Monday, 31 December 2012
New Year’s Resolutions and Behavioural Economics
31st December, the date when we undertake to be better people in the year ahead, normally by promising ourselves that we’ll spend less money, get fitter, lose weight, be more relaxed….eat fewer biscuits.
For the 80% of us who live in urban areas, there’s one New Year’s Resolution that will help achieve all of these: give up owning a car. Can behavioural economics help us stick to our resolutions? First, behavioural economics shows that we are loss-averse: so it’s better to re-frame a decision not in terms of what’s being “lost” (the car), but as what’s being gained (money, fitness, being thinner). Re-framing a loss as a gain makes it much more attractive. Second, humans succumb to the status quo bias, tending to go with the default: if there’s a car parked outside, despite our resolution to walk, we’ll give into temptation and take to four wheels for the next short journey. And thirdly, everyone knows that resolutions are easy to make but hard to stick with – behavioural economists know that a “commitment device” will help the process. For example, one way of not giving into the temptation to splurge on credit cards is to cut them up or hide them. Similarly, it’s a lot easier to eat fewer biscuits if there are none at home. So maybe there’s only one sure-fire way to beat the temptation to get into your car: don’t have one parked outside. Happy 2013!
(Photo of Jammy Dodger from www.tangosquad.com)