License To Sin: When Good Behavior Leads To Bad Results

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Most people are taught early to believe in what we might call “momentum  morality”: the idea that good (or bad) actions lead to further good (or bad) habits. Economists and other philosophical types call these feedback loops “virtuous (or vicious) cycles,” and we’re the last to argue against the concept. Such loops do get started, and the ancient Greeks were right to stress the importance of cultivating virtues. But a recent smoking-related study in the journal Addiction reminds us that, sometimes, good behavior can lead to bad—and this tendency is as real in personal finance as it is in health and wellness.

The study that caught our eye was lead by Wen-Bin Chiou, a psychologist at Sun Yat-Sen University in Taiwan. His team gave sugar pills to a group of smokers in that country, leading half to think they were receiving a Vitamin C supplement. All the study participants were then given an unrelated survey to take—and were told that they could light up if they wished. And wouldn’t you know it: Those who thought they had earlier swallowed a vitamin smoked twice as many cigarettes as those who knew they’d been given a simple sugar pill.

These results dovetail with earlier studies outside the health sphere. People who are reminded of their humanitarian qualities, for example, will in some circumstances give less money to charity than people who aren’t similarly primed. Likewise, folks who consciously support gender equality in one context are sometimes more likely to discriminate along gender lines in other contexts down the road.

MORE: (The Blackberry Moral (Or: The Trouble With Too Many Options))

These and many other examples reflect a tendency known as the licensing effect, whereby doing something good or positive makes us feel (often non-consciously) like we have earned the right to do something less good — something selfish, perhaps, or something requiring less discipline. That last point helps to understand how the licensing effect might apply to money decisions. You need only remember a time when you completed a strenuous run or finished a long book—and then treated yourself to an unhealthy snack or mindless TV show. After all, you deserved it, right?

Too often, when we make a smart financial move—when we hunt down a bargain, say, or sign up for a savings plan at work—we reward our effort or wisdom with an impulse purchase or the temporary relaxation of a budgeting rule. Even worse—as we’ve written about earlier—some financial “windfalls” lead us to reward ourselves repeatedly, not only erasing the specific savings that sparked our “license to sin” but actually increasing our marginal propensity to consume (MPC); that is, for a few hours or days, depending on the size of the windfall, we’ll keep spending our “extra money” over and over again.

MORE: (Profitable Nonviolence)

Chiou plans to investigate the kinds of fixes that might help conquer the licensing effect. In the meantime, it can’t hurt and will likely help to remind ourselves—when we find a bargain or boost our 401(k) contribution or otherwise take a positive financial step—that this stroke of good luck or great effort shouldn’t stealthily give us permission to “go easy,” “loosen up,” “relax” or otherwise reward ourselves in a way that undercuts the very hard work and smart thinking we’re celebrating.

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