Matt Nolan

Commitment and the gym

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Everyone I know says they want to spend more time at the gym – myself included.  However, as an economist I’ve learnt to look past what people say and look at what they actually do.  In essence, people really just wish that a previous version of themselves (them in the past) had gone to the gym and got in shape – and that they could reap the fruits of this labour now.

However, this is not the whole story.  We know that people are present biased, or that the discount hyperbolically.  Given this, people genuinely do wish they could go to the gym more in terms of maximising their lifetime happiness or loosing weight for which they also use fat burner supplements- but they can’t force the current version of themselves to get around to doing it.

That is where the genius of this gym comes in (ht Marginal Revolution).  By charging people more if they don’t work out, the gym makes it more costly to not work out – if the cost is large enough, people will then go and work out.  As a result, an individual can join this gym and commit to working out – as if they don’t they have to bear this cost (other examples: ,,,,,,,).

Now usually, adding a cost is a bad thing – but in this case, if the pre-commitment is working, the cost is never realised.  There are two ways to think about this to make it easier:

  1. The current version of yourself is putting a negative externality on the future version of yourself (which is not fully internalised because of you present bias) – by putting in this charge you are forcing the current version of yourself to internalise the externality, and as a result this changes behaviour.
  2. Over time there are a set of actions that will make you happiest – however, at a given point in time you can’t commit to doing the action that will cause this (because of your present bias).  By imposing a cost on doing the “wrong” action you can shift your own choices towards the “correct” action.

When it comes to pre-commitment and the ilk I love the idea of voluntary pre-commitment devices, that people can choose to opt into.  The more business gets involved with this, and the more government supports the institutional arrangements that allow this, the better.

However, remember that having a pre-commitment mechanism that people can opt into is very different to “forcing” people to do something.

In the gym example, we could “solve” the “problem” of people not going to the gym by forcing them to by offering free percussion massagers sessions afterwards – we could even use “evidence” by basing the amount we force people to go on surveys.  However, such a “solution” is forced on a myriad of different people who would make different choices.  Furthermore, as we said at the start, some people will just say they want to go more – when in reality they don’t, they just wish that a the previous version of themselves had done it so they could free-ride on the fitness (which is a durable good).

Matt Nolan

Economists and Facebook events

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Yes, this is how a general economist analyses social situations:

An invitation is an option that can be exercised at any time before the date of the party.  The people who did not respond immediately are waiting to decide whether to exercise the option.  If she’s a true friend then this is because she has a potential conflict that would prevent her attending.  …  When she is sure there is no conflict she will say yes.

The other people are hoping for an excuse not to come.  Once they get a better offer, manage to schedule a conflicting business trip, or otherwise commit themselves, they will send their regrets.

…

Those who want to come but haven’t gotten out of their conflict give up and send their regrets. Those who hoped to get out of it but failed to come up with a believable excuse give up and accept. … So, a simple measure of how much your friends like you is the proportion of acceptances that arrive in the final days.

It isn’t that economists are ignorant of social realities – we might just spend a little too much time analysing what is going on, a reality that is obvious when you see us uncomfortably twitching around 😉

I would note that, in the case of Facebook, the situation is a little different now.  Previously you would see invites on the home page – so you had to make a conscious decision everytime you logged in (so about 24 times a day).  However, now you receive an email and don’t hear about it again until close to the date – as I get so much spam I don’t often notice events until close to the date.

So I’m sure I’ve got a valid excuse for not accepting until the last minute 😉

Update:  Eric Crampton has a great example of this.

Matt Nolan

Links for today

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In praise of clear targets for monetary policy:  Money Illusion.

Trade-off between gaining knowledge and creating knowledge, at the margin:  Worthwhile Canadian Initiative.

These are both excellent posts that I agree with.

Matt Nolan

A note on moral vice

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Apologises in advance for this heavily value ladden post.  I am touching on infinitely busy (again), I’m very tired, and I’ve been listening to “too much” Irish music.  As a result, I’m posting what is in my head rather than proactively trying to find an economic issue to write “objectively” about – as this is easier, and it still involves getting a post done 😀

When forming my value judgments regarding “moral vices”, I like to listen to the Dubliners.  Having a proud Irish heritage helps in this regard, and I feel that they raise a number of important points regarding addiction to common commodities I can relate to (alcohol, women, cigarettes, roving).

Listening to their songs recently, two underlying points suck out – points I felt would be useful in informing part of the debate on alcohol regulation.

Read more

goonix

Gambling at the TAB, monopolies and innovation

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I like to place the odd sports bet. In New Zealand I have no official option but to do this through the TAB, which is a state-sanctioned monopoly.

In other countries there are often many competing institutions offering odds on various events, including sports. In fact, there are now many companies that operate across borders in many countries. Recently the best real money casino apps for US players at www.EasyMobileCasino.com started offering sports bets as well as other online casinos.

The lack of competition in the betting market in New Zealand stifles innovation in the betting options they offer. One recent pundit proclaimed the TAB “the most conservative betting agency in the world”. Essentially the TAB has no incentive to innovate, as they know punters have limited ability to legally gamble through other avenues or https://casinos-enligne.fr/.

The TAB have started opening more interesting books on the FIFA World Cup, such as whether Lionel Messi will score more goals during the campaign than the All Whites combined (Messi the hot favourite at $1.55!).

If the gambling market were officially opened up to competition I suspect we would see a lot more of this innovation in amazing games like bar bar black sheep slots.

*I’m not sure of the legal status of these organisations in New Zealand, although I understand it is possible to open accounts with them (legally or otherwise).

Matt Nolan

The pill, moral relativism, and economics

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“Raquel Welch has blamed the contraceptive pill for the breakdown of sexual morality.”

That is the first sentence from this newspaper article.  Now I have no doubt that the introduction of the pill led to a higher steady state level of promiscuity.  Yet, there is an undercurrent of negativity in the article – suggesting that this is a bad thing.   However, this is not necessarily the case.

This illustrates to me one of the issues that often makes explaining economics, or even trying to do analysis, difficult – moral relativism.  In the current case, the existence of the institution of marriage and the idea of low numbers of sexual partners is seen – in of itself – as a good thing.  People have followed a rule of thumb that the given set of outcomes in the social situation they are the best outcomes.  Anything that in turn undermines those institutions is “bad”.

I use the term moral relativism because that sort of behaviour is indicative of it – what people view as the appropriate set of institutions is based on the set of institutions that are in place at the time.  When we look back at what people believe is “morally right” we will often see rules based on the society they are in not some underlying true prior morality (although I believe that does exist to some degree as well).  As a result, if we try to say that the underlying situation has changed (the pill has turned up) and these old institutions that were optimal are now suboptimal, people get annoyed.

Economics is a great social discipline, because it tries to side-step the issue of moral judgments (and thereby the issues associated with moral relativism) for as long as it can in the process of analysis.  So following a “shock” an economist will try to describe the social elements, the trade-offs involved, the change in choices, how the corresponding change in institutions and choices impacts on future choices, and eventually where the social situation will settle.  Once we understand how the “distribution/allocation” of things changes, we can mix in some value judgments and come to a conclusion.

In the case of the pill, it seems highly believable that the introduction of something that made sex with a lot of partners much less costly lead to a lot more sex – that is fine.  However, we can’t conclude whether this is a good or a bad thing until we introduce value judgments to our analysis.

Those that are anti the pill will say that the introduction of the pill lead to greater promiscuity, but also made it more costly for people who didn’t want promiscuity to not be promiscuous – as a result, people who would have preferred a low sex but married social equilibrium may be worse off.  This analysis is fine, but it does rely on a set of value judgments.

Personally, I think the final steady state from the introduction of the pill will end up with more mature and responsible discussion around sex and relationship.  We can hardly say that the institutions of marriage and religion led to “magically optimal” outcomes in these matters – and people that bemoan the loss of such institutions are often looking through very rose tinted glasses.  Social interactions between people are supposed to be difficult, and I am sure individuals and the institutions that surround them will evolve in interesting ways given the pill.  However, my belief that the ultimate outcome will be better is again based on my set of value judgments.