Speak German to save

In these troubled, deficit laden times, those countries that spent the last decade consuming less and saving more have been denouncing the spendthrift ways of the US and UK, who spent all summer singing instead of storing away food. Of course, they have been conveniently ignoring the fact that they wouldn’t have been able to save at all if other countries hadn’t been willing to buy their exports.

There are reasons why saving would naturally be higher in some countries, for example, in countries such as China, where there is less of a social security net, it makes sense for households to save more of their incomes for rainy days. In countries with an ageing population, such as Germany, households may be saving more for retirement.

There may also be cultural reasons why some nationalities seem to spend more than others. But could language also play a part?

According to Keith Chen at the Yale University School of Management, languages differ dramatically on the rules around speaking about the future:

“For example, a German speaker predicting precipitation can naturally do so in the present tense, saying: “Es regnet morgen” which translates to: “It rain tomorrow”. In contrast, English would require the use of the future tense, “It will rain tomorrow””

Keith Chen’s research suggests that speakers of languages that require you to speak differently about the future, for example, by requiring a future tense, tend to save less per year, hold less retirement wealth, smoke more, are more likely to be obese, and suffer from worse long-run health. Wow, what a list. It’s as if speaking about the future differently from the way you speak about the present leads you to see the future as a long time away, leading you to plan less for what is to come.

One possible explanation is that countries in the same region tend to have similar cultural values as well as similar languages. But after testing for this, Keith Chen finds that this cannot explain the link.

So does speaking, say German instead of English lead you to save more? Or could languages be reflecting deep-seated historical cultural values and preferences that live on today? The paper takes the view that it is the former – that the language you speak affects your preferences.

Maybe a good reason to drop the grammar lessons.

The full paper, “The Effect of Language on Economic Behaviour” is here: http://cowles.econ.yale.edu/P/cd/d18a/d1820.pdf

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