An Uncertainty Management Perspective on Long-Run Impacts of Adversity: The Influence of Childhood Socioeconomic Status on Risk, Time, and Social Preferences

Abstract

While there has been a recent increase in focus on the role of early life socioeconomic status (SES) on preferences and decision-making, there is still debate surrounding the proper theoretical framework for understanding such effects. Some have argued that early life SES can fundamentally shift time preferences per se, such that those from low SES backgrounds favor current rewards over future rewards. Others have argued that, while early life SES has lasting effects on behavior, such effects are only observable in the presence of salient cues to mortality. Here, we propose an alternative framework that centers on environmental uncertainty. In this uncertainty management framework, early life deprivation promotes the development of strategies that minimize the downside costs of uncertainty across domains. We argue that this focus on managing uncertainty results in greater risk-aversion, present- orientation, and prosociality. Furthermore, these effects need not be dependent on salient cues to mortality. Across four large samples of participants (total N=4,714), we find that childhood deprivation uniquely predicts greater risk-aversion (both incentivized and hypothetical) and greater prosociality in economic games. Childhood deprivation also predicts greater present-orientation, but not above-and beyond current SES. We further find that mortality cues are not necessary to elicit these differences. Our results support an uncertainty management perspective on the effects of childhood SES on risk, time, and social preferences.

Keywords: Early Life Environment, Experimental Game Theory, Socioeconomic Status, Economic Games, Risk Preferences, Time Preferences