it? The impact of advice cost on its use. Francesca Ginoa, Organizational Behavior and Human Decision Processes (In Press).

Marketing actions can modulate neural representations of experienced pleasantness. Hilke Plassmann, John O’Doherty, Baba Shiv, and Antonio Rangel. 2008 105(3) 1050-1054.

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23 Responses

  1. Clayton Graham said,

    June 14, 2008 at 5:30 am

    Alarmingly (and feeling rather like I’m embiggening the Devil) this suggests that advertising has socially redeeming qualities. Could it be that the umpty-ump percentage mark-up we pay on all our purchases to cover the advertising used to sell them to us is actually worth it?

  2. Pro-reason said,

    June 14, 2008 at 6:54 am

    Great stuff! But, ugh, you put “humankind” in the first sentence. There’s “mankind” and there’s “humanity”, but please don’t mix and match them to produce “humankind” or “manity”.

    One word comes from Old English “man” and the other comes from Latin “homo”, both of which meant “person” (despite the common misconception that they meant “male person”). There’s no need for a neologism.

    Back to your article. Wikipedia has a nice one on “Cognitive dissonance” which contains another good example.

  3. Mark Wainwright said,

    June 14, 2008 at 8:56 am

    #2, learned discourses on the etymology of “human” don’t give any reason why it can’t form a compound with “kind”. And “humankind” isn’t a “neologism”: it’s recorded in OED from 1645. Originally two words, it appears as one word since 1728, which is about two centuries longer than “anyone” which Ben also uses in his first sentence. I don’t notice you complaining about that.

    Kind of off-topic, but linguistics is full of Bad Science too. I think of would-be pedants who go round “correcting” perfectly correct usages as like the kind of friend that’s always urging you to take vitamin supplements.

    By the way Ben, a particularly excellent column. And I haven’t even paid for it!

  4. Ian said,

    June 14, 2008 at 9:27 am

    When can I buy the T-shirt? Can you make sure it’s an expensive designer one ‘cos I find they’re much better.

  5. Ian said,

    June 14, 2008 at 10:14 am

    @ muscleman.

    Whenever my parents are round I feed the stuff I bought in Lidl and tell them it’s from M&S or Sainsburys. They praise it highly and continue to shop at M&S/Sainsbury’s despite being told where the food was really from.

    I think I may apply to become marketing advisor to Lidl – first piece of advice; double your prices (that should cover my salary).

  6. muscleman said,

    June 14, 2008 at 11:50 am

    I agree Ian, I have had some really good food from Lidl. Their fish covered in herbs are just wonderful for eg. I wouldn’t go there for fresh veg, but for meat and fish and products thereof or good tinned goods, yes.

  7. thekumquat said,

    June 14, 2008 at 3:41 pm

    Muscleman: My local Lidls have excellent seasonal veg – like the other food, it’s what is going cheap. Also good cheese and meats, although the frozen stuff is variable.

    I believe people are much more likely to turn up to doctor appointments they have to pay for and to take prescription drugs they have paid for – but there’s also the costs incurred in running such systems…

  8. muscleman said,

    June 14, 2008 at 4:34 pm

    Must just be our Lidls then, the fruit and veg is always tired and wilted. But then this is Scotland, they probably don’t get much call for it…

  9. chinaphil said,

    June 15, 2008 at 4:07 am

    Hang on, there’s two different things here.

    1) We all know that we start off as plebs, and that you do have to educate your palate (/equivalent sense) to appreciate the really fine stuff. Therefore, you might taste something really expensive and find it a bit yucky, (or open Joyce and find him unreadable) but you might know that if you eat (read) it a bit more, get used to it, there is a high possibility that you’ll come to appreciate its excellence.

    2) There’s lying to others and yourself about this process, pretending you like caviar on your first try, or loved Joyce the first time you looked at him.

    Because of (1), we do sometimes use price as a guide to quality – it’s a bit like expert literary opinion. We might also make more of an effort to find what’s good in something expensive than we would to find the quality in something cheap.

    However, when this becomes an automatic process, and price is automatically associated with quality, with judgment merely a form of rationalization, then life’s gone down the toilet, really. Because price varies for many reasons other than quality: availability, marketing, packaging, etc.

    Which is why we must all say hurrah for literature and music: a paperback by McEwan/Dickens/Shakespeare costs exactly the same as one by Clancy; a CD of Mozart/Dylan/Led Zep costs no more than S Club.

  10. ayupmeduck said,

    June 15, 2008 at 8:20 am

    As Nadia points out, Economics has know this for a while, and they are called Veblen (or sometimes Giffen) goods.

    There are a lot of marketing departments that are well aware of this. Sometimes they even plan to sell at lower prices but find that they cannot. For example, and I don’t know if it has changed recently, but for many years all attempts to sell cheap good quality lipstick failed. As soon as the price dropped below about $2, lipstick became impossible to sell.

    A more recent example is the BMW X3 which is not really designed or built by BMW, and well, erm, I have to be careful what I say, but let’s just say that by selling the X3 at an “artificially” high price, owners just assumed that the X3 was the usual BMW high quality. BMW were found out that if they lowered the price, owners would actually check the quality rather than just assume it. And it worked, they sold lots of X3’s and nobody asked and any questions.

  11. killary said,

    June 15, 2008 at 12:32 pm

    While there are of course countless examples to the contrary, it is generally true that more expensive items perform better than cheaper ones.

    By and large expensive cars/wine/clothes/etc are better than cheaper ones. Why should we be surprised that have long experience of this we automatically expect it to be true? Unfortunately we forget that this rule has very many exceptions. Oscar Wilde said that a cynic knows the price of everything but the value of nothing: well when it comes to medicines the lay person cannot know the value of the drugs, but is influenced by the price.

    Off Topic: Can I totally agree with Mark Wainwright about the curse of Bad Pedantry in language. People with a little learning think they can impose spurious “rules” on the rest of the population. The one that irritates me lately is the myth that you cannot use “less” when talking about countable quantities.

    Tell that to Shakespeare, Austen, Eliot, Dickens, Hardy and all the great writers who seldom or never used “fewer”. Anyone who has read “Origin of Species” or “Voyage of the Beagle” can find that Darwin invariably used “less” for countable objects: there are hundreds of examples of this in his works.

  12. luckypeachtree said,

    June 16, 2008 at 5:01 am

    Sadly it extends beyond fine wines and fine dining – in my previous beer job an (inevitably) small scale live test market proved that more people wanted to pay a 30% ‘premium’ rather than 20% for a posher beer with a well-known brand. A shame because it would reduce the size of audience that would eventually get to enjoy it, but plc gotta think of the shareholders …

    On the other hand there are some great models coming out for music, my latest industry, couldn’t agree more with chinaphil on that.

    If you want to test freaky pricing behaviour (free/cheap vs. stupid/ luxury), come to China and go for your life!

  13. timsenior said,

    June 16, 2008 at 5:57 am

    Is this about value or about price? I know I feel happier if I’ve been told that something is worth a certain amount, but I can have it at a discount. Does anybody know of any reasearch on this? Who’d like to re-run the experiment, telling the subjects that normally people pay $30 for the advice (which might be rubbish) but for you, today, you can have it for $20. Would that increase or decrease the number of people who accept it? PhD, anyone?

  14. tomrees said,

    June 16, 2008 at 1:01 pm

    I think this is all linked to the function of money in society. It’s not really about buying nicer stuff. It’s about demonstrating your wealth (and hence position in society) to your peers (and to yourself). So we feel better when consuming something expensive because it shows that ‘You’re worth it’. Stella Artois? Reassuringly expensive!

  15. perspix said,

    June 16, 2008 at 2:23 pm

    I should add, “reputation” justified or otherwise.

    Pentapeptides come to mind. They must be worth it because that Beauty Editor Nadine Bagget says so on the telly.

  16. Nadia said,

    June 16, 2008 at 7:54 pm

    I wasn’t really saying that economists know everything about the phenomenon, just that the concept and idea has been around for a while.

    We are in agreement about how economics needs to take onboard much wider areas of psychology, sociology, politics, deontological ethics, etc. in order to actually describe things, as long as we are rigorous and evidence based when we do it. Agreement is good!

    Veblen was one of the first to enunciate that to the nascent neoclassicists, which is why I used the term ‘even hardened mainstream economists’ before explaining what they think.

  17. swirus said,

    June 18, 2008 at 11:38 am

    Lots of nice discussion about economics here, I thought I’d contribute another theory to go with the Veblen Goods (status) and the Giffen Goods (substitution effects), that of Akerlof’s Lemon. This posits: In the market for used cars, in the absence of mechanical expertise or any other information about a given vehicle, the only indicator of the value of a vehicle which the purchaser may consider is the price. If a vehicle is priced cheaply, there are concerns “What is wrong with it? Is it a Lemon?”, yet if it is reassuringly expensive, those concerns are eliminated. In the absence of other concrete information, the purchaser is relying to the price as the only indicator of value, despite the fact that this is set by the seller, and that the cost may not be fair.

    Why do people buy (and doctors prescribe) branded drugs when identical generics are available. Well the branded drugs might be better advertised, the doctors might be set in their ways, and the individuals might be ignorant. But I suspect part of it might well be that the act of paying more for something is associated with getting a better product, even if it is identical!

  18. Robert Carnegie said,

    June 21, 2008 at 9:47 pm

    I’m given to understand Jane Austen spelled the word “choose” with a letter u…

    Some branded supermarket painkillers have particular formulations of multiple drugs – paracetamol and caffeine seems to have been popular – but this doesn’t work significantly better for me, almost the reverse, and come to think, there was that one paper that I got perhaps unnecessarily worried about when the BBC(?) reported on it, suggesting that paracetamol and caffeine together are bad for you, although that doesn’t seem to have gone anywhere – although even so, caffeine seems to have been dropped from some cold symptomatic remedies of the paracetamol and decongestant type. Another argument is that caffeine may not do any good, or perhaps they wanted to differentiate the hangover cure and energy products or remove needless use of decongestant for hangover victims. I find that if a hot clear yellow beverage deletes other symptoms of a cold then tiredness does remain.

    Branded pills also used to claim to act faster, but I’m not sure about now. A dispersible paracetamol may be slightly faster, logically, and is sold without major branding at a non-trivial but non-usurious premium price.

    I am not sure if Akerlof’s Lemon is correctly described, but I gather he did get a Nobel prize so it probably takes a bit of work just to understand what he’s saying. Upon the point made, I’d suppose that a second hand car is priced so that a knowledgeable purchaser will kick the tyres, slam the door and decide that the price is reasonable. An un-knowledgeable purchaser will merely assume that this is the case. One catch is that the seller may not in fact base price on a knowledgeable assessment of the car, either, but save the trouble and cost and just pick a number. Another is that the knowledgeable purchaser may be satisfied with a cheap deal that comes with the necessity to reflange the cognet tining every 1,000 miles, whereas the less well endowed do not even know what a tine-flanger looks like and would do better to pass up on the deal.

  19. Brett Dunbar said,

    June 22, 2008 at 12:51 am

    On the subject of reversed demand curves while Veblen goods are pretty common, until very recently nobody had found a clear Giffen good in the wild. Theory predicted they could exist but none had ever been observed. A 2007 paper by Robert Jensen and Nolan Miller found two, rice in south west China and (a little less clearly) wheat/noodles in north west China. They conducted an experiment to demonstrate that they actually were Giffen goods.

  20. stumo said,

    June 22, 2008 at 10:52 am

    Going back to the first study, maybe there’s another factor at work here:

    – If the advice is free then in some senses you loose nothing by taking it, and it might mean you realise your answer was in fact wrong, so you might as well take it all the time (and ignore it if you think it’s wrong)

    – If the advice needs to be paid for, then if you’re certain of the answer then you won’t buy it – so you’ll only buy it when you’re unsure. If you’re blindly guessing then you might as well go for the answer you’ve paid for, since it’s got to be better than nothing

    Which I think means you’d expect to see people following the paid advice more often – not because they rate the paid advice higher, but because they’ve only bought it when they need it.

    (I suspect there is still an effect at work here where we value expensive stuff more, but I’m not convinced this study provides evidence for it – although it certainly doesn’t contradict it)

  21. Majordomobibfortuna said,

    June 24, 2008 at 6:37 am

    Would this also go some way to explaining the “Richer Sounds” school of marketing where I’m convinced that no one ever buys the cheapest headline “get you into the shop” set of speakers because once your in there is always a more tempting set which must be better because it costs just a little bit more?? No critisism of Richers as they are a decent shop service wise but it is clever marketing nonetheless?

  22. Robert Carnegie said,

    June 26, 2008 at 11:29 pm

    I was a bit taken aback when informed that the shops were owned by a Mr. Richer.

  23. Pro-reason said,

    August 20, 2008 at 2:22 am

    “Humankind” was used here and there in the past, but has only come into vogue in recent decades due to political correctness.

    You can rightly call “color” an Americanism, even though you can find it sporadically if you look back in time. In the same way, you can call “humankind” a neologism.

    The etymology doesn’t by itself prove a given form to be correct or incorrect, but clarifies people’s reasons for saying things. It is quite clear that people have recently started insisting upon “humankind” on the basis that “mankind” refers only to blokes, which it never has. Similarly, etymology can show us (e.g.) that “snigger” is not a racist term.

    There’s nothing wrong with coining new words, but the fact that “-kind” is not a productive suffix (try adding it to any other word), shows that this is just a clumsy addition of “hu-” to the correct word.

    Feel free to say “humankind” in the same way you might feel free to say “irregardless” or “on purposely”. Freedom is great. But be aware that it sounds faintly comical.