Economics training and hyperbolic discounting: training versus selection effects

ABSTRACT

This paper contributes to the literature on the effects of economics training on behavior by examining the link between hyperbolic discounting and the number of economics classes taken by a sample of 1310 college graduates at Ohio University. A strong negative correlation is found between economics training and hyperbolic discounting behavior. Regression analysis shows that dynamic consistency is a determinant of taking economics classes. Once the endogeneity of these variables is accounted for, economics training is no longer a statistically significant determinant of hyperbolic discounting. Thus, the selection effect of studying economics outweighs the training effect. Behavioral variables are found to be more important in explaining hyperbolic discounting than demographic variables. The study suggests the importance of controlling for both the selection effect and the training effect for all studies that examine the role of economic training on behavior.

KEYWORDS:

• Hyperbolic discounting
• dynamic inconsistency
• economics training
• intertemporal choice
• naiveté

JEL CLASSIFICATION:

• D80
• D90

Disclosure statement

No potential conflict of interest was reported by the author.

Economic Behavior Survey

This 3 minute survey is being used for research by Honors Tutorial students for an Ohio University economics class. This is not a commitment or a request to donate any money to Ohio University. There are no right or wrong answers and all information will be kept confidential.

Purpose

The purpose of the survey is to better understand economic behavior and preferences regarding the timing of financial decisions. Thank you for your participation!

1. Please enter the ID survey code listed in the email sent to you.

2. Given the choice, would you rather receive $100 today or $110 in one month?

3. Given the choice, would you prefer to donate $50 to a good cause today or $55 in one month?

4. When you make plans, (saving, weight loss, gym, vacation, etc.) how often do you stick to them? Use the scale of 1 to 10, with 1 being never sticking to plans and 10 being always sticking to plans.

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12. To the best of your recollection, how many college economics classes did you take?