The Economics and Egonomics of New Year's Resolutions

If you are like many Americans, you made a New Year's resolution, and, if you are like most of those people, you will have given up on it before the year is half over. Traditional economic analysis would attribute this result to a difference between what was expected and what actually happened. Either the benefit of maintaining the resolution wasn’t as great as expected, or the cost of maintaining it was more than expected. 

While considering benefits and costs is always a good place to start when trying to explain why something happens, this explanation feels incomplete. If it were solely a matter of benefits and costs, we would be far less hard on ourselves when we broke our resolution. Moreover, the difficulty of following through on our intentions probably wouldn’t have been considered an interesting problem by a Nobel laureate. Thomas Schelling, who won the Nobel Prize in Economics in 2005 for his contributions to game theory, postulated in “Egonomics, or the Art of Self Management" that we behave as if we have two selves: The one who wants to achieve a goal, despite its costs, and the one who wants to give up on the goal when faced with those costs. As examples, he wrote that there is "the one who wants clean lungs and a long life and another who adores tobacco" and there is the “one who wants a lean body and another who wants dessert. The two are in a continual contest for control.”

Schelling suggested a classic way to overcome the problem of having two selves: Taking away decision-making ability from the “wayward” self by having the “goal-setting” self pre-commit to certain actions:

1. Locking away a high-calorie treat so that it is not immediately accessible;
2. Setting the alarm clock across the room so that we have to get out of bed to turn it off
3. Pre-ordering a healthy lunch right after breakfast, when an unhealthy choice is least tempting

Since the time that Schelling wrote about these tricks, behavioral economics has provided more insight about why they are useful, and technology has made it easier to implement them. There is an alarm clock that rolls away from you until it is turned off, and there are low-cost safes with time-based locks on them, so that you can lock away a treat until later.

The internet has also made it easier to access tools that boost our resolve. To increase accountability and muster support from his friends, New York Times reporter Brian Stelter tweeted everything he ate in 2010 and ended up losing 90 pounds. For those who need higher stakes to follow through, economists at Yale founded stickk.com, where you can specify that money be donated to a charity you don't like whenever you don't meet your goals. (Why not a charity that you do like? Because then your failure of resolve wouldn't be as costly, making it less unpleasant to give in.) The proliferation of location-aware smartphones has enabled apps like GymPact, which pays you for checking in at the gym when you said you would, where the funds come from those who committed to working out but ending up skipping.

Of course, the internet and smartphones have also made the resolution to maintain focus more difficult. We are always only one website or app away from distraction. Fortunately, there are browser extensions, such as StayFocusd for Chrome and LeechBlock for Firefox, that you can use to limit your access to the internet.

Despite all the forces that make it difficult to keep a resolution, there is still a benefit to making one. Research suggests that those who make a formal resolution are 10 times more likely to succeed in changing than those who do not make a resolution. If your goal-setting self makes a resolution this year, I hope you find this blog post helpful when your “wayward” self wants to break it.

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Not surprisingly, psychologists also have a lot to say about keeping resolutions, especially with the growing insight that willpower is like a muscle: in the short term, it gets tired with use, but in the long term, use makes it stronger. This article provides advice based on recent psychological research.