The Simple Economics Series is a collection of information that explains, in plain English, the fundamentals of personal economics and theory. If you enjoy this type of post or personal economics see the entire series here.
Basic Premise of Theory
Time perspective is a fundamental dimension in the construction of psychology that emerges from the cognitive processes that partitions the human experience into past, present and the future (Zimbardo & Boyd, 1999). Time perspective has a pervasive and powerful, yet often unrecognized, influence on human behavior.
Basic Concepts, Relationships Between Concepts and Assumptions
The basic concept of time perspective theory is that our perception of time influences our actions. The theory of time perspective borrows heavily from psychology but is also quite useful in sociology, neuroscience, and economics. Due to the complexity of its constructs and influence across multiple fields, defining time perspective can be challenging. Most models break down time perspective into categories such as past, present, or future. In addition, researchers often measure and plan experiments comparing the variables of present orientation and future orientation.
Time Perspective Theory suggests that our outlook has an extremely profound influence on the way we perceive all elements of human behavior. The underlying assumption of the theory is that time, or time perspective, it the variable that actually influences our behavior. The notion that individuals can be categorically defined based on a few simple survey questions is also left up to debate. Many studies assume that if an individual is future oriented in one area they will likely be future oriented in all areas of their lives.
Evaluation of the Theory
The basic Theory of Time Perspective has issues with internal consistency. It is often observed that broad, interdisciplinary studies can be difficult to define across all situations. Psychology and neuroscience both utilize time perspective but evaluate and measure it quite differently. Economics is primarily interested in the implication of time perspective.
Time Perspective Theory does provide a framework and a series of tools to help define and measure its psychological constructs. Intuitively, researchers understand that time does have a profound influence on our lives and decision making processes. The difficulty lies in determining a consistent way to measure and quantitatively evaluate its effects. The utility of the theory has interesting implication in human behavior and can give an explanation for perceived irrationality. Most researchers and academics are future oriented and have some difficulty identifying with the perceived irrationality of observed present oriented individuals (i.e. gambling, extreme risk).
Understanding how people actually behave is an integral aspect of Consumer Economics. The notion that time perspective influences all decision making processes makes Time Perspective Theory extremely relevant in economics. Risk taking and substance use are two obvious examples that are influenced by future orientation. In addition, family financial planning is based on an individual’s propensity to plan for the future and retirement. Understanding an individual’s time perspective orientation can be useful when trying to relate the importance of estate planning or retirement investment allocations.
Economic policy can also benefit from understanding the way a population skews on future orientation. 401k and HSA options may be great politically, but if most consumers are present oriented then individuals will not utilize their given options.