Skip to main content

Instant Gratification

Walter Mischel ran a series of famous experiments in the late 1960s where he tested the ability of children to control their impulse for immediate gratification.  He simply put them in a boring office with a marshmallow or Oreo sitting on a plate. The kids were told that if they did not eat it that they would get another marshmallow / cookie in 15 minutes.  Below is a short video of the experiment.   

At the time, Mischel surmised that the kids who ate the marshmallow immediately or soon after the clock started running were unhappy at home and had behavioural difficulties. However, he also tracked his 653 subjects over time and found that the kids who were unable to control their need for gratification performed very poorly in school relative to those who delayed their need for gratification. They also underperformed in later life. You can read more here

Why did Mischel find what he did? One possibility is that kids who ate the marshmallow quickly grew up in unstable and untrustworthy environments and that their instant gratification simply reflected growing up in such an environment (click here). This instability meant that they were also reluctant to invest in their human capital i.e., education. Indeed, instant gratification is rational and optimal if one lives in an unstable environment.  


Popular posts from this blog

The Economics of Global Warming

The Berkeley Earth Project , an independent study of global warming, has found that the earth has become a degree warmer over the past half century.  However, the statistical uncertainty surrounding pre-1920 estimates makes it very hard to say much about long-term trends - click here for graph .  This is one of my concerns with the global warming debate - we simply don't have trustworthy long-run data which looks at temperature changes over the last millennium (or two).  My second concern with the global warming debate is that it is very hard to prove any sort of casual link between global warming and human activity.  The scientists may be able to show correlation between global warming and our production of carbon dioxides etc., but correlation is not causation. My third concern with the debate is  that those who are sceptical or agnostic are stereotyped as flat-earthers or intellectually-challenged crackpots.  This only stifles debate and the progress of science itself. 

Boom and Bust: A Global History of Financial Bubbles

Boom and Bust: A Global History of Financial Bubbles, co-authored with my colleague Will Quinn , is forthcoming in August. It is published by Cambridge University Press and is available for pre-order at Amazon , Barnes and Noble , Waterstones and Cambridge University Press . 

The Failure of Herstatt Bank

As an undergraduate, I was taught about the failure of Herstatt Bank in 1974 and Herstatt risk. This bank was only the 35th largest bank in Germany at the time so why would anyone be interested in studying its failure? Herstatt failed because of its involvement in risky foreign exchange business. When it closed its doors on 26 June 1974, counterparty banks (mainly in New York) had not received dollars due to them because of time-zone differences - this is known as settlement risk. The cross-jurisdictional implications of its failure resulted in the Bank for International Settlements setting up the Basel Committee on Banking Supervision and Herstatt's failure was a key reason for the establishment of real-time gross settlements systems, which ensures that payments between two banks are executed in real time. The Bank of England's Ben Norman has an interesting post on Herstatt over at the Bank's new blog ( Bank Underground ). As well as giving an excellent overview of