Times of recessions often cause people to tighten their purse strings. During the 2007-2009 recession, more than half of Americans experienced some type of economic hardship, such as the loss of a job or a reduction of hours. As a result, overall spending decreased in luxuries like vacations and alcohol, and necessities such as food. Some people even moved back in with their parents.
However, while some people returned to their childhood home to conserve money, recent research actually suggests that for some people, childhood conditions not only shape our spending decisions, but actually cause some people to spend more impulsively in times of a recession. This is the suggestion of recent research led by Vladas Griskevecius from the University of Minnesota and Joshua Ackerman from the Massachusetts Institute of Technology. In a series of studies, they found that, ironically, people raised in an environment low in economic resources make riskier and less conservative choices when reminded of recessions, regardless of their current economic status.
In an initial study, half of participants were shown a series of images related to the recession (for example, pictures of home foreclosure signs or unemployment signs) while the other half viewed more neutral images. Next were two financial decision making tasks – one in which participants made a series of choices between a smaller amount of money immediately or a larger amount of money 33 days after the experiment (e.g., a preference for $30 now or $41 in 33 days), and one in which participants made a series of choices between a smaller amount of guaranteed money or a gamble for a larger amount of money (e.g., $30 for sure or a 54% chance of $50).
The amount of economic resources participants had when growing up – and not how well off they were at the time of the experiment– turned out to be a key factor in shaping these decisions. Among those initially shown the images related to the recession, those raised in an environment poor in economic resources were more likely to choose a smaller amount of money and more likely to choose a risky gamble than those raised in a more well-off environment. However, this was not true for those who initially viewed the neutral images, suggesting that there is something particular about recessions that makes childhood loom large.
This was confirmed in two additional studies. In the second study, participants first read either a news article about the recession or an article about a different topic. Next was a task assessing participants’ affinity for luxury goods. Among only those who read the article about the recession, participants raised in a resource-poor environment had a stronger preference for luxury goods than those raised in a more resource-rich environment. A third study also showed that those raised in a resource-poor environment make riskier gambles, but this time, instead of asking participants about their childhood background, it was measured via the level of oxidative stress in a urine sample, a known marker of childhood environment. Again, current level of economic resources was not a factor in how people responded after being reminded of the recession in either study.
These findings are striking because they suggest that childhood conditions loom over us into adulthood--even being more important than current conditions. Not only that, but since childhood conditions only shaped decisions when people were initially reminded of the recession, these findings also suggest that when times are tough childhood conditions can cause us to make the exact wrong decisions.