On Impatience

One of the more important concepts in economics is the personal discount rate, which basically measures how willing someone is to put off gratification now for gratification later.

For example, both my girlfriend and I are huge fans of french fries. But I eat them almost every day (hence the chubbed-out illustration you see up above) while my girlfriend partakes two or three times a month. My discount rate for french fries is thus rather high since my choices imply that eating fries now has a much greater value than waiting until later.

But what is it about me that drives my impatience? Is it a proclivity for eating in general, education, income, age, gender, or even psychological state?

A new study co-authored by Harvard's David Laibson, a leading expert in the area of intertemporal choice, attempts to piece these actors apart.
In three different experiments, researchers tried to find out what trait was most correlated with whether a person chose impatiently.

Surprisingly, they found that, by themselves, traits like age, education, and intelligence had little or no correlation with how people chose. What did have the most correlation was each subject's individual discount rate. (To arrive at the rates, the experiments asked people whether they wanted some money now or more money later (of varying amounts). The researchers were able to use these answers to construct discount rates and then see how well they predicted people's habits like eating, smoking, and exercise.) But even the discount rates had very low ability to predict. And this makes sense, the researchers say:

"Behavioral outcomes are influenced by hundreds of variables and a near-infinity of circumstances, happenstances, and coincidences."

Take smoking: It can be influenced by any number of factors including the smoking habits of your spouse or friends, any genetic predisposition towards addictive behavior, watching celebrities smoke, seeing cigarette advertising, living in a state with low cigarette tax, and so on.

But what we're really interested in when we talk about impatience is how it affects a person's ability/desire to invest in their own health, to take one important example. Smoking habits can tell us something about that, and so can eating and exercise routines. And all of these traits involve deciding between consuming now or later.

So instead of looking at just one behavior, the researchers decided to throw them all together into an index, and viola, predictive ability increased. Why?

Our model assumes that behavior derives from three sources: traits that predict behavioral impatience (e.g., the discount rate), traits that predict other broad classes of behavior ... and idiosyncratic factors (e.g., residence in a state with low cigarette taxes)...it is unlikely that any single trait would have substantial predictive power for any particular behavior. However, the framework predicts that an aggregated index of behavior should be relatively highly correlated with particular traits.

And since this has gotten way too abstract, here is a real-world implication:

This method of measuring an individual's impatience has advantages over traditional personality tests, which simply ask participants to introspectively evaluate and explicitly state their own dispositions rather than to demonstrate them and implicitly disclose them through a sequence of decisions with (potentially) real consequences.

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