That’s the clever title of the latest paper from Dean Karlan (one of the founders of StickK.com, who was featured in this New York Times Magazine article yesterday along with my colleague John List) and co-authors Xavier Giné and Jonathan Zinman.
The researchers had surveyors approach people on the streets of the Philippines and offer them the opportunity to open a bank account that paid zero interest. The kicker: all the money deposited would be forfeited if, six months after opening the account, the account holder’s urine test showed evidence of smoking.
It doesn’t sound like much of an offer: zero interest, a good chance you’ll lose any money you deposit, and you have to consent to the embarrassment of a urine test. Still, the power an experimenter yields over subjects never ceases to amaze me — more than 1 in 10 of the people approached actually signed up for the account!
It worked surprisingly well, too. The treatment-on-the-treated estimate suggests that about 30 percent of those who opened an account quit smoking because of the account. That’s a higher success rate than is generally seen among those who try to quit smoking using nicotine patches, etc.
Also, who knew that people in the Philippines wanted to stop smoking? I thought kicking the habit was an exclusively American obsession.
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that last comment sounds kinda racist- like the Filipinos are too dumb for public health initiatives- then again, tobacco industry propaganda dominated public sentiment here up until the 90s- one can only cringe at the amount of marketing which will be pumped into the third world, to push an addicitive drug- indeed, “kicking the habit” is a misnomer for an addictive drug- kicking the monkey of your back is more accurate- it’s not simply inner will modification, but an outside force (support) is also needed to break off from the addiction
Fascinating blog. I’d like to see an article on the economic effects of Pioneer pulling out of the plasma screen production business.
I have to admit that when I read the headline I thought this post would be about buying nice chairs.
My thought was toilet paper.
I hate this discovery because it will mean more companies will abuse the public trust using this ‘experimental marketing’ approach. Look at how companies have abused the ‘Survey’ to the point that most people won’t do them, because they know it’s used more to collect contact information than anything else.
I hope a bank (or better a credit union) in the U.S. sees this, and decides to do something similar, with one change to act as an incentive. A portion of the money lost by those who could not quit smoking would be divided up among the quitters, based on deposit size. The quitters could look at quitting as an investment (beyond just saving from not buying the expensive cancer sticks), meanwhile the banks would skim off the non-quitters money and make interest on loaning out the deposits. Those who couldn’t pull off quitting would be the only losers, though they get to lose twice. There’s some testing logistics, but somehow I think banks would just turn those into profit makers (fees) rather than problems.
Wait, I don’t get it. A person is willing to risk capital in exchange for an inflationary loss at most? I’m confused.
Basically, the expected loss (inflation plus risk to the invested capital) is being judged by these people as a reasonable cost for assistance in quitting smoking. If anybody who didn’t smoke signed up, that would be economically odd, but this is just more evidence that monetary risk is a viable incentive strategy for behavior change.