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Financial Impatience Across the Globe

Impatience is practically universal, but inflation and inequality exacerbate it.

Key points

  • A new study assessed preferences for smaller, sooner monetary rewards over larger, later ones in 13,000+ participants from 61 countries.
  • It turns out that almost everyone prefers rewards sooner rather than later, even if the later reward is larger.
  • However, people who live in countries with high economic inequality and high inflation tend to be more impatient.

I have spent most of my career so far investigating one phenomenon: the tendency for people to prefer smaller, sooner rewards over larger, later rewards. This tendency is known as temporal discounting. Whenever I’ve described it to people, they usually nod their heads knowingly and share examples: having an extra slice of cake (despite knowing it will make them feel bad later), spending money on fun luxury items (instead of saving it for retirement), paying extra to get their items shipped sooner, etc.

So, I always assumed that temporal discounting–which I will also refer to as impatience – was a universal, human phenomenon, even though not everyone “discounts” the future to the same degree. But not only do I live in a WEIRD (i.e., western, educated, industrialized, rich, and democratic) society, but I (like many others) also tend to do research in WEIRD samples. That means that there was always a possibility that temporal discounting is a WEIRD quirk that would not be generalizable to different cultures.

That’s why a recent study, titled “The Globalizability of Temporal Discounting” is such a big deal. 170 authors, led by Kai Ruggeri from Columbia University, assessed temporal discounting in over 13,000 subjects from 61 countries, and they found that, yep, temporal discounting is observed in all those countries.

Subjects were asked questions like, “Do you prefer $500 now or $550 in 12 months?” to see how much they would have to be offered in one year in order to give up a smaller amount now (note: monetary amounts were adjusted for currency and purchasing power).

It turns out that everyone prefers rewards sooner rather than later, even if the later reward is larger. In fact, people’s preferences differed more within countries than they did between countries. Temporal discounting is not just generalizable; it is “globalizable.”

Here are a couple of other interesting findings from the paper, and my takes:

People from poorer countries (with more economic inequality) are more impatient. The wording here is important. It is not the case that poor people are more impatient. In fact, the authors found no relationship between someone’s economic standing in their country and their level of temporal discounting. Instead, it seems that financially unstable environments–marked by high inflation, high inequality, and lower wealth–can foster more impatience. Although not allocating resources for the future can be problematic (e.g., leading to low savings and poor health), it is worth pointing out that this seemingly short-sighted behavior is actually rational when things are unpredictable.

For example, if inflation is high and might get worse, maybe that $550 in one year will not actually be worth as much as $500 now. And the future is always uncertain, but in poorer countries that uncertainty might be magnified. If you really believe that a “bird in the hand is worth two in the bush,” then temporal discounting makes a whole lot of sense: take the $500 now in case the $550 never comes along.

“Present bias” might not be as pervasive as it seems. Okay, I’ll admit this takeaway is my own rather than 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 anomalies. Anomalies are patterns of behavior that don’t make much economic sense, but have been observed in a lot of studies. I don’t have space here to discuss all of them, so I’ll just talk about a controversial one that I find interesting: present bias.

If you prefer to have $500 now over $550 in 12 months, then 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 months). However, many people switch their preferences, preferring $500 now over $550 in one year, but actually preferring $550 in two years over $500 in one year. This anomaly has been called “present bias,” because it suggests that there is something about having money now that makes it especially valuable.

The Ruggeri et al. (2022) study found that present bias is also not just reserved for “WEIRD” samples; people in all countries displayed this bias. However, I noticed that only about 13 percent of each country’s sample showed the effect, making it not nearly as widespread as temporal discounting itself.

Another compelling tidbit in the paper is that people in wealthier countries showed present bias more than people in poorer countries did, even as they were generally more patient. While these findings are secondary to the main result–that neither temporal discounting nor its related anomalies are unique to our culture–it’s definitely worthy of more exploration.

Overall, the Ruggeri et al. study is truly a feat 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 so happy to witness this level of cooperation all in the name of learning the truth about the psychological tendencies that unite us all.

References

Ruggeri, K., Panin, A., Vdovic, M. et al. (2022). The globalizability of temporal discounting. Nature Human Behaviour. https://doi-org.libproxy.adelphi.edu/10.1038/s41562-022-01392-w

Henrich, J., Heine, Heine, S.J., Norenzayan, A. (2010). The weirdest people in the world? Behavioral and Brain Sciences, 33, 61-83.

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