NPR had a story the other week about Yale economist James Choi, who examined 50 popular personal finance books to see how their tips aligned with traditional economic advice. (You can find Choi’s study here.) Choi concluded that much practical advice departs from economic logic, but this doesn’t mean the popular advice is necessarily wrong. In fact, the personal finance types often did a far better job of accounting for the role of temptation. I found the whole thing a powerful reminder of why educators misstep when they give short shrift to human nature and the importance of good habits.
A couple of Choi’s examples really illustrated this point. For starters, Choi explains that economists generally dismiss the idea of “earmarked” savings. To an economist, whether you’re saving for a car, vacation, or house, it’s all just money—there’s no value in creating a particular fund for this or that. The problem? If the money is there to spend and it’s not set aside for a specific purpose, it can be tempting to spend it on a whim. That’s why many of the more popular finance authors tend to encourage “mental accounting,” with different buckets for different goals. Choi notes that, while this advice may not be economically logical, it’s sensible and can help people resist their impulse to spend.
Choi also points out that many economists actually advise 20- and 30-somethings with a steady job not to save money. The thinking is that they’ll eventually earn a lot more money, so it doesn’t make logical sense to scrimp now when it’ll be easier to save later. As Choi says, “I tell my MBA students, ‘You of all people should feel the least amount of guilt of having credit card debt, because your income is fairly low right now but it will be, predictably, fairly high in the very near future.’” Economists call this “consumption smoothing.”
But Choi found that most popular authors ignore the economists and advise all their readers to live within their means and save steadily. While academics regard such advice as wrong-headed, it’s not hard to see where the supposedly sophisticated, economically logical advice could lead us astray. After all, people tend to be good at wanting things and not so good at self-discipline.
“Consumption smoothing” presumes that people can turn habits on and off: that they can go for a decade or more without saving, and then turn 30 (or 40) and decide, “It’s time to save big bucks and put away those credit cards.” I don’t know about you, but I don’t know many people who operate that way. It seems fairer to say that those who’ve developed the habit of saving money tend to keep on saving, and that those who haven’t, don’t.
Indeed, Choi observes that the importance of learning to save “is almost always missing from economic models” and, in a bit of droll understatement, acknowledges that this is “a potentially important oversight.” Even Choi, who tells his MBA students to live it up and worries about someone “unnecessarily depriving yourself in your 20s and even 30s,” concedes that, “there is something to this notion of being disciplined and learning to live within your means at a young age.”
It strikes me that Choi’s observation is true more generally: Good habits can be valuable, even when they may not be strictly logical. Heck, the emphasis on developing self-discipline and self-regulation is a big part of what’s always appealed to me about social and emotional learning. Clarity around behavior, homework, cellphone use, and classroom conduct can also help students cultivate the kinds of habits that will stand them in good stead.
That said, is it theoretically, logically essential that students learn to limit their time online or turn in homework when it’s due? Of course not. Like a pedigreed economist, you can argue that students will eventually learn those skills when they really need them. And there are students who, for various reasons, will be OK even if they never develop regular work practices or study skills. Logically, is it really worth all the time and energy to cultivate good habits?
I strongly suspect the answer is yes. And I fear that would-be reformers who want to relax the guardrails around homework, discipline, devices, or classroom conduct risk making the same mistake as those ivory tower economists. Habits matter, in practice if not always in theory. Those working to minimize the consequences for missed homework or misconduct trust that students will generally make good decisions, habits or no. That’s a theory sorely in need of a reality check.
