Sunday, 29 January 2012

Short-term vs long-term

When I first came to the city my first job was as an Emerging Markets Analyst in an Investment Bank. Fresh out of uni with an Economics degree I thought I knew a fair bit about the workings of a countries economy, so was shocked to find I didn't understand half of what was being said to me by my colleagues in the first week!!

Fortunately for me Ms Haribo was in the team and took me under her wing. Over the next couple of months she taught me how to calculate seasonally adjusted growth rates, whilst I coaxed her off her three-Americanos-a-day habit. By the time she left for Japan we were firm friends!!

Since then I've always deferred to her knowledge of Economics and she to my knowledge of nutrition, which is why, when I had the idea of doing some blogs on the application of Economics to developing healthy habits, I thought I'd ask for her help!! As usual she's risen to the challenge and written a few blogs on the subject, the first one of which is below. I'll post teh rest over the next couple of weeks and hope you enjoy them as much as I have!

Miss Haribo here!

January is almost over and I bet quite a few of us have already given up on those New Year resolutions to stop drinking and do a painting course, while giving up give up cheese and going to the gym more. Congratulations to those to haven’t but to those who have it’s only normal.

Sometimes our short-term self sabotages our longer-term goals. Or in other words we make decisions today that our future self would prefer us not to make. I’m sure we’ve all regretted some on the couch eating crisp sessions, or having a few too many drinks at an after-work drinks. This is what economists like to call time inconsistency, and often stem from hyperbolic preferences, which mean that we discount the near future incredibly heavily.

It’s ok for the couch or the gratin dauphinous to win occasionally (I believe 20% of the time), but what can we do to stop ourselves sabotaging our future selves? The answer is commitment devices.

These aren’t as difficult as you might think. Just telling someone about your goal and asking them to monitor you will help, as can arranging to do exercise with a friend. For example, I often make ‘gym dates’ with a work colleague early in the morning, this way I know she’s watching me and that I’m watching her.

Miss Haribo.

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