The New Year is a nice time, symbolically, to make a big change in life but practically it almost never works out that way. From a Boston Globe article, I learned that 80% of New Years resolutions are broken. Frankly, I'm surprised that as many as 20% are accomplished! People don't change much on the eve of December 31 to the morning of January 1 (perhaps except for the addition of a hangover) so I suspect much of the 20% accomplished are trivial ("remember to call my mom on her birthday this year") and require single actions, not sustained effort.
Resolutions are puzzling from both an economic and psychological perspective. To an economist, there's no reason why one day should be intrinsically more favorable than another to make a positive life change. If drinking less or exercising more would be a good idea, why wait until January 1st to start doing it? On the other hand, a psychologist might wonder why people set themselves up for failure so often. If 80% of resolutions ultimately amount to lying to yourself, why persist in encouraging such a mentally unhealthy activity?
The real question: if most resolutions would be good things to accomplish, why are people so bad at keeping them? It's easy to just dismiss New Years resolutions as "cheap talk" which people utter in order to sound socially acceptable and make themselves feel better, with no intent of actually following through. But, I think there's a little bit more to it than that.
In their book, Willpower: Rediscovering the Greatest Human Strength, Roy Baumeister and John Tierney offer a pretty good explanation for why New Years resolutions have such a short shelf-life. When someone creates a list of challenging self-improvement tasks, they are probably very optimistic about their future state of mind. But, realistically, we only have so much willpower to divide between different goals that require self-control. Willpower, in this regard, is somewhat like a muscle: when it is used lots in a short span of time it becomes fatigued, so later acts of self-control are more difficult. Creating a list of resolutions is like weight-lifting beyond the mind's capacity; it can't dedicate enough mental power to accomplish all the goals at once, so in the end none of them are met. As a result, creating a big list of dramatic changes is one of the least effective ways to actually modify your own behavior.
A better strategy is to choose one area that seems most important and focus on moderate improvements. Also like a muscle, willpower can become stronger when exercised. Picking reasonable goals gives a sense of accomplishment when they are completed, making it easier to stick with other changes in the future. In other words, build up capacity slowly to avoid a painful sprain of the willpower muscle (although if I stretch this analogy much further, I might suffer a tear in my credibility). Introducing the concept of willpower to economic thinking means we don't have to dismiss failed self-improvement projects as mere cheap talk, and can instead look more realistically at the human mind and its practical limitations.