Why Chinese discount future financial and environmental gains but not losses more than Americans
Min Gong, Dave Krantz, Elke Weber
Project Complete
Understanding cultural and economic country differences in temporal discounting is critical for extending incentive-based environmental policies successfully from developed countries to developing countries. We report the results of a study that examined differences between Chinese and Americans in discounting of future financial and environmental gains and losses. 118 Americans, 86 Chinese in China, and 127 Chinese abroad were recruited online and completed an internet survey. The study had a 2 (Chinese vs. American: between) X 2 (gain vs. loss: between) X 4 (Categories: environmental existence value vs. environmental use value vs. monetary luck value vs. monetary self-earned/inflicted value: within) design. For the environmental existence values, participants compared either a small increase in the population of fish in a national park now and a larger increase a year from now (Gain domain), or a small decrease in the number of old trees in a forest and a larger decrease a year from now (Loss domain). For the environmental use values, participants compared a smaller immediate increase (decrease) in air quality with a larger increase (decrease) in the future. For the monetary values, participants chose between a smaller amount of monetary gain/loss now and larger amount of monetary gain/loss later, and the gain/loss was either because of good/bad luck or self-earned/inflicted.
Living in a rapidly changing society, Chinese were more concerned about the insecurity and uncertain value of future gains, and had higher expectations for returns they could receive were they to invest the gains without delay. This is consistent with their greater discounting of gains. However, when discounting losses, both Chinese and Americans focused on the magnitude of the losses and the psychological cost of carrying debts, consistent with them displaying similar discount rates.
Major Findings
- In general, environmental use value was discounted significantly more than the monetary values, but environmental existence value was discounted similarly to the monetary values. Confirming previous research, we found that participants discounted gains significantly more than losses.
- Furthermore, there was a significant interaction between culture and gain/loss outcome: Chinese discounted gains, but not losses in both outcome categories more than Americans. Open-ended comments provided by participants in conjunction with their intertemporal choices suggest that different considerations drove decisions uniquely in the gain and loss domains. Respondents from both countries focused on the uncertainty and foregone returns associated with waiting for future rewards.
- Living in a rapidly changing society, Chinese were more concerned about the insecurity and uncertain value of future gains, and had higher expectations for returns they could receive were they to invest the gains without delay. This is consistent with their greater discounting of gains. However, when discounting losses, both Chinese and Americans focused on the magnitude of the losses and the psychology cost of carrying debts, consistent with them displaying similar discount rates.
- Under revision for the Journal of Risk and Uncertainty.
CRED2 Award (2010-2015): Funding was provided under the cooperative agreement NSF SES-0951516 awarded to the Center for Research on Environmental Decisions.
