Paper Talk: I Will Save vs. I Save

Ran across a really cool paper on how linguistic traits relate to savings behavior. Pretty cool, in that it tries to get to the root of a very deep endogeneity issue – does it get there? We’ll see…

The Effect of Language on Economic Behavior: Evidence from Savings Rates, Health Behaviors, and Retirement Assets

Language is pretty cool, though I haven’t taken enough (any) linguistics classes to be able to speak intelligently about it. This paper tried to determine whether differences in financial behavior could be culturally related. To do this, the paper draws on the fact that languages differ in their treatment of the future versus the present. Some languages do not distinguish between the present and the future (weak FTR languages), and others do (strong FTR languages). (This harks back to an Intro to Anthropology class I took my freshman fall, where I learned about the Sapir-Whorf hypothesis of language driving perception. I remember an anecdote about the Eskimo people having forty-something different words for ‘snow.’)

The idea is that if language DOES drive perception (and thus behavior), one would see that countries with weak FTR languages have less investment, care less about maintaining long-term physical health, etc. And the author found this to be true, using data on investment behaviors, smoking, and retirement portfolios. People who spoke weak FTR languages presumably THOUGHT less about the present versus the future and thus engaged in fewer behaviors to prepare for the future – they smoked more and invested less.

The implication is that there is some deep driver of this behavior, because language was invented such a long time ago that it’s hard to call it endogenous. Perhaps weak FTR languages are created by less advanced populations who subsequently participate in less forward-thinking behaviors. Perhaps it is all genetic, affecting both language and behavior. This question reaches so far back that we may never know the answer. But, the idea of drawing from linguistics to inform an economic analysis made this paper a real treat for me.

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