Commitment Devices
A commitment device makes a future choice harder to reverse or attaches a cost to abandoning a goal. People use it to help a long-term plan survive later temptation.
THE IDEA
A commitment device is a choice made in advance to constrain a later choice. In Thaler and Sunstein’s terms, the Planner arranges a consequence that the tempted Doer will have to face.
1. Financial Stakes
The source describes Thaler helping a colleague, David, set a deadline for thesis chapters. Missing a deadline meant a check would be cashed. It also recounts a weight-loss agreement between economists Romalis and Karlan with a $10,000 penalty, followed by weigh-ins to support maintenance.
2. Restricting Access
Christmas savings clubs restrict withdrawals until the holiday period. Voluntary casino self-exclusion similarly limits access to a tempting activity. The useful restriction depends on the goal and on whether it is enforceable.
3. Related Incentives and Defaults
The source also discusses policies such as cigarette and sugar taxes and daylight saving time. These change incentives or schedules, but are not necessarily voluntary commitments made by the person affected. Automatic saving can help a plan continue; it becomes a stronger commitment device when reversing it is difficult or costly.
Markets can support self-control through restricted accounts and commitment services while also offering ways to spend or borrow immediately. Before choosing a device, specify the behavior, the consequence, and who will check whether the commitment was met.
When to use it
Using a gym buddy with a penalty for skipping workouts
Setting up automatic transfers to a savings account that are hard to reverse
Using apps like Stickk.com to commit to quitting smoking with financial stakes
Choosing automatic retirement contributions together with a withdrawal restriction that makes abandoning the savings plan costly.
FROM THEORY TO EVERYDAY LIFE
In practice
David's Thesis Bet
Thaler offered David a deal: write checks for $100 each month, to be cashed if a new thesis chapter wasn't submitted. David finished on time, as the immediate pain outweighed the abstract loss of retirement contributions.
Weight Loss Bet
Economists Romalis and Karlan bet $10,000 each on losing 30 pounds in nine months. Both succeeded, and later used surprise weigh-ins to maintain weight loss.
Christmas Savings Club
A bank account that accepts weekly deposits but prohibits withdrawals until just before Christmas, helping people save despite low interest and high transaction costs.
A MOMENT TO REFLECT
Put it to work.
What is a personal goal where you have struggled with self-control? How could a commitment device help?
Think of a time when you made a commitment to someone else to achieve something. Did it work better than doing it alone?
Why might a Christmas club be more effective than a regular savings account despite worse financial terms?
CONTINUE THE CONVERSATION
Source texts
- Nudge The Final Edition (Richard H. Thaler Cass R. Sunstein)