SEATTLE — Hit the gym, or the couch? Save for retirement, or spend the whole paycheck? Choose the chips, or the rice cakes in the vending machine?
Most people are going for the chips, finds David Laibson, a Harvard economist who presented some of his work on how people make choices at the annual meeting of the American Association for the Advancement of Science in Boston recently.
Laibson’s research consistently finds that people have a terrible time turning their good intentions into action.
And conventional interventions, such as providing education and even financial incentives, don’t necessarily help. For example, Laibson counted only a 0.1 percent increase in employees saving in a 401(k) plan even when study subjects were paid to listen to presentations about the benefits. “So financial incentives and education don’t do it,” Laibson said.
In another study, he gave subjects the choice between eating a piece of fruit and chocolate. He learned if the subjects were promised the food in a week, they would choose the fruit. But if it was a reward to be delivered the same day, they invariably chose the chocolate.
“The problem is the difference between good intentions for the future, and the reward today. If you get the reward today, you give it full weight. A reward in the future gets half the weight.”
In the domain of exercise, this translates into people eagerly paying money for memberships they will rarely use. “If you ask me how many times I will exercise in the coming year I will say 364 times. Just not today.
“The story with our diet, our savings, our exercise is we have terrible follow-through. So what do we do?”
The good news is that his experiments also showed taking even small concrete steps toward a goal significantly increased the chances of meeting it. Even better was to start out in the right place, and have to undo it in order to fail.
Consider the 401(k) savings plan choice again. Laibson found that by putting the study subjects in a retirement plan on an opt-out basis, such that the employees had to sign a form to drop out, suddenly participation rates of those not already enrolled zoomed above 90 percent — and stayed there. Even two years later, rates were above 88 percent. “It makes all the difference if you start out in the right place,” Laibson said.
In another experiment, study subjects were mailed letters encouraging them to have colonoscopy screenings. Just 33 percent of those who received the letter made an appointment. But the researchers found that if they included a sticky note with blanks for a date and time to be filled in by the subject, screening appointments increased to 37 percent.
“Not a huge difference, but all we did was add a few drops of ink to the mailer and it drove participation up by about 10 percent.
“Using nudges, we can transform good intentions into taking actions.”
Which gets us back to the vending machine. Seattle City Councilmember Richard Conlin said he is optimistic that if customers see better choices they will make them. He uses a little of this psychology on himself, keeping salad mix and cut up vegetables in the refrigerator to make it easier to be good when he comes home tired and late from work.
“That is the hardest part, not doing whatever is quickest,” said Conlin, who admitted his downfall is the tasty cheese tucked away in the fridge — no doubt behind the vegetables.