Financial rewards for weight-loss and exercise work…but only if you take the money away at the end for non-performance. Rewards are just not as effective as punishments! [Study: Framing Financial Incentives to Increase Physical Activity Among Overweight and Obese Adults: A Randomized, Controlled Trial] This result is, of course, very consistent with Dr. Daniel Kahneman’s work in behavioral economics, memory, and our perception of happiness. One of the key points is how we assign value on items that we already owe versus those that we are considering acquiring.
Consider your house (if you own one) or your car. Would you sell it for the same amount of money as you would be willing to buy it for? The answer is no! We value what we own far more than other people’s stuff. Our reaction to ownership is emotional. Mathematics of equivalence just doesn’t penetrate how we feel through to our judgement.
Consider the following social incentive program:
At the start of my weight-loss program, I get $50 to lose 10 pounds over a 6 months period. At the end of that time period, I only lose 4 pounds. I have to give back $30 — that’s the deal, right? I now have only $20.
What if instead I was paid $5 for each pound I lost? I lose 4 pounds in 6 months, I get $20.
The final amount of money I get is the same in both situations, but how I feel about the outcome differs. At the end of the program, I am much happier to get $20 then to lose $30. Because that $50 in the first scenario felt like my money! I am willing to work harder not to lose my money than to get a bonus.
And this is exactly what Dr. Patel’s et. al. study published in the Annals of Internal Medicine found. In a 13 week intervention, participants were offered financial rewards to walk 7000 steps per day. The participants were divided into 4 randomly-assigned groups:
- Control — no intensives for walking, just data collection on the number of steps per day an individual took;
- Gain Incentive — individuals got paid for meeting their goals each day;
- Lottery Incentive — individuals might get a reward if the goal for the number of steps was achieved;
- Loss Incentive — individuals were paid up-front and then penalized if they underperformed.
The Loss Incentive walked more! People really hate to part with their money.
This study is about social engineering for good — finding incentives that work. So next time you are giving your kids allowances, make sure to take away money AFTER they don’t finish their chores. Just holding, feeling ownership for a short time, changes our perceptions and our emotional response to essentially the same reward.
Consider applying the same social hack to grades — everyone gets an A at the start of the class, and then continuously loses grade points for non-performance. Or everyone gets rewards for meeting their water (or energy) rations for the year upfront, and then pays out when more used. And so on…