Commitment devices: keeping temptations at bay
July 10, 2008
Please welcome a new guest blogger on SocFinance: Zsuzsanna Vargha
The most interesting concept of the book is the “commitment device”. As Carruthers writes, “’Commitment devices’ make decisions tractable and help to protect individuals from various temptations, including those that produce myopic choices and loss of self-control. To give an example, a hard-drinking partygoer who gives her car keys to an abstemious friend is using a third party to precommit to not driving while drunk. At the macro level, a gold-standard system helps governments resist the temptation to inflate their currency. Sexual behavior and savings offer other indications of the extent of self-control. Commitment devices frequently utilize social structures, conventions, norms, and institutions, and they operate at both micro and macro levels. They are costly and hence not evenly distributed throughout society: evidently one of the privileges of the rich is that they can hire some self-control.
The key problem, according to Offer, is that rapidly increasing affluence can eclipse existing commitment devices and lead to irrational or bad outcomes.” This is interesting because Offer is working from a behavioral economics framework, yet the result sounds much more like Bruno Latour. I am thinking of Latour’s example of the hotel manager in his essay “Technology is Society Made Durable” (In: A sociology of monsters: essays on power, technology and domination, edited by John Law). In very simplistic terms, in Latour’s story the hotel manager is trying to get guests to leave their room keys at the hotel, instead of taking them on their outings (and losing them). The manager tries various methods of combining the key and objects, until he finds one that works: attaching a large weight to the key, which makes it uncomfortable to carry the key. This way the manager succeeded in aligning various actors for his cause: the key, the weight, the guests. The technology of the key-with-weight is thus in fact a network of human and non-human actors. Commitment devices, in this light, are technologies for non-action. Offer calls it selfcontrol.
In any case, the concept points to the other side of technology as enabling action—you also need to work hard and configure technologies to restrict action. This is not new but Offer uses it to argue that prudential action is overridden by growing material well-being. This is because commitment devices cannot make their way to all the places where temptation makes its way. Using Offer’s concept of “commitment device” would be a fruitful approach to work out the overlaps between behavioral economics and actor-network methodologies. This is all the more important since Social Studies of Finance has been inspired by not only science and technology studies but also by behavioral finance. There is a lot to be said about affluence, temptation, and commitment devices, and whether Offer is on the right track by concluding that affluence erodes prudence. I also wonder what the substance of the argument means for finance: commitment devices make prudence possible. At a minimum, the concept could be tried out on topics like risk management, accounting (mal)practice, investing versus gambling, to name a few.