Older is wiser, at least economically

September 24, 2013

The brains of older people are slowing but experience more than makes up for the decline, a University of California, Riverside assistant professor of management and several colleagues found when asking the participants a series of financially related questions.

Ye Li, the UC Riverside assistant professor, and Martine Baldassi, Eric J. Johnson and Elke U. Weber, all currently or formerly of Columbia University, outlined the results in a paper, "Complementary Cognitive Capabilities: Economic Decision Making, and Aging," which was just published in the journal Psychology and Aging.

The study is believed to be the first to measure decision making over the lifespan through the lens of two types of intelligence: fluid and crystallized. Fluid intelligence is the ability to learn and process information. Crystallized intelligence refers to experience and accumulated knowledge.

Past research has found fluid intelligence declines with age, but provides no definitive conclusion as to whether decision-making abilities declines as people age. Li, a faculty member at UC Riverside's School of Business Administration, and his colleagues set out to answer that question.

Their work has broad implications. As the average age of the world's population rises rapidly, understanding how and how well older adults make decisions is crucial because they are faced with an increasing number of important choices related to their retirement finances and health care. Furthermore, as new laws increase the minimum retirement age, people remain professionally active later in life, with holding many key .

To conduct their research, Li and his colleagues recruited a group of 336 people – 173 younger (ages 18 to 29) and 163 older (ages 60 to 82) – and asked them a series of questions that measured making traits. They also administered a battery of standard fluid and crystallized .

These traits included temporal discounting (how much people discount future gains and losses), loss aversion (how much the valuation of losses outweigh gains of the same magnitude), financial literacy (understanding financial information and decisions) and debt literacy (understanding debt contracts and interest rates).

They found the older participants performed as well or better than the younger participants in all four decision-making measures. The older group exhibited greater patience in temporal discounting and better financial and debt literacy. The older participants were somewhat less loss averse, but the result did not reach standard levels of significance.

"The findings confirm our hypothesis that experience and acquired knowledge from a lifetime of offset the declining ability to learn new information," Li said.

The findings also support the fact that older people could be further helped by being provided aids to ease the burden on their decreased fluid intelligence, such as a calculator or advisor, when making significant financial decisions, Li said. On the other hand, younger adults may benefit from more financial education so that they can gain experience with major financial decisions before making them in the real world.

Li and several of his colleagues who co-authored the Psychology and Aging paper are working on a follow-up project that asks adults ranging from 18 to 80 specific questions about decisions such as selecting a health care policy, when to start drawing Social Security and how to pay off multiple credit card balances.

Explore further: Study finds that age does not impair decision-making capabilities

More information: yeli.us/papers/LiBaldassiJohns … 11AgingDecisions.pdf

Related Stories

Study finds that age does not impair decision-making capabilities

January 17, 2013
(Medical Xpress)—Contrary to conventional wisdom that cognitive function declines beginning in the mid-40s, aging does not correlate with a deteriorating ability to think for ourselves.  These are the findings of one of ...

Study: Older adults more willing to wait for gains

July 19, 2011
Older adults, compared with younger adults, tend to report they are more upbeat and that their emotions and mental health do not interfere with their work and social life. That better mental health allows them to wait longer ...

Study: Making medical decisions for a cognitively impaired family member is complicated

August 15, 2013
Decision-making by a surrogate for a family member who is unable to make medical decisions is more complicated than decision-making by patients themselves, according to a study from the Regenstrief Institute, Indiana University ...

Older adults make smarter decisions that lead to long-term gains, study shows

September 21, 2011
Many people believe getting older means losing a mental edge, leading to poor decision-making, but a new study from psychologists at The University of Texas at Austin and Texas A&M University suggests older adults are far ...

Study: Agents like Snowden prone to irrational decision making

July 9, 2013
U.S. intelligence agents – like the embattled Edward Snowden – are more prone to irrational inconsistencies in decision making when compared to college students and post-college adults. That's according a new Cornell ...

Recommended for you

Talking to yourself can help you control stressful emotions

July 26, 2017
The simple act of silently talking to yourself in the third person during stressful times may help you control emotions without any additional mental effort than what you would use for first-person self-talk – the way people ...

Heart rate study tests emotional impact of Shakespeare

July 26, 2017
In a world where on-screen violence has become commonplace, Britain's Royal Shakespeare Company is turning to science to discover whether the playwright can still make our hearts race more than 400 years on.

Do all people experience similar near-death-experiences?

July 26, 2017
No one really knows what happens when we die, but many people have stories to tell about what they experienced while being close to death. People who have had a near-death-experience usually report very rich and detailed ...

Risk for bipolar disorder associated with faster aging

July 26, 2017
New King's College London research suggests that people with a family history of bipolar disorder may 'age' more rapidly than those without a history of the disease.

Visual clues we use during walking and when we use them

July 25, 2017
(Medical Xpress)—A trio of researchers with the University of Texas and Rensselaer Polytechnic Institute has discovered which phase of visual information processing during human walking is used most to guide the feet accurately. ...

Toddlers begin learning rules of reading, writing at very early age, study finds

July 25, 2017
Even the proudest of parents may struggle to find some semblance of meaning behind the seemingly random mish-mash of letters that often emerge from a toddler's first scribbled and scrawled attempts at putting words on paper.

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.