Personality Psychology and Economics

252 Pages Posted: 4 Apr 2011 Last revised: 5 Apr 2011

See all articles by Mathilde Almlund

Mathilde Almlund

University of Chicago - Department of Economics

Angela Duckworth

University of Pennsylvania - Department of Psychology

James J. Heckman

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); American Bar Foundation; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Tim Kautz

University of Chicago

Multiple version iconThere are 2 versions of this paper

Date Written: February 2011

Abstract

This paper explores the power of personality traits both as predictors and as causes of academic and economic success, health, and criminal activity. Measured personality is interpreted as a construct derived from an economic model of preferences, constraints, and information. Evidence is reviewed about the "situational specificity" of personality traits and preferences. An extreme version of the situationist view claims that there are no stable personality traits or preference parameters that persons carry across different situations. Those who hold this view claim that personality psychology has little relevance for economics. The biological and evolutionary origins of personality traits are explored. Personality measurement systems and relationships among the measures used by psychologists are examined. The predictive power of personality measures is compared with the predictive power of measures of cognition captured by IQ and achievement tests. For many outcomes, personality measures are just as predictive as cognitive measures, even after controlling for family background and cognition. Moreover, standard measures of cognition are heavily influenced by personality traits and incentives. Measured personality traits are positively correlated over the life cycle. However, they are not fixed and can be altered by experience and investment. Intervention studies, along with studies in biology and neuroscience, establish a causal basis for the observed effect of personality traits on economic and social outcomes. Personality traits are more malleable over the life cycle compared to cognition, which becomes highly rank stable around age 10. Interventions that change personality are promising avenues for addressing poverty and disadvantage.

Suggested Citation

Almlund, Mathilde and Duckworth, Angela and Heckman, James J. and Kautz, Tim, Personality Psychology and Economics (February 2011). NBER Working Paper No. w16822. Available at SSRN: https://ssrn.com/abstract=1801080

Mathilde Almlund (Contact Author)

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

Angela Duckworth

University of Pennsylvania - Department of Psychology ( email )

3815 Walnut Street
Philadelphia, PA 19104-6196
United States

James J. Heckman

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States
773-702-0634 (Phone)
773-702-8490 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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American Bar Foundation

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Chicago, IL 60611
United States

Institute for the Study of Labor (IZA)

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Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Tim Kautz

University of Chicago ( email )

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