Economics Can Help You Keep Your Resolutions
You'll have a better chance of success if you use a commitment device
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As the calendar rolls over each year, millions of people around the world embark on a journey of self-improvement, setting goals ranging from fitness to finance. Conventional wisdom tells us that most of these resolutions are doomed to fail, often within the first few months. But is there more to this story?
If you’re focused on seeing your goal all the way through to the end of the year, you can rely on a variety of acronyms to set your goals like SMART, BHAG, and OGSM. You can also rely on advice from successful public figures like Warren Buffet, Sahil Bloom, James Clear, or Betsey Stevenson. I’ve always liked the way thatsets his goals each year:
Contrary to the typical narrative, many people do improve in different areas of their lives, even if they don’t stick to their resolutions for the entire year. You may not lose the 20 pounds you’re hoping for, but losing 10 pounds is still an improvement. If you’re dead set on achieving the full goal, why do these well-intentioned commitments often lead to disappointment, and how can we turn this around?
The Roots of Resolution Failure
The New Year is a popular time to set goals, but most of the payoffs from those changes happen well into the future. The reason so many of us fail to achieve our resolutions lies in behavioral economics, specifically in concepts like present bias. Imagine you’re trying to lose weight. It requires upfront effort, but the visible results won’t show for weeks, maybe months. Or think about saving money. The costs are immediate, but the joy of what you’ll do with those savings is a distant dream.
This is present bias—our tendency to overvalue immediate rewards and undervalue future benefits. It’s a deep-rooted psychological pattern affecting everything from our eating habits to retirement savings. It’s often more satisfying to binge-watch our favorite TV show than to commit to our long-term goals of exercising or reading. It doesn’t help that we’re usually overconfident with our goals as well, which makes it even harder to be successful.
So, how can we steer behavior toward long-term goals? Enter incentives and nudges. Incentives can be tangible, like money, or intangible, like personal satisfaction. Aligning these with individual values makes long-term goals more appealing. Behavioral nudges, popularized by Nobel Laureate Richard Thaler, are subtle environmental tweaks that make the preferred choice easier. For example, restructuring a kitchen to make healthy foods more accessible can significantly alter eating habits.
Ensuring Incentive Effectiveness
These are voluntary strategies with consequences for failing to follow through. If you’re more intrinsically motivated, there are an abundance of apps to help you stay on track with your desired goal. If you need more extrinsic motivation, you may want to consider using a commitment device. Effective commitment devices align short-term actions with the long-term goals you’re setting and have two major features: they are voluntarily adopted and they tie consequences to follow-through failures.
Platforms like StickK or Beeminder let you wager money on your success. Fail, and your money might go to a friend, a charity, or support a cause you dislike. The potential loss of money, especially when it may go to supporting a cause you dislike, can be a powerful motivator to stay on track.
Social commitments, like announcing goals to your network, create a sense of obligation. This approach uses an element of shame to encourage you to see your goals through to the end. We often see this approach on social media as people post weekly status updates about their progress.
But increasing the use of commitment devices isn’t straightforward. Many of us shy away from setting measurable goals, knowing we might not follow through. Commitment devices require specific, quantifiable targets to gauge success. It’s much easier to announce we will “lose some weight” this year rather than set a specific goal of “losing 20 pounds” by the end of the year. Rethinking how we set goals and understanding the economic principles that influence our behavior is the first step to making those resolutions stick this year!
The average resolution lasts just 3.74 months [Forbes]
Approach goals are more likely to be accomplished (59%) than avoidance goals (47%) across a wide range of potential resolutions [PlosOne]
Filmmaker Alice Wu successfully employed a commitment device to complete the screenplay for The Half of It by writing a $1,000 check to the National Rifle Association of America (an organization she doesn't support) and asked a friend to mail it in if she didn't complete the screenplay in five weeks [Vanity Fair]
Almost three-quarters—71% —of people who took part in Dry January said they slept better and 67% had more energy [Today]