Say the state has a law making underage smoking illegal. This creates an "Existing legal duty" not to smoke. Such laws are often not enforced because it is costly for the state to enforce them. But a parent or relative might find it easier to detect whether their child is smoking. What effect does the existing legal duty have? Wikipedia explains
The prime example of this sub-issue is where an uncle gives his 17 year old nephew (a citizen of the USA) the following offer: "if you do not smoke cigarettes or marijuana until your 18th birthday, then I will pay you $500" (it is a criminal offense in the US for people under the age of 18 to smoke). On the nephew's 18th birthday, he tells the uncle to pay up, and the uncle says no. In the subsequent lawsuit, the uncle will win, because the nephew, by US law, already had a duty to refrain from smoking cigarettes.
Now the economics: Knowing his uncle will renege, the 17 year old nephew will smoke -- even if he wanted to take contract. Taking this one step farther. Suppose the 17 year old wanted to create the will power not smoke and promised to pay $500 to his least favorite charity if he broke his promise. He can't do that either. The US government deprives him of the right that Obama's budget chief has
Regardless of the data, psychology matters. Orszag has employed this knowledge while training for a marathon.
"If I didn't achieve what I wanted to, a very large contribution would automatically come out of my credit card and go to a charity that I very much didn't support," Orszag says of his training strategy. "So that was a very strong motivation, as I was running through mile 15 or 16 or whatever it was, to remind myself that I really didn't want to give the satisfaction to that charity for the contribution."
He declines to name the charity.
The link is to an NPR interview where the exchange interviewer Andrea Seabrook hears this and tries to get Orszag to reveal the charity rather amusing.
About the strategy of binding yourself Orszag says it's about using psychology rather than economics, and while that may be true it's an idea that comes up in economics -- Thomas Schelling's two selves being perhaps the best example
. But don't forget the excellent R. H. Strotz, "Myopia and Inconsistency in Dynamic Utility Maximization
," The Review of Economic Studies, Vol. 23, No. 3. (1955 - 1956), pp. 165-180 -- and the Odyssey.