Socially Efficient Commitment Devices

Monday, March 4, 2013
By dreeves

image of a burning dollar bill

StickK popularized the idea of the anti-charity [1] as a commitment device. Another [Update: former] Beeminder competitor, Aherk, offers to publish embarrassing photos of you on Facebook to ensure you don’t fall prey to akrasia. Another clever idea — proposed by Jennifer Hamon on Akratics Anonymous — is to set up a script to automatically delete important files if you don’t keep making progress on a writing project.

I hate all those ideas.

“StickK’s anti-charities seem the most egregious, actively harming the world.”

Take my thoughts on this with a huge grain of salt, given my conflict of interest, but I really dislike commitment devices that destroy things — either information or other forms of value. StickK’s anti-charities [2] seem the most egregious, actively harming the world. I’m certainly motivated to not allow the world to become a worse place, so it’s not that it would be ineffective as a commitment contract. Just that I’m also motivated to prevent things that don’t make the world worse in any way, like paying money to a third party (who’s not evil).

At the other extreme, I’m skeptical of commitment contracts where the beneficiary is a (good) charity because what kind of jerk is motivated to not give to charity? If you set an amount that you really can’t afford then that can work. Unfortunately no one seems to ever have the guts to do that.

So, yes, this is all an elaborate rationalization for Beeminder getting all the money! I’m serious though, I think the economics / psychology / behavioral economics are sound. Commitment contracts should be socially efficient and deleting even files on your own computer isn’t!

In fact, if you set up a commitment device where you destroyed your computer if you didn’t stay on your yellow brick road then I actually would call that kind of immoral, even though it was your own computer. Because you could’ve instead given it away and not wasted anything. Burning money, in contrast, doesn’t waste anything (except some paper). [3]

So I’m fine with the hypothetical money-shredding alarm clock, even though no one would ever actually use one of those. (There are some clever phone apps that make you jump through various hoops to make the alarm turn off that might be useful though.) And I guess, if I’m to be true to my principles, Aherk is fine too, from a social efficiency point of view, as long as your friends would get amusement out of your embarrassing photos commensurate with your own embarrassment.

The whole point of a commitment device is to set up an automatic potential penalty that punishes you in some way. Just make sure that the amount of harm caused to yourself is counterbalanced by a greater or equal amount of benefit to someone else, leaving the world no worse than you found it!


 

Footnotes

[1] The idea originated, as far as we know, in 1984 in John Bear’s The Blackmail Diet where the author describes his own commitment contract to lose 70 pounds in a year or pay $5k to the American Nazi Party. Thanks to Daniel Akst’s We Have Met the Enemy where we learned that and many other fascinating things about the first world’s ironically biggest problem, self-control.

[2] Bethany points out that this is a clever trick for getting more bang for your buck: it increases your utility for that amount of money if it is otherwise going to benefit something horrible such as the Puppy Kicking Society of North America. But at what cost?!

[3] UPDATE: I’m adding this footnote in 2020 because no one understands what I mean when I say “literally burning money isn’t wasteful”. It’s admittedly confusing. “Burning money” is used idiomatically to mean being maximally wasteful and destroying real value. But imagine you do a bunch of work for me and I pay you by writing down IOUs on pieces of paper and then the next day you set fire to those pieces of paper. My reaction would be “gosh, thank you for obliterating my debt!”. Burning government currency feels intuitively different but it’s really truly not. It’s very weird and ironic for the government to object to people burning their IOUs.

I know half of you are still looking at me like I’m hovering upside down and speaking backwards, so here’s another way to look at it. The money issuer (the government or the fed or whatever) fully accounts for money getting lost or accidentally destroyed and they just print more to keep the total physical money supply at the right level. Not only is that very little skin off their nose — they can spend pennies printing stacks of hundred dollar bills — but they can then actually spend those bills! (Or sell them to banks at face value, whatever.) Burning money is fundamentally the same as sending it to the government. The actual waste — from a society-wide perspective — of literally burning money is just the quite low cost of replacing it.

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