Personality Traits and Economics

People often attribute their own success or the success of others to various individual attributes like motivation, determination and curiosity. Historically, the academic study of these personality traits lay within the realm of psychology. Economists concerned with the life and labor market successes of individuals were always mindful of the impacts of individual traits, but did not include these in their formal models. As such, the effect of these factors in regressions were either captured in the disturbances or, more troubling, in the coefficients on other variables of interest, such as education.

However, economists are now explicitly modeling the generation and ultimate effects of various personality traits. A recent paper (gated version here, non-gated here) by Borghans, Duckworth, Heckman and Weel summarizes the literature from psychology and economics and attempts to build a framework upon which economists and other social scientists can work to understand the influence of personality traits on life outcomes, as well as their genesis. The paper is a whopping 165 pages long, which is enough to deter most souls. However, here are a few reasons why I think it is worth reading in its entirety (or, alternatively, a few reasons why I am reading it in its entirety):

1) Personality traits affect most outcomes we care about: Are you a health economist interested in, say, smoking? To the extent that starting/quitting behavior is driven by discount rates (roughly, the value of the future relative to the present) and motivation, it is worth understanding how these personality traits interact with other economic and biological influences to influence healthy behaviors.

2) Economic imperialism and interdisciplinary collaboration: Economics is getting popular in part because its' disciplinary lens is being focused on a wide variety of questions and human behaviors. Part of this "imperialism" requires a strong understanding on the part of economists of fundamental research in other disciplines. The other side of this is that economists, who believe in comparative advantage, will likely require expert inputs from other fields to build the best possible research project.

I guess there are really three things here. First, if you are interested in economics in the armchair sense, this paper is a great way to see how the scope of the field is growing. Second, if you are an economist, it is a frontier of the field worth paying attention to. Third, if you are a non-economist researcher reading the work of economists in fields outside the traditional scope may alert you to opportunities for collaboration.

3) Behavioral Economics Plus: This paragraph alone hooked me on this paper (emphasis mine):

The evidence from personality psychology suggests a more radical reformulation of classical choice theory than is currently envisioned in behavioral economics which tinkers with conventional specifications of preferences. Cognitive ability and personality traits impose constraints on agent choice behavior. More fundamentally, conventional economic preference parameters can be interpreted as consequences of these constraints. For example, high rates of measured time preference may be produced by the inability of agents to delay gratification, interpreted as a constraint, or by the inability of agents to imagine the future. We develop a framework that introduces psychological variables as constraints into conventional economic choice models.

A "radical reformulation" of behavioral economics, a field that is considered radical itself? Count me in! In a future post, I will discuss what their reformulation is (I'm not that far into this paper yet) and why it is (or isn't) interesting.