The Link Be­tween Pa­tience and Pros­per­ity

Pa­tience could be the root of eco­nomic pros­per­ity

Indwe - - Contents -

Pa­tience is not only a virtue. It might also be the root of eco­nomic pros­per­ity.

On 15th Au­gust 1248, the Arch­bishop of Cologne, Ger­many, laid the foun­da­tion stone of a cathe­dral, largely funded by civil so­ci­ety, that would take 632 years to com­plete. How is it pos­si­ble that a com­mu­nity could fund the con­struc­tion of a build­ing that nei­ther they, nor their chil­dren or grand­chil­dren, would ever see com­pleted?

Pa­tience is a virtue, writes Ro­man poet Pru­den­tius in his fifth-cen­tury poem “Psy­chomachia”, but econ­o­mists are in­creas­ingly con­fi­dent that it’s also a key build­ing block of eco­nomic pros­per­ity.

Two con­cepts are of rel­e­vance. The first is to what de­gree you con­sider the fu­ture in your de­ci­sion-mak­ing – that’s your time pref­er­ence. The sec­ond is the pe­riod of time that is rel­e­vant for you cur­rent de­ci­sion­mak­ing – your time horizon. Pa­tient peo­ple tend to have a high time pref­er­ence and long time horizon. And, as more and more ex­per­i­men­tal ev­i­dence now shows, so do suc­cess­ful peo­ple.

The study of pa­tience was made fa­mous by the Stan­ford marsh­mal­low ex­per­i­ment. In the late 1960s, Wal­ter Mis­chel of­fered chil­dren a choice be­tween a small but im­me­di­ate re­ward like a marsh­mal­low, or a larger award like two marsh­mal­lows if they waited 15 min­utes. Some chil­dren im­me­di­ately grabbed and swal­lowed the marsh­mal­low. Oth­ers waited a while, and then had a bite. But sev­eral waited dili­gently un­til the 15 min­utes had passed for their sec­ond marsh­mal­low. Fol­low-up stud­ies showed that the chil­dren who were able to wait for the higher pay-off were also more likely to have bet­ter re­sults at school,

as well as health­ier body mass in­dexes and other life mea­sures.



In a 2007 study re­port pub­lished in the Jour­nal of Pub­lic Eco­nom­ics pa­per, Eric Bet­tinger and Robert Slonim found that par­ents’ pa­tience is doesn’t cor­re­late with that of their chil­dren, and they go on to ques­tion the be­lief that it’s only na­ture at work. Their study also found that math­e­mat­ics scores and whether a child had at­tended a pri­vate school were un­cor­re­lated, sug­gest­ing nur­ture’s in­flu­ence is also limited.

Most stud­ies find that girls tend to be more pa­tient than boys. This has im­por­tant im­pli­ca­tions for mo­ti­vat­ing chil­dren. Girls are more likely, for ex­am­ple, to re­spond to stu­dent per­for­mance in­cen­tives. Know­ing what de­ter­mines pa­tience can go a long way in help­ing kids per­form bet­ter at school, and achieve bet­ter life out­comes.



Global sur­veys now ask questions that al­low us to de­duce some mea­sure of time pref­er­ence or time horizon. The re­sults sug­gest that while th­ese gen­er­ally cor­re­late pos­i­tively with GDP per capita, it’s not al­ways the case. Ci­ti­zens of Botswana and Kenya, for ex­am­ple, are more pa­tient, on av­er­age, than those of Ja­pan and France. (South Africa is very close to the world av­er­age.)

Pa­tience also varies across time. At a con­fer­ence at Stellenbosch Univer­sity in Novem­ber 2017, Jan Luiten van Zan­den and Ger­arda Wester­huis of Utrecht Univer­sity pre­sented a pa­per on how time pref­er­ence has changed over the past few cen­turies. They ar­gue that, dur­ing the Mid­dle Ages in Eu­rope, the “fu­ture” be­came more im­por­tant. In other words, peo­ple’s time pref­er­ence in­creased.

Sav­ing and in­vest­ment there­fore in­creased, and peo­ple started to ac­cu­mu­late cap­i­tal with long time hori­zons. (The con­struc­tion of the Cologne Cathe­dral is an ex­am­ple of this.) Why that is re­mains some­what of a mys­tery, but there are clues in the chang­ing (re­li­gious) be­liefs and in­sti­tu­tions of the time.

Con­sider the emer­gence of cor­po­ra­tions, ini­tially re­li­gious in­sti­tu­tions and guilds but later com­pa­nies, notably the limited li­a­bil­ity com­pany, which would tran­scend the life of share­hold­ers. The rise of big busi­ness fol­lowed in the late 19th and early 20th cen­turies, where salaried man­agers now fo­cused on long-term value cre­ation. Van Zan­den and Wester­huis ar­gue that this trend has re­versed in the past few decades.

THE RISE OF SHORT-TERMINISM Since the 1970s, “short-terminism” has been in­creas­ing, a trend that’s re­flected in the fo­cus of short-term value for share­hold­ers (and per­for­mance-re­lated pay for man­agers). One fac­tor that might ex­plain this is the shift from modernism to post-modernism. Mod­ernists be­lieved that the fu­ture could be changed, for ex­am­ple, through strate­gic plan­ning in a busi­ness en­vi­ron­ment or, in the case of the Soviet Union, even an econ­omy. The rise of post­mod­ernist be­liefs – that re­al­ity can­not be known and the fu­ture can­not be pre­dicted or changed – has shifted our long-term gaze to the present. In­stant grat­i­fi­ca­tion, ex­ac­er­bated by so­cial me­dia, is now the or­der of the day.

There are valid rea­sons to ques­tion th­ese pre­lim­i­nary findings. Com­pa­nies like Al­pha­bet, Ap­ple and Face­book seem to be able to in­vest in new tech­nolo­gies where the pay-offs are only likely to be in the medium to long run. But it’s dif­fi­cult to imag­ine that we in­vest in some­thing that we won’t see the end of – per­haps that is why tack­ling cli­mate change is so dif­fi­cult!

Time pref­er­ence and time horizon re­main vastly un­der­stud­ied top­ics. We know that time pref­er­ence mat­ters at an in­di­vid­ual level – more pa­tient peo­ple are more “suc­cess­ful” later in life. What we don’t know is why they are pa­tient, and how to im­prove our im­pa­tient na­tures.

Sim­i­larly, we know that some so­ci­eties, at cer­tain times in his­tory, had a longer time horizon. Those so­ci­eties were then able to in­vest and ac­cu­mu­late, im­prov­ing the pros­per­ity of the generations to fol­low.

Con­sider this: Chil­dren born in 2018 are likely to live un­til 2100. Are our po­lit­i­cal and busi­ness lead­ers fac­tor­ing the year 2100 into their long-term strate­gies? Un­likely. Per­haps we need a bit more of the long-term horizon the in­hab­i­tants of Cologne had 632 years be­fore com­plet­ing their cathe­dral.

Text: Jo­han Fourie: As­so­ciate Pro­fes­sor in Eco­nom­ics at Stellenbosch Univer­sity/fin­week Im­ages ©

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