Psychological health

Financial Impatience Across the Globe

I’ve spent most of my career so far studying one phenomenon: people’s tendency to prefer smaller, faster rewards to bigger, final rewards. This trend is known as time discount. Whenever I describe it to people, they usually shake their heads knowingly and share examples: getting an extra slice of the pie (even though they know it’ll make them feel bad later), spending money on fun luxury items (rather than saving it for retirement), and paying extra to have their items shipped sooner , and so on.

Therefore, I’ve always assumed that time-reduction—which I’ll also refer to as impatience—was a universal human phenomenon, even though not everyone “underestimates” the future to the same degree. But I don’t just live in estrangement (for example, wstern estudy Inon-industrial sAnd the Dremocratic), but I (Like many others) also tend to do a WEIRD sample search. This means that there has always been a possibility that time discounting is something peculiar that cannot be generalized to different cultures.

for this reason recent study, titled “Globalization of Time Discount” is a big deal. 170 authors, led by Kay Ruggeri of Columbia University, evaluated temporal discounting in more than 13,000 subjects from 61 countries and found that, yes, temporal discounting was observed in all of those countries.

Questions were asked to topics such as, “Do you prefer $500 now or $550 in 12 months?” To see how much to give in one year to give away a smaller amount now (note: cash amounts have been adjusted for currency and purchasing power).

It turns out that everyone prefers rewards sooner rather than later, even if the subsequent reward is greater. In fact, people’s preferences differed more inside more than they did between Countries. Temporal deduction is not only generalizable; It is “globalizable”.

Here are some other interesting findings from the paper, and my take:

People from poor countries (with more economic inequality) are more impatient. The wording here is important. It’s not that the poor are more impatient. In fact, the authors found no relationship between a person’s economic status in their country and the level of time discount. Alternatively, it appears that financially unstable environments—characterized by high inflation, high inequality, and low wealth—could foster more impatience. Although not allocating resources for the future can be problematic (eg, result in lower savings and poor health), it is worth noting that this seemingly myopic behavior is actually rational when things are unpredictable.

For example, if inflation is high and may get worse, maybe $550 in one year isn’t actually worth $500 now. The future is always uncertain, but in poor countries this uncertainty may be magnified. If you really think that “one bird in the hand equals two in the bush,” the time deduction makes a lot of sense: Take the $500 now if the $550 doesn’t show up at all.

“Current bias” may not be as widespread as it seems. Well, I’ll admit that these takeaways are mine and not from the authors. In addition to testing how much people discounted future rewards, the authors also asked about other head scratching phenomena related to temporal discounting, known as anomaly. Anomalies are behavioral patterns that do not have much economic meaning, but have been observed in many studies. I don’t have space here to discuss them all, so I’ll just talk about a controversial topic that I find interesting: current bias.

If you’d rather have $500 now over $550 in 12 months, you should also prefer to have $500 in 12 months over $550 in 24 months, since the amount of time between the two options is the same in both cases (12 month). However, many people change their preferences, preferring $500 now over $550 in one year, but actually preferring $550 in two years to $500 in one year. This anomaly is called current bias, because it indicates that there is something in having money now that makes it particularly valuable.

Rogerie and others. A study (2022) found that the current bias is also not limited to ‘WEIRD’ samples; People in all countries showed this bias. However, she noted, only about 13 percent of each country’s sample showed the effect, making it not as widespread as the time discount itself.

Another compelling piece of information in the paper is that people in the richest countries have shown bias nowadays more than people in poor countries were doing, even when they were generally more patient. While these findings are secondary to the main finding – that neither temporal resolution nor the anomalies associated with it are unique to our culture – they certainly deserve further exploration.

In general, Ruggeri et al. Study is truly an achievement of modern science. Bringing together 170 researchers in 61 countries to conduct the same protocol in 13,629 people (during a global pandemic, no less!) is astounding. I am very happy to witness this whole level of cooperation in the name of learning the truth about the psychological tendencies that unite us all.

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