You’re Wrong To Believe Will Power Cures Laziness (Well, Mostly)
#Story 1
I am reading Nobel laureate Abhijit Banerjee and Esther Duflo's latest book ‘Good Economics For Hard Times’. Unlike the title, I am having a good time reading it.
The couple is famous for carrying out randomized control tests (RCT) to find solutions for different elements of poverty.
The study was conducted in rural Bangladesh with a focus on migrant labourers. Every year, they have a lean season called monga (season on hunger). During monga, people in rural areas have fewer opportunities to get earn. They have a chance to earn more by migrating to urban areas and yet stay back.
In an RCT, a set of people received either of the two- information on benefits of migrating or information plus an envelope stuffed with $11.05 to take care of travelling and two days of staying + food.
A quarter of households who wouldn’t have migrated accepted the offer. And within them, people who received the initial boost migrated the most. Half of them went back during next monga season.
Lesson: Information was not the binding constraint but incentive to act upon the information was.
Derivative: Unless you have an environment designed to elicit the desired behaviour, or at least nudge people towards it, information alone won’t help.
Story #2
This comes from Dan Ariely’s research in Kenya’s largest slum Kibera.
Objective: Get people living in Kibera earning $ 10 a week to save more.
Why? Too many temptations to spend made them borrow at 10% interest rate a week. It soon compounded and made it tough to repay.
What? Randomized control tests were conducted to ask people to save more.
How? They tied up with m-pesa and created a system where they had to text a certain amount to be saved. m-pesa would save that money and invest somewhere. They could remove the money but it was tough and required physical travelling to m-pesa centres.
Different RCTs:
- Some people just got the system
- Some people got weekly reminders to try and save 100 shillings
- A text message reminder addressed by their kids. ‘Please save 100 shillings Dad- from Joseph’
- If you save 100 shillings, we will match 10% of it (Rewarding the behaviour)
- If you save 100 shillings, we will match 20% of it.
- If you save 100 shillings by the weekend, you will keep the 10 shillings that we have deposited. (Playing on loss aversion)
- If you save 100 shillings by the weekend, you will keep the 20 shillings that we have deposited.
- A large coin etched with 24 numbers on the edge was given to the households. They were asked to put it somewhere it was visible in the house. Every week, they had to take the coin, take a knife, scratch the number for that week. Scratch it one way if you saved the same amount or the opposite if the money is less than the minimum amount to be saved.
Results:
Every test contributed to an increase in savings. #4 and #5 had the same effect so did #6 and #7. #3 was as effective as the #4 and others.
But the one that got them to double their savings, to everyone’s surprise, was the etched coin.
Because the coin served as a constant reminder in the environment they live in. In other cases, the savings only went up on the day the message was sent. In the case of the coin, it was an everyday reminder.
Lesson: In the surroundings where temptations to spend chase us, how can we save even if we want to?
The surrounding we live in has to generate the desired outcome. It needs to have cues.
#Story 3
This comes from a study done by Dan Ariely himself. It concerns migrants in North India.
Migrating helps to earn more. So they can save more and send it back home.
But that’s an ideal scenario. Reality is different. Often they are tempted to spend more than they should and thus end up sending less money back home.
Cometh RCTs.
Set 1: One-third of the people were given an envelope with all the earned money at the weekend.
Set 2: One-third got the same amount of money equally divided into 4 envelopes.
Set 3: One-third got 4 envelopes with money equally divided. The only change- the envelope(s) bore the names of their children.
What might have happened?
Set 1 ended up saving the least amount of money. Once you open an envelope, you lose the count of spends.
Set 2 was made to arrive at a decision point after they had exhausted envelope 1 or 2 or 3. Do I really need this to spend? This prompted them to spend less. (Recollect why we binge on Netflix. It removes the decision point where we ask should we spend more time in watching this rather than doing something productive. Someway, serialized shows introduce the decision point by making the next episode unavailable.)
Set 3 used another amazing too. It made them aware of the opportunity cost. So every other envelope I open and spend comes at the cost of my children’s education and their future.
Conclusion
I come back to the title of this article. Look around you. Is there something you think you should be doing and end up acting otherwise? Well, almost.
You have the will-power but when it comes to acting laziness takes over. That’s because you don’t have any environmental cues to do it.
So next time you take a resolution, make sure to create an environment to achieve it.
Source:
- Good Economics for Hard Times
- Dan Ariely’s interview
- Dan Ariely’s Talk at Ford
