BY RICHARD SEBAGGALA
All of us at one point in time have acted against our better judgment and engaged in behaviour that we regretted later yet we could have avoided it with adequate forethought.
The question is: How can we train ourselves to avoid such behaviour in future?
Economists have for a long time been interested in understanding why people act the way they do. Oneofthegreatestinsights of early economists’ thinking was that individuals are intelligent, logical, selfish and always weigh costs against benefits, exhibiting time- consistent preferences.
However, examples abound to demonstrate that most people are time-inconsistent in their choices. For example, when joining university, students commit to study hard. However, upon arrival, they cannot resist the temptation to engage in behaviour that distracts them.
Such time- inconsistent behaviour is prevalent throughout the different areas of personal lives like marriage, work, dieting, weight loss programmes, quitting addictive behaviour, saving, among others.
Economists define such decisions as time- inconsistent preferences. This is when there are many different “selves” within decision makers, with each “self” representing the decision maker at different points.
Hoch and Loewesterin (1991) define a time- inconsistent choice as one that would not have been made if it had been contemplated from a removed, dispassionate perspective, representing a temporary adjustment in tastes.
The explanations behind people acting inconsistently over time include the following:
The earliest economists (Marshall, 1980 and Bass, 1974) argued that time- inconsistent behaviour arises from unpredictable changes in moods and tastes. However, recently economists have challenged this thinking. They argue that time- inconsistent behaviour is driven by people’s choices between myopic and foresighted preferences. Generally speaking,
people are shortsighted in their decisions because they disregard the future rewards in favour of immediate ones. For example, at the beginning of the semester, a student can say with confidence that he/she will read hard. However, in the course of the semester, temptations like sleeping and clubbing come in the present leaving only a slim probability to excel academically in the future.
The other cause is procrastination. Economists argue that people put off some duty for the future with no tangible reason.
The procrastinator is usually simply lazy and is mostly associated with naïve people. Therefore, it is important to work on the areas that trigger laziness such as distractions, unhealthy eating and limited exercise.
The other way to fight procrastination is visualizing the ultimate fruits of long-term efforts such as happiness and satisfaction that will ultimately happen if one focuses on positive behaviour instead.
The third explanation is loss aversion, which implies that people prefer avoiding losses to making gains. The saying goes that, “Losses loom larger than gains.” For instance, it is more difficult for most of us to adapt to a less privileged style of living from one of luxury, than vice-a-versa.
Therefore, since most decisions have both losses and gains, people’s tendency to prefer avoiding losses to making gains will imply that most of us are not risk takers (risk aversion).
Robert F. Kennedy said, “Only those who dare to fail greatly can ever achieve greatly”, and T.S. Eliott said, “Only those who risk going too far can possibly find out how far they can go.” One has to be a risk taker to achieve success in life.
In conclusion, the beginning of change is acknowledging whether the foregoing lifestyle applies to you. And whether the necessary steps to eradicate the inconsistency can be taken.
The writer is a lecturer in the Faculty of Business and Administration