Language and the Way We Save
Transcription of interview with Keith Chen on September 3, 2012.
Douglas Goldstein, CFP®, Financial Planner & Investment Advisor
Keith Chen is an Associate Professor of Economics at the Yale School of Management.
He specializes in behavioral economics and has covered a great deal of diverse topics,
from economics to psychology and biology.
He has looked at how ex-prisoners would have looked different if their conditions in prison
would have been different.
Douglas Goldstein, financial planner & investment advisor, interviewed Chen on Arutz Sheva Radio.
Douglas Goldstein: Your newer research is related to language.
You’ve spoken about how some languages have a concept of the future and some don’t.
What’s that all about?
Keith Chen: As a behavioral economist, one of the things that I work on most and study
is how people make decisions when those decisions involve critically aspects of time.
How do you like muster the will to save for retirement?
How do you muster the will to wake up early in the morning and exercise, and how do you
muster the will to quit smoking?
All of these decisions basically feel like savings to an economist, and that’s because
they all fundamentally involve this idea that you have to endure some pain in the present
in order to gain pleasure and benefit in the future.
Douglas Goldstein: How does that relate then to the language that people use?
Keith Chen: The interesting thing that I started to notice was that when you look across countries
in the world, first of all, there’s vastly different savings.
There’s vastly different kind of tendencies of people to be able to sacrifice in the present
in exchange for the future.
There’s a lot of different factors going on.
There are obviously strong cultural factors.
There’s kind of experiences with depression and hyperinflation and all those kinds of
things, but a factor that stood out to me that economists had not thought a lot about
was differences in how your language forces you to talk about the future.
I was talking with some colleagues who are linguists and I was reading up on some of
the interesting work that they do, and I realized that in fact actually about 10% of world languages
interestingly enough have no systematic future tense in some sense.
It’s a minority of languages in the world, but there are some very notable examples,
like Chinese and Finnish, and languages like that that basically force their speakers to
talk about the future as if it were the present, to speak about the future in exactly the same
way that they talk about the present.
The interesting thing is that even though many of these languages are outliers in the
world in terms of how they talk about the future, almost all of those countries are
also outliers in terms of how much they save.
They save tremendous amounts, and what I began to wonder was if your language treats the
future exactly the same way that it treats the present, does that make the future feel
more like the present, and does that make it easier
to save?
In some sense, when you’re saving, your present
self has to feel pain and your future self gets to bear the fruit, and you see the rewards
of that.
In some sense, if your future self feels more like your present self, if in fact you talk
about these two people in the same way, then that should make that activity easier.
Douglas Goldstein: This sounds like a very useful lesson.
What can people do to adapt this way of thinking within their own language?
Keith Chen: Since I’ve started this project, it’s actually interesting.
If you look at both financial advice and also personal goal advice, I’m not advocating
this and I’m not saying you should go out and do this, but many people who do get advice
about how people should be able to set goals that they can follow through actually advocate
writing down a list of goals and writing them down in the present tense.
They say that this is a more effective way of visualizing yourself achieving these things.
There are examples of this in Hebrew as well but you actually see oftentimes people trying
to shift their own or listeners’ perceptions of time by systematically and suddenly changing
tenses.
For example, linguists call this the historical present.
Oftentimes when you hear people talking about past events, if they want to make them feel
more present or feel more vivid, they’ll talk about them in the present tense.
You’ll hear someone recounting a story, “I see my friend walking down the street
and I say to him,” and obviously, you’re not indicating that that’s happening right
now.
Douglas Goldstein: How people can visualize
the future?
Are there other ways that people can really bring you closer to home?
Keith Chen: The main takeaway from a lot of my research is that people whose language
has suddenly encouraged them to disassociate the future from the present have a very difficult
time saving, but there are many ways that people in their own lives can try and emphasize
to themselves that they’re not toiling for no good reason like this.
This all has future rewards and future payoffs.
A colleague of mine at the University of Pennsylvania ran this fascinating study where he got a
company to agree to send digital photos from the company directory to him, and then he
just applied some very standard now software where you can digitally age people’s photos.
You basically take these smiling photos, headshots of people, and digitally age them to look
like they’re 65.
What he had the company do is randomly on half of their employees’ retirement forms
put a smiling picture of you at age 65 on the form that asks you how much would you
like to put away for retirement, and on the other half of the forms, just put a standard
picture, the smiling picture of you unaltered, to see what the effect was.
What he found was these pictures of a 65-year-old you dramatically increased people’s willingness
to put aside large shares of their current wages into their retirement accounts whereas
pictures of just the smiling them don’t.
I think the lesson here is habit of mind that encourages you to remember that the retired
you is you, and that you really care about that person, can go a long way to helping
you overcome problems with savings.
I think that’s probably why you see a lot of financial planners try and systematically
talk with people about their future plans, make very visceral and real what you want
to be doing 10, 20 or 30 years from now.
If you can make that very real, then that makes it a lot easier to sacrifice.
Douglas Goldstein: Can you just tell us what are some other aspects of this research that
we can look forward to?
Keith Chen: Directions that I’m taking this research now, and I actually think they may
be more exciting than some effects that I’m finding on savings - it turns out these language
effects are also very big on other dimensions.
We’re looking at the ability to quit smoking.
I actually have some new projects that are looking at safe sex behavior even in a developing
country setting.
More broadly though, where this research really is heading right now is in the direction of
just really trying to help tease out those subtle drivers of our own savings behavior.
Hopefully, in the future, once we really understand all of the ways and all of the subtle influences
that impact on people making these decisions, hopefully we’re going to be able to use
that research to help make people better stewards of their own futures.
Douglas Goldstein: How can people follow your work?
Keith Chen: You can always find my website at Yale.
If you just Google “Keith Chen,” I’m usually the first link, or “Keith Chen economist”
or “Keith Chen Yale,” you can come and check out the work.
Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host
of the Goldstein on Gelt radio show (Monday nights at 7:00 PM on www.israelnationalradio.com.
He is a licensed financial professional both in the U.S. and Israel.
Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, NFA,
SIFMA.
Accounts carried by National Financial Services LLC.
Member NYSE/SIPC, a Fidelity Investments company.
His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered
at: www.profile-financial.com (02) 624-2788 or (03) 524-0942.
Disclaimer: This document is a transcription and/or an educational article.
While it is believed to be current and accurate, divergence from the original is to be expected.
The original podcast can be heard at https://sites.google.com/site/goldsteinradioshows/.
All information on this website is purely information and should not be used as the
sole basis for making financial decisions.
The opinions rendered herein are those of the guests, and not necessarily those of Douglas
Goldstein, Profile Investment Services, Ltd., or Israel National News.
Readers should consult with a professional financial advisor before making any financial
decisions.
Please see the complete disclaimer at https://sites.google.com/site/goldsteinradioshows/.