Banerjee and John (2021) on Nudge Plus

Sanchayan Banerjee and Peter John, “Nudge Plus: Incorporating Reflection into Behavioral Public Policy.” Behavioural Public Policy, 1-16, 2021, available at https://doi.org/10.1017/bpp.2021.6.

• Should we embed a prod for people “to reflect” into System 1 nudges? Such a prod is the “plus.” [The authors themselves seem to equate nudges (or perhaps "classic nudges" with System 1 nudges; the "plus" activates a System 2 element in conjunction with a System 1 nudge.]

• Bundling a nudge with a plus makes nudges more salient.

• People need actual reflection, not just “the potential for reflection [p. 2].”

• Thaler and Sunstein consider that a legitimate nudge must be one that would receive wide assent if everyone were informed about its aim and operation. This restriction would rule out manipulating people in ways that harm them. Nonetheless, such a legitimate nudge might, when it is affecting choice, remain hidden, invoking an automatic, System 1 response.

• Nudge plus wants to extend the transparency, so that just about everyone understands what is going on in the choice moment. Actors maintain their autonomy, though without being required to pay extremely close attention or to engage in strenuous cognitive processing. 

• Commitment devices are a nudge plus, because the need to consider whether to sign up for the device spurs the requisite reflection; likewise with cooling-off periods.

• People often choose not to use GPS on familiar routes – they are thinking, they are not being “tricked into using the device heuristically once again [p. 7].” For them, GPS is a nudge plus.

• Adding a regular prompt to set a future fitness goal turns an otherwise ordinary fitness tracker into a nudge plus.

• But… do people really desire this “experiential learning environment [p. 10],” this near necessity to reflect regularly, at least to some extent?

Kirgios, Mandel, Park, et al. (2020) on Temptation Bundling

Erika L. Kirgios, Graelin H. Mandel, Yeji Park, et al., “Teaching Temptation Bundling to Boost Exercise: A Field Experiment.” Organizational Behavior and Human Decision Processes 161: 20-35, 2020.

• Temptation bundling came to the world's attention (er, my attention) in a 2014 article by Milkman, Minson, and Volpp. Temptation bundling is when you pair a "should" behavior –exercise, for instance – with a "want" behavior, an indulgence such as listening to a captivating, somewhat trashy novel. The idea is that the pairing makes it more likely that you actually will engage in the "should" activity, and it will be more enjoyable than it would be without the tied "want," while you also will reduce the guilt feelings associated without giving in to an indulgence. Hmm, I might have some (vegan, of course) chocolate while blogging...

• The 2014 article had a pretty small sample size (226) and findings that suggested temptation bundling did provide, in the short-term, a boost to engagement with the "should" behavior.

• The 2020 article (which involves as a co-author Katherine Milkman, part of the original temptation bundling team) works with a commercial fitness company to test temptation bundling on a much larger sample. The experiment sticks with the audio books/exercise pairing, but with about 15 times the previous number of participants.

• A new question that is looked at is whether would-be exercisers actually have to be told about temptation bundling, or can an exercise gym company, by giving people an audiobook in the context of encouraging exercise, induce their customers to temptation bundle on their own? The term of art the authors employ is "information leakage." That is, even without being told or advised to bundle, maybe just being given access to an audio book by your gym induces temptation bundling.

• A chain of gyms introduced a 28-day long StepUp Program for their millions of members, with some rewards for participating. The Program was described as “a habit-building, science-based workout program [p. 23].” StepUp served as the locus for tons of research: "Our study was one of 20 preregistered studies embedded in the StepUp Program... [p. 23]." 

• Within the framework of the StepUp Program, more than 2,300 people participated in a temptation bundling experiment. About half of the participants were informed they had been gifted a free audiobook, and they received a code allowing them to choose and download a book. The other half received the same audiobook gift and were encouraged to use the book in a temptation bundle with exercise; this encouragement continued throughout the month.

• Most people (some 86%) didn’t bother to collect their free audiobook. Now I am sad. In some sense, we are back to a small sample: less than 200 subjects in each of the conditions downloaded their free audiobook. 

• Gym attendance is the main variable of interest. The free audiobook offer, whether paired with temptation bundling encouragement or not, increases workouts by something like 10 to 14%, both during the Program and up to 17 weeks later. (This result comes from a variation of the experiment that includes a third control group of participants who are not offered a free audiobook.)

• The marginal impact of the temptation bundling is pretty small (effectively zero during the 28-day treatment period), perhaps inducing some people to go to the gym (in the long run) who would not otherwise have gone. 

• A follow-up lab experiment establishes that information leakage might be what drives the very similar results for the audiobook treatments, with and without the temptation bundling encouragement. (As the lab experiment was not part of the original pre-registration, presumably its utility was understood only after the  original experiment showed near identical results for the two conditions.)

• In my view, this experiment removes a bit of the luster from temptation bundling. I'm a bit disappointed, really – not in the experiment itself, which is superb, but by the meh, alas, results. 

Folkvord, Codagnone, Bogliacino, et al. (2019) on Online Gambling

Frans Folkvord, Cristiano Codagnone, Francesco Bogliacino, et al., “Experimental Evidence on Measures to Protect Consumers of Online Gambling Services.” Journal of Behavioral Economics for Policy 3(1): 20-29, 2019 [pdf here]. 

• Internet gambling might be particularly likely to induce problematic play. 

• The outcome variables tracked in both a laboratory (n=522) and an online (n=5997) experiment are the average amount bet, the time between plays, and the likelihood of ending a gambling session when given the opportunity. 

• In the first stage of the laboratory experiment, gamblers receive one of four interventions: a pop-up warning with a picture about gambling addiction; the warning without a picture; a task to reveal overconfidence; and a picture of a logo of a gambling treatment service. A control group skips those pre-play interventions. 

• None of the first-stage (pre-play) interventions reduce the extent or speed of play, though two of the interventions seem to speed up play! 

• The second stage of the laboratory experiment and the online experiment expand the number of treatments, including the possibility to set monetary limits and using pop-up messages requiring an action to continue gambling. 

• Most of the interventions have no effects. Monetary limits and the warnings that require a response reduce average bet amounts and slow down the rate of play. Registration forms incentivize people to quit.

Duckworth, Milkman, and Laibson (2019) on Willpower and Beyond

Angela L. Duckworth, Katherine L. Milkman, and David Laibson, “Beyond Willpower: Strategies for Reducing Failures of Self-Control.” Psychological Science in the Public Interest 19(3): 102-129, 2019.

• Higher self-control is associated with many good things -- but people struggle with self-control.

• Various models (such as dynamically inconsistent preferences) have been proposed to try to capture the workings (and failures) of self-control, and many strategies are deployed to try to bolster self-control. Exhortations to show more willpower, to just say no, are not that effective. That is, relying on willpower alone, as opposed to other strategies, is almost to give the game away.

• Strategies that try to make willpower more effective can usefully be categorized. In particular, some try to alter the situation (Situational strategies), and some try to target how the decision maker thinks about a given situation (Cognitive strategies). Further, some are undertaken by the decision maker herself (Self-Deployed strategies) and others are enacted by various outside actors, choice architects, including employers and regulators (Other-Deployed strategies). Self-Deployed strategies require that the decision maker understand, at least to some extent, her self-control shortcomings -- in the usual terminology, she must be somewhat sophisticated (not naive) about her intertemporal inconsistencies.

• Four categories of self-control strategies emerge within this two-dimensional framework, then: Self-Deployed Situational Interventions; Self-Deployed Cognitive Interventions; Other-Deployed Situational Interventions; and, Other-Deployed Cognitive Interventions. The authors list and discuss various strategies within each of these categories.

• Self-Deployed Situational Interventions attempt to manage the environment to reduce the need for self-control; such strategies include: deleting a game from your phone or employing other commitment devices (or commitment contracts) that reduce temptations or raise their effective prices; temptation bundling; removing temptations from view (which is one way to raise their effective price); and behavior therapy, such as removing "cues" from your environment when fighting an addiction.

• Self-Deployed Cognitive Interventions include: goal setting (which might be undertaken in public or in private); dividing the goal into bite-sized subgoals, and allowing for small wins along the way; explicit planning and implementation intentions (developing a detailed map of how a goal will be achieved); intensive self-monitoring (such as weighing yourself every day); psychological distancing from temptations or from interpersonal problems; mindfulness and cognitive therapy (generally provided in the form of Cognitive Behavioral Therapy).

• Other-Deployed Cognitive Interventions (which might not be recognized by the targets) include: descriptive social norms (like energy use by others in your neighborhood); social labeling (which might motivate you to live up to your identity, as a green consumer, say); age-processed renderings or other techniques to make one's own future self more relatable; and fresh-start framing, as with new year's resolutions.

• Other-Deployed Situational Interventions include: hard paternalism (e.g., social security, high sin taxes); microenvironments (healthy food placed at eye level); default settings or active choice mandates; requirements for choices to be made in advance; and planned interruptions (such as a mandated break on a slot machine, say).[Incidentally, as Loewenstein points out, hard paternalism does not bolster self-control but eliminates the need for self-control.]

Fennell (2019), "Personalizing Precommitment"

Lee Anne Fennell, “Personalizing Precommitment.” University of Chicago Law Review 86(2): 433-458, March 2019.

• Achieving long-term goals such as losing weight or writing a book requires the cooperation of many temporal selves of the same individual -- and perhaps the indulgences of some Mr. Hydes will undermine Dr. Jekyll's best-laid schemes. Precommitment can help, and the law might have a role to play in making such precommitments more available.

• Fennell invokes the "scale mismatch" terminology of Drazen Prelec; scale mismatch is when the goal (such as losing weight) is achieved in aggregate terms but the steps (literally?) to achieve the goal are lots of small individual decisions.

• Rigid rules – exercise one hour every day – might work in overcoming these temporal internalities, but such rules might be excessive or so demanding that they are abandoned.

• Perhaps people can fashion their own, less rigid but more sustainable rules? Good choices of “partitions” and “menus” can aid the process. For instance, appropriate serving sizes and types of serving utensils and single-serve packaging: all of these nudges can contribute to achieving a weight-loss goal.

• Segmentation eases metering and monitoring. How much cake did I eat? It might be easier to know the answer when the cake is consumed in segmented units -- I had three cupcakes -- than when I just keep picking at some unsegmented blob o' cake.

• Writing a book might be made manageable by segmenting the task into chapters and sections. But…while smaller chunks are easier to complete, given scale mismatch, they also look less meaningful in terms of progress, and more capable of postponement.

• Instead of segmenting work time, what about segmenting time not spent working – like limiting breaks to ten minutes?

• Monetary issues often can be addressed with precommitments and partitions. Purchasing a home can be a sort of forced saving – but this commitment device can be undone by easily acquired home equity loans. Can programs be provided that allow people to opt into a "no home equity loans" condition? 

• People might try to earmark money for savings by having special accounts or even physical envelopes -- though the commitment can be undone if an emergency arises. In general, setting high savings targets with sub-partitions (so that prematurely opening one savings envelope does not mean that all the others are opened, too) looks like a pretty good strategy. Even precommitting some money to indulgences can aid the larger goal of saving money. Should bank savings accounts come with earmarked sub-accounts that are made salient in web-based representations, say?

• Online menus could be personalized, by removing some excessively tempting items at the consumer’s request. 

• Rigid rules such as “no dessert” prune the menu to two choices: comply or don’t comply: “the reason that they can be so effective – the extreme chunkiness of the choices they present – is also the reason why they often fail” 

• Rules change the effective payoffs: the good choice becomes more automatic, and the wrong choice bears a higher price. 

• Lapses can induce further failures. Ex ante, it often is best to believe that behavior is bundled, that a lapse today will mean a rapid downward spiral. (Fennell calls such notions "behavioral firewalls"; in this case, good behavior today prevents future bad behavior.) Ex post (after a lapse), however, it is best to believe that the lapse was anomalous, that it doesn’t fore-ordain future behavior. Now the firewall changes: future behavior must be sealed off from the lapse.

• As with money set aside for financial indulgences, limited, planned exceptions can be helpful – but perhaps not implementable, perhaps zero tolerance, rigid rules are needed. 

• Receiving an income tax refund can be a form of forced savings or a welcome source of wam – but private firms can offer products that undo the commitment element of tax refunds. The IRS, incidentally, provides a split-refund facility, to allow the funneling of part of a refund into savings.

Professor Thaler’s Nobel Prize Speech (2018)

Richard H. Thaler, “From Cashews to Nudges: The Evolution of Behavioral Economics.” American Economic Review 108(6): 1265–1287, June 2018.

• "In the beginning there were stories [p. 1265]." Those stories were of anomalies with respect to the standard economic model of rational choice. For instance, the "cashews" in the title refer to an incident where guests thanked then-graduate-student Richard Thaler for rendering inaccessible the pre-dinner snacks: the guests seemed to believe that the loss of the option to eat cashews made them better off.

• A key development in behavioral science was the work of Kahneman and Tversky, which indicated that departures from fully rational behavior are systematic. This non-randomness suggests that modifications of the rational model could do a better job at explaining behavior. Further, Kahneman and Tversky's prospect theory offers a simple explanation for some of these systematic departures.

• Standard economic theory often is presented as a descriptive theory of how people choose as well as a normative theory of how people should choose. It is better at the latter (normative) task than at the former (descriptive) task. 

• Thaler and Shefrin propose a planner/doer model of intrapersonal (or intra-firm) conflict; the planner component of a decision maker can alter the doer's incentives by employing commitment strategies or deploying the (payoff-compromising) induction of guilt. 

• Economics typically assumes that dollars are fungible, that the best way to spend them is independent of where the dollars originated. But people assign income to different "mental accounts" according to its origin. Some income might be allocated to a mental checking account, so it is psychologically available for spending, whereas other funds might be assigned to mental savings, and therefore, are psychologically unavailable for quotidian consumer purchases. Dollars, in practice, are not fungible -- as anyone who has ever "played with house money" knows. 

• Is it fair to raise prices just because demand increases, as when a snowstorm makes snow shovels highly sought after? Many people (but not many economists!) think that such price increases are unfair, and might punish businesses that engage in such behavior. 

• The endowment effect is when mere “ownership” of an object (like a coffee mug) seems to raise the valuation that the “owner” places on the object. Endowment effects reduce the willingness-to-trade of owned objects, and some of Professor Thaler's work shows that endowment effects are common even when decision makers operate in markets, and when they have opportunities to learn over time.

• Even in financial markets, with their ongoing nature, high stakes, and sophisticated participants, security prices are not always right: for instance, parts of a firm can bizarrely be deemed more valuable in financial markets than is the entire firm (even though the complementary parts are not themselves of negative value). 

• Draft picks in the National Football League are mispriced: the best value for teams seems to lie in draft picks in the early part of the second round. The people making the draft picks might be excessively optimistic about their ability to identify winners when making first round picks.

• In the standard rational choice model, nudges (aspects of the choice architecture that don't affect standard payoffs or incentives) would not have much influence on choices -- but they often do. 

• Some firms try to use nudges to take advantage of those systematic departures from rational behavior on the part of their consumers; Professor Thaler calls this nefarious sort of choice architecture "sludge."

Monterosso and Ainslie (2007) on Recovery from Addiction

John Monterosso and George Ainslie, “The Behavioral Economics of Will in Recovery from Addiction.” Drug and Alcohol Dependence 90(Supplement 1): S100-S111, September 2007.

• Addicts have severe self-control issues with respect to the object of their ardor.

• The goal of this article is to suggest that behavioral economics ideas are fruitful not only in thinking about the process of building an addiction, but also in understanding recoveries from addiction.

• Dynamic inconsistency seems to be tied up in addiction: addicts often express (quite credibly) desires to quit or cut down, but do not follow through on those desires.

• But dynamic inconsistency might also suggest pathways out of addiction – and many treatment programs look to develop these pathways, which involve internal, not external, commitment devices (“private side-betting”).

• Drug use would not be a problem if the pain arose immediately, and the gratification arrived after a delay.

• “Hyperbolic discounting implies that the increase in valuation that occurs when moving a fixed unit of time closer to an expected outcome is proportionately greater the closer one is to that outcome. Think of the experience of waiting for an additional day for an important event that is a year off, versus for one that is imminent [p. 3].”

• Hyperbolic discounting sets one up for dynamic inconsistency of the immediate gratification variety; further, addicts tend to display higher discount rates than non-addicted people (though causality might go both ways). How is it that people with this sort of discounting ever recover, and become dynamically consistent with respect to their intentions to indulge in drugs, say?

• A hyperbolic discounter has a multitude of different (time-based) “interests” – it is Jekyll and Hyde and the rest of the London population, too.

• How does one “interest” protect itself against foreseeable future “interests”? One approach is to make the tempting act unavailable, or raise its cost – perhaps by announcing to your social circle that you are on a diet, for instance, or are having a Dryuary. Or maybe you can deflect your attention (subconsciously) from activities that lead to your problem activity, or develop a repugnance towards them.

• These approaches are not really about willpower; rather, they signal a sophisticated understanding of your own future lack of willpower. And yet many treatment programs harp on building willpower.

• Another method to bolster willpower is a form of mental accounting: you bundle current choices with a string of future choices. In this way, a choice to drink today isn’t just about drinking or not drinking today: a choice to drink means that you will make a similar choice in future days – and that prospect might be sufficiently harrowing to keep you from drinking today.

• Experiments show that humans and non-human animals do choose less impulsively when they know that the current choice will bind similar choices down the road.

• What if you knew that having a drink today would have no effect on your future behavior, that you were pre-determined to drink every future day? What if you were told that you were pre-determined to never drink again, whether or not you drink today? It looks like current abstention is bolstered by the notion that it can influence future choices! But people do abstain, so they must see a link between today’s choice and future choices.

• Bundling can arise when someone sees that “I’ll smoke today and quit tomorrow” will also apply tomorrow, ad infinitum. Then, the actual choices today are “I’ll smoke today and forever” or “I’ll stop today and not relapse.” The personal “rule” becomes “never smoke.”

• The situation is like an intrapersonal repeated prisoners’ dilemma: the only reason you choose to “cooperate” today is if you can thereby make it more likely that your future selves also will choose to cooperate.

• But recall: in iterated prisoners’ dilemmas, it is hard to restore cooperation after a single defection. Likewise, a single lapse from abstinence by a recovering addict can lead to a binge. This sort of behavior looks like it is better described by the “bundling” model or willpower, not a story of binding commitments.

• Why would an addict fall off the wagon?: “[T]o the extent that her abstinence is based on a bundling effect, the primary danger comes from factors that reduce her differential expectation of future abstinence as a function of current abstinence [p. 9].”

• This reduction of perceived danger can derive from overconfidence, underconfidence, or rationalization.

• Twelve-step programs emphasize that willpower is unreliable, yet their adherents seem to do better (than those in other treatment forms) in overcoming cravings.

• Twelve-step treatments seem to respond to the threats created by overconfidence, underconfidence, and rationalization. How? (1) powerlessness and its related credos; (2) the focus on abstinence and the permanence of addiction; and (3) the adoption of doable goals, such as “one day at a time,” while tracking the abstinence streak.

• “When a person structures her choices with personal rules she can be expected to express different preferences than she would if she were making a choice just on the basis of its own merits, and these preferences are apt to differ as well among categories of reward, according to their temporal distribution, emotional relevance, dangerousness, impulse control history, and doubtless many other factors [p. 12].” 

• There is a possibility for a deleterious positive feedback loop, where proximity to the temptation good (or a cue) increases the probability of consumption which increases appetite which leads to increased probability of consumption…

Koessler, Torgler, Feld, and Frey (2016) on Promising to Pay Your Taxes

Ann-Kathrin Koessler, Benno Torgler, Lars P. Feld, and Bruno S. Frey, “Commitment to Pay Taxes: A Field Experiment on the Importance of Promise.” Tax and Transfer Policy Institute, Australian National University, Working Paper 10/2016, November 29, 2016 [pdf here].

• A natural field experiment (n≈2000) is conducted in Switzerland (in 2013); the subjects, Swiss taxpayers, do not know that they are taking part in an experiment. 

• The experiment concerns whether it is possible to encourage timely tax payments by having taxpayers voluntarily promise to remit their taxes on time. One potentially confounding factor, however, is that a new “dunning” policy for late taxpayers is enacted concurrently with the experiment. 

• There are two “promise” treatments. In both cases, subjects are told that if they fill in and return a postcard promising to pay their taxes on time, and then do pay their taxes on time, they will be entered into a lottery. The differences between these two treatments is that in one case the lottery prize is cash – 1000 Swiss francs – and in the other, the prize is a wellness spa trip for two, worth approximately 1000 Swiss francs. 

• Both promise treatments have parallel treatments that provide the same lottery to punctual payers, but that do not require or provide the option for the non-binding promise. A control treatment with no lottery or promise completes the collection. 

• Almost one-third of the subjects who are given an opportunity to promise to pay on time make the promise. The willingness to promise is a pretty strong signal both of whether you have paid on time in the past, and of whether you will pay on time this year. 

• Those who were in the spa lottery and who made the promise saw a significant jump in their compliance rates. But the lotteries with promise opportunities do not seem to do any better overall than the lotteries without the promise opportunities. 

• My takeaway, perhaps not as optimistic as that of the authors, is that the “promise” intervention is pretty weak tea.

Samek (2016) Nudges Schoolchildren to Drink Healthier Milk

Anya Samek, “Gifts and Goals: Behavioral Nudges to Improve Child Food Choice at School.” CESR-Schaeffer Working Paper Series, Paper No: 2016-007, January, 2016; available at SSRN.

• The author arranges for a field experiment to take place at eight public elementary schools in Chicago; the 1400 or so child subjects do not know that they are participating in an experiment. 

• The only lunch menu choice that is available to these schoolkids every day is whether to get the (low-fat) white milk, the (low-fat) chocolate milk, or do without milk altogether. On the first day of the experiment, students are nonchalantly observed when they make their milk choices. Chocolate milk is the big favorite: more than 85% of kids take the chocy, 11% take white, and 3.4% go milkless.

• In the second and final day of the experiment, a control and two treatment goups are implemented. In the control condition, teachers very briefly explain the relative merits of white milk (chocy milk has added sugar, and that is less healthy, you see) shortly before lunch. In the “Gift” condition, the explanation is followed up by a gift of a sticker to all students, no questions asked and nothing required in return; and in the third condition, “Goal,” students are asked to make an unenforceable goal, a written pledge, as it were, to choose the white milk (though they can pledge themselves to chocolate). 

• The control condition induces a huge increase in white milk purchasing, to over 47%. The Gift condition brings a slightly larger shift to white, with the Goal condition in between. The goal-setting “works” better for younger kids, but the sticker “works” about the same for everyone. 

• The unconditional gift tries (and seemingly succeeds) to connect the milk choice to reciprocity; one advantage of an unconditional gift is that no enforcement (of conditions) is needed. 

• The choices in the Goal group suggest a good deal of time inconsistency – lots of kids who pledge to get the white milk change their mind when the decision itself is at hand – even though the elapsed time between pledge and decision is only about 15 minutes. 

• The fact that the nudge and its recorded effects are of the one-day-only variety is a pretty severe restriction on drawing policy advice from the experiment. My main takeaway, as it were, concerns the large shift towards choosing white milk in the control condition: a very short piece of pro-white-milk propaganda delivered by a teacher alters lots of elementary student milk choices. Use this power wisely!

WS on Hot States and Cold States (IV)

If to do were as easy as to know what were good to do, chapels had been churches and poor men's cottages princes' palaces. It is a good divine that follows his own instructions: I can easier teach twenty what were good to be done, than be one of the twenty to follow mine own teaching. The brain may devise laws for the blood, but a hot temper leaps o'er a cold decree: such a hare is madness the youth, to skip o'er the meshes of good counsel the cripple.

(Merchant of Venice, Act 1, Scene 2, lines 206-213)

************************************************

Look thou be true; do not give dalliance

Too much the rein. The strongest oaths are straw

To th’ fire i’ th’ blood. Be more abstemious,

Or else goodnight your vow.

(The Tempest, Act 4, Scene 1, lines 56-59, Folger Shakespeare edition)

Bhattacharya, Garber, and Goldhaber-Fiebert (2015) on Exercise Nudges

Jay Bhattacharya, Alan M. Garber, and Jeremy D. Goldhaber-Fiebert, “Nudges in Exercise Commitment Contracts: A Randomized Trial.” NBER Working Paper 21406, July 2015.

• The authors implement a natural field experiment: people who browse their way to stickK.com looking to sign a contract that requires them to exercise regularly are randomized into one of three conditions. 

• The three conditions differ based upon the default length of the exercise commitment contract; the default (which is easy to override) can be 8 weeks, 12 weeks, or 20 weeks. More than 8,000 people take part in the experiment (unbeknownst to them, it seems), though some of the analysis relates to approximately 3,000 subjects for whom a longer period of data is available. 

• A nudge towards longer contract durations succeeds; that is, a 20-week default setting leads to longer duration actual contracts than do the shorter default terms. More than one-in-five contractors choose to put up monetary stakes – they lose money if they fail to exercise to the terms of the contract – that average $23 per week. 

• Not only does the 20-week nudge result in longer duration contracts, it induces more weeks of exercise – though the average weeks of successful exercise are less than half of the specified durations. 

• About 6% of the sample enters into a second commitment contract after the expiration of their earlier contract. The data suggest that people would be much more likely to sign a second exercise commitment contract if they were placed into a long (more than 18 weeks) initial commitment contract, as if the longer duration helps cement an exercise habit. 

• Following the reporting of their empirical results, the authors develop a parallel theoretical model. The model offers a four-period version of a quasi-hyperbolic utility function; the four periods allow for a pre-contract period and, later, the option of signing a second contract. 

• The subjects are assumed to be present biased and sophisticated about their bias – after all, the subjects are interested in committing to exercise. Exercise in the model is a habit-forming good, but one involving current costs along with future benefits. Without commitment, present-biased people will choose to exercise too little, from the point of view of their own long-run (non-present-biased) preferences. 

• Small changes in the depreciation of exercise “capital” (which underpins the habit-forming nature of exercise) lead to large changes in optimal exercise choices. In contrast, even sizable changes in the degree of present bias have little impact on optimal exercise. 

• The authors offer a definition of a nudge that incorporates asymmetric or libertarian paternalism: a nudge in a given period t cannot decrease the person’s period t utility by very much. (But a nudge surely will decrease that utility, that is, it cannot make the period t person better off.) And though nudges must be small in this sense, they nevertheless can have a large effect on exercise choices, in particular, by helping to promote an exercise habit. A large nudge, however, can lead to so much present exercise that in future periods, exercise is eliminated, as the subject finds it optimal to rest on his or her exercise laurels. 

• Are sophisticated but present-biased people better off with a nudge? By definition, here, the person in the nudged period is not better off. Future selves can be helped or harmed, however – the overall welfare effects of nudges for a heterogeneous population are ambiguous.

Shakespeare on Signaling Commitment

Tell me your counsels, I will not disclose 'em:

I have made strong proof of my constancy,

Giving myself a voluntary wound

Here, in the thigh: can I bear that with patience.

And not my husband's secrets?

(Julius Caesar, Act 2, Scene 1, Lines 926-930)

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

…prove that ever I lose more blood

with love than I will get again with drinking, pick

out mine eyes with a ballad-maker's pen and hang me

up at the door of a brothel-house for the sign of

blind Cupid.

(Much Ado About Nothing, Act 1, Scene 1, Lines 224-228)

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

I will not love: if 
I do, hang me; i' faith, I will not. 

(Love's Labour's Lost, Act 4, Scene 3, Lines 1326-1327)

Milkman, Minson, and Volpp (2014) on Temptation Bundling

Katherine L. Milkman, Julia A. Minson, and Kevin G. M. Volpp, “Holding the Hunger Games Hostage at the Gym: An Evaluation of Temptation Bundling.” Management Science 60(2): 283-299, 2014.

• Frequently our willpower to engage in activities we know we should engage in – like exercise – proves wanting. Frequently our willpower to resist alluring activities – like devoting a lot of time to reading a fun novel – also proves wanting. 

• Temptation bundling to the rescue! The idea is only to engage in the tempting activity while you are investing in the desirable but oft-neglected activity: you can only read (or listen to) the compelling novel while you are exercising. 

• The potential benefits of bundling go beyond nudging you to exercise as much as you want to anyway. Rather, the bundling can add to your welfare through two further channels. First, the exercise itself becomes less onerous. Second, the consumption of the tempting good need no longer be followed by guilt attached to squandering time on trifling indulgences. 

• The analysis involves a field experiment at an almost unnamed university. The subjects are 226 university-affiliates with gym memberships who own an iPod with free memory. The subjects are randomly allocated to three treatments. In the full treatment, an addictive novel (such as The Hunger Games) is loaded onto a loaned iPod (one iPod per subject), and the iPod is stored at the relevant gym – so the full treatment group must go to the gym (and, presumably, exercise,) if they want to listen to their novel on that iPod. The intermediate treatment group receives an addictive novel on their own iPod, and is encouraged to only allow themselves to listen to the novel while exercising. The control group is encouraged to exercise and receives a $25 bookshop gift-card that could be used to acquire a tempting e-novel. 

• Each participant undergoes an intake process, with e-novels selected by the non-controls, along with 30 minutes of exercise undertaken while listening to the novel, followed by rating how enjoyable the exercise proved. Everyone agrees not to discuss the experiment with others, and off they go, for the next nine weeks. 

• The treatment conditions lead to more exercise – but only for the first seven weeks (pre-Thanksgiving). In these seven weeks, gym visits average 7.8, 6.5, and 6.1 across the conditions. 

• The full treatment works better for those who report they like the initial workout experience, and for those who are most busy. 

• A concluding outtake visit allows estimates of willingness-to-pay for one month of a novel/exercise commitment device like that provided in the full treatment. About 60% of subjects indicate a positive willingness-to-pay for the commitment. 

• Perhaps the bundled temptation could be made more alluring, such as Netflix-style subscriptions that only work when you are on an exercise machine. Will the private sector create these?

Sadoff, Samek, and Sprenger (2015) on Food-Related Time Inconsistency

Sally Sadoff, Anya Samek, and Charles Sprenger, “Dynamic Inconsistency in Food Choice: Experimental Evidence from a Food Desert.” January, 2015 [pdf].

• The authors present the results of a natural field experiment: the subjects did not know at the time that they were participating in an experiment. 

• The subjects receive $10 in a special budget each week for two weeks; they can buy ten units of food each week, as each unit costs $1. There are 20 different food items available, half of which are healthy, and half of which are unhealthy. The selected food items are delivered to the subjects’ homes. 

• At the onset, before selection or delivery, the more than 200 subjects rate how much they like the 20 food items. Then they choose their items for the first week’s delivery. 

• At the time of delivery of the ten selected items, the subjects are given a surprise presentation of four additional goods, which can be exchanged on a one-for-one basis with any of the delivered items; so, participants have an opportunity to partly change their minds. The four additional items are foods they rated highly, two healthy, two unhealthy, and include at least one item of each type that was not in the pre-arranged bundle. 

• The idea is that any exchanges made at the time of delivery are evidence of time inconsistency; the researchers focus on exchanges that alter the healthy-unhealthy mix: 21% (46 of 218) of the subjects show such an inconsistency, and 44 of those 46 move to a less healthy mix. 

• In the second week, one day before delivery, subjects are asked if they would again like the extra four items brought for a potential exchange (with their new, pre-arranged bundle). One-third of the subjects say “no thanks,” that is, they choose to commit to not being offered a future opportunity to exchange. 

• People who are dynamically consistent in week 1 are more likely (than are the dynamically inconsistent) to say "no thanks" to the offer to have the extra items available. That is, those subjects who successfully fight temptation in week 1 are those who make most intensive use of the commitment device that eliminates temptation. Further, those who prefer not to have the option to change tend to choose relatively healthy bundles in the first instance. 

• The theoretical underpinning of Sadoff et al. (2015) derives from articles by Gul and Pesendorfer, and by Fudenberg and Levine. In these models, the mere existence of a tempting good, even if it is not chosen, in a sense alters a consumer’s reference point in such a way that the value of consuming other goods is somewhat compromised by the tempting option. People in this situation, and who understand it, will want to restrict their options, even though they are eliminating options that they know they will not choose in any event. 

• In the O’Donoghue and Rabin (2003) approach (as described here), alternatively, it is only sophisticated, present-biased consumers who know that they would succumb to temptation who find it worthwhile to restrict their future options. 

• The analysis suggests that encouraging people to make their food choices well in advance of consumption might help spur the consumption of relatively healthy foods. (Note that the grocery deliveries in the experiment generally are not consumed right away, either, and hence the additional items might not be all that tempting. Gains to precommitment might be even larger in the face of more intense temptation.) 

Datta and Mullainathan (2014) on “Behavioral Design”

Saugato Datta and Sendhil Mullainathan, “Behavioral Design: A New Approach to Development Policy.” Review of Income and Wealth 60(1): 7–35, March 2014.

• Behavioral economics can help us design development policies that will work. There are no guarantees, of course – much of what we have learned comes from small-scale field experiments, and their external validity and ability to scale are not yet proven. 

• The poor are like the rest of us, though their poverty adds to their psychological burdens. 

• A farmer’s failure to use fertilizer might not arise from an underlying preference not to use it; indeed, it can happen even where there is a desire to use fertilizer. People procrastinate, and they do so repeatedly; people also lack self-control to resist temptations, including temptations to use resources for things other than fertilizer. As a result, the timely provision of fertilizer at a small subsidy can have significant impacts on usage; likewise, a commitment savings plan can spur fertilizer use. 

• Four types of mental resources are scarce: (1) self-control; (2) attention; (3) cognitive capacity; and (4) understanding. More information or even financial subsidies may not resolve the problems created by these scarce resources. 

• Datta and Mullainathan argue that development problems might be fairly situation-specific, and that the binding constraint or constraints might implicate behavioral issues. (Compare with Dani Rodrik's work (with co-authors) on "growth diagnostics".) Datta and Mullainathan suggest a behavioral mapping of problems that reveals where these constraints (bottlenecks) might bind. Commitment savings accounts, steady income flows, appropriate defaults, reward lotteries, and reminders: these are some strategies that can help to overcome behavioral bottlenecks.

Jayson Lusk Takes on Libertarian Paternalism

Jayson L. Lusk, “Are You Smart Enough to Know What to Eat? A Critique of Behavioural Economics as Justification for Regulation.” European Review of Agricultural Economics 3: 355-373, 2014.

• People make some 200 food-related decisions per day! 

• Food policy activists presume that people should be eating differently than they do. 

• Lusk argues that behavioral economics-inspired policies are best when they are applied to rules that are aimed at externalities, not internalities. 

• Behavioral economics is sort of an intellectual fad, boosted by the interest of journals in novelty. At the same time that behavioral economics articles started appearing claiming that humans are not rational, other journals were publishing articles claiming that non-human animals are rational. 

• Some behavioral economists jump quite quickly from small-scale experiments on undergraduates to major claims about appropriate policy. Laboratory conditions are not the real world, and lab experiments reveal how people operate in the lab. 

• People need practice to make good decisions, so the government should not remove opportunities for people to choose. People self-regulate, self-commit, and even employ stickk.com. 

• Behavioral economics incentivizes the abdication of personal responsibility and normalizes abnormality. Markets, alternatively, anticipate our changing preferences. 

• If we abandon traditional “welfare” analysis based on consumer surplus, all we have to go on are the prejudices of researchers. 

• Is there really any evidence that those people who are subject to all of these behavioral biases actually do worse in life than others not similarly afflicted?

Bernheim and Rangel (2004) on Cues and Addiction

B. Douglas Bernheim and Antonio Rangel, “Addiction and Cue-Triggered Decision Processes [pdf].” American Economic Review 94(5): 1558–1590, 2004.

• Three premises: (1) use among addicts is frequently a mistake; (2) experience sensitizes users to environmental cues that trigger mistaken usage; (3) addicts understand their susceptibility to cue-triggered mistakes. 

• Addictive substances interfere with how the brain forecasts near-term hedonic rewards, leading to the cue-conditioned problems. 

• Upon exposure to cues, you might enter a “hot” mode, in which you consume the substance irrespective of preferences. Sensitivity to cues depends on past consumption. “Wanting” a drug is not the same as “liking” the drug; see Robinson and Berridge (1993, 2001).

• Some patterns of addictive behavior that the model is consistent with: (1) unsuccessful attempts to quit and recidivism even though the short-term, painful withdrawal costs have already been incurred; (2) cue-triggered recidivism; (3) self-described mistakes, even in the act of consuming; (4) precommitment strategies; and (5) the use of behavioral and cognitive therapy. 

• The model involves a consumer who enters each period in a cold state, but who can choose among different lifestyles for that period; each lifestyle has a different prospect of presenting cues, and hence of being forced to mistakenly consume the drug.

Burke, Luoto and Perez-Arce (2014) on Soft and Hard Commitments

Jeremy Burke, Jill E. Luoto and Francisco Perez-Arce, “Soft versus Hard Commitments: A Test on Savings Behaviors [pdf].” RAND Labor & Population WR-1055, July 2014.

• One approach to increase savings is to offer people “commitment accounts,” which make it hard to withdraw funds and which might even result in losses if the saver does not live up to her commitments. It is commonplace for most people to turn down the opportunity to enter into commitment savings accounts. 

• This paper looks at a softer approach, where people are given a convenient way to save money, and are encouraged to do so, but without any commitment. The idea is that more people will find such accounts attractive, perhaps raising total savings relative to both commitment accounts and the status quo. 

• An online experiment is conducted with US subjects who indicated that they wanted to save more. They know they will be given $50, $100, or $500 (usually $50!), which they can receive after a brief delay, or they can save some or all of the money over the subsequent six months. Before they know which amount they are given, they are asked to make decisions regarding saving the different amounts at an annualized interest rate of 30%. 

• The savings options are not the same for everyone, however. Rather, the subjects are randomly selected to either the control – a standard savings account with no withdrawal restrictions – or to a soft or a hard account. The hard account allows no withdrawals until the six months have passed; the soft account is like the control, except that subjects receive subtle, active suggestions to save. Irrespective of the account they are selected for, the vast majority of subjects save some of their experimental windfall. Nonetheless, take-up is highest for the soft account, and the amount initially saved also is highest for the soft account – including among the most impatient savers. 

• After six months, the soft account leads to higher savings than does the control account. Nonetheless, as money is withdrawn from the soft accounts over the six months, the hard account leads to even higher total savings at the end of six months.

Schwartz et al. (2014), “Healthier By Precommitment”

Janet Schwartz, Daniel Mochon, Lauren Wyper, Josiase Maroba, Deepak Patel, and Dan Ariely, “Healthier by Precommitment.” Psychological Science 25(2) 538–546, 2014.

• People find it hard to generate the persistent willpower needed to keep actions consistent with intentions. Features such as diffuse, future rewards from resisting temptation might contribute to this difficulty. 

• Financial incentives have been shown to help with weight loss, quitting smoking, and complying with a medical regimen. They might (but only might) even spur the formation of habits, giving temporary financial incentives a lasting impact. 

• Sophisticated folks are aware of their self-control shortfalls, and might welcome commitment devices. 

• The field experiment involved an existing healthy eating program in South Africa that gives 25% cash back at the end of the month for healthy food purchases. Some participants were given the option of forfeiting their cash back if they did not increase their healthy grocery component by five percentage points. The shoppers had no direct positive incentive to take part, they could only lose money relative to not participating (as in this earlier field experiment). A control group was informed about the possibility of such a commitment contract, but was not offered the option to make the commitment. 

• More than one-third of the households offered the commitment contract chose to join the commitment scheme. They were allowed to drop out after one month, however, and about one in six did drop out. 

• The committed shoppers did increase their consumption of healthier items relative to the non-committed shoppers. The commitment seems crucial for converting intentions into future action. But shoppers nonetheless failed to live up to their commitments on average: “…in any given month only one-third of the committed households met their goal.” 

• The standard ethical query applies: Is it ethical to offer (relatively poor?) people a commitment device when it is more than conceivable that many of them will suffer a loss of funds because they will not fulfill their commitment?

Karlan and Linden (2014) on Savings for Education in Uganda

Dean Karlan and Leigh L. Linden, “Loose Knots: Strong versus Weak Commitments to Save for Education in Uganda [pdf].” NBER Working Paper No. 19863, January 2014.

• Low threshold commitment devices (loose knots) might attract more participants, but not lead to as much behavior change as would stronger commitments. 

• A field experiment involved 136 rural or near-rural primary schools in Uganda. Some schools were given a “strong” commitment savings product – withdrawals took the form of vouchers that could be used only to purchase school supplies; other schools received a weaker (loose knots) version, where withdrawals could be made in cash and spent on anything. 

• Students deposited more money in the soft commitment account than in the hard commitment account, which led to more school supplies purchased and better test scores. 

• The savings account employed a double-locked lock box kept at the school, with the funds transferred to a bank at the end of a trimester. The accounts earned no interest, despite significant inflation. The savings decisions were taken in public. 

• When disbursements were made from the accounts, a small market was set up at each school to sell school supplies, tutoring, etc. With vouchers, this market provided the only legitimate use for the savings (other than re-deposit.) 

• Parent outreach does not affect savings, but it helps direct saved funds towards education. The loose knot (cash) accounts with parent outreach formed the preferred treatment in terms of incentivizing the purchase of more school supplies. 

• This commitment savings intervention was very costly to implement relative to the increased savings.