Loss Aversion, Greenpeace, and Health

Here’s a pattern of tactics I realized have something in common. They all work by presenting a threat. Loss aversion, as it can be called, can be more motivating – using the stick instead of the carrot.

## Example 1 From Greenpeace:##

The ranking criteria reflect the demands of the Toxic Tech campaign to the electronics companies. Our two demands are that companies should:

1) clean up their products by eliminating hazardous substances;

2) takeback and recycle their products responsibly once they become obsolete.

I talked to someone at Greenpeace about this (we could get in touch with him again for an interview) and he said the strategy here was to always be targeting the company in last place. All the companies will improve because they fear being outed as “the worst” by Greenpeace.

##Example 2: Loss Aversion for Weight Loss from NPR (excerpt):

Would you stick to your diet if your savings were at stake? Two professors are betting the answer is yes. The winning formula may include signing a contract to enforce the bet.

Yale professors Ian Ayres, an expert in contract law, and Dean Karlan, a behavioral economist, both entered weight loss bets. And both won. They took off the weight they pledged.

Karlan describes a recent effort in the Philippines to help smokers quit. Through a local bank, the smokers signed agreements to put their cigarette money into savings accounts and agreed to urine tests. At the end of six months, if the tests showed they had nicotine in their system, their savings were lost — given to charity.

“It was wildly successful,” says Karlan. People who took up the account were 30 percent more likely to stop smoking, at least temporarily, than the smokers who didn’t participate in a savings agreement.

The results exemplify what behavioral economists call “prospect theory,” or loss aversion.

“What we know about incentives is that people work a lot harder to avoid losing $10 than they will work to gain $10,” explains Ayres. “So something that’s framed as a loss is really effective at changing behavior.”

They have a theory and they know it works because they have stats.

##Example 3: Smoking Habit Auction##

On Monday 31 March, 2008, the highest bidder will receive a contract written by my lawyer, Chris Hoquard at Dominion Law, in which I hand over my right to smoke to them, and agree to pay them a forfeit of NZ$1000.00 per cigarette that I smoke at any time following the auction’s closure. I will donate the proceeds from the auction to the Cancer Society of New Zealand.

Again, success and failure here are clearly defined.

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