Armin Falk is a German research economist who claims to have found the reason why the Danish are twice as rich as the Spanish, and why the Spanish are nearly eight times as rich as Angolans. The answer? Patience. Mr. Falk is director of the Behavior and Inequality Research Institute in Bonn and, together with polling specialist Gallup, just completed a survey of 80,000 people in 76 countries that will soon be summarized in the Quarterly Journal of Economics. Those sampled represent 90 percent of the world’s population and 90 percent of global income.
“To create wealth, you have to invest in equipment and human capital,” Mr. Falk says. Investing requires patience or, as economists say, a lower time preference, the equivalent of someone not interested in quick satisfaction through consuming.
The concept is best illustrated by an anecdote about a fisherman. If he wants more fish than he can scoop up with his bare hands, he has to make a net. And before he can make a net, he has to catch enough fish to feed himself while investing time in the net-making too. “The more patient people are and the more they save, the more they can invest in equipment and education — and they become that much more productive and rich,” Mr. Falk says.
Critics point to a chicken-and-egg argument about which came first: stability and growth or patience?
His study shows that the most patient people are in Scandinavia, western Europe and English-speaking countries, although there is a difference between north and south within Europe. “Of all the influences investigated, patience had by far the biggest influence on per-capita income and is the decisive factor in why some countries are rich and others are comparatively poor,” he says. And it’s a long-term success factor as well, with patience affecting growth rates over the past 200 years. Any time patience rose by a single unit, so did the growth rate of per-capita income, which rose between 0.5 to 1.1 percentage points.
Mr. Falk believes the distribution of patience could be genetic. “When populations are separated from one another for longer periods, they develop different gene pools,” he and his co-authors wrote in a recently published study, referring to ancient, continent-spanning migrations. The differences are either random or influenced by local conditions, such as the weather or historical events. Since behaviors are passed on to subsequent generations, regional variations in a willingness to wait, or not, can emerge.
Using genetic distances and migratory routes from Africa to other continents, Mr. Falk shows that differences in patience grow the longer populations are separated. “The centuries-long imprinting by the environment, shocks, crises and climatic anomalies still has an effect today,” he says. The study discovered that variations in risk-aversion and altruism are even more defined than with patience.
Patience also has wealth-creating side effects since it begets better institutions, such as independent justice systems as well as competition and contracts. The institutions give those making plans more confidence, which increases their willingness to invest in equipment and education. The reverse, Mr. Falk says, is also true. If bad healthcare or poor security lead to low life expectancy in a country and the population is aware of that, they will opt for quick satisfaction over long-term investment — because after all, you can’t take it with you. Ending this downward spiral requires fundamental change. Dictators and corrupt elites hinder the establishment of reliable institutions.
Mr. Falk’s thesis that wealth is the result of a people’s patience is controversial, not only because of his hypothesis that patience is also connected to higher cognitive abilities. Additionally critics point to a chicken-and-egg argument about which came first: stability and growth or patience? Other topics — such as colonialism, industrialization, racism and natural resources — may also play a part. But to find out more or challenge the work, Mr. Falk's critics will need to take a look at the survey and his findings. Mr. Falk says he hopes to soon make the data available to others soon. For now, everyone else will just have to be patient.
A German version of this article first appeared in WirtschaftsWoche, Handelsblatt Global's sister publication. To contact the author: [email protected]