Economies Cannot Produce Wealth without Patience and Long-Term Horizons
In a pioneering study, psychologist Walter Mischel demonstrated that delaying gratification in childhood led to success in later life. The experiment entailed placing toddlers in a room with treats and giving them the option of eating them immediately or waiting for fifteen minutes so that they could get a second offering. Follow-up studies found that participants were more successful in adolescence if they exercised self-control by waiting for fifteen minutes before eating the treats.
The observation that self-control is correlated with individual accomplishment is uncontroversial, though its link to national success is underexplored. Building a civilization necessitates the renunciation of present desires for long-term benefits. For society to thrive, citizens must save, invest, and plan. In planning for the future, people will automatically prioritize investments at the expense of acquiring luxuries, thus indicating low time preference.
Invariably, capital accumulation is a consequence of low time preference, and those with lower time preference will be inclined to forfeit current wants for future success because they are future oriented. When an entrepreneur reinvests profits into his venture, this is an outcome of futuristic thinking. Since he is a long-term thinker, the entrepreneur appreciates that capital investments drive value creation and ultimately increase the firm’s competitiveness.
Even contemplating starting a business is indicative of long-term thinking, considering the roadblocks that entrepreneurs frequently encounter. Most people
Article from Mises Wire
