My, that donut looks tasty, doesn’t it?
What do you think? Can you hold off enjoying an immediate pleasure in the hope of getting a future benefit? Can you set aside that slice of cake for dessert so as to maintain a healthy weight? Will you work up the will to work out when you’re tired so as to build your fitness?
Imagine now how you’d feel about a much simpler task: choosing between eating a single marshmallow now, or getting two marshmallows in 15 minutes?
That was the choice facing young children in a Stanford University experiment in the 1970s. By checking back in with the children over their lives, researchers noticed something interesting. Children who had successfully delayed gratification by waiting for the reward had higher achievement later in life. They outperformed in diverse areas such as better social skills, higher SAT scores, and more able to cope with stress. See The Bing “Marshmallow Studies”
Later studies revealed that children will delay gratification longest when they trust that the future reward will be forthcoming. If they are uncertain about the reward, they give in to temptation earlier. See A Bird In The Hand for more on how an uncertain future affects decisions we make today.
Americans are failing the marshmallow test at an individual level. Consider how we behave with our spending. U.S. household debt at the end of September 2020 was over $14 trillion (American Household Credit Card Debt Statistics):
- We owe almost $10 trillion in mortgage debt, spent in the pursuit of ever bigger houses. The average size of a family home has increased by more than 60% since the 1970s. New US homes today are 1,000 square feet larger
- We owe more than $1.5 trillion in student loans, an amount that has grown by more than 600% since 2003. Student Loan Debt by Year
- We have binged on another $2 trillion or so in auto loans and credit card debt.
The blossoming debt is causing not just financial problems for individuals, but stress and anxiety as well. For some good advice on managing student loan debt and stress generally, see this Bankrate.com article The impact of student loans on mental health.
With this behavior on an individual level, is it any surprise that America is also failing the marshmallow test at a national level? Our national debt at June 2021 was over $28 trillion (U.S. National Debt Clock):
- We are spending money we don’t have to fund immediate consumption we often don’t need and so running up trillion dollar annual budget deficits. We are consequently building up our national indebtedness to levels never seen by any nation in world history. See Pull The Emergency (Debt) Brake.
- We watch our basic infrastructure (highways, utilities, schools) crumble around us, seemingly unable to halt the decay. By neglecting even preventative maintenance in the short term, we are courting much larger costs to completely replace worn-out facilities when they fail utterly.
The dynamics of delayed gratification help explain why as individuals and as a nation we spend beyond our means. Consumption today is worth more than consumption tomorrow. Put another way, money in the future is worth less to us than money today. Similarly, costs in the future hurt less than costs today, and we thus prefer to pay costs as late as possible. A debt repayment deferred to next year is preferable to one we must pay today.
So let’s imagine now how we feel about racking up costs today for a bill that might never come due? Or even if the bill must eventually be paid, that someone else will have to pay it? You might well conclude that present consumption is worth more than speculative future costs. We are certainly behaving as if this were true.
Consider how we handle our national indebtedness: whenever existing debt comes due, we just issue new debt to pay off the old debt, in addition to whatever new debt we need to fund current spending. It’s as if we have a credit card that not only requires no minimum payment each month, but has no limit! We can spend whatever we want for as long as we want.
While this is a pleasant daydream, do we really think the world will keep lending us money without limit? As we rollover existing debt and steadily add to our balance, we can expect worried lenders to eventually start demanding ever increasing premiums. They will want more interest to cover the growing risk that we default on our debt or, more likely, inflate our currency by printing money, thereby devaluing it. An honest person will admit that there must come a point at which either our credit or our currency are ruined, or both.
Why do we persist? We’re not sure we’ll go bankrupt, and we’re not sure when. We fool ourselves that because parts of the future are uncertain, we can safely ignore it altogether. See The United States Is Not Bankrupt ... Yet.
Saying we can’t predict the future with certainty does not justify being willfully blind to the direction we’re heading. See Dean Wormer Was Right for more on willful ignorance.
We can choose to start passing the marshmallow test any time. See A Bird In The Hand for some specific ideas.