NBER WORKING PAPER SERIES PERSONALITY PSYCHOLOGY AND ECONOMICS Mathilde Almlund Angela Lee Duckworth James J. Heckman Tim D. Kautz Working Paper 16822 http://www.nber.org/papers/w16822 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue This research was supported by grants fromCambridge, NIH R01-HD054702, MA 02138 R01-HD065072, and K01-AG033182; the University of Chicago; The Institute for NewFebruary Economic 2011 Thinking (INET); A New Science of Virtues: A Project of the University of Chicago; the American Bar Foundation; a conference series from the Spencer Foundation; the JB & MK Pritzker Family Foundation; the Buffett Early Childhood Fund; and the Geary Institute, University College Dublin, Ireland. The opinions expressed in this report are those of the authors and do not necessarily reflect the views of any of the funders. Amanda Agan and Pietro Biroli are major contributors to this essay through their surveys of the effect of personality on crime (presented in Web Appendix A7.B) and health (presented in Web Appendix A7.A), respectively. We are grateful to Pia Pinger for her analyses of the German Socio-Economic Panel (GSOEP) survey data. We have benefited from comments received from Amanda Agan, Dan Benjamin, Pietro Biroli, Dan Black, Daniel Cervone, Deborah Cobb-Clark, Flavio Cunha, Kathleen Danna, Thomas Dohmen, Steven Durlauf, Joel Han, Moshe Hoffman, John Eric Humphries, Miriam Gensowski, Bob Krueger, Jongwook Lee, Xiliang Lin, Dan McAdams, Terrance Oey, Lawrence Pervin, Pia Pinger, Armin Rick, Brent Roberts, Molly Schnell, Bas ter Weel, and Willem van Vliet. We also benefited from a workshop at the University of Illinois, Department of Psychology, on an early draft of this paper and presentations of portions of this paper at the Spencer/INET workshop at the University of Chicago, December 10-11, 2010. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer- reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications. © 2011 by Mathilde Almlund, Angela Lee Duckworth, James J. Heckman, and Tim D. Kautz. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Personality Psychology and Economics Mathilde Almlund, Angela Lee Duckworth, James J. Heckman, and Tim D. Kautz NBER Working Paper No. 16822 February 2011 JEL No. I2,J24 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. Mathilde Almlund James J. Heckman University of Chicago Department of Economics Department of Economics The University of Chicago 1126 E. 59th Street 1126 E. 59th Street Chicago, IL 60637 Chicago, IL 60637 [email protected] and University College Dublin and IZA and also NBER Angela Lee Duckworth [email protected] University of Pennsylvania Department of Psychology Tim D. Kautz 3701 Market St., Ste. 209 University of Chicago Philadelphia PA 19104 Department of Economics [email protected] 1126 E. 59th Street Chicago IL 60637 [email protected] An online appendix is available at: http://www.nber.org/data-appendix/w16822 Almlund, Duckworth, Heckman, and Kautz 3/17/2011 4 Contents 1. Introduction ............................................................................................................................. 6 2. Personality and Personality Traits: Definitions and a Brief History of Personality Psychology .................................................................................................................................... 12 2.A. A Brief History of Personality Psychology .................................................................... 15 3. Conceptualizing Personality and Personality Traits Within Economic Models ................... 22 3.A. An Approach Based on Comparative Advantage .......................................................... 24 3.B. Allowing for Multiple Tasking ...................................................................................... 26 3.C. Identifying Personality Traits ......................................................................................... 27 3.D. Extensions of the Roy Model ......................................................................................... 31 3.E. Adding Preferences and Goals ....................................................................................... 32 3.F. Adding Learning and Uncertainty .................................................................................. 34 3.G. Definition of Personality Within an Economic Model ................................................... 35 3.H. Life Cycle Dynamics ...................................................................................................... 41 3.I. Relationship of the Model in This Section to Existing Models in Personality Psychology 44 4. Measuring Personality .......................................................................................................... 47 4.A. Linear Factor Models ..................................................................................................... 47 4.B. Discriminant and Convergent Validity .......................................................................... 48 4.C. Predictive Validity .......................................................................................................... 51 4.D. Faking ............................................................................................................................. 54 4.E. The Causal Status of Latent Variables ........................................................................... 55 5. Implementing the Measurement Systems ............................................................................. 57 5.A. Cognition ........................................................................................................................ 57 5.B. Personality Traits ............................................................................................................ 65 5.C. Operationalizing the Concepts ....................................................................................... 67 5.D. Personality Constructs .................................................................................................... 69 5.D.1. Self-Esteem and Locus of Control Are Related to Big Five Emotional Stability .. 77 5.D.2. Relating the Big Five to Measures of Psychopathology ......................................... 78 5.E. IQ and Achievement Test Scores Reflect Incentives and Capture Both Cognitive and Personality Traits ...................................................................................................................... 82 5.F. The Evidence on the Situational Specificity Hypothesis ............................................... 92 6. Personality and Preference Parameters ................................................................................. 94 6.A. Evidence on Preference Parameters and Corresponding Personality Measures ............ 94 6.B. Mapping Preferences into Personality .......................................................................... 104 6.C. Do Measured Parameters Predict Real World Behavior? ............................................ 106 6.D. Integrating Traits into Economic Models ..................................................................... 107 6.D.1. Traits as Constraints .............................................................................................. 108 6.D.2. Traits as Preferences ............................................................................................. 110 7. The Predictive