As an economist, I would say “of course”! Increasing the price (the reward for weight loss) generally leads to an increase in supply (of efforts to lose weight). However, there is evidence that in some cases, adding a financial incentive can actually reduce effort. For instance, Uri Gneezy and Aldo Rustichini (2000) found that adding a financial penalty when parents were late to pick up their children at daycare lead to an increase in the number of parents who arrived late to pick up their children. As summarized by the Freakonomics podcast, some incentives were “…completely incompatible with money. Like, for example, avoiding the guilt of inconveniencing the day care workers.”
So, does paying for weight loss fall in the traditional economic realm where paying more leads to more effort or the Israeli daycare phenomenon? According to a study by Finkelstein et al. (2017), the answer is the former.
We conducted a parallel-group randomized controlled trial from October 2012 to October 2015 with 161 overweight or obese individuals randomized to either control or reward arm in a 1:2 ratio. Control and reward arm participants received a four month weight loss program at the LIFE (Lifestyle Improvement and Fitness Enhancement) Centre at Singapore General Hospital. Those in the reward arm paid a fee of S$165.00 (1US$ = 1.35S$) to access a program that provided rewards of up to S$660 for meeting weight loss and physical activity goals. Participants could choose to receive rewards as guaranteed cash payments or a lottery ticket with a 1 in 10 chance of winning but with the same expected value. The primary outcome was weight loss at months 4, 8, and 12. 161 participants were randomized to control (n = 54) or reward (n = 107) arms. Average weight loss was more than twice as great in the reward arm compared to the control arm at month 4 when the program concluded (3.4 kg vs 1.4 kg, p < 0.01), month 8 when rewards concluded (3.3 kg vs 1.8 kg, p < 0.05), and at month 12 (2.3 kg vs 0.8 kg, p < 0.05). These results reveal that a payment/rewards program can be used to improve weight loss and weight loss maintenance when combined with an evidence-based weight loss program.
The world of sports also finds that financial incentives lead to weight loss.
The Finkelstein et al. 2017 study did find that weight loss was more persistent after the incentives ended (month 12), but it would be interesting to see if the financial incentives also lead to long-run weight loss multiple months after the incentives had ended. If that was the case, then clearly neoclassical economics could not purely explain the result. If that was the case, once the financial incentives were taken away individuals should go back to their preferred weight. There may, however, be a status quo bias. Getting people to change behavior may be costly and thus financial rewards are needed. Once this behavior change has been made and turned into habit, however, perhaps the cost of continuing the healthier behaviors is lower and this a new optimal weight (which would likely fall between the weight with financial incentives and pre-intervention weight) could be reached.
HT: Marginal Revolution.
- Finkelstein, Eric A., Kwang-Wei Tham, Benjamin A. Haaland, and Aarti Sahasranaman. “Applying economic incentives to increase effectiveness of an outpatient weight loss program (TRIO)–A randomized controlled trial.” Social Science & Medicine (2017).
- Gneezy, Uri, and Aldo Rustichini. “A fine is a price.” The Journal of Legal Studies 29, no. 1 (2000): 1-17.