New year, same you - the problem with New Year's resolutions
The turn of the calendar from 2020 to 2021 brings with it another opportunity to develop New Year's resolutions we have no intention of keeping. I got the jump on this forecast failure recently by joining a gym in December, giving myself a full month to fail before 2021 even began. I am currently going once a week, which given the goal of three times a week, suggests I am two-thirds of the way towards failure. Or one-third of the way towards success if you are a glass-half-full person.
Millions of others will join me over the coming months as gym memberships lapse, diets expand to include the chocolate we swore we wouldn’t touch, and the money we saved gets squandered on a new PlayStation 5.
Why do we magically think the next year will make us any better? What is it about the New Year that encourages people to come up with New Year's resolutions?
Behavioural economics gives us some insights as to why we fail, the short answer is wishful thinking
We already know that diet and exercise are good for us. That smoking is bad. That reading a book once a week will expand our minds.
Simply knowing this stuff, i.e. being educated to the beneficial effects, isn’t enough to change and reform habits. The fact that you have to pay actual, real money for a gym membership that doesn’t get used isn’t enough to make you actually go either.
Behavioural economics studies how individuals make decisions including psychological, cultural and other factors. It tells us that people are irrational and unpredictable, but irrational and unpredictable in predictable ways. That’s a bit of a mouthful, I’ll break it down.
It’s predictable that we fail New Year's resolutions. Several reasons could include:
Planning fallacy - expecting and planning for best-case scenarios e.g. expecting you will have time to go to the gym three times a week
Optimism bias - people’s tendency to believe that outcomes will be positive e.g. that the diet will work, and quickly.
Bandwagoning - jumping on other people’s goals, rather than setting our own. It’s not a coincidence that gyms offer better-value memberships all at the same time during January.
Discounting the future - accepting an immediate short-term reward rather than the larger than long-term reward e.g. watching Netflix beats training for that half-marathon.
Byte Size is a classic example of faulty goal setting - demonstrating the planning fallacy. Despite best intentions to do an article a week this year, we have managed just one per fortnight at best.
Savvy companies, understanding people’s behaviour, can profit by exploiting our irrationality, e.g. by creating a herd effect - ‘thousands of people are subscribing to our new diet programme’. Don’t believe the hype.
Fortunately, behavioural economics also helps us understand how to achieve goals
Commitment is tricky and it's easy to give up on a goal. Behavioural economics tells us why we fail, but it also provides insight to help form new habits and achieve goals. Some tactics that can help us follow-through:
Utilise technology and download apps that support the goal. Tracker apps provide positive reinforcement by telling people how far they have come.
Tell other people the goal to help stay accountable. Failure to follow through in that instance could harm reputation, increasing the stakes.
Do it together and find a team to support you with your goals. People are more likely to commit when they feel others are relying on them or they are in it together.
Structure the environment around the goal to encourage good decision making e.g. not having a vending machine with unhealthy snacks in the office or putting savings in a place they are hard to spend like a term deposit.
Be realistic with your goals, if you’ve never (or rarely) gone to the gym before the odds of going from 0 to 100% are slim.
Often behavioural economic ideas are applied to policy, but they are equally relevant in our personal lives. Happy New Year. Kick ass in 2021.
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