Intimately tied to all the merriment and optimism associated with ushering in the new year is the practice of new year’s resolutions. Maybe it’s the picture of starting fresh in a new year, a blank slate to be a better you, but many of us feel heat to come up with an exciting and ambitious resolution to make this year the best one yet.
But if you think about it, what was so dramatically different in our lives from yesterday (December 31st) to today? What makes January 1st the best day to commit yourself to a new goal? What makes today the best day to start and not tomorrow?
On the subject of resolutions, Behavioural Economics has a lot to say about setting and sticking to goals. I’m not touching that hot potato. Instead I am asking:
Why January 1st? Behavioural Economics might have the answer.
Mental accounting might be able to explain why we budget our time the way we do. Mental accounting originated to describe how people mentally allocate money to different budgetary categories even though money itself is fungible.[1] It explains why people might not be willing to spend $30 on a meal they eat alone, but will do so with friends because the former comes from the food budget and the latter comes from the entertainment budget. Rajagopal and Rha (2009, p. 774) describe this concept expertly: “a mental account is a psychological account which individuals form to evaluate costs and benefits of outcomes which are later evaluated using the principles of prospect theory (e.g. loss aversion, risk seeking behavior for losses etc.). This leads to the differential ‘‘posting” in accounting parlance of money to different accounts. For example, the loss of a $10 bill and the loss of a ticket which cost $10 could be framed very differently and assigned to different loss accounts (Tversky & Kahneman, 1981).”[2]
What does this have to do with new year’s resolutions? I think we can explain the phenomenon with the mental accounting of time. Time is a limited resource, which makes it valuable.[3] Research has found that people create mental accounts for time, and allocate time differently for different activities – such as work and non-work.[4] The literature also acknowledges that there are differences between perceived time and actual time based on a slew of biases and heuristics of distortion, where "perception and cognition intervene between the decision maker and his objective environment” (Simon, 1959, p. 272).[5] Similar to mental accounting of money - where we get caught up thinking all money is not the same - perhaps we also think that not all time is the same. Days of the week are also treated differently in terms of perception of time – with weekends being associated more closely with leisure, and behavioural decisions following suit.[6] This goes to show we tend to allocate specific activities, and align our decisions with those activities, with specific days. Like the setting of resolutions on New Year’s Day.
Some scholars point to our tendency to delay the start date of accomplishing a challenging goal with hyperbolic discounting. This refers to how people tend to value immediate rewards even if they are smaller than future rewards that might be greater but more uncertain, where people discount future rewards depending on the length of time that separates them from the outcome.[7] The concept points to how people prefer more immediate rewards, and why we often wait until Monday to start our diet, or next month, and instead eat the cheeseburger right now. What is the powerful force behind New Year’s Day that allows us to overcome hyperbolic discounting?
A last piece of the puzzle could be social norms. This is the idea that people feel they ought to do something because others are doing it too.[8] Seeing our friends and family setting goals triggers the sense that we should do it too, and social norms explains why the seemingly "appropriateness" of that particular behaviour motivates us to also participate.[9] Even if we don’t actually see the achievement of others' resolutions, knowing that those resolutions are out there captivates us to join in.[10]
Mental accounting of time and hyperbolic discounting explain why we pick January 1st to quit gobbling up the donuts, and social norms explains the collective excitement to jump on the bandwagon. No comments are being made as to how successful these resolutions will be…
Either way, I wish you good luck with your resolutions… and a happy 2017!
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[1] Thaler, R. H. (1985). Mental accounting and consumer choice. Marketing Science, 4 (3), 199–214.
Note: My mother would like you to know that fungible means mutually interchangeable, replaceable with an identical item. It isn't a type of little mushroom, unlike my made-up definition for it.
[2] Priyali Rajagopal, Jong-Youn Rha, The mental accounting of time, Journal of Economic Psychology, Volume 30, Issue 5, October 2009, Pages 772-781, ISSN 0167-4870, http://dx.doi.org/10.1016/j.joep.2009.06.008; Tversky, A., & Kahneman, D. (1981). The framing of decisions and the psychology of choice. Science, 211 (4481), 453–458.
[3] Jacoby, J., Szybillo, G., & Berning, C. K. (1976). Time and consumer behavior: An interdisciplinary overview. Journal of Consumer Research, 2 (4), 320–339.
[4] Priyali Rajagopal, Jong-Youn Rha, The mental accounting of time, Journal of Economic Psychology, Volume 30, Issue 5, October 2009, Pages 772-781.
[5] Priyali Rajagopal, Jong-Youn Rha, The mental accounting of time, Journal of Economic Psychology, Volume 30, Issue 5, October 2009, Pages 772-781; Simon, H. (1959). Theories of decision making in economics and behavioral science. The American Economic Review, 49 (3), 253–283.
Note: a heuristic is a mental aid involved in learning, self-education, and trial and error - it does not necessarily produce perfect results for goals but one that is sufficient and immediate. The way we systematically make errors in our learning, judgement and decision-making involving heuristics is a key underlying component of Behavioural Economics.
[6] Priyali Rajagopal, Jong-Youn Rha, The mental accounting of time, Journal of Economic Psychology, Volume 30, Issue 5, October 2009, Pages 772-781
[7] Loewenstein, G., & Elster, J. (Eds.). (1992). Choice over time. Russell Sage Foundation.
[8] Cialdini, R. B., Reno, R. R., & Kallgren, C. R. (1990). A focus theory of normative conduct: Recycling the concept of norms to reduce littering in public places. Journal of Personality and Social Psychology, 58, 1015–1026.
[9] Lindenberg, S., & Steg, L. (2007). Normative, gain and hedonic goal frames guiding environmental behavior. Journal of Social issues, 63(1), 117-137.
[10] Goldstein, N. J., Cialdini, R. B., & Griskevicius, V. (2008). A room with a viewpoint: Using social norms to motivate environmental conservation in hotels. Journal of consumer Research, 35(3), 472-482.
Note: This is in contrast to the Theory of Planned Behaviour, which argues that people are motivated to pursue their own self-interests based on a cost-benefit analysis (Ajzen, 1985).
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