An interview with Matthew Ridley (University of Warwick) and Ulrike Malmendier (UC Berkeley)
Matthew Ridley’s research explores how anxiety and depression shape economic behavior and why traditional models often miss these effects. Ridley highlights the growing concern around mental health impacts, and how the shift toward destigmatization can help bring mental health interventions into the real world. Ridley and Malmendier are exploring such interventions in the context of workplace design. They discuss their joint work in Nairobi, Kenya, which aims to show how employers can improve both performance and worker wellbeing by addressing the adverse effects of stress and anxiety. In their discussion, Ridley and Malmendier emphasize the need for economists to engage more deeply with mental health to better understand how people make decisions and respond to economic pressures.
Ulrike Malmendier:
As economists, we think about how humans process information and make their decisions based on their thinking. And nevertheless, it’s still fairly recent that people have started considering mental health as a factor in decision-making—how anxiety or depression might influence our choices.
Why do you think that is?
When I did my PhD, I felt that economics was not ready, or nobody was thinking about it, including me.
Why do you think we didn’t and why do we do now?
As economists, we think about how humans process information and make their decisions based on their thinking. And nevertheless, it’s still fairly recent that people have started considering mental health as a factor in decision-making—how anxiety or depression might influence our choices.
Matthew Ridley:
That’s a great question. I’ve wondered if part of it is the changes in awareness of mental health in broader society that have been reflected back into economics. People talk a lot more about anxiety. In the rest of society and on social media, there’s much more discussion around mental health. You see it in statistics, too. Young people, especially adolescent girls, are more likely to report anxiety than in the past.
There have also been campaigns to destigmatize and expand mental health care. All that has probably made people pay more attention to the topic. Economists, too, are realizing they can’t ignore it. We probably should’ve always paid attention to it; it just didn’t have the same salience.
Ulrike Malmendier:
Exactly my thinking as well. We should’ve always been thinking about it, but it needed broader awareness and destigmatization.
As you just point out, mental health difficulties among young girls are playing more of a role. Unfortunately, the increase in mental health struggles, especially among young girls, might be part of why it’s gained urgency.
Since you were one of the early researchers pushing this, would you be willing to share a bit about how it started for you? When did you begin thinking, “I’m going to bring this into economics”? Did it take courage? Was there a triggering event or a mentor who made a difference?
Matthew Ridley:
I definitely didn’t know I was going to be researching mental health. I thought I’d probably be doing something completely different. But then there was a sequence of events, including some courses and papers I read. I remember reading a paper by Frank Schilbach, who later became my advisor. That was still early in my PhD.
It was his paper on the economics of alcohol and self-control, his original job market paper. I remember being very excited about that because it made me realize I had permission to study things that weren’t traditionally “economics” but clearly important in people’s lives.
He was applying economics to topics that had previously only been looked at by psychologists or doctors. That opened my mind. I thought about my own life and, like many people, I’ve felt anxiety in my life, and I noticed economic models didn’t really include that.
Later, in a health economics class taught by Heidi Williams, we had to come up with research ideas. I wrote down topics that interested me, then Heidi pointed out they were all about mental health. I hadn’t noticed that, but it revealed something about where my interests were.
Ulrike Malmendier:
Excellent.
Matthew Ridley:
I also think Frank’s behavioral economics class helped—it made it click! Those were the right tools to study mental health.
Ulrike Malmendier:
I love all that. Looking back at my own PhD, I should have realized earlier that anxiety mattered, but it hadn’t made that step yet.
And I love how you’re highlighting Frank’s job-market paper. It’s one thing to have a successful job-market paper that can get you a job and a publication, but, more importantly, the impact in giving others permission to explore ideas beyond the traditional boundaries is really fantastic.
Matthew Ridley:
Yes, agreed.
Ulrike Malmendier:
In terms of your own research, can you give a quick overview of the questions you’ve addressed or are currently working on—including the Kenya project? Then, a little bit more about what’s been surprising and unexpected.
Matthew Ridley:
Absolutely. My first deep dive into this was a review article I co-authored with Frank Schilbach, Gautam Rao, and Vikram Patel, during my PhD. We looked at the causal links between poverty and common mental illnesses. It was mostly reviewing existing work, but we learned a lot through it.
One of the main takeaways is that there’s now quite a lot of evidence that in lower-income settings, there’s a causal relationship between poverty and mental health. For instance, giving people money through cash transfers reduces depression. It makes people happier.
Interestingly, anxiety is less frequently measured in these studies. The focus is more on depression and happiness. There is also some evidence that treating mental health improves economic variables.
That’s where the evidence feels a bit weaker—it often comes from medical studies that measure things like how many days a person worked in the last month as a subjective self-perception, and that number seems to increase when people receive mental health treatments.
Still, it’s hard to translate that into a causal estimate of full economic return or broader effect on economic behavior.
So that’s what we’re trying to address in the Kenya study. We are testing a mental health intervention and measuring a much broader range of economic outcomes: productivity, workplace decision-making, etc.
We’re trying to understand how treating mental health affects all those economic mechanisms and effects.
So, to return to the broader message of that review article, there seems to be some evidence of causality in both directions: Mental health problems can be caused by poverty, but they can also lead to poverty. That creates the possibility of poverty traps driven by mental health issues, especially in a developing country. To break that cycle, we might need better mental health interventions, and that’s the cycle we’re trying to interrupt with this study.
We might need an understanding of how people with poor mental health are going to react to economic interventions. Sometimes those interventions could increase stress, and we also need to understand why mental health is having these effects.
Mental health problems can be caused by poverty, but they can also lead to poverty. That creates the possibility of poverty traps driven by mental health issues, especially in a developing country. To break that cycle, we might need better mental health interventions, and that’s the cycle we’re trying to interrupt with this study.
Ulrike Malmendier:
This is a great overview and I think it already touches on points where this research could go next. Step one is establishing that mental health affects the decision-making of many people. It’s a widespread issue, and we should account for it.
Second, we can show that it has an effect on outcomes that economists have been traditionally interested in—like earnings, education, and so on.
Matthew Ridley:
Exactly.
Ulrike Malmendier:
So the next step is: what do we do about it? And how do we help people?
In the Kenya study, the goal is to test interventions in workplace environments where traditional economic thinking about incentives might break down. Are there other systems that might be more effective?
Your research has a nice flow. What have you seen so far that surprised you?
For example, I did a similar interview with Gautam Rao on his research on sleep, and he was surprised by how exaggerated some of existing conclusions from existing sleep research was, and how it picked up the slightest impact on behavior and the way sleep researchers measure effects, which made him realize those effects don’t always translate directly into economic decisions.
So I’m curious, was there something in your mental health research that was stronger, weaker, or different from what you expected?
Matthew Ridley:
Yes, a couple of things come to mind.
To echo Gautam’s point on sleep: in mental health, there’s a lot of medical literature outside economics claiming we already know the costs of mental health, and they’re huge.
But when you dig into where that comes from, it often measures: “Did someone feel like they were giving 100% at work?” or “How many days did they miss at work?”
That’s useful, but as economists, we know that we need to do more to understand what the causal effect is.
It was surprising how few studies exist that focus on outcomes economists care about.
There’s a collection of medical RCTs and mental health treatments, but they don’t have all the outcomes that economists would typically put in.
Another surprising finding from our review was looking at the big picture. We found that when you look at the existing data, it generally suggests that within a population or country, there’s a negative correlation of income and mental illness, so people with lower incomes tend to have more depression and anxiety.
But when you zoom out to the country level using the Global Burden of Disease data, which just looks at all kinds of diseases, there’s a positive correlation between GDP per capita and depression/anxiety rates.
That’s despite the negative relationship at the individual level. And part of me is still not sure if it has something to do with the data or something deeper.
There may be some issues here. Some economic studies have been done in low-income settings. The cost of cash transfer trials and the raw data show very high rates of depression and anxiety. But maybe something different is going on at the country level that doesn’t reflect the effects of income at the individual level.
We might need to think more about rich countries too—what’s different about them?
Ulrike Malmendier:
Right…
Matthew Ridley:
It could be that income growth also leads to more inequality, which offsets some of the benefits of getting richer, at least from a mental health perspective.
Ulrike Malmendier:
That reminds me of the whole debate around happiness and income. For a long time, we struggled to understand the mixed correlations there and it needed a lot of work, including work on better data and better analysis of the data to figure this out. But from what you’ve said, it sounds like we really need good economists working on this to identify causal effects properly,especially when it comes to the puzzle of income and mental health within a country. Now, related to the correlation with poverty and within and across a country, a lot of your research has been in lower income countries and less in developed economies.
Matthew Ridley:
Yes, that’s right.
Ulrike Malmendier:
That brings me to your current work in Kenya.
Why focus there? Is the goal poverty reduction? Is that one of the motivations? What led to this combination of economics and mental health research? And why does it work so well in that context?
And if rates of depression are high in wealthier countries, too, shouldn’t we also study them?
Matthew Ridley:
Yes, I think we can and should study this in richer countries.
But part of what motivated me was the potential for social impact and the extent of the suffering it can cause in low-income countries is often worse. There’s usually less of a social safety net, and poverty is more existential. It felt important to understand the lives of people who need the most support.
There’s always balance. Should we be studying a more low-income place than Nairobi, Kenya? Maybe. But there are practical constraints—you need infrastructure to run the trial and measure things appropriately. Nairobi had that.
But part of what motivated me was the potential for social impact and the extent of the suffering it can cause in low-income countries is often worse. There’s usually less of a social safety net, and poverty is more existential. It felt important to understand the lives of people who need the most support.
Ulrike Malmendier:
So Nairobi, Kenya, is kind of in the sweet spot—a place where we can hope to make a meaningful difference and make a strong impact with this research.
Matthew Ridley:
Absolutely. Yes.
Ulrike Malmendier:
At the same time, there’s excellent infrastructure in the Busara Center for Behavioral Economics in Nairobi, the research center Johannes Haushofer co-founded. That makes it easier to do this kind of work.
Matthew Ridley:
Yes, exactly.
Ulrike Malmendier:
Great. So, where do you see this research going next? You already outlined the flow in establishing the importance of mental health and its impact on outcomes. So what’s next? How can we address it?
And, are there other aspects of the study you would want to emphasize in terms of what’s next or what you’re hoping to see? It seems like this study builds on economic research, integrates mental health, and tries to directly address it. That feels important.
Matthew Ridley:
Yes, as a big-picture next step, I’d love to see us go even further by eventually developing models of mental health that can be integrated into existing economic models and used to make predictions in a broader range of settings.
Behavioral economics has done this with things like the beta-delta model of present bias. Those models capture something important about self-control.
What’s the equivalent for anxiety? We don’t really have one yet. But if we did, it could add real insight. We probably need more empirical evidence before we get there.
Ulrike Malmendier:
Yes, agreed.
Matthew Ridley:
I think one reason we don’t have that yet is that the experimental economics that has been done to identify behavioral models is in these dry economic settings often uses small monetary stakes, and those environments don’t trigger much anxiety because it’s all an experiment.
So we’re not really identifying how anxiety is affecting their economic decisions. That’s why I see this as a long-term goal.
Ulrike Malmendier:
That’s a great point—thank you for that clarity. Good theory needs good data, and we also need to be thoughtful about which settings we’re studying. Sometimes people are deeply invested in a decision, and that’s when anxiety or other mental health issues become most relevant.
Last question:
If you think about other researchers, maybe even younger than you who are in their PhD, and are interested in this kind of work, especially in mental health and economics, do you have any advice for them?
Any thoughts that come to mind around mentoring or encouraging young researchers to get involved?
Matthew Ridley:
Yes, if someone wants to work in mental health economics, I might say, spend more time reading psychology research and think about how to bring those insights into economics. Your PhD is a great time to do that.
As you know, as you move up on the academic ladder beyond your PhD, you start to have more and more demands on your time, so take advantage of the flexibility while you have it.
There’s a huge amount of psychology literature on depression and anxiety, and a lot of it could be taken into economics. There are implicit models built into the theories behind things like cognitive behavioral therapy.
I think a PhD student could get a lot of traction by reading psychology and considering asking: how can I bring this into economics?
Ulrike Malmendier:
Exactly—and that’s actually what we do at the Ideas Hub at the O’Donnell Center. We try to explore materials we wouldn’t typically read and see in a seminar, to stay fresh and open, and integrate new perspectives. But as a PhD student, you can go even further with that. So yes, I love that.
Matthew Ridley:
Absolutely. You’re right. And when I joined your postdoc, we had those sessions on neurobiological experience effects that were incredibly useful.
Ulrike Malmendier:
Yes, our bio bootcamp. That was very helpful.
Matthew Ridley:
Exactly. More of that is probably one way to help people who want to get into this area.
Maybe more initiatives like bootcamps or interdisciplinary seminars would help give students the chance to see work from other fields and think about how they are doing things. There’s always something to learn from that contrast in perspectives.
Ulrike Malmendier:
Absolutely. I love that. That’s exactly the kind of work I enjoy doing.
Great. I think that’s all I had. Was there anything else you wanted to mention? Anything I should’ve asked?
Matthew Ridley:
No, I think we covered everything.
Ulrike Malmendier:
Excellent. Thank you so much, Matthew.
Matthew Ridley:
Thank you, it was great fun.