 42. Some Contributions of Economics to the Study of Personality 875
skills such as education and job training Ka, 
and the effort allocated to the task eTa:
Ta = φa(Ca, Pa, Ka, eTa), (42.1)
a = 1, . . . , A.
Equation 42.2 shows how the effort allo -
cated to task Ta depends on cognition Ca, 
personality Pa, other acquired skills Ka, in-
centives RTa, and preferences γa:
eTa = ΨTa(Ca, Pa, Ka, RTa, γa),(42.2)
a = 1, . . . , A.
This representation distinguishes prefer -
ences from skills, although as previously 
noted, the two are likely closely related. 
Their relationship is an ongoing topic of re -
search.
The effort applied to a task is the out -
come of a choice problem that depends on 
skills, preferences, and incentives, much like 
a supply equation in the standard economic 
theory of consumer choice. Preferences can 
be thought of as additional skills. Some psy -
chological theories posit that people have 
limited effort that they can divide among 
different tasks (see, e.g., Baumeister & Tier -
ney, 2011).
Equations 42.1 and 42.2 formalize the 
difficulty in establishing causal relationships 
between outcomes and skills. Multiple skills 
and effort generate performance in a given 
task. Many studies in psychology and eco -
nomics do not control for these inputs and 
equate measurement of a set of outcomes 
with the skill the analyst is trying to mea -
sure. This practice can lead to a substantial 
bias in inference about any particular skill.
In addition, most studies assume a linear 
or at least monotonic relationship between 
outcomes and skills. This practice is particu -
larly problematic for measuring personality 
skills, where the effect of a skill on an out -
come is not always linear or monotonic. Too 
much of a good thing can be bad. For ex -
ample, extreme levels of skills are associated 
with psychopathologies. High levels of con -
scientiousness are associated with obsessive- 
compulsive disorder, which hinders task 
performance (Samuel & Widiger, 2008). 
Nonlinearities can also arise when skills 
and incentives interact, as in the analyses 
of Borghans et al. (2008) and Segal (2012), who showed that people with different per -
sonality skills respond differently to incen -
tives on tests.72
Skills evolve over time through investment 
and habituation.73 Equation 42.3 shows that 
skills at age a + 1 are age-  dependent func -
tions of cognitive ability, personality skills, 
other acquired skills, preferences, and in -
vestment Ia at age a. In this way, previous 
levels of skills and acquired skill affect 
current levels of skills and acquired skills. 
Equation 42.3 formalizes the notion that 
skills governing performance at a point in 
time are themselves the outcome of invest -
ment and habituation:
(Ca+1, Pa+1, Ka+1, γa+1) =  
ηa(Ca, Pa, Ka, γa, Ia), (42.3)
a = 1, . . . , A.
In conjunction with resource constraints, 
a “deeper” set of preference parameters at 
age may govern investment decisions and ef -
fort allocated to tasks. See Figure 42.12 for 
a schematic.
In addition, investment today increases 
the stock of future skills, which in turn in -
creases the return to future investments. 
Economists call this phenomenon dynamic 
complementarity . This channel increases 
the returns to early investments, because it 
makes future investments more productive. 
For this reason, Cunha et al. (2010) showed 
that it is economically efficient to invest in 
the most disadvantaged young children, be -
cause it raises their payoffs from future in -
vestments. Heckman and Mosso (2014) pre -
sented a more complete discussion of static 
and dynamic complementarity and a formal 
proof of when early investment is more ef -
fective compared to later investment.
An important extension of this model -
ling approach is that performance on cur -
rent tasks themselves can depend directly on 
performance of past tasks independent of a 
person’s skills or effort. This embodies the 
idea of habituation that was discussed by 
Aristotle (see Ross, 1956): Constant practice 
of moral behavior can make persons moral 
habitually. Formally, Equation 42.1 can be 
modified as
Ta = φa(Ca, Pa, Ka, eTa, Ta–1),(42.4)
a = 1, . . . , A.