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The Marshmallow Test and Financial Reform

Jun 27, 2010 • Behavioral Economics, Financial Markets, Labor, Regulation • 97 Views    No Comments

Is it possible that the marshmallow test relates to financial reform? As described in a 2009 New Yorker article by Jonah Lehrer and a WNYC Radio Lab podcast, a marshmallow test given to 4 year olds might predict adult behavior.

40 years ago, psychologist Walter Mischel began studying gratification by giving young children a choice. A child and a single marshmallow were left in a room. The child could have one marshmallow now or two later. 500 children were tested. Mischel concluded that at 4 years old, certain children can resist temptation. Some could last 20 minutes while others capitulated immediately. The average resistance time was 7 or 8 minutes. (Researchers also used chocolate bars and Oreo cookies.)

Years later, in a follow-up study, Mischel discovered that the SAT scores of children who held out for 15 or 20 minutes were 210 points higher than those who lasted only 30 seconds. Returning to the same people 40 years later, he found that the high delayers had better jobs and were skinnier.

Looking at other studies, Lehrer again found a connection between our “hard wiring” and our behavior. In his book, How We Decide, discussing the connection between our “decision making apparatus” and our financial behavior, he suggests that an unaffordable McMansion bought through a subprime mortgage could be increasingly attractive if the potential loss is long term and the gratification is current.

The Economic Lesson

And this is where we can return to financial reform. If the intersection of neurological and psychological research does indeed point to certain people having certain innately unhealthy tendencies, how much should government protect them and everyone else?

 

 

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