Benefits Now, Costs Later
Immediate effort can discourage actions with delayed benefits, while immediate pleasure can encourage actions with delayed costs. The timing helps explain why people struggle to follow some long-term plans.
THE IDEA
Benefits Now, Costs Later
We have seen that predictable problems arise when people must make decisions that test their capacity for self-control. Many choices in life, such as whether to wear a blue shirt or a white one, lack important self-control elements. Self-control issues are most likely to arise when choices and their consequences are separated in time. At one extreme are what might be called investment goods, such as exercising, flossing, and healthy eating (meaning, healthy foods, and not too much of them). For these goods the costs are borne immediately, but the benefits are delayed. When it comes to investment goods, people tend to err on the side of doing too little. Although there are some exercise nuts and flossing freaks, it seems safe to say most people are not resolving on New Year’s Eve to floss less next year and to stop using the exercise bike so much.
At the other extreme are what might be called temptation goods: smoking, drinking a lot of alcohol, binge-watching old episodes of Friends, and eating jumbo chocolate doughnuts are in this category. We get the pleasure now and suffer the consequences later. (The consequences from binge-watching are the deadlines missed because we were procrastinating.) Again, we can use the New Year’s resolution test: How many people vow to smoke more cigarettes, drink more alcohol, watch more sitcoms, or have more chocolate doughnuts next year? Both investment goods and temptation goods are prime candidates for nudges. Most people do not need any special encouragement to eat another brownie, but they could use some help exercising more.
When to use it
Personal finance: Encouraging saving (investment good) and discouraging impulsive spending (temptation good).
Health: Designing programs that make exercise more immediately rewarding or that make unhealthy food less immediately appealing.
Productivity: Setting up systems to reduce procrastination (e.g., deadlines, accountability) and to make work tasks feel less costly upfront.
Business: Make future subscription charges clear and design reminders or commitments that help customers follow their own plans.
FROM THEORY TO EVERYDAY LIFE
In practice
Exercise as an investment good
Going to the gym has immediate costs (time, effort, discomfort) but delayed benefits (fitness, health). Many people struggle to maintain an exercise routine because the benefits are not immediate.
Binge-watching as a temptation good
Watching multiple episodes of a TV show provides immediate enjoyment but leads to missed deadlines and reduced productivity later. People often continue watching despite knowing the negative future consequences.
A MOMENT TO REFLECT
Put it to work.
Think of an investment good you have been avoiding. What small nudge could help you take the first step?
Identify a temptation good you overindulge in. How can you make its future costs more immediate or salient?
How does the New Year's resolution test reveal whether a behavior is an investment or temptation good?
CONTINUE THE CONVERSATION
Source texts
- Nudge The Final Edition (Richard H. Thaler Cass R. Sunstein)