Time to revisit the agency theory and expand our thoughts on what motivates physicians? A nudge to health economists

Abstract

Health economists typically use agency theory to predict how physicians respond to various policy schemes. Empirical studies show that many schemes lead to unintended responses, indicating that current theoretical models fail to fully explain physicians’ behaviour. Drawing on key lessons from social psychology and public administration literatures, we propose to expand the principal-agent framework by unfolding physicians’ non-pecuniary motives to provide care using three components: patient benefits, intrinsic motivation, and societal benefits (externalities). We argue how each of these motivational components align with the existing agency framework and provide examples of how to measure the degree to which physicians are motivated by these components. Finally, we discuss how physicians’ non-pecuniary motives can be used to inform policymaking.

Keywords: Health care; agency theory; double agency; altruism; externalities; user orientation; intrinsic motivation; public service motivation; non-financial incentives

JEL Classification: I10; I11