Pragma Synesi – interesting bits

Compendium of interesting bits I come across, with an occasional IMHO

How to help your good self to triumph over your bad self

A good way to lose weight, or quit smoking.

Carrot and stickK

Feb 7th 2008 | NEW YORK From The Economist print edition

How to help your good self to triumph over your bad self

WHEN two tubby graduate economics students at the Massachusetts Institute of Technology decided to lose some weight, they employed the profit motive to help them succeed. Dean Karlan promised to pay John Romalis $10,000 if he did not lose 38lb (17kg) by an agreed date. Mr Romalis made a similar pledge. If both failed, the one who failed by least would get $5,000. Happily, both succeeded in shedding pounds not dollars, and the initial deal was replaced with a “maintenance contract” which allowed either economist to show up unannounced to check the weight of the other and collect $5,000 for each pound over an agreed weight.

That was in 2002. Last month, a still slim Mr Karlan, now a professor at Yale, launched stickK.com, a company based on this contractual approach to achieving tough personal goals. It is based on Mr Karlan’s beloved behavioural economics, which combines insights from psychology and economics to explain how people make decisions. The traditional rational economic model of decision-making cannot explain why people are tempted to do bad things in the short run (smoke, eat too much) that they know have long-term consequences they do not want (cancer, obesity). One behavioural-economics theory is that the (bad) short-term self does not give sufficient weight to the outcomes that the (good) long-term self values most.

StickK tries to change this by using the price mechanism to increase the short-run cost of ignoring those long-term intentions. Go to its website, and you can design a “commitment contract” that will impose an immediate cost if you fail.

For instance, you could commit yourself through stickK to give up smoking, or to reach a certain weight, by a particular date. As part of the typical contract, an independent referee must be appointed to monitor whether the goal has been reached and to inform stickK.

And if the contract is broken? There are various punishments to which stickK’s clients can commit themselves. These range from the mild (having your failure publicised on its website) to the severe (forfeiting serious sums of money—to charity, not to stickK). In their contracts, clients can opt to pay in advance an amount of their choice into a stickK account. If they break the terms of their contract, this will go, according to their choice, to a preferred charity, a charity chosen by stickK, or, to make the incentive not to fail especially sharp, to a charity or cause they hate (within reason: the Ku Klux Klan, say, would be a step too far).

Mr Karlan and the co-founders of stickK, Ian Ayres, a law professor, and a young student entrepreneur, Jordan Goldberg, have already raised $1.2m from an angel investor. They aim to grow fast through online advertising, selling products that help clients achieve goals, and by doing deals with firms to design health programmes. Already, over 1,000 contracts have been signed, with combined penalties for failure of over $50,000. Who says that virtue doesn’t pay?

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March 19, 2008 - Posted by | behaviour, decision making, diet, health | ,

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