Tom Pepinsky

Category: Economics

  • If It Rains Tomorrow, I Save

    The dork blogs are all abuzz about this working paper (PDF) by Keith Chen entitled “The Effects of Language on Economic Behavior.” Here’s the abstract

    Languages differ widely in the ways they partition time. In this paper I test the hypothesis that languages which grammatically distinguish between present and future events (what linguists call strong-FTR languages) lead their speakers to take fewer future-oriented actions. First, I show how this prediction arises naturally when well-documented effects of language on cognition are merged with models of decision making over time. Then, I show that consistent with this hypothesis, speakers of strong-FTR languages save less, hold less retirement wealth, smoke more, are more likely to be obese, and suffer worse longrun health. This is true in every major region of the world and holds even when comparing only demographically similar individuals born and living in the same country. While not conclusive, the evidence does not seem to support the most obvious forms of common causation. Implications of these findings for theories of intertemporal choice are discussed.

    This paper has been called a first attempt at Whorfian economics, which hearkens back to the old Sapir-Whorf Hypothesis which holds that, roughly speaking, language independently shapes human behavior. There are both strong and weak versions of this. The strong version would look at a language like Navajo that only grammatically encodes the colors red, white, and black to conclude that Navajo-speakers will have a more difficult time conceiving of green versus blue than English speakers (and that Russians will have an easier time distinguishing light blue (голубой) from dark blue [синий] than English speakers). The weak version would make much (of course) weaker claims, but still hold that we should be able to observe differences in human behavior across otherwise identical people if they speak different languages.

    I happen to have gone to college to study Linguistics. In fact, I actually tried to major (*ahem*, concentrate) in Anthropological Linguistics before a very kind adviser told me that that was even stupider than just majoring in Linguistics. So the debate about whether language affects human behavior is near and dear. It also happens to be the single most common argument that I have with my father-in-law, so it comes up. I strongly believe that the Sapir-Whorf hypothesis as commonly understood by non-specialists is a huge mistake, and deeply flawed (it’s a post for another time about just why I have such strong reactions against it) but there is good evidence that in some of its weaker forms, in a probabilistic sense, it might hold for particular issues, e.g. the relative prevalence of perfect pitch among Mandarin speakers.

    So that’s why this paper fascinates me. The argument is simple. All languages have the ability to talk about future events, but some of them require the speaker to make particular grammatical gestures to do that. English is one. If you want to talk about the possibility of rain tomorrow, you have to say it will rain tomorrow. You cannot say *it rains tomorrow. In Indonesian, however, you don’t need to do that. You can say hujan besok (which translates literally to rain tomorrow). In German, you can say Morgen regnet es (or tomorrow rain it). All human languages can be divided into two groups: those that require grammatical encoding of future events (English) and those that do not (German, Indonesian). The former are called Strong-FTR languages, and the latter Weak-FTR languages.

    Chen’s hypothesis is that people will behave differently with regard to the future based on their native language, which I find a bold prediction but not that surprising given the literature. What he then proposes is that he should be able to observe such differences in their economic activities. To me, that’s an amazingly bold claim! Here is a specific proposition:

    languages with strong-FTR force their speakers to differentiate present and future events when speaking about them. It seems plausible that with finer distinctions in timing comes greater precision of beliefs…if more finely partitioning events in time leads to more precise beliefs, weak-FTR language speakers will be more willing to save than their strong-FTR counterparts. Intuitively, since discounting implies that the value of future rewards is a strictly-convex function of time, uncertainty about the timing of future payoffs makes saving more attractive.

    I mean, wow.

    The bulk of the paper goes into establishing that net of a lot of other systematic determinants, it looks like people who speak strong-FTR actually are less likely to report having saved in the past year than those who speak weak-FTR languages. I want to commend Chen: most of the critiques I’ve seen of his paper hold that he’s missing some omitted variable somehow, and he’s been very careful to rule out the most likely reasons why this would be a spurious correlation.

    Still, like many readers, I suspect, I have a tough time buying this. But we’re scientists here, so we go with the evidence rather than our intuitions or gut, which both tell me to run screaming from this finding. I want to comment on four things: two theoretical issues, an empirical question, and a methodological issue. (I also highly recommend that you read my former professor Julie Sedivy and her comments on it.)

    First theoretical point: I don’t know this for sure, but I believe that the distinction between strong-FTR and weak-FTR is not as grammatically encoded as we think. The example is in the title to this post: if it rains tomorrow, I save. Here I have constructed a grammatically correct English sentence in which I speak about a possible future state but in which I have never had to use the word will or anything like that. I never grammatically encoded the future, it’s understood from context. Here’s why that matters: Chen’s argument is that strong-FTR languages oblige speakers to divide time in particular ways. It’s easy for me to construct an example in which grammar doesn’t force me to do this. I do have to speak conditionally, but if the argument is that encoding in non-conditional contexts is what matters, then that must be made clear.

    Second theoretical point (UPDATE: See comments at the end of the post for a helpful correction; thank you, readers!): this is one of those papers in which I was entirely open to the possible that the exact opposite of the author’s hypothesis was the hypothesis to be tested. Consider this statement: “if more finely partitioning events in time leads to more precise beliefs, weak-FTR language speakers will be more willing to save than their strong-FTR counterparts.” It rests on the idea that weak-FTR languages partition time more finely; Chen tells us that “it seems plausible” that this is true. Well not to me. Why does that follow from the lack of grammatical encoding of the future tense? What if someone told you the exact opposite: speakers strong-FTR languages partition time more finely (because, say, they have to talk about it). I would be just as likely to believe that theory. That just makes me very, very nervous about the theoretical underpinnings of this completely contrary finding.

    Now onto empirics: the results here rely on a statistical method called conditional logistic regression, which despite the fact that it appears in STATA and on a couple of grad syllabi, is not widely understood by political scientists. I had to read up a lot on this method to figure out exactly what was happening to generate these results. I think that the paper could benefit from a much, much richer discussion of how conditional logistic regression “matches an individual with others who are identical on every dimension listed above, but who speak a different language”. All of the inference rests on this point. I’m not saying that this is wrong, but rather that this strikes me as a rather imprecise way of describing exactly what’s happening. If I can be confused, others can be too.

    More on point, it’s interesting to me that the author adopts this methodology (which allows for a huge number—millions!—of potential fixed effects regardless of the sample size), but then enters a couple of variables (Trust, Employment, Beliefs about Saving) into the models as linear predictors instead of dummied-out and jointly interacted fixed effects like the others. As a reviewer, if I saw this I’d immediately ask what happens if these are included as fixed effects too…a more flexible modeling strategy that seems in the spirit of the overall analysis anyway. The fact that Chen does not do this strikes me as fishy. In general, this is the type of paper where I’d like to play with the analysis code myself to see what commands are being entered into the computer to produce these results.

    Finally, a methodological question. Andrew Gelman has written about what he calls “Type M” errors, the errors that arise when we try to estimate small effects. By any stretch of the matter, I think it’s reasonable to assume that the effect of grammatical encoding of the future on savings behavior is a small one! Yet Chen’s baseline estimate is that “strong-FTR families sav[e] only 46% as often…as weak FTR families.” That’s a gigantic effect (although to be fair, maybe the baseline savings rate in the entire population is only 1%, we can’t tell from the paper). Gelman observes that the classical null hypothesis testing in a model like this is particularly likely to give results that imply large effect sizes (such as this) when the actual effect size is small, as it probably ought to be if it exists as all. This analysis seems ripe for a Bayesian reanalysis.

    In all, I’ve written 1600 words on this. If nothing else, that tells me that this is interesting food for thought.

  • Self-Referential and Self-Serving

    I recently attended a really interesting conference at Penn State called Global Asias. Like many interdisciplinary “pan-Asia” conferences, I found myself representing both the token Southeast Asianist and the token political scientist. Most everyone else was a China humanities person; there were a couple of India and Japan humanists too, but that’s about it. So I spend a lot of time at these things translating their regional and disciplinary interests into something that I can understand.

    Over lunch, I found myself (surprise!) at a table full of China people. Three of them, in particular, were easy and fun to talk to. I had given a presentation on political business relations in Southeast Asia, so the topic turned to political business relations in China. They told me fascinating stories about the absolutely nauseating levels of corruption in China, how the CCP is frantically forcing the state-owned banks to pump billions of yuan into the wobbly property sectors around the coastal cities to keep the country’s economic system afloat, and thereby to keep the CCP in power. After we complained about the state of affairs, we had a quiet moment. Then one of them said, “Yeah, but I just hope that China can maintain this system.”

    Huh? Well, OK, maybe I don’t know what this means. We got to talking further about the plight of China’s urban labor force, which outside of the high-skill industries is really vulnerable to the business cycle and is politically marginalized (they are all basically illegal migrants within China because they have no local residency status, therefore are ineligible for most government services). They talked about these horrible stories of factories poisoning workers, then firing them, and forcing them to return to the countryside, crippled and broke and now a burden to their families. Again, the conversation wound down for a moment, and the second one said, “I really hope that the Chinese can keep this system together.”

    Wait, what? Before I could probe further the conversation turned to the countryside, to the ways in which urban China has grown at an astonishing rate since the early 1990s while the countryside has stagnated, how the CCP–which ones lavished favors on the local village enterprises–has turned essentially into an urban big business party. How rural smallholders have no property rights, no political voice, yet they get to participate in fake elections every couple of years which foreign Polyannas think are some sort of sign of orderly society rather than firm social control. As we paused to get some dessert, the third one said, “I just look at China and hope that the Party can figure out how to protect the system.”

    The f***? At this point I had to intervene. “What,” I asked, “do you three mean when you express this desire for the Chinese regime to keep the country together? The story that you’re telling me is one of a brutal and repressive dictatorship, corrupt to the very core and basically indifferent to the plight of 90% of its population. You guys are academics in U.S. universities. None of you is Chinese. You all expressed disgust and hope for political reform in the countries that I study. Why do you hope that the system in China will remain intact?”

    Their answers were instructive, and at the risk of generalizing too far from their informal remarks, I think that they illuminate something fundamentally rotten about much of the recent contemporary China scholarship in the U.S. Many–not all, but a good many–China scholars are self-referential, and they are self-serving.

    My lunchmates responded to my question like this: we have to keep the current system going because the risks of it coming apart are too great. I pushed further on what they meant. Well, they replied, do you want another 1911 or 1949? They are referring here to the Revolution of 1911 (which ended the Chinese imperial dynasty) and the end of the Chinese civil war (20 years of nationalist versus communist). Both of these events were marked by huge social unrest, economic collapse, and untold human death and suffering. These were really bad. It would be nice not to repeat them.

    But the point here is that their referents for what it would mean for the CCP to come apart were exclusively Chinese. There was no sense that the political and economic experiences of, oh, Russia or Brazil or Indonesia or Mexico or Egypt or South Africa or whatever could possibly be relevant for the Chinese experience. I ask them directly about this, and they looked at me like I was crazy. But think about it–if you wanted to guess what would happen in China without the CCP, would you look to the fall of the Qing Dynasty or would you look to the collapse of another one-party state in with a rapidly modernizing economy? I’m not saying that China will be just like Brazil; far from it. I’m saying that it is peculiar not to even consider that another country’s experience could have anything to contribute to a China scholar’s view of what China is like. Political change is always difficult, but it is usually not genocidal. China, for them, is sui generis. There’s nothing like it, and China can be (nay, it must be) understood completely on its own terms.

    This view, like its parallel in U.S. politics of “American exceptionalism,” bugs me to no end. Maybe it’s just because I’m a Southeast Asianist, but no one in political science thinks that Indonesia that special anymore. The risk of this sort of self-referential China scholarship is that it leads to asymmetric parochialism. Indonesianists, Latin Americanists, Middle East scholars, we all are required by our discipline to know the broad canon of comparative politics of developing countries. China scholars just need to know China. That’s nonsense.

    But of course, there’s a deeper critique that I want to make, and this brings me to the second point. Fine, due to the way that China scholars tend to think, they believe that political change cannot lead to anything other than humanitarian disaster. You know who else thinks that, and consistently reminds Chinese people that any political or economic reforms that are not directed from the center are going to result in disaster? The CCP–that is, China’s own political elite. They say this because they obviously stand to lose the most from reform. To put it crudely, they are first up against the wall.

    My lunchmates expressed no sympathy for the CCP leaders or the corrupt new politically-connected capitalists. But I believe that like China’s elites, my lunchmates (like a lot of China scholars that run in certain circles) stand to lose a lot from political and economic reform. Why? Because the current Chinese political-economic system makes it very lucrative to be a U.S. scholar of China.

    It’s lucrative in a couple ways. First, in purely monetary terms, there is great demand in China for the prestige that a U.S. degree brings. If you speak Mandarin and can show up to say “I am the professor of Blah at the university of Blah” you can almost certainly arrange for yourself and your family a sweet gig at Beida or Nanda and make a pile of loot (we academics almost never make piles of loot, so it matters). It’s also lucrative because China funds Chinese studies around the world, most recently through the establishment of Confucius Institutes. They bring teaching and research funds that are unmatched, which can be used to do great things (like, have conferences on Asia that invite people like me).

    There’s a second, less monetary way in which the current system is lucrative: people seems to understand it and it makes sense to them. China scholars know how this Chinese system works, and it would be costly to have to learn how a new Chinese system works.

    This does not make China scholars support the regime. But it makes them indirectly interested in the same sorts of things that the CCP is interested in: stability, not change; and orderly if astoundingly unequal society, not what they fear would be the chaos of a country in which ordinary Chinese have political and economic rights and exercise them. The distaste for reform, in other words, is not just self-referential, it is also self-serving.

    To return to our conversation: after hearing them out, I asked them, “so, surely, you would advocate some sort of reforms, right? You don’t support the continuation of every single policy or practice in place now, right?” Of course, they said. But from their perspective, what China needed was gradual reform, from the top, with the CCP clearly on board and the military actively supporting the decisionmakers. That way Chinese society will adapt to the new changes at the proper pace. Sounds familiar to me. “Is such change likely,” I asked? Well, they responded, probably not: when you look at specific events like the Shanghai rail disaster, or chronic problems like internet censorship, you definitely get the sense that the elite may talk about small reforms, but that the system cannot tolerate real reform.

    Sounds to me like hoping for gradual reform is another way of hoping that the current system hangs together.