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.

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…

Dickson, Jennings, and Koop (2016) on Domestic Violence and Glaswegian Football

Alex Dickson, Colin Jennings, and Gary Koop, “Domestic Violence and Football in Glasgow: Are Reference Points Relevant?” Oxford Bulletin of Economics and Statistics 78(1): 1-21, 2016 (pdf).

• Football matches can provide emotional cues that might spur domestic violence; in particular, an unexpected loss might lead to more violent incidents. Such was the finding from a 2011 article that examined some American football games, where betting odds provided the reference point for outcome expectations. 

• Dickson, Jennings, and Koop examine the Scottish Premiership (soccer), and domestic violence in the Glasgow area from January 2003 until October 2011. Two long-term and fierce rivals, Celtic and Rangers, are based in Glasgow. Together, they are referred to as the “Old Firm.” 

• Old Firm matches (that do not have extremely “unexpected” outcomes as the rivals are always competitive with each other) are associated with increased domestic violence (by some 36%); other Scottish Premiership matches, not so. (Another event that brings a significant increase in domestic violence is the Christmas/New Year’s holiday.) 

• Unexpected outcomes only are correlated with increased domestic violence for a restricted set of matches that are very important in terms of final league standings. That is, football-related loss aversion is not generally a big deal for Glaswegian domestic violence.

Dahl and DellaVigna (2009) on Movie Violence and Crime

Gordon Dahl and Stefano DellaVigna, “Does Movie Violence Increase Violent Crime?” Quarterly Journal of Economics 124(2): 677-734, May, 2009 [pdf].

• Experimental evidence and survey responses indicate a rise in aggressive behavior after exposure to movie violence. Dahl and DellaVigna examine evidence from an ongoing “natural experiment,” seeing what happens to reported crime after a blockbuster violent movie.

• Assaults fall on the evening (both before and after midnight) that a violent movie attracts a large audience.

• For every million people watching a strongly violent or violent movie, assaults fall by more than 1% that night; after midnight, the fall is closer to 2%. A popular violent movie reduces assaults by about 1,000 per weekend. (Still, an unseasonably cold day would lead to an even greater fall.) 

• The mechanism seems to be that the criminogenic population selects into watching the movie rather than, say, drinking. Note that most movie houses do not serve alcohol. So for the evening of the movie watching, there is “voluntary incapacitation.” For the post-midnight hours, presumably there is a carry-on effect from the relatively salubrious hours in the cinema. 

• Even though violent movies reduce crime by enticing violence-prone individuals into the comparatively peaceful setting of a cinema, there would be an even further reduction in crime if these same people watched a non-violent movie. The laboratory evidence isn’t wrong, but it does not capture what appears to be the most important element of the movie violence-crime connection, the incapacitation of likely criminals as they watch movies. There is no evidence for an overall cathartic effect from watching violent movies.

Kremer and Levy (2008) on Peer Effects and Alcohol

Michael Kremer and Dan Levy, “Peer Effects and Alcohol Use Among College Students.” Journal of Economics Perspectives 22(3): 189-206, Summer, 2008.

• The data come from a large state university that randomly assigns some roommates. The finding: males assigned roommates who drank in high school had a lower GPA. 

• By using high school characteristics, we can rule out that the GPA connection stems from common shocks to the roommates. 

• For the most part, studies don’t find much support for the idea that academic characteristics affect the academic performance of roommates. Kremer and Levy likewise find no effect of academic background or social background on roommate academic achievement. 

• The GPA decline for males is about .27 if the roommate drank in high school. The drop is especially bad for weak students, and for those who themselves drank in high school, and it’s much greater in the second year (though you are no longer roommates). 

• Roommates who are not randomly assigned, but who choose each other, do not see falls in GPA from roommate drinking history. 

• Reducing the drinking of one student can reduce the drinking of others. But collecting non-drinkers in substance-free housing will concentrate the drinking students, with a negative effect on overall GPAs.

Adam Oliver on “Nudging, Shoving, and Budging”

Adam Oliver, “Nudging, Shoving, and Budging: Behavioural Economic-Informed Policy.” Public Administration, 2015; doi: 10.1111/padm.12165.

• There is no accepted definition of libertarian paternalism or nudges. As a result, many policies are described to be behavioral despite having little claim to that moniker. You should worry about being pro-nudge, because the nudgers might go way beyond what you think you are signing up for. 

• Oliver claims nudges should present “no” burden on the rationals while attempting to correct an internality. 

• Loss aversion is not something you choose, but something you are, like a White Sox fan [Okay, the White Sox are not actually mentioned in the article.]

• Libertarian paternalism concerns internalities, respects liberty, and employs behavioral means. The British Behavioural Insights Team goes beyond nudging: sometimes it addresses externalities, as with organ donation. Having teenagers mentor toddlers to reduce teen pregnancy is not an obvious behavioural policy, nor is the provision of information about the drinking habits of one’s peers. 

• Straight out paternalism, without the libertarian adjective, is a “shove”; smoking bans are shoves. 

• A “budge” is a behaviorally informed regulatory intervention, designed to counter the misleading nonsense thrown up by profit-seeking corporations, like the payments made by candy makers to grocery stores for check-out line product placement. 

• Maybe it is the opportunity to choose, and not the utility derived from the choices, that is the real measure of welfare.

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.