Imagine the following situations: Maria reads an article on the benefits of a low-fat high fiber diet, and decides that she wants to change the way she eats, but when lunch comes around she ends up ordering McDonald’s. In the same vein, John feels stuck in his career and decides that he wants to study a new programming language to get an advantage over his colleagues, but when 5 o'clock rolls around and he finishes with work, instead of logging in the online classes he paid for, he sets up his console for an afternoon of gaming. They have fallen prey to what in behavioral economics is called “hyperbolic temporal discounting.”
Most people, with the exception of savvy economists, when given the choice between 100 dollars now or 110 in a month, they choose the first option. Conversely, when given the choice between a 100 dollars in 12 months on 110 in 13 months, they choose the second option. What changed? Once you remove immediacy as a factor, people tend to choose rationally the option that they think is in their best interest.
Hyperbolic temporal discounting is defined by Rodzon et al (2011) as “the tendency to perceive a desired result in the future as less valuable than one in the present”, in other words, people tend to sacrifice future (and bigger) payouts in exchange for present (and smaller) rewards.
This tendency can be observed not only in savings and investment, but also in other areas of human life like education, career, self-care, etc, and is closely related to procrastination. Think of how many ways our culture reinforces immediacy: credit cards, in house loans, overnight deliveries, instant notifications and read receipts… smart marketing strategies no doubt. Why study now for that degree that may or may not give you the satisfaction you crave when you have that video game that gives you now the same feeling of advancement? Why get changed to go for a walk when your couch seems to have a gravitational force of its own? Why cook a healthy meal when I can get an artery clogging triple burger on my way home? Well, the answer, as you can guess, your brain prioritizes now over later. This predilection is intertwined with our evolutionary path: before the development of conservation methods, early hominids had to eat whatever they catched in the moment because they didn't know when they would have food again (fun fact: this is also the reason why every surplus of energy is stored as fat).
How do we avoid this tendency? Findings suggest that a strong connection with our future selves improves disposition to delay instant consumption and save for the future (Hershfield et al, 2011). Often, clients have difficulties sustaining conducts that lead to their objectives (what is commonly referred as intention - action gap, or the inability to translate my plans or ideas into behaviors), so in our meetings we work to establish specific objectives, realistic action plans, identifying and replacing dysfunctional thoughts, fostering their sense of power and connection to their future self.
Questions? Comments? Anecdotes? Please comment below. I’ll be posting periodically content like this and much more.
Dobelli, R. (2013). The art of thinking clearly: better thinking, better decisions. Hachette UK.
Duan, J., Wu, S. J., & Sun, L. (2017). Do the powerful discount the future less? The effects of power on temporal discounting. Frontiers in psychology, 8, 1007.
Hershfield, H. E., Goldstein, D. G., Sharpe, W. F., Fox, J., Yeykelis, L., Carstensen, L. L., & Bailenson, J. N. (2011). Increasing saving behavior through age-progressed renderings of the future self. Journal of marketing research, 48(SPL), S23-S37.
Joshi, P. D., & Fast, N. J. (2013). Power and reduced temporal discounting. Psychological science, 24(4), 432-438.
Rodzon, K., Berry, M. S., & Odum, A. L. (2011). Within-subject comparison of degree of delay discounting using titrating and fixed sequence procedures. Behavioural processes, 86(1), 164-167.
Vuchinich, R. E., & Simpson, C. A. (1998). Hyperbolic temporal discounting in social drinkers and problem drinkers. Experimental and Clinical Psychopharmacology, 6(3), 292–305.
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