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Economists find money is more precious than time

31 August 2005

They say that time is more precious that money but economists have shown that this isn't the case. Researchers presented a paper at the 2005 World Congress of the Econometric Society, which is hosted by UCL (University College London) that shows people are more willing to share the fruits of their labour rather than their money.

In a laboratory experiment designed to eliminate factors that can distort the comparison between monetary and non–monetary generosity, Professor Tore Ellingsen his colleague Professor Magnus Johannesson from Stockholm School of Economics found a of third subjects demanded no compensation for non-monetary investments. In contrast, almost all subjects demand compensation for equally costly monetary investments.

“Except for donations to charities and other gifts from the relatively rich to the relatively poor, generosity is largely expressed by non–monetary means,” says Professor Ellingsen.

“People often help their neighbours and friends, but rarely give them money. Within organisations, some workers regularly sacrifice large amounts of time for the benefit of their colleagues, but would never consider giving them cash.

"Many economists have found it puzzling that charities keep asking high income earners for their amateur volunteer service. Even after taxes, it would seem that both the charity and the high income earner would be better off if the donor worked overtime and donated their wages instead. Results of the experiment suggest why charities do not pursue the money checks exclusively: some people are simply more willing to share their time than to part with their money."

Previously economists have proposed three sets of explanations for non–monetary generosity: it may simply be more efficient to give time than to give money; time gifts may constitute better signals of altruism than money does; or the donor is paternalistic and fears that a cash gift will be spent inappropriately.

“While we believe that there is some truth in all of these explanations, our own understanding is that powerful social norms mandate greater generosity in the time domain than in the money domain, and that these norms are at best indirectly linked to the economists' explanations.

“We are supposed to share our time more willingly than our cash, in the same way as social norms make us vote and give blood,” says Professor Ellingsen.

To test their hypothesis they enlisted the help of 276 undergraduate business and economics students from Stockholm School of Economics. They let half of the subjects invest time or money in a project. Each subject was paired with a ‘sleeping partner' who made no investment. The project yields a pay-off of 100 Swedish kronor, but only if the sleeping partner agrees to the investor's proposal on how to split the pay-off.

The majority of the investors propose an even split of the pay-off when they have invested their time in the project, thereby demanding no compensation for their time. Investors who make a comparable monetary investment always demand some compensation.

The researchers say the finding is not attributable to the sleeping partner's behaviour and thus it seems that subjects are truly more generous with their time than with their money.

Professor Tore Ellingsen from Stockholm School of Economics will present the paper, ‘Time is not money' on Monday 22 August 2005 between 11.15 and 12.45 BST

For further information, please contact:

Professor Tore Ellingsen
Stockholm School of Economics
Mobile: +46 (0)7 0796 1049
Email: <a href="mailto:tore.ellingsen@hhs.se>tore.ellingsen@hhs.se

Judith H Moore
UCL Media Relations Manager
Tel: +44 (0)20 7679 7678
Mobile : +44 (0) 77 333 075 96
Email: Judith.moore@ucl.ac.uk

Notes to editors:

About the World Congress of the Econometrics Society

The Econometric Society is the leading international learned society in the field of economics, and its quinquennial world congress is recognised as the most prestigious in economics. UCL is hosting the ninth Econometric Society World Congress from 18-24 August 2005, which is the first time the Congress has been held in London and has not been hosted by a UK institute for 35 years. A full copy of the programme can be accessed on the 2005 Econometric Society World Congress website: http://www.eswc2005.com/

About the UCL Department of Economics

The Chair of Political Economy at UCL was created in 1828 establishing the first Department of Economics in England . The modern department has an outstanding international reputation in key areas of current research including applied theory, microeconometrics, game theory, labour economics, development economics, macroeconomics, industrial economics and environmental economics. It is one of only four economics departments in the UK to achieve the 'double 5*' rating in the two most recent (2001) national Research Assessment Exercises (RAE).