As we get older, there is no doubt that our brains become slower. But new research suggests that life experience may make up for cognitive decline in old age.
Researchers from the School of Business Administration at University of California, Riverside, conducted what they say is the first study to measure a person's decision making over their lifespan through two types of intelligence: fluid and crystalized.
Fluid intelligence is the ability to learn and process information, while crystalized intelligence is experience and accumulated knowledge.
The researchers note that previous studies have suggested that fluid intelligence declines as a person ages, but this hypothesis does not determine whether decision-making abilities also decline with age.
For their study, published in the journal Psychology and Aging, the research team recruited 336 participants. Of these, 173 were aged between 18 and 29, while 163 were aged between 60 and 82.
Participants were asked to answer a series of questions designed to measure economic decision-making traits. These were:
- Temporal discounting - how much people discount future gains and losses
- Loss aversion - how much the valuation of losses outweigh gains of the same magnitude
- Financial literacy - understanding financial decisions and information
- Debt literacy - understanding debt contracts and interest rates.
The participants were also required to complete a series of fluid and crystallized intelligence tests.
Older participants 'wiser' than younger
Results of the study revealed that older participants performed just as well or better than the younger participants in all decision-making measures.
The older group demonstrated greater patience in the temporal discounting area and showed better financial and debt literacy.
The researchers note that the older participants appeared slightly less loss averse, but they say this difference was so small that it was deemed insignificant.
Ye Li, assistant professor of management at the School of Business Administration at the University, says:
"The findings confirm our hypothesis that experience and acquired knowledge from a lifetime of decision-making offset the declining ability to learn new information."
Prof. Li adds that the findings also show help could be given to older people in order to aid their decreased fluid intelligence when making significant financial decisions, such as a financial advisor.
Additionally, he says that younger adults could also benefit more from financial education, so that they gain experience in making major financial decisions in life.
The researchers are in the process of a follow-up study involving adults between the ages of 18 and 80. The team will be asking them specific questions regarding decisions on selecting health care policies, when to start drawing social security, and how to pay off multiple credit card balances.
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