Latsis Symposium 2012 – Economics on the Move Experimental choices and field behavior – on impatience, saving and smoking Matthias Sutter University of Innsbruck and University of Gothenburg 1
Overview of talk • Main paper (forthcoming in AER – with Martin Kocher, Daniela Rützler and Stefan Trautmann) Impatience and uncertainty – Experimental decisions and their relation to adolescents’ field behavior. • A follow up-paper, based on comments that we got on the main paper (with Silvia Angerer and Daniela Rützler) Experimental choices as predictive of long-run field behavior three years later 2
General motivation • Recent research shows that experimentally elicited risk and time preferences are a good predictor of adults’ field behavior (economic success, health status) (Chabris et al., 2008; Burks et al., 2009). • Children and teenagers face many real life decisions on uncertain outcomes with long-term consequences (e.g. smoking, taking drugs, drinking, saving, investing in education). 3
Contributions of our main study (1) Elicitation of time preferences and risk and ambiguity attitudes in children and teenagers. (2) Linkage of experimentally elicited attitudes to field behavior. (3) No drop-outs and thus no self-selection in a large sample size of 661 school children, aged 10 to 17 year. 4
Measuring risk and ambiguity attitudes safe amount (increasing) Urn 5
Measuring risk and ambiguity attitudes • Risk aversion: 0 (risk loving) CE risky prospect 0.5 (risk neutrality) 1 – prize 1 (risk aversion) • Ambiguity aversion: CE risky prospect – CE ambiguous prospect CE risky prospect + CE ambiguous prospect -1 (ambiguity loving) 0 (ambiguity neutrality) 1 (ambiguity aversion) 6
Main results on risk and ambiguity attitudes Risk aversion -Girls are significantly more risk averse (marginal effect of 0.067). -Age plays no role, nor do any other sociodemographics. Ambiguity aversion -No effects of age or gender. 7
Measuring impatience 10.10 euro today Ο Ο [1] or 10.10 euro in 3 weeks 10.10 euro today Ο Ο [2] or 10.30 euro in 3 weeks 10.10 euro today Ο Ο [3] or 10.50 euro in 3 weeks 10.10 euro today Ο Ο [4] or 10.70 euro in 3 weeks 10.10 euro today Ο Ο [5] or 10.90 euro in 3 weeks 10.10 euro today Ο Ο [6] or 11.10 euro in 3 weeks 10.10 euro today Ο Ο [7] or 11.30 euro in 3 weeks 10.10 euro today Ο Ο [8] or 11.50 euro in 3 weeks 10.10 euro today Ο Ο [9] or 11.70 euro in 3 weeks 10.10 euro today Ο Ο [10] or 11.90 euro in 3 weeks 10.10 euro today Ο Ο [11] or 12.10 euro in 3 weeks 10.10 euro today Ο Ο [12] or 12.30 euro in 3 weeks 10.10 euro today Ο Ο [13] or 12.50 euro in 3 weeks 10.10 euro today Ο Ο [14] or 12.70 euro in 3 weeks 10.10 euro today Ο Ο [15] or 12.90 euro in 3 weeks 10.10 euro today Ο Ο [16] or 13.10 euro in 3 weeks 10.10 euro today Ο Ο [17] or 13.30 euro in 3 weeks 10.10 euro today Ο Ο [18] or 13.50 euro in 3 weeks 10.10 euro today Ο Ο [19] or 13.70 euro in 3 weeks 10.10 euro today Ο Ο [20] or 13.90 euro in 3 weeks 8
4 choice lists with 10.10 € as starting point 1) 10.10 € 10.10 € + x today 3 weeks 3 weeks 6 weeks 2) 10.10 € 10.10 € + x 3) 10.10 € 10.10 € + x today 1 year 3 weeks 1 year and 3 weeks 4) 10.10 € 10.10 € + x Four more lists with 4.05 € as starting point 9
Main results on impatience Impatience increases with… -risk loving (more risk averse subjects are more patient) -worse math grades -more pocket money -lower stakes -No age effects 10
Questionnaire on field behavior Variables (1-4 are mainly self-reports; 5 collected from school) 1. Saving: “Do you save money from your available budget?” 2. Smoking: “Do you spend money for tobacco?” 3. Alcohol consumption: “Do you spend money for alcohol?” 4. Body mass index: weight/height² normalized by the median body mass index for each age and gender (hence we measure relative overweight; partly verified through health care checkups) 5. Grade on school discipline (available for a subset of students) 11 11
Main results Subjects who are more impatient in the experiment … – are more likely to spend money for alcohol – are more likely to spend money for tobacco – are less likely to save money – are more likely to have disciplinary problems in school Subjects who are more risk averse in the experiment … – have a lower BMI Subjects who are more ambiguity averse … − are less likely so smoke 12
Comments that we got on the main paper • It might be no surprise that children who are more impatient in the experiment are those who save less, but spend money on alcohol and tobacco, because they need the money for their addictions. • A stringent test of whether experiments are a useful indicator of field behavior would be whether they can predict later behavior, in particular whether impatient children are more likely to start bad habits.
Our follow up-study • The experiments in the main paper were run in 2007/2008. • In the academic year 2010/2011, we went back to 359 subjects (within subjects design) in three schools in Innsbruck and Schwaz. • We administered a questionnaire on field behavior and demographics.
Experimental Choices 2007 – Field Behavior 2010 • Impatience, risk and ambiguity attitudes elicited in 2007 were then related to field behavior in 2010 • Field behavior variables: – Saving – Smoking – Alcohol consumption
Main results from follow-up paper Subjects who were more impatient in 2007 are more likely… – to stop saving between 2007 and 2010, – to start spending money for cigarettes between 2007 and 2010, and – to start spending money for alcohol between 2007 and 2010 Subjects who were more ambiguity averse in 2007 are less likely − to start smoking Subjects’ risk attitudes had no effect. 16
Can economics as a scientific discipline… … that must extricate itself from its current conceptual crisis, benefit from concepts, methods and insights developed in other disciplines, notably the natural sciences? The general answer must be “Yes” since rigorous methods from the natural sciences (… they were experimenting long before we started to do so …) help economists get a better grip on human behavior. The current success of behavioral economics (with controlled experiments in the field) is a first fruit of such an approach. 17
Thank you for the invitation to the Latsis Symposium and for your interest and attention! 18
Data and experimental setup • 661 participants aged 10 to 17 years. • Real monetary payoffs. • Experiments run in 4 Austrian grammar schools from October 2007 until May 2008. Age group # subjects 10-11 years (5th grade) 208 12-13 years (7th grade) 184 14-15 years (9th grade) 135 16-17 years (11th grade) 134 SUM 661 20
Risk and ambiguity attitudes - Method • Design based on Ellsberg‘s (1961) two-color choice task. • 20 choices between a risky lottery with a 50/50 chance of winning (“urn A”) and a sure amount of money. • 20 choices between an ambiguous lottery with an unknown probability of winning (“urn B”) and a sure amount of money. • Winning prize (=x) of both lotteries is between 4 and 12 €. • One choice played for real; 2 € show up fee. • Pen and paper experiment in class; 50 minutes. 21
Measuring impatience - Method • 8 choice lists with 20 decisions each between an earlier, smaller amount and a later, larger amount. • Early amount always fixed: either 4.05 € or 10.10 €. • Later amount started with early amount and increased in steps of 0.10 €, respectively 0.20 €. • Early amount available today or in three weeks. • Later amount entails delay of three weeks or one year. • One out of 160 decisions was paid out at the respective date. 22
Experimental choices and field behavior (x y z) denotes the number of times the variable is significant at the 1%, 5%, 10% level 23 23
Experimental choices and field behavior Body mass index – Disciplinary grade rel. BMI (“+” is worse) Impatience (future equivalent) + (0 0 2) [0.006] + (7 1 0) [0.227] Risk aversion – (7 1 0) [-0.014] Ambiguity aversion Age Female – (0 8 0) [-0.012] – (8 0 0) [-0.275] German grade # – (8 0 0) [-0.245] Math grade # – (0 7 1) [-0.198] No. of siblings Pocket money per week + (0 8 0) [0.009] No. of observations 611 389 Mean (pseudo) R² 0.043 0.134 24 24
Conclusions from main paper • Clear evidence of impatience, risk, and ambiguity aversion. • Field behavior (saving, smoking, drinking, body mass index, discipline in school) is predominantly influenced by impatience (delay aversion). • Risk and ambiguity attitudes are relatively poor predictors of field behavior, consistent with the literature (see Dohmen et al., 2010). 25
Field behavior 2007 and 2010 Smoke Alcohol consumption Saving Age 2007 (2010) 2007 2010 2007 2010 2007 2010 10/11 (13/14) 0 (0%) 3 (2%) 0 (0%) 6 (4%) 152 (98%) 135 (87%) 12/13 (15/16) 0 (0%) 6 (9%) 1 (1,4%) 22 (31%) 67 (96%) 51 (73%) 14/15 (17/18) 1 (1,3%) 14 (18%) 9 (12%) 35 (46%) 71 (93%) 59 (78%) Aggregate 1 (0.3%) 23 (8%) 10 (3%) 63 (21%) 290 (96%) 245 (81%)
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