Economic inequality and instability impact long-term decision-making around the world, study finds

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Would you rather have $500 today or $550 in 12 months? A large study covering more than 60 countries finds that individuals across all income groups and locations often prefer immediate gains over future gains, a phenomenon known as temporal discounting. However, greater individual economic resources and living in a stable, more equal economy make the behavior less likely.

The results of the study appear in the journal Nature Human behavior. Kai Ruggeri of Columbia University Mailman School of Public Health is lead author.

Over 13,000 participants from 61 countries conducted a simple experiment with questions such as choosing between an extra month’s pay now or waiting a year for an extra month plus an extra 20%. These were followed by similar questions to explore how different answers seem to contradict each other. Participants also answered questions about their financial situation, risk preference, economic outlook and demographics.

Although time discounting is prevalent across all income brackets, it’s no surprise that this behavior is more common among those with fewer financial resources who have a greater short-term need for cash. However, poor economic environments – not just “being poor” – are also associated with a tendency to discount future values, with inflation and economic inequality being cited in the study as specific factors.

“It stands to reason that being low income would encourage taking the smaller immediate gains, and the data backs that up. But we also see that if you’re wealthy in a very unstable economic environment with high inflation and high inequality, you’re also more likely to make short-term decisions that may be problematic later,” says Ruggeri, PhD, assistant professor of health policy and management at Columbia Mailman School.

The researchers also found that people are inconsistent in their decisions between immediate and future financial options. For example, when choosing between receiving a payment today or a larger payment later, most people will prefer to receive the smaller amount today. However, when offered the exact same values ​​but to make a payment (rather than receive money), most people would prefer to pay the smaller amount today. It seems like we’re willing to give up the benefits when it comes to faster wins, but we try to avoid losing more when it comes to payouts. This is precisely why credit card bills show payment amounts as “minimum” or “full”, rather than “here’s how much you’ll lose if you don’t pay it back now”.

“We know that people pay a lot of interest on credit cards because they like to keep money in their savings accounts. In general, people like certainty and will accept lesser results for themselves. “Up to a point. Once the potential gains get much higher, it changes preferences,” says Ruggeri.

The researchers say their findings could lead to better-informed economic policy, with implications for public health. For example, there are known links between short-sighted decision-making and healthy eating, getting vaccinated, wearing a mask and exercising. Recognizing that preferences for immediate options over future options are often the direct result of the environment and not simply bad choices can help reshape policies that often harm the most vulnerable.

This project was carried out by 171 researchers from more than 60 countries, many of them from a network of students and early career researchers. Amma Panin (Catholic University of Louvain, Belgium) was the lead expert and Eduardo García-Garzón (Universidad Camilo José Cela, Madrid, Spain) was the lead statistical expert.

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