Living Economics

Not Now, Later!
Self-control overcomes the present-bias effect and can be enhanced through learning or external cues. -

Angela Duckworth, now an assistant professor of psychology at the University of Pennsylvania, used to teach high-school algebra. She realized that it was hopeless to teach teen-agers algebra when they do not have self-control. She found that the ability to delay gratification through self-control is a better predictor of academic performance than I.Q.

This observation further confirms the result of the well-known marshmallow experiment conducted in late 1960s with 4-year old children. In that experiment, children who were able to wait a while before eating the one marshmallow in front of them were promised more marshmallows later. Those children who were able to delay gratification were later found to do better in college or in their careers.

Lack of self-control is essentially a manifestation of the present-bias effect1. (See Doing It Now or Later) Specifically, when rewards are immediate and costs are delayed, there is a tendency to appropriate the rewards. And when costs are immediate and rewards are delayed, there is a tendency to procrastinate.

Self-control is not only important in personal development, it is also important for economic growth. Saving by not spending all current income also requires self-control in the form of abstinence. It is savings that funds capital investment for greater future productivity. An economy that overspends its current income on current consumption by borrowing is digging its own grave.

Fortunately, self-control is not a result of just in-born sheer will power, but a behavior that can be learned or channeled towards. For example, the enrollment rate of employees in 401(K) employer-matchable retirement plans went up significantly by simply enrolling all employees by default. (See Life by Default ) The simple extra step of having to opt out is sufficient to keep the employees in the plans. Not surprisingly, people who are good at delaying gratification through self-control also have various mental tricks to defeat the natural present-bias effect.

Note:
  1. The tendency to give more weight to the more immediate moment as it draws closer. Such a bias, however, may lead to different behaviors depending on whether the choices involve immediate costs or immediate rewards. When costs are immediate and rewards are delayed, there is a tendency to procrastinate. When rewards are immediate and costs are delayed, there is a tendency to appropriate the rewards.
  2. The tendency to give more weight to the more immediate moment as it draws closer. Such a bias, however, may lead to different behaviors depending on whether the choices involve immediate costs or immediate rewards. When costs are immediate and rewards are delayed, there is a tendency to procrastinate. When rewards are immediate and costs are delayed, there is a tendency to appropriate the rewards.
References:
  • Lehrer, J. 5/18/2009. Dont The Secret of Self-Control. The New Yorker.
  • Economist. 8/27/2005. "Pensions by default."
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