Economists usually have a hard time explaining to non-economists, what it actually is that they do. Indeed it is quite scary to realize how few people outside of the discipline realize that getting a degree in economics does not really have a lot to do with balancing a check-book, being successful on the stock market, or starting your own business (FYI: Economics does not equal Finance, Business, Accounting, Management, etc.). So invariantly, if you happen to be an economist, somebody, at some point, will ask you for your educated advice on how to manage their finances, balance their books and/or increase their savings. The next time this happens, you might want to make reference to a recent study from the Journal of Judgment and Decision Making. The study is a great starting point for conversation as that it doesn't depart from your tormentors preconceived notion of economics as having to do with money, but yet allowes you to allude to the more esoteric nature of modern economic inquiry:
According to a study conducted at Stanford, people who endorse high similarities between their current self, and their conceptual future-self have lower discount rates for future earnings and do better at experimental temporal discounting tasks. More impressively, people with higher degrees of connectedness to their future-self show significantly higher real life asset accumulation, even after controlling for age and education.
Attitudes regarding self-continuity were measured by a novel psychometric test, which was designed to capture the dimensions of connectivity (i.e. how much you feel that you and you’re future self are actually the same self), as well as liking and caring for one’s self, as one imagines it 10 years into the future. In three studies, the measure showed high retest-reliability and proved to be a robust predictor of people’s implicit valuation of future rewards.
Experimental evidence for the findings is based primarily on peoples’ choices on a so-called discounting task. In these tasks people get to chose between an immediate payoff of $15-$83 and a slightly higher delayed payoff (e.g. $30 - $85). The delay for this experiment was set within the range of 10-75 days. By letting each subject make multiple choices of this kind and looking at the number of delayed payments each subject chooses, researchers are able to create an index for that persons' discount rate, which can then be related to the self-continuity measure.
To establish a strong link between the experimental result and real-life saving behavior, the study included a second experiment, in which subjects engaged in self-reported asset disclosure. The report included information on
According to a study conducted at Stanford, people who endorse high similarities between their current self, and their conceptual future-self have lower discount rates for future earnings and do better at experimental temporal discounting tasks. More impressively, people with higher degrees of connectedness to their future-self show significantly higher real life asset accumulation, even after controlling for age and education.
Attitudes regarding self-continuity were measured by a novel psychometric test, which was designed to capture the dimensions of connectivity (i.e. how much you feel that you and you’re future self are actually the same self), as well as liking and caring for one’s self, as one imagines it 10 years into the future. In three studies, the measure showed high retest-reliability and proved to be a robust predictor of people’s implicit valuation of future rewards.
Experimental evidence for the findings is based primarily on peoples’ choices on a so-called discounting task. In these tasks people get to chose between an immediate payoff of $15-$83 and a slightly higher delayed payoff (e.g. $30 - $85). The delay for this experiment was set within the range of 10-75 days. By letting each subject make multiple choices of this kind and looking at the number of delayed payments each subject chooses, researchers are able to create an index for that persons' discount rate, which can then be related to the self-continuity measure.
To establish a strong link between the experimental result and real-life saving behavior, the study included a second experiment, in which subjects engaged in self-reported asset disclosure. The report included information on
“portion of home owned, total amount of money in bank accounts, total amount of money in investments, and worth of other material belongings, debts, outstanding home, car, and student loans, credit card debts, and medical debts, income, as well as other financial information.”As would be hypothesized from the experimental finding, an individuals’ amount of accrued assets was found in significant relationship to that persons’ self-continuity score. Hence, the data supports the hypothesis that a stronger connection to ones’ future-self increases actual savings behavior. However, it needs to be mentioned that the identified correlation does not necessarily imply causality. Investigation of whether or not (and in which direction) a causal link exists between self-continuity and savings is left for future research. Certainly, establishing such a link would have practical implications for policies that aim to increase savings rates, as well as for economic theorists who are looking for psychological criteria on which to base heterogeneity assumptions around which to model human motivation and behavior. For the time being, the study provides graduate students in economics with a sound piece of financial advice: "Become more connected to your future-self".
Ersner-Hershfield H, Garton MT, Ballard K, Samanez-Larkin GR, & Knutson B (2009). Don't stop thinking about tomorrow: Individual differences in future self-continuity account for saving. Judgment and decision making, 4 (4), 280-286 PMID: 19774230
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