Cognitive skills affect economic preferences, strategic behavior, and job attachment

Economic analysis has so far said little about how an individual's cognitive skills (CS) are related to the individual's economic preferences in different choice domains, such as risk taking or saving, and how preferences in different domains are related to each other. Using a sample of 1,...

Full description

Saved in:
Bibliographic Details
Published inProceedings of the National Academy of Sciences - PNAS Vol. 106; no. 19; pp. 7745 - 7750
Main Authors Burks, Stephen V, Carpenter, Jeffrey P, Goette, Lorenz, Rustichini, Aldo
Format Journal Article
LanguageEnglish
Published United States National Academy of Sciences 12.05.2009
National Acad Sciences
Subjects
Choice Behavior
Cognition
Cognitive ability
Control variables
Correlation analysis
Correlations
Decision Making
Discounting
Economic analysis
Economics
Employment
Game Theory
Humans
Intelligence quotient
Intelligence Tests
Lotteries
Numeracy
patients
Payments
Preferences
Prisoners dilemma
Reproducibility of Results
Risk
Risk aversion
Risk taking
Self Concept
Social Class
Social Environment
Social Sciences
Socioeconomic Factors
Strategic behavior
Truck drivers
Online AccessGet full text

Cover

More Information
Summary:Economic analysis has so far said little about how an individual's cognitive skills (CS) are related to the individual's economic preferences in different choice domains, such as risk taking or saving, and how preferences in different domains are related to each other. Using a sample of 1,000 trainee truckers we report three findings. First, there is a strong and significant relationship between an individual's CS and preferences. Individuals with better CS are more patient, in both short- and long-run. Better CS are also associated with a greater willingness to take calculated risks. Second, CS predict social awareness and choices in a sequential Prisoner's Dilemma game. Subjects with better CS more accurately forecast others' behavior and differentiate their behavior as a second mover more strongly depending on the first-mover's choice. Third, CS, and in particular, the ability to plan, strongly predict perseverance on the job in a setting with a substantial financial penalty for early exit. Consistent with CS being a common factor in all of these preferences and behaviors, we find a strong pattern of correlation among them. These results, taken together with the theoretical explanation we offer for the relationships we find, suggest that higher CS systematically affect preferences and choices in ways that favor economic success.
Bibliography:SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 14
ObjectType-Article-1
ObjectType-Feature-2
content type line 23
Edited by Avinash K. Dixit, Princeton University, Princeton, NJ, and approved March 17, 2009
Author contributions: S.V.B., J.P.C., L.G., and A.R. designed research; S.V.B. performed research; S.V.B., J.P.C., L.G., and A.R. analyzed data; and S.V.B., J.P.C., L.G., and A.R. wrote the paper.
ISSN:0027-8424
1091-6490
1091-6490
DOI:10.1073/pnas.0812360106