Research & Academia
Of Cashew Nuts, Marshmallows, and the Wealth of Nations Professor Jean-Robert Tyran Jean-Robert Tyran is Professor of Economics at the University of Vienna and director of the Vienna Center for Experimental Economics. After earning his PhD in economics at the University of Zurich in 1997, he worked as an Assistant Professor at HSG until 2004. Prof. Tyran has published in various field journals as well as in general interest journals such as American Economic Review, Econometrica, Review of Economic Studies, and Science.
The invitation to contribute a piece to this special issue on “patience” reached me while I was reading Richard Thaler’s new book “Misbehaving”. Thaler is one of the founding fathers of behavioral economics and the book recounts his academic journey. He starts by describing his formative encounter with the later Nobelist Daniel Kahneman and the walks and talks they had with Amos Tversky in the late 1970s. He then reviews his enduring struggle to convince “Econs” - as he calls standard economists - of the need to take a more realistic view on how humans (mis-) behave. Thaler’s book is witty and sprinkled with anecdotes from his personal life. One day, Thaler writes, he was having some friends over for dinner. They were having a pleasant conversation over a glass of wine and a large bowl of cashew nuts to nibble while the turkey was roasting in the oven. When Thaler realized that the bowl will be emptied in no time, he removed the bowl from the table, putting it out of sight. Surprisingly (to an Econ), everyone was thanking the host for doing so.
What was happening in Thaler’s kitchen is, in the language of Econs, an example of dynamically inconsistent behavior. First, people prefer A over B, later they prefer B over A. Examples of such behavior abound. Recall your thought, early on that Saturday morning, to go to the gym to exercise but then, you ended up on the couch watching a football game in the afternoon. Or think of your last New Year’s resolution. Thaler’s anecdote is a parable of impatient behavior (thoughtlessly munching the cashew nuts instead of waiting for the turkey to be ready) arising from a mix of temptation and weakness of will. But behaving impatiently is not in the best interest of the party because munching the nuts will ruin the appetite for the main course. Putting the cashew nuts out of sight serves as a commitment device to overcome weakness of will (the anecdote thus reminds us of the famous story of Odysseus tying himself to mast to be able to hear the beautiful song of the sirens without wrecking his ship). Econs think of how people make choices over time by referring to the notion of a “discount rate”. The idea is that people prefer to get a dollar today to getting a dollar tomorrow. 25