Monday, June 16, 2008

StickK it to me?

My fiancé Nicole has just finished reading the book Nudge by Cass Sunstein and Richard Thaler. As I understand it, it's a about behavioral economics and its application in everyday life. What is behavioral economics you ask? Simply put, it's the study of how human beings actually behave in the real world and how that behavior challenges traditional economic assumptions about rational actors. One example in the book is the new company called which was founded by a lawyer and an economist who specialize in behavioral economics. The idea behind the company is that people have goals that they want to achieve but often have trouble seeing them through. The goal that comes to mind for most people, of course, is weight loss. How many Americans have attempted to lose weight only to fail at their attempt, or to succeed for a time but then fail to keep the weight off? Well, the idea behind is that people would have a better shot at losing weight and keeping it off if something painful were to happened to them if they fail. Specifically, at you enter into a contract to pay money if you fail to achieve your stated goal. You don't pay the money to, but to some other recipient. You can choose to pay the money to a friend or to a charity. But if you pick a friend or a charity that you like, you may not have sufficient incentive to meet your goal. So you can also choose to donate your money to an anti-charity. For instance, if you're pro-life you can donate to a pro-choice organization or vice versa.

Nicole thought this was an intriguing idea and suggested that we try our own contract to loose weight. I dissented vigorously. Unfortunately, I sometimes have this tendency with Nicole where, when she suggests a new idea, I immediately and vehemently say no and list all the things that I think are wrong with her idea. This, quite understandably, agitates her immensely.

In the case of, I find myself intuitively skeptical of the entire concept. Despite the success stories listed on the web site, I have to believe that the people who have successfully lost weight or quit smoking would have done so anyway. Or at least they might have done so with some level outside encouragement that didn't require them to donate money to charities they disagree with.

I did some research on to see what the skeptics might be saying. Tyler Cowen of the Marginal Revolution blog thinks that isn't likely to work. He says, "one group of potential customers doesn't really want to change, the other group is unwilling to give up control." I, for one, probably fall in to both camps. The idea of entering into some artificial, frankly silly, contract requiring me to donate money to groups I don't much like (and right when I'm already going to be feeling bad for not having met my goal) just doesn't have a whole lot of appeal to me. But I also have to admit that I don't think I trust my self-control enough to wager a sufficient sum of money to make my commitment contract really bite. For example, one of the founders of mentions in the FAQs that he wagered $500 a week on his ability to lose 1 pound a week. This is a substantial amount of money for him, as it would be for me. Indeed after three or four weeks of not reaching my goal I would feel compelled to break my contract. University of Chicago Law School Professor Eric Posner (perhaps among others) has questioned whether a contract is actually enforceable. After all, contracts are usually enforceable only when both sides agree to exchange something valuable and it's not clear that is providing anything of value to its users. would argue that it's providing a "commitment service" to its users, but this is, to say the least, a novel legal argument. What's more, at you can select a referee who would tell the site whether or not you've met your goal, but if your referee fails to report for any reason will just take your word for it. Yes you might be able to pick an unbending referee, and you do pay the full amount of your wager upfront ( will dole out the money either back to you or to your chosen recipient) but one can easily see the entire project crashing down the first time someone sues their referee, and for good measure. Ultimately, people who aren't that committed to their contract are likely to find a way out.

So what has this investigation of done for me? Well, it's forced me to question how committed I am to losing weight. I'm not willing to wager a significant amount of money on my ability to loose weight at least in part because I don't think I care enough about weight loss to really force myself into doing it. But I did discover one thing that I am committed to. I set up a contract to pay Nicole $10 a week whenever I immediately say no to one of her ideas or suggestions instead of hearing her out with an open mind. We'll see if can change my behavior. For my sake, I sure hope it can.

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