Harvard Business School Negotiation, Organizations, and Markets Unit (NOM), Working Paper No. 08-020
Why do we choose instant gratification, even when we know that restraint will make us happier in the long run? This is a consequential question for every member of an organization, from a shirking employee to a CEO who mortgages the future for the sake of a quarterly report. This paper synthesizes recent empirical studies of the “want/should” tension, examining the problem from economic and psychological perspectives and suggesting practical methods of optimizing our decision making. The authors find that people usually make better decisions about the future than they do about the present. For example, imagine that a person was planning his or her meals for the next day; he or she would prudently choose a salad over a cheeseburger. But the next day, when faced with an immediate, visceral choice, he or she might succumb to the cheeseburger. The best solution to this sort of problem is “commitment schemes,” such as long-term gym memberships.
When people make commitments about the future, they are more likely to appeal to their more rational selves. According to the authors, commitment schemes modify people’s behavior more effectively than simple incentive adjustments such as “sin” taxes on cigarettes.