The Economics And Egonomics Of Resolutions

- Shreeya Jain , Economics Association

2017-02-19

Technical

As 2016 came to a close, I’m sure that you, like most of the people, made a New Year’s resolution and I believe, like the majority of them, you too are going to give up on it before the year is half over. Traditional economic analysis would attribute this result to a difference between what was expected and what actually happened. Either the benefit of maintaining the resolution wasn’t as great as expected or the cost of maintaining it was more than expected.

While considering benefits and costs is always a good place to start when trying to explain why something happens, this explanation feels incomplete. If it were solely a matter of benefits and costs, we would be far less hard on ourselves when we broke our resolution. Moreover, the difficulty of following through on our intentions probably wouldn’t have been considered an interesting problem by a Nobel laureate. Thomas Schelling, who won the Nobel Prize in Economics in 2005 for his contributions to game theory, postulated in ‘Egonomics, or the Art of Self Management’ that we behave as if we have two selves: The one who wants to achieve a goal, despite its costs, and the one who wants to give up on the goal when faced with those costs. As examples, he wrote that there is “the one who wants clean lungs and a long life and another who adores tobacco” and there is the “one who wants a lean body and another who wants dessert.” The two are in a continual contest for control.
Schelling suggested a classic way to overcome the problem of having two selves: Taking away decision-making ability from the “wayward” self by having the “goal-setting” self pre-commit to certain actions:

1. Locking away a high-calorie treat so that it is not immediately accessible
2. Setting the alarm clock across the room so that we have to get out of bed to turn it off
3. Pre-ordering a healthy lunch right after breakfast, when an unhealthy choice is least tempting

Since the time that Schelling wrote about these tricks, behavioral economics has provided more insight about why they are useful, and technology has made it easier to implement them. There is an alarm clock that rolls away from you until it is turned off, and there are low-cost safes with time-based locks on them, so that you can lock away a treat until later.

Robert Cialdini, author of ‘Influence: The Psychology of Persuasion’, echoes Schelling’s theory of pre-commitment with his “commitment and consistency” principle. He demonstrates that people who commit in words or on paper to a given goal are more likely to follow through because they merge that goal with their self-image. Without these pre-commitments, we are more vulnerable to procrastination and accepting the status quo. Consequently, the more we vocalize our goals to ourselves and others, the higher probability we will have of succeeding.

The New Year has kicked off and now is your moment to come up with the next step—making your resolution fun for you. Maybe listening to music while walking? Yoga classes? Perhaps using a variety of workouts? Just remember that if you don’t succeed even after following all these steps, there’s still some good news for you: there are many other ‘fresh starts’ on the calendar when you can try again.

Look back at those resolutions not as failures, but rather as turning points of your life.