Marshmallows and time preference

You probably recall Jonah Lehrer’s New Yorker article about the kids who were told not to eat the marshmallow. Those who were able to hold out were better behaved, higher achievers later in life.

Low delayers, the children who rang the bell quickly, seemed more likely to have behavioral problems, both in school and at home. They got lower S.A.T. scores. They struggled in stressful situations, often had trouble paying attention, and found it difficult to maintain friendships. The child who could wait fifteen minutes had an S.A.T. score that was, on average, two hundred and ten points higher than that of the kid who could wait only thirty seconds.

When I was reading it, it reminded me of some ideas that have been around for in economics for a couple centuries or so: time preference and intertemporal choice. Someone with high time preference will tend to consume sooner rather than later. People with low time preference are the savers—the ones who can hold out. The same applies to social groups or societies. For example, married folks or people who have children (or expect them) tend to have lower time preference and set aside more for the future. And they tend to display fewer risky behaviors, so they can actually see the eventual benefits of their saving. It’s the opposite for the single, childless, young. This relates to why single males in their 20s tend to have high car insurance, lots of cool electronics stuff, and little in their IRAs. Consume more now, have less later.

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