The Economics of Self Control

Shirlee Wohl March 14, 2012 0

“Tomorrow. The best time to start a diet is always tomorrow.”

This is how Jody Sindelar, Professor at the Yale School of Public Health, introduces her research on self-control. A spe-cialist in behavioral economics, Sindelar is especially interested in the economics and policy implications of various addictions including substance abuse, alcoholism, and overeating.

By conducting numerous field studies and analyzing national survey databases, Sindelar has contributed to the growing field of behavioral economics – a field combining human psychology and economics. In a recent publication, Sindelar explores how self-control affects tobacco use and responsiveness to tobacco taxes in adolescents. Contrary to previous studies promoting tobacco taxation, Sindelar shows that individuals with low self-control are less likely to respond positively to cigarette taxes than those with more willpower.

The Economics of Addiction

While addictions are often considered medical or psychological conditions, smoking is driven particularly by economic fac-tors. The tobacco industry wants to make as large a profit as possible, and therefore companies will do anything to increase revenue and the number of consumers. For example, cigarette companies are known for using cartoons to target children, as well as increasing nicotine content to make cigarettes more addictive.

Anti-smoking campaigns also use economic theory to support their lobbying and policy decisions. One of the strongest arguments against smoking is that it is an incredibly costly habit. A person that smokes a pack of cigarettes day can spend around $3000 per year on cigarettes alone, while also drastically increasing his or her chances of developing a costly illness such as lung cancer.

Given the already high expenses of both nicotine and healthcare, public health initiatives seek to make smoking even more expensive by supporting a tobacco tax. This tax would provide another economic reason for smokers to quit and would also deter young people from picking up the addictive habit.

These economic arguments are surely powerful, but not powerful enough to convince the remaining 60 million American who still light up every day. Therefore, money cannot be the only factor in an individual’s decision to start or continue smoking. People, in other words, are not entirely rational, so behavioral economics, which, Sindelar says, “assumes you are rational but also human,” can be used to demonstrate how other factors such as self-control affect smoking habits.

Public health initiatives often focus on the economic incentives to quit smoking.

To Quit or to Consume?

Neo-classical economic theory assumes that once a person makes a decision, he or she will stick to it. In reality, however, there is a “present bias,” the tendency to continue the routines of the present instead of making changes. Closely related to the present bias is the idea of time inconsistency: a person may want to not be smoking in a month but might want that cigarette now. In other words, Sindelar explains that every person has “two minds. One is you want to quit and the other is you want to consume.” While many smokers say they are going to quit, “the best time to start is always tomorrow.” The present bias, however, often means tomorrow never comes.

In order to diminish the present bias and finally reach tomorrow, behavioral economists have tested the effectiveness of small payments that make quitting in the present more appealing. In theory, paying smokers small amounts or providing other economic incentives to stop immediately helps tip the balance to favor quitting now rather than later.

Two brochures advertise different reasons for quitting smoking: staying healthy and saving money.

Self Control and Tax Policy

Inspired by the potential of payments to affect the decisions of smokers, Sindelar began research on the actual effectiveness of tobacco taxation on individuals with varying amounts of self-control. More specifically, her studies have shown that “sin taxes,” such as a tobacco tax, “may increase welfare by assisting individuals with self-control problems and trouble resisting temptation.” However, the effectiveness of such taxes may vary based on the amount of self-control a person possesses.

For individuals with high self-control, a tobacco tax may be effective because it offers an immediate incentive to stop smoking. Because these individuals have the willpower to follow through on their decisions given a strong enough incentive, taxation could be significantly effective in decreasing cigarette consumption.

The anticipated outcome is less certain for individuals with low self-control. Because these people may be aware that they do not have the self-control to quit in the future, a tax could provide an incentive to not start smoking at all. Alternatively, this group might not respond to taxation at all because the economic incentive is not enough to help them resist temptation.

Additionally, young people almost never purchase the first cigarette they smoke; cigarettes are usually obtained from friends or stolen from parents. Therefore, taxation would have no economic effect on first time smokers, and must therefore be effective in convincing already addicted smokers (especially those with low self-control) to quit.

Determining the responsiveness of low self-control groups to tobacco taxation is noteworthy from a public health policy standpoint. If research shows that these individuals respond positively to such a sin tax, then there is a strong political argument for implementation of the tax. But if the low willpower group is largely unresponsive, taxation could be detrimental to this already disadvantaged population. Because cigarette use is already highly correlated to those with lower incomes and education levels, taxation could have a severely negative effect on a group of people who are already struggling.

Finally, understanding the responsiveness of high and low willpower adolescents is perhaps even more important than analyzing the same data for adults. Cigarette companies tend to target young people, who are the most at-risk for starting to smoke. Therefore, research must show that young people with low self-control are especially responsive to taxation before it is implemented as an anti-smoking initiative.

Although 70% of smokers want to quit, it is difficult to convince them to start now rather than later.

Measuring Self Control

While it is undoubtedly useful to know how various groups of adolescents respond to tobacco taxation, the study proposed above faces an obvious obstacle: how do you measure self-control? Like any personality trait, self-control is not simply present or absent. It is seen in varying degrees in the human population.

To tackle this problem, Sindelar and her research partners used two proxies for self-control using national survey data already available. They found that the answer to the question, “Do you go with your gut when you make decisions?” most accurately predicts willpower. This question most accurately represents a person’s impulsivity, which psychologists have associated with higher self-control.

The responses given by adolescents to a second question, “What do you think are the chances that you will live to age 35?” served as the second proxy for determining willpower. This question addresses time preferences; those who anticipate living longer value the future more and are therefore more likely to exhibit the self-control needed to keep them alive.

Using data from the National Longitudinal Study of Adolescent Health, Sindelar and her research team, including Yale Professor Jason M. Fletcher, determined that those surveyed could be divided into two different groups: a large group of adolescents with higher self control and a smaller group of adolescents with lower self control.

By statistically analyzing data from the two constructed groups, Sindelar and Fletcher determined that the larger group (higher self control) was sensitive to the tax rate. However, the smaller, low self control group was largely unresponsive. They concluded that taxation would not be effective in preventing adolescents from smoking and instead might actually harm the welfare of this group. Not only would this be a burden on the smokers individually, but the related increase in smoking-related illness would increase healthcare and welfare costs nationally.

Message Framing: The Future of the Anti-Tobacco Campaign

With the knowledge that tobacco taxes might not reduce cigarette consumption in the most at-risk groups, Sindelar is exploring new ways of changing smoker behavior. A current research project revolves around “message framing.” This method involves sending the same anti-smoking message in a variety of different ways, such as determining if individuals are more responsive to health or economic arguments.

To accomplish this goal, Sindelar conducted a field study in New Haven, Connecticut by putting up brochures in three different low-income locations: health clinics (health-oriented), check cashing sites (economics-oriented), and supermarkets (neutral). Two types of brochures were distributed: ones encouraging “getting healthy” and others encouraging “saving money.” By analyzing the number of brochures taken from each location, it is possible to determine the message framing most effective in specific locations.

Sindelar also hopes to expand her message framing research to online studies that will reach more people. In doing so, Sindelar will continue to expand the anti-tobacco public health initiative, as well as adding to the data available on alleviating addictions, ultimately providing for a healthier tomorrow.

About the Author
SHIRLEE WOHL is a Junior in Calhoun College double majoring in Molecular Biophysics and Biochemistry and Environmental Studies. She currently works in the Rhoades Lab in the Department of Molecular Biophysics and Biochemistry.

Acknowledgements
The author would like to thank Professor Jody Sindelar for taking the time to explain her past and current research, and for providing additional reading materials and images.

Further Reading
Fletcher, Jason M., Deb, Partha, and Sindelar, Jody. “Tobacco Use, Taxation and Self Control in Adolescence.” NBER Working Paper No. 15130. July 2009.
Fletcher, Jason M., and Sindelar, Jody L. “The Effects of Family Stressors on Substance Use Initiation in Adolescence.” Review of Economics in the Household. 22 Dec 2010.
Kenkel, Donald, and Jody Sindelar. “Economics of Health Behaviors and Addictions: Contemporary Issues and Policy Implications.” The Oxford Handbook of Health Economics. Oxford: Oxford University Press, 2011. 206-31.
Modi, Manisha. “National Longitudinal Study of Adolescent Health.” Surveys measuring well-being. 14 Sept 2000.

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