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3 unusual facts about Commitment device


Commitment device

An early example of a commitment device is the tale of Odysseus ordering his men to lash him to the mast of the ship so that he would be able to hear the sirens' song without jumping overboard.

Dubner and Levitt give the example of Han Xin, a general in Ancient China, who positioned his soldiers with their backs to a river, making it impossible for them to flee, thereby leaving them no choice but to attack the enemy head-on.

A commitment device is, according to journalist Stephen J. Dubner and economist Steven Levitt, "a means with which to lock yourself into a course of action that you might not otherwise choose but that produces a desired result".


Financial fragility

Policy-makers stated policy of no bailouts in the event of a crisis is not credible, so in the absence of a commitment device banks will take on excess risk.


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