Talking About Money Article Club: The Effect of Language on Economic Behavior by M. Keith Chen

Talking About Money Article Club: The Effect of Language on Economic Behavior by M. Keith Chen

Considering the language you grew up speaking, you may or may not be predisposed to save (really!).


I was conducting a professional development training in Cleveland and I mentioned this fascinating study to my participants.  I had been referencing this study for quite some time, yet I couldn’t remember the name of the study (or author, for that matter) so I casually mused that maybe I would discuss this study in more detail on a future blog post.  “You should totally do that!” one of my trainees quipped.

Thanks for the encouragement.  This post is for you.

Geeking Out on Economics Research…on Linguistics

The Effect of Language on Economic Behavior: Evidence from Savings Rates, Health Behaviors, and Retirement Assets by M. Keith Chen of the Cowles Foundation for Research in Economics at Yale  University, while published in 2011, has made its way through the personal finance world as of late, and I for one was intrigued by its findings.

The hypothesis for this research was that by speaking “in a distinct way about future events leads speakers to take fewer future-oriented actions,” or put in another way:  Does the language that you speak influence how you perceive the value of present-day versus future life events?  Chen reviewed the linguistic concept of Future-Time Reference (FTR), which studies how speakers of a certain language mark the timing of events, from the past to the present to the future.  Speakers of English have a strong FTR, meaning that us English speakers are required by our language to mark time.  “It cold tomorrow” is not a proper English sentence, while “it is going to be cold tomorrow” is.  See the difference?

In contrast, speakers of weak FTR languages (like German or Mandarin, for example) are not required to include the function of time in their sentences.  Take the sentence, “I go listen seminar.” This is a completely reasonable sentence in Mandarin, and does not require the speaker to indicate when said seminar took place.  It is this comparison of strong versus weak FTR that Chen investigated and applied to savings behavior.

”I Saved Yesterday” vs. “I Save Today” vs. “I Am Going to Save Tomorrow”

The results of his research were quite interesting to me.  At both a household and a national level he found that a nation’s FTR did have a predictive value with regards to savings behavior.  Namely, weak-FTR speakers were 31% more likely to have saved in any given year, and to have accumulated 39% more wealth by retirement.  This was true even of countries that were comprised of both strong and weak FTR languages (Switzerland, Singapore, and Nigeria to name a few).  In these countries, with similar cultures and social policies, the weak FTR speakers saved disproportionately more than the strong FTR speakers. Wild, huh?

Chen concludes this study by stating that while his results do in fact support his hypothesis, he is willing to consider that there could be a possibility that language is not causing, but rather reflecting, deeper differences that drive savings behavior.  (Ah, that good ol’ chicken-and-egg theory rounds out the research.)

Now that we know this is proven in at least one round of research (and coming out of Yale, no less), English speakers – because they are English speakers with a weak Future-Time Reference – discount the future because their language represents the future as wholly distinct from the present.  Today is today and tomorrow is tomorrow, and never the twain shall meet.  In contrast, Germans with a weak Future-Time Reference conflate today and tomorrow and treat the two more or less the same.

Applying This Research to Social Policy

What does this mean when we talk about encouraging people to save?  While I do find this research fascinating, this is where I get stuck.  Do we try to get Americans to consider their 74 year-old self as the exact same as their 44 year-old self, while in fact we understand that their life and financial circumstances to be distinct from one another?  And if we did, how would we do that?  I’ve seen those services offering to show you photoshopped images of yourself at an older age, presumably to inspire you to take on a better (and more expensive) skin care regime.  Would we do this to all the 25 year-olds in America and say, “This is your 85 year-old self.  Don’t you want to save for their retirement?”  I just don’t know.

Or maybe this is the responsibility for the federal government (who are also English speakers, I might add)?  Should Social Security be revamped so that it does more than help elders subsist around the poverty line?  Should it serve as a de facto pension for all American workers, especially since pensions from private industry are going the way of the dinosaurs?  In essence, should American workers not have to bear the brunt of saving for their own retirements, because as weak Future-Time Reference speakers it is not in their linguistic nature to do so?  I don’t know about this either.

I would love to hear your thoughts, both about this research and about the social policy implications of it.  And while you are at, please spread the love on the social media platform of your choice.  <3

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