Newall, Walasek, Hassanniakalager, et al. (2023) on Gambling Risk Warnings

Philip W.S. Newall, Lukasz Walasek, Arman Hassanniakalager, et al., “Statistical Risk Warnings in Gambling.” Behavioural Public Policy 7(2), 219-239, 2023 [pdf available here].

• Warning messages in the gambling arena, when they are provided, tend to be generic and do not facilitate comparison across various betting options.

• Theoretical loss = (house edge) times (total amount bet), or, the expected price of a bet or bets; for instance, in European roulette, the house edge is 2.7%, so the theoretical loss of betting $100 is $2.70.

• Theoretical loss is a long-run concept and not salient for bettors, while their recent gambling experience is quite salient. But given that most of the social harm from gambling is tied to bettor losses, theoretical loss is a decent metric for the social risks of alternative wagers. 

• Expected prices (or theoretical loss) of gambling tends to be hidden from gamblers – but it would be possible to provide (sometimes approximate) theoretical loss information, or other related metrics such as house edge. (For games where player behavior affects the odds, the risk could even be personalized based on player characteristics.) Presumably gamblers (all else equal) would be dissuaded from forms of gambling with high theoretical losses. 

• Should gambling warnings also note volatility and the slow convergence to theoretical loss levels?

• Gamblers cannot identify vast differences in expected price on seemingly identical games.

• Some jurisdictions mandate “return to player”-style info; but players often do not understand it. And sometimes the info is hard to find and to see.

• Should the automatic reinvestment of small wins into a player's available gambling account be banned?

• In sports betting, longshots and “exact score” or other prop bets tend to have higher house edges – and these are heavily advertised.

Ainslie (2021) on Willpower

George Ainslie, “Willpower With and Without Effort.” Behavioral and Brain Sciences 44, e30: 1–16, 2021, pdf here. [This "target" article attracted 26 commentaries, which can be found here. Ainslie's response to the commentaries is here.]

• The basic framework: a Smaller, Sooner (SS) option versus a Larger, Later (LL) option. 

• The SS option is tempting in the moment, even if the LL option is valued more highly at other points of time. 

• Why is SS tempting? Perhaps visceral factors take over, or hyperbolic discounting does its thing. “Preference for the [SS] option is often temporary…[p. 2].” 

• Two different mechanisms, suppression and resolve, are commonly associated with willpower. Habit is a third willpower-adjacent mechanism that can be distinguished from resolve (or from a lack of resolve). 

• Suppression involves avoiding (or blocking or ignoring) the re-evaluation of the two alternatives while waiting for the LL. (Cue the marshmallow test!) Suppression “is necessarily unstable [p. 1],” a “game of keep away [p. 5].” Suppression requires attention, and thus precludes other uses of mental resources that might themselves be rewarding. 

• Resolve refers to sticking with the original valuations by cognitively changing the stakes. “Recursive self-prediction” seems to be a leading approach to resolve, and underlies personal rules. Resolve “is intent that is maintained by an enforcement mechanism [p. 5].” One resolve mechanism is to raise the stakes by viewing giving into temptation not as a one-time deviation, but as the start or continuation of a long series of lapses. (Suppression can be one device for building resolve.) 

• Hyperbolic discounting can be a basis for why people choose the LL alternatives when making category-wide choices, and why they try to bundle individual choices into those larger categories. 

• Scale mismatch makes it hard to overcome current temptations – what would be the harm of eating this tempting dessert? (p.5) The harm lies in undermining the credibility of your weight-control plan. So, there is value in viewing your current choice as a test case. 

• There can be significant value in (legalistic?) distinctions to permit occasional deviations, so that you can give in to temptation to a degree without destroying the credibility of your long-term plan. (What happens in Vegas...)

• "Resolve becomes effortless to the extent that you are confident of maintaining it [p. 8]."

• Habit is a “routine simplification of action [p. 2]” which is not the same as resolve. With habit, the issue is moved out of the choice domain, behavior becomes arational. Ainslie distinguishes routine habits (like showering in the morning) from good habits ("preserved by resolve" and put at risk by unexcused lapses) and bad habits (repeated impulsive behaviors).

Leitzel (2021) on Regulating Cocaine

Jim Leitzel, “Double Defaults: Behavioral Regulation of Cocaine.” Journal of Behavioral Economics for Policy 5(1): 7-12, 2021 [pdf here]. 

• Can we protect against the dangers of excessive or highly risky cocaine use without imposing the huge costs that accompany cocaine prohibition? 

• Yes, we can! We can offer some protection against diseased or impulsive decision-making, without posing a large barrier to “rational” cocaine use. 

• We can manage the supply side like alcohol, perhaps, or prescription drugs, but… we also can “nudge” people towards rational cocaine-related behavior. 

• We can take advantage of the surprising power of default options. 

• The First Default: You are Not Eligible to Purchase Cocaine. 

• If you are of age, you can choose to override this default of ineligibility.

• Pass a test, pay a fee, acquire a cocaine buyer’s license; behave well or you will lose your cocaine buyer’s license!

• The Second Default(s): You Can Only Purchase Cocaine in Moderate Doses.

• Prices, Quantities, Waiting Periods – the default settings on all of these are aimed at enforcing modest consumption. The waiting period involves ordering your cocaine purchases in advance, by three days, say. 

• At some cost (time, money), you can override these default terms for more liberal access to cocaine (if you have a record of unproblematic cocaine-related behavior); alternatively, you can opt-in to more stringent rules, at low cost or even some subsidization. Want to only be allowed to purchase cocaine on weekends? – great, you can impose this restriction, and the suppliers will enforce it.  Want to have a cocaine-free February? Great, you can put in a no-purchases-during-February rule, and the sellers will enforce it.

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.

Sachs (2018) on “America’s Health Crisis and the Easterlin Paradox”

Jeffrey D. Sachs, “America’s Health Crisis and the Easterlin Paradox.” Chapter 7 in World Happiness Report 2018, available at https://worldhappiness.report/ed/2018/.

• In the US, “income per capita has more than doubled since 1972 while happiness… has remained roughly unchanged or has even declined.” (The Easterlin Paradox lives on in the US of A...)

• Some culprits: obesity, substance abuse (particularly with opioids), and depression

• Aggregate factors that influence cross-country SWB include: health; social support networks; personal freedom; social trust; and generosity

• The US displays declining life expectancy! Drug overdose deaths are a part of the story

• Some 38% of US adults are obese: added sugar and snacks are among the suspects. Corn subsidies promote the consumption of high-fructose corn syrup

• The obesity/depression circle: "Studies have found that obesity is a significant predictive factor for subsequent depression, while depression is a predictive factor for subsequent obesity [p. 151]." 

• There's also a screen time/depression circle, while video games and social media provide new sources of addiction

• Mental illness and depression remain the major determinants of well-being. In the US, "There is significant evidence of a major, long-term, and continuing epidemic of clinical depression...[p. 153]." 

• Behavioral Economics Outlines also has outlined a contribution by Professor Sachs to the 2019 World Happiness Report on addiction and unhappiness  in the US. Incidentally, the 2021 World Happiness Report, co-edited and with other contributions by Professor Sachs, is available here. (All nine of the reports that have been released to date can be found here.)

Sachs (2019) on Addiction and Happiness

Jeffrey D. Sachs, “Addiction and Unhappiness in America.” Chapter 7 in World Happiness Report 2019.

• In the US, the Easterlin paradox continues to appear: "the average life evaluation in the United States, as measured by the Cantril ladder, has declined during the past dozen years, from 7.2 in 2006 to 6.9 in  2018, despite ongoing U.S. economic growth [p. 124]."

• Sachs hypothesizes that the US is in the midst of an addiction epidemic – with rising unhappiness and depression as consequences. 

• The addiction epidemic includes alcohol, tobacco, and other drugs, of course, but also the internet, food, sex, exercise, work...  

• Co-morbidities are common 

• Causes of the increase in addictions are hard to identify precisely, but there are many candidates: current life conditions, inequality, marketing (and designing more addictive goods, such as slot machines and cigarettes), failure to sufficiently regulate industries such as opioids and sweetened foods and social media...

• "The U.S. has had, by now, two startling wake-up calls: back to back years of falling life expectancy and declining measured subjective well-being [p. 130]." Better public policy is desperately needed, and directions to go are outlined in the Global Happiness and Well-Being Policy Report, 2019.

Allcott, Lockwood, and Taubinsky (2019) on Soda Taxes

Hunt Allcott, Benjamin B. Lockwood, and Dmitry Taubinsky, “Should We Tax Sugar-Sweetened Beverages? An Overview of Theory and Evidence.” Journal of Economic Perspectives 33(3): 202-227, Summer 2019.

• Some US cities, and many nations, tax beverages with added sugar; often such drinks do not receive the favorable tax treatment otherwise provided to groceries, too

• In the US, consumption of sweetened beverages falls with income, and the top 20% of consumers drink a lot of soda

• Associated health risks include weight gain, type 2 diabetes, and cardiovascular disease

• Fiscal externalities abound throughout the health care “system," so someone's unhealthy behavior is in part paid for by others. [Nonetheless, I am very wary of justifying policy on the basis of such fiscal externalities, in part because they seemingly justify any draconian measure. Your lack of exercise is costly to me! You must be coerced to exercise more and to eat in a more healthy way! Perhaps our willingness to provide subsidies for those in health crisis is predicated on the notion that we don't ask too many questions of how they got in such dire straits.] 

• Sugary drinks also present the potential for internalities, perhaps emanating from poor information or present bias or addiction or some other rationality shortfall

• The monetary incidence of a soda tax is likely to be regressive; do the internality benefits reverse the full incidence of such a tax? (That is, those who consume the most will pay the most tax, but (presumably) also receive the lion's share of benefits in the form of better health down the road from reduced soda consumption.)

• Soda tax revenues can be earmarked for programs benefiting people who pay the taxes, but if those programs are desirable, they should be funded anyway, and not have their funding dependent on a single dedicated revenue source. 

• Perhaps 1-to-2.1 cents per ounce is an “optimal” soda tax?

• Lessons? (1) Focus on the externalities and internalities (therefore…); (2) target those consumers who present the largest ex- and in- ternalities; (3) Implement the tax in terms of grams of added sugar; (4) Diet drinks and fruit juices are another story; (5) Be sophisticated about incidence; (6) Reduce avoidance through statewide (not municipal) taxes; and... (7) Reasonable soda taxes probably bring net social benefits.

• Here's a previous outline of an article on the sweetening of diets.

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.

Sugden v. Sunstein on Nudging, Round 2: Sunstein's Turn

Cass R. Sunstein, “’Better Off, as Judged by Themselves’: A Comment on Evaluating Nudges.” International Review of Economics 65(1): 1-8, March 2018.

[Round 1 here; Round 3 here]

• In trying to improve wellbeing, individuals’ judgments of their own welfare are a central metric. This metric is complicated, however, if people have different judgments before and after a nudge, say. 

• Sugden argues that two potential interpretations of “as judged by themselves” (AJBT) are flawed, one by applying only to relatively rare self-control issues, and the second by allowing individual preferences to be sacrificed to the whims of nudgers. 

• Sugden's title asks if people really want to be nudged towards healthier living. The empirical answer is “yes.” 

• AJBT is not our method to rule out charges of paternalism, but rather, to limit the coercive element of paternalistic acts – like a GPS, we want to improve “navigability,” so people can better serve their own interests. Nudges are about means, not ends. 

• Reminders (such as text messages) serve people’s pre-nudge preferences -- likewise with information provision, as with calorie counts. Other nudges can change behaviors in a manner that the nudged individual endorses after-the-fact, but not before, such as a mechanism to dissuade texting while driving. 

• With self-control problems (akrasia), nudges might help to bolster Dr. Jekyll (planner) at Mr. Hyde’s (doer) expense. Sunstein asked folks online if they had a self-control problem: the majority said yes. And programs to ends addictions are quite popular. 

• Yes, preferences can be formed in the process of elicitation; for instance, people might stick with, and endorse, any of various default settings. Then nudgers are forming preferences, but AJBT limits what nudgers can do. 

• To summarize, some nudges serve ex ante preferences when they increase navigability; some help with (widespread!) self-control shortcomings; and some contribute to preference formation, but in a manner that still respects after-the-fact preferences.

Moschion and Powdthavee (2018) on Drug Use and Happiness

Julie Moschion and Nattavudh Powdthavee, “The Welfare Implications of Addictive Substances: A Longitudinal Study of Life Satisfaction of Drug Users.” Journal of Economic Behavior & Organization 146: 206-221, February 2018. [This outline is based on the pre-publication version, pdf available here.]

• People in general seem to have difficulty in predicting what will make them happy.

• It may be that drug users mispredict the utility that they will get from drugs, in contrast to the rational addiction approach. So, the authors look to see if people who start to use drugs sometime in the previous six months are happier or less happy. If they are less happy, then this suggests (but by no means proves) that drug use is not rational, but results from mispredictions of the hedonic payoff from drug use.

• Mispredictions of future utilities might stem from focusing illusions or projection biases. If you are feeling blue today, focusing illusions and projection biases might tilt you, excessively, in the direction of drug use.

• A higher future price of the addictive good lowers current utility for rational addicts, but increases it for mispredicting addicts, even though both “types” of addicts respond to the future price increase by decreasing current consumption.

• Some (but not all) previous work has found that higher cigarette taxes or public smoking bans have been associated with increased subjective well-being for (predicted) smokers. [Even sure-fire evidence that ex-smokers are happier than they were when they were smoking does not undermine rational addiction theory: rational addicts know that they will be happier if they give up smoking, they just find the costs of quitting to be too high to justify the transition.]

• The longitudinal, bi-annual data comes from a housing insecure Australian population, 2011-2014, with n exceeding 1,100. The life-satisfaction question is of the 0-to-10-scale, “all things considered” variety. This is the dependent variable, while the main independent variables concern past, current, and future substance use. This sample is more than four times as likely to smoke as the average Australian – but is less likely to engage in heavy drinking.

• The data reveal that daily smoking is quite persistent over six-month periods, and relatively easy to initiate. Weekly illegal drug use is not very persistent, though cannabis consumption is quite persistent.

• Lower life satisfaction seems to precede daily smoking, daily pot use, and weekly illegal drug use, with the illegal drug use result being most robust. Current (high) consumption of any of the substances, including alcohol, seems to lower current happiness. Weekly street drug use is similar to getting a divorce, in terms of life satisfaction. The negative effects of illegal drugs tend to be worse for women and for the less educated.

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…

Shakespeare on Habit Formation and Addiction

How use doth breed a habit in a man!

(Two Gentlemen of Verona, Act 5, Scene 4, Line 2149; a variation of this quotation introduces  “A Theory of Rational Addiction,” by Gary S. Becker and Kevin M. Murphy, Journal of Political Economy Vol. 96, No. 4 (Aug., 1988), pp. 675-700).

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

Good night- but go not to my uncle's bed.

Assume a virtue, if you have it not.

That monster, custom, who all sense doth eat

Of habits evil, is angel yet in this,

That to the use of actions fair and good

He likewise gives a frock or livery,

That aptly is put on. Refrain to-night,

And that shall lend a kind of easiness

To the next abstinence; the next more easy;

For use almost can change the stamp of nature…

(Hamlet, Act 3, Scene 4, Lines 2562-2571) 

Alemanno (2015) on “Nudging Healthier Lifestyles”

Alberto Alemanno, “Nudging Healthier Lifestyles: Informing the Non-communicable Diseases Agenda with Behavioural Insights.” Chapter 14 in A. Alemanno and A. Garde, eds., Regulating Lifestyle Risks: The EU, Alcohol, Tobacco and Unhealthy Diets, Cambridge University Press, 2015.

• The European section of the World Health Organization has begun an initiative to combat “lifestyle” non-communicable diseases: those associated with tobacco, alcohol, and goods high in salt, sugar, and fat. 

• Regulations that commonly are applied to lifestyle goods include mandatory information disclosure; marketing limitations; taxes and other devices to reduce availability. 

• Behavioral economics-style nudges fit well with lifestyle issues. They tend to be low cost and preserve individual choice. Lifestyle nudges might include disclosure rules; default settings; and, simplification. For instance, the extremely graphic photos required on cigarette packs, and nutrition fact panels, are nudges of a sort. 

• The European Union (oddly) is requiring that cigarette packs not disclose tar, nicotine, and carbon monoxide content. The rationale is that such information might lead smokers to think that some cigarettes are less harmful than others. (There is some evidence that consumers smoke low tar and nicotine cigarettes more intensely, undoing any relative health benefits.) 

• Thaler and Sunstein’s “publicity principle” (borrowed from John Rawls, building on Kant) is that governmental nudges must be supportable if everyone is informed about them. If people will be upset if they were misled, even if the misleading resulted in better choices for them, then the misleading is wrong. 

• Much of the evidence for nudges comes from the laboratory, and might not work in the real world. Or, a nudge might work at first, but then become less effective over time. Notice that marketing experts think that nudges work, however.

Sayette et al. (2008), “Exploring the Cold-to-Hot Empathy Gap in Smokers.”

Michael A. Sayette, George Loewenstein, Kasey M. Griffin, and Jessica J. Black, “Exploring the Cold-to-Hot Empathy Gap in Smokers.” Psychological Science 19: 926-932, 2008.

• The cold-to-hot empathy gap is the notion that people (when in the cold state) underestimate the extent to which visceral factors will impact their future decisions (made in the hot state). 

• The experimental set-up: smokers know that at the next gathering they will be in a craving state. They are asked to precommit to a willingness to pay (wtp) to accept craving (in the form of delayed access to a smoke). Some participants are asked for this wtp when they are craving, and others are asked when they aren’t. 

• In session 2, now with everyone in the hot state (craving), they are given a chance to revise their wtp. 

• Results: people in the cold state in the first session revise upward their wtp in the second session: they seem to suffer from a cold-to-hot empathy gap. The cold group also seems to underpredict the depth of their future cravings.

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.

Loewenstein (1996) is “Out of Control”

George Loewenstein, “Out of Control: Visceral Influences on Behavior [pdf].” Organizational Behavior and Human Decision Processes 65: 272-292, March 1996.

• People can make choices that are mistaken, and make them in full knowledge, at the time of choosing, that they are making a mistake. This disjunction between perceived self-interest and behavior is caused by intense visceral factors such as cravings, “drive states” (hunger, thirst, sexual desire), moods and emotions, and pain. 

• While rational choices require that visceral states be taken into account, many types of self-destructive behavior seem to involve an excessive influence of visceral factors on choices. Indeed, some intense visceral factors seem to preclude “decision making” – no one chooses to fall asleep while driving. 

• Sales people, con men, cults: all take advantage of visceral factors. They tend to apply pressure for immediate action – visceral factors fade over time. 

• People under the sway of intense visceral factors tend to narrow their focus. Addicted people narrow their focus to the addictive good; people become more self-centered. 

• Loewenstein’s seven propositions amount to: “visceral factors operating on us in the here and now have a disproportionate impact on our behavior [p. 276].” Alternatively, the same factors, past or future, or experienced by someone else, are underweighted, despite substantial experience with visceral factors.

• Quasi-hyperbolic or other non-exponential discounting approaches have two significant limitations: (1) people seem to have such preferences only with respect to certain kinds of choices; and, (2) time delay is not the only feature of a choice situation that seems to involve impulsivity. Physical proximity and sensory contact, for instance – the smell of cookies! – also play a role. 

• Almost any cue associated with a reward can produce an appetitive response – especially a priming dose. 

• Vividness (such as terrorist attacks) affects decisions. Does vividness alter subjective probabilities, or does it intensify the emotions associated with thinking about the outcome? 

• Though visceral states have an undue influence on behavior, people are not fully sophisticated about the extent to which their own future (or past!) behavior will respond to visceral forces. A recovering alcoholic might underestimate how difficult abstaining will be if he goes to the office Christmas party. 

• Rational addiction is wrong because it doesn’t fit the facts – e.g., addicts should buy in bulk to save money on their long term habit; further, the “rapid downward hedonic spiral” is “difficult to understand” as a rational choice. So why do people become addicted? In part, because they underestimate the influence of craving and withdrawal on their future behavior. They wrongly believe they will be able to quit. 

• People blame themselves for a lack of past effort because they discount the effect of fatigue. 

• The visceral model suggests a multiple-selves interpretation. The farsighted self is the one relatively immune from visceral factors, and is much more consistent over time than the selves who are influenced by fluctuating visceral factors.

Becker, Grossman, and Murphy (1991) on Rational Addiction

Gary S. Becker, Michael Grossman and Kevin Murphy, “Rational Addiction and the Effect of Price on Consumption [pdf].” American Economic Review 237-241, May 1991.

• This paper provides a capsule summary of what might be considered the non-behavioral model of addiction, the approach to addictive behavior based on full-on standard rational economic choice; the original, fuller treatment is Becker and Murphy (1988). (A still earlier precursor is Stigler and Becker (1977), "De Gustibus Non Est Disputandum.") 

• A consumer's preferences can be described by the utility function U(t) = u[c(t), S(t), y(t)], where y is a non-addictive good, c is an addictive good, and S is the stock of addictive capital; t represents the time period. c(t), therefore, is consumption of the addictive good in time period t. 

• Reinforcement: the higher the stock of addictive capital, the higher the current consumption of the addictive good. The stock of addictive capital S comprises past consumption of the addictive good, though this stock depreciates at a constant per period rate, so if someone chooses to go cold turkey, S would wither away over time.

• Rationality here, as elsewhere, means having fixed, forward-looking preferences. 

• There exists a low-consumption, unstable steady state, as well as a high-consumption (addicted), stable steady state. At a steady state, each period's chosen (optimal) consumption of the addictive good (c) equals the depreciation in S, so that the next period, the consumer wakes up with an unchanged stock of addictive capital -- and hence once again chooses the same consumption c, and so on.

• Implications: long-run elasticities are greater in magnitude than short-run elasticities; current consumption responds to anticipated future price changes; past, current, and future consumption are mutually complementary. These implications can be tested, and the tests (generally on legal addictive behaviors such as smoking) tend to support rational addiction as opposed to myopic (non-forward-looking) behavior. 

• The government cannot help rational addicts by making it harder for them to procure their drug of choice. They freely chose to become addicted, knowing the consequences of their behavior. If they had to do it all over again, they would make the same choices. Addicts might not be very happy, but their other choices were even less palatable to them than was becoming an addict. They probably have high discount rates, however, as the future costs of current consumption of the addictive good did not weigh heavily in their decisions.

Giné, Karlan, and Zinman (2010) on Committing to Quit Smoking

Xavier Giné, Dean Karlan, and Jonathan Zinman, “Put Your Money Where Your Butt Is: A Commitment Savings Account for Smoking Cessation.” American Economic Journal: Applied Economics 2(4): 213-235, January 2010.

• Likely heavy smokers were randomly chosen to be offered a “Committed Action to Reduce and End Smoking” (CARES) savings account. After six months, a urine test was given to indicate whether the saver had given up smoking. A failed test meant that the money in the account was forfeited. A second treatment involved giving smokers aversive cue cards as opposed to the opportunity to open a CARES account. 

• CARES accounts were accompanied by weekly visits from a bank employee to collect additional deposits. Participants were urged to save the money they otherwise would have spent on cigarettes. The deposit collection seemed to be important for getting people to take up CARES. 

• Only eleven percent (a total of 83) smokers offered CARES signed up. Smokers randomly offered CARES were a bit more likely to pass a second, surprise urine test after one year. (That is, most did not quit smoking, but quit rates were about 1/3 higher than for smokers not offered CARES.) The cue cards didn’t help induce smoking cessation, though almost everyone who was offered the cards took them. 

• About 2/3 of CARES clients lost their deposits by failing the urine test. They tended to have lower deposits, though, and may have cut down on their smoking (and spending on smoking), even if they didn’t quit. Is it ethical to offer relatively poor people a commitment savings account in the fore-knowledge that many of them will end up unable to collect their savings?