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Retirement, Wisdom and the Aging Decision Maker

Is retirement a waste of intellectual capital?

The U.S. Census Bureau puts the world population in 2050 at around 9 billion, with around 1.5 billion older than 65. That’s more than one in ten retirees compared to the roughly one in fifteen now. It seems safe to say that our mature population plans to stick around. If we choose to allow (or force) older citizens to retire is this a good decision or a massive waste of intellectual capital?

One observation is fairly worrying: Retirement appears to lead to cognitive decline. Several studies have investigated this relationship using large data sets. One study by Bonsang and colleagues sums things up. They looked at cognitive decline across European countries with different retirement ages, using the large SHARE data set covering more than 30,000 people born in or before 1954. Countries that have earlier ages of retirement (i.e., have higher financial disincentives to continue working, like France and Greece) also have faster rates of age-related cognitive decline.

But supposing no one retired? Would our elder workforce jeopardize our productivity? This question is usually answered by referring to one of two competing mythologies surrounding aging. One represents the classic Disney view of old age, where our elders are the keepers of the wisdom—they are patient and slow, and almost always wiser than the young. The other is a more dystopian view, where older individuals are a bumbling citizenry of people whose minds shutdown often and at random.

Research has found support for both views, with important distinctions. I point out the biggest distinction here by listing a few studies where the research has been done many times by many groups of people in many different ways. Put simply, in comparison with younger adults, older adults are better at regulating their emotions, they’re better at understanding social conflict, their vocabularies are larger, and they generally have more accumulated knowledge about the world (i.e., factual knowledge). On the flipside, older adults reason and process information more slowly, they have more trouble inhibiting habitual behavior, and they tend to remember less new information.

This is the difference between crystallized intelligence and fluid intelligence. Crystallized intelligence is your knowledge base, what you know and know well. Fluid intelligence is your capacity to learn and manipulate new information. One can think of this as a trade-off between wisdom and learning: older people appear to pay for their wisdom with a reduced ability to learn more.

Now given this trade-off, we want to know where our elders will stack up when they keep coming in to work. A recent study by Ye Li and colleagues addressed this. Their research studied two age populations (about 200 people in each)—one between 18 and 29 and the other between 60 and 82. Over a period of months, these two groups took a series of cognitive and decision making tasks. The cognitive measures were split across three groups, designed to measure 1) crystallized intelligence 2) fluid-intelligence, and 3) inhibitory control measures such as the Stroop task, which involves naming the font color of words that spell out the names of different colors (e.g., 'red' spells red, but the font color is black).

The decision making tasks were common to economic decision making. These measured things like temporal discounting (would you rather have some money now or more money in the future?), anchoring effects (not letting arbitrary numbers influence numerical estimates), and framing effects (would you choose to save 200 out of 600 people or kill 400 out of 600?).

First, the older people were better at all of the decision making tasks. They were more patient when they needed to be, less influenced by arbitrary numbers, and didn't get hung up on framing effects.

Second, the cognitive tasks showed the same pattern I highlighted above: Older individuals had higher levels of crystallized intelligence, but performed more poorly on measures of fluid intelligence and inhibitory control.

Most importantly, decision performance was predicted by all the cognitive measures. Which is to say, what the older people lacked in fluid abilities, they made up for in general knowledge. And where the youth lacked wisdom, they compensated with a little cognitive elbow grease.

In sum, if we define wisdom as knowledge combined with its judicious use, then older people seem to have it, well into retirement. Moreover, this wisdom may more than compensate for what they lack in other areas. So next time age seems to be getting the best of you, just sit back and be wise for a minute. You've earned it. But then maybe get back up again.

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