The Market for Less By Bryan Caplan

Guest blogger James Schneider makes a thought-provoking point about the market for self-control:

The market is often better at abetting good habits than it is at

discouraging bad habits. Imagine an alternate world in which a lot of

people aspired to smoke more cigarettes but they had trouble sticking to

their preferred regimen. In this alternate world, the market might

offer yearly memberships that shipped people a carton of cigarettes

every week. Or, pharmacies might sell a membership pass, where you get a

free or discounted pack of cigarettes every day. These arrangements

would incur a fixed cost, but they would lower the incremental cost of

smoking additional cigarettes — thus helping you to achieve your goal

of smoking more. However, it would be harder for the market to inflate

the future cost of cigarettes in the more likely event that you needed

help reducing your smoking. Imagine explaining to the local Quickie

Mart that higher cigarette prices would further your health goals. What

would happen if Quickie Mart obliged your strange request and promised

to inflate the price of cigarettes that they sold specifically to you?

When cravings struck, you would just buy your cigarettes at a different

store.

At first glance, this is a powerful asymmetry. Indeed, in slogan form you might say, “There is no such thing as a ‘market for less.'” But can this slogan really withstand critical scrutiny?

If you’ve had intermediate microeconomics, the simplest response is to say, “Raising the price of x relative to y is equivalent to lowering the price of y relative to x.” So if you want to make tobacco more expensive relative to non-tobacco, you don’t have to directly raise the price of tobacco. You could instead cut the price of everything else. Using James’ “yearly membership” approach, a store like CostCo could (a) charge a high membership fee, (b) have cheap prices for everything except tobacco, and (c) have regular prices for tobacco – or simply not carry the vile weed.

If you learned your intermediate microeconomics well, however, you might fret about the income effect. The cheap prices for all non-tobacco products effectively enrich you. As a result, you might take your savings and spend it on tobacco, thwarting your personal self-control project. (For a single item, in contrast, this income effect would probably be trivially small).

Is there a substitute that avoids such income effects? Sure. Remember stickK.com? The logic is simple: Precommit to forfeit some money if you buy too much of the wrong thing. Want to smoke less? Fine. Commit to pay $100 for every pack of cigarettes you smoke – no matter where you buy it. Won’t you try to wriggle free? Maybe. But you could also precommit to buy everything with credit cards and send your monitor copies of all your receipts.

The cleaner approach, though, is to base penalties on a periodic objective test. For fatty foods, you could base penalties on the difference between your actual and desired weight. For tobacco, you could base penalties on nicotine or Cotinine levels.

Most people will naturally whine that such tests are “inconvenient” or “intrusive.” Yet this whining helps us ballpark the seriousness of the problem. If you aren’t willing to do a weekly cheek swab to keep yourself on the straight and narrow, how much do you really care about your problem?

The honest answer for the average person, as far as I can tell, is “not much.” StickK.com remains a niche service. The website brags that it has “$17,143,845 on the line” and takes credit for “2,502,250 cigarettes not smoked.” By start-up standards, that’s impressive success. By national or global standards, though, that’s abject failure.

In the end, I come to the same conclusion as James: There’s isn’t much demand for self-control.

The market offers a lot of programs that could easily be tweaked to be

commitment devices. The fact that the market doesn’t offer these

commitment devices indicates that they probably aren’t desired.

How can lack of demand be reconciled with all the excuses about lack of self-control? I once again point to the psychological literature on Social Desirability Bias.

Part of the reason why people who spend a lot of time and money on

socially disapproved behaviors say they “want to change” is that that’s

what they’re supposed to say. Think of it this way: A guy loses his wife and kids because he’s a

drunk. Suppose he sincerely prefers alcohol to his wife and kids. He

still probably won’t admit it, because people

judge a sinner even more harshly if he is unrepentent. The drunk who

says “I was such a fool!” gets some pity; the drunk who says “I like

Jack Daniels better than my wife and kids” gets horrified looks. And

either way, he can keep drinking.

Cynical? Certainly. But when narrow-minded economic theory and broad-minded empirical psychology point in the same cynical direction, the cynics are probably on to something.