I would like to show how hyperbolic discounting really relates to people's self-destructive, irrational behavior in the various forms mentioned above. Based on the empirical insights provided in the previous chapters, Chapter 6 discusses how we can deal with the self-control problem to avoid self-destructive behavior.
What Are Self-Destructive Behaviors?
Harmful Choices
Such a unified approach is reasonable, given that there are often non-negligible connections between different types of self-destructive behavior. In other words, a person prone to self-destructive behavior "A" with a certain frequency is also likely to engage in self-destructive behavior "B.".
Associated Self-Destructive Behaviors
All associations between the different self-destructive activities are statistically significant, except for that between smoking and obesity in women. However, it is important to point out that the presence of positive associations between various self-destructive activities does not imply a causal relationship.
Comparing Present and Future Rewards
Present or Future? Choices over Time
For example, a famous twin study in the USA (the Minnesota Twin Study) reports that approximately 72% of interpersonal differences in body mass index (a measure of the degree of obesity) can be explained by genetic factors (Cutler and Glaeser 2005). A monkey keeper suggested that his monkeys should eat three chestnuts in the morning and four in the evening.
Present-Oriented Inclination: Subjective Discount Rates
Despite the clear relationship between a high discount rate and a high present orientation, the cause of self-destructive behavior is not straightforward. As will be explained in detail below, self-destructive behavior arises as irrational behavior because the subjective discount rate is not constant.
Bankers ’ Way of Time Discounting
The degree of impatience (as measured by the discount rate) is higher when the delay represents waiting for future gratification (i.e., a reward of some value) than when it represents future dissatisfaction (i.e., the loss of some value). Since this trend implies that the discount rate depends on whether the value to be discounted is positive or negative, the anomaly is called the "sign effect". The cue effect is related to preferences for loss aversion and makes people unfavorable toward behaviors that lead to future loss and suffering (eg, overeating, overborrowing, etc.).
Hyperbolic Discounting and Inconsistent Decisions
Being Swayed by the Temptation of Immediate
In Chapter 3, I will explain in more detail why the hyperbolic discounting model is better for describing intertemporal decisions. At this stage, it is important to note that hyperbolic discounting can cause self-destructive decision procrastination and procrastination, harming the decision maker's long-term welfare.
Self-Destructive Procrastination
The impact of hyperbolic discounting on people's propensity to take out credit card loans is clearly observed in the US, a typical card company. The figure shows that hyperbolic discounting had detrimental effects on both human health and financial prosperity.
The Self-Control Problem
But even if hyperbolic discounters are sophisticated, they won't always make better decisions than naive people. This illustrates the potentially greater risk of making self-harming choices that educated people have compared to naive people.
Binding Future Selves ’ Hands
Binding Loose Selves
Paradoxically, the same schedule could be accelerated even further for a sophisticated person: for example, the sophisticated person's current "self" would choose to eat an unripe apple today because that self provides for waiting to eat the apple until the day is ripe. after tomorrow will result in a tomorrow 'self'. Thus, a ripe apple would not be a viable choice for the sophisticated person and he or she might choose to eat a less ripe apple (i.e. eat the apple today) compared to a naive person, who would are eating a ripe apple. the day after tomorrow, but eat the apple the next day.
Freezing Assets
A famous example of a pre-engagement strategy can be found in book 12 of the famous Greek myth The Odyssey: Before sailing the ocean, Odysseus told his companions to tie his body to the mast during the voyage so that not to fall to the ground seduced. from the enchanting singing of the Sirens (Homer "ODYSSEY"). Thus, Odysseus could foresee that at some point in the future, he would be tempted into an impulsive decision, and so he vowed to avoid temptation by asking his companions to physically restrain him from engaging in harmful behavior.
Coping with Self-Destructive Behaviors
Knowing Oneself: Self Signaling
In order to incorporate knowledge of the self-control problem into decisions, people must learn how hyperbolic they are in controlling their own choices and behaviors in their daily lives. By examining each day how well they have performed on these large and small tests, people can gradually learn how hyperbolic they are and thus how serious their self-control problems are.
How to Improve Decisions and Behaviors
For example, it is much more difficult to stick to the "No Smoking" rule during the first week of a smoking cessation plan than after the plan has been successfully followed for six months. Dividing cognitive power between two tasks increases the possibility that the behavior you want to control will be controlled by the hands of the devil.
Behavioral Economics Policy Recommendations
As explained earlier and as I will discuss in the following chapters, decision biases due to hyperbolic discounting cause self-defeating behavior. Please compare receiving 10,000 JPY today (shown as "A") and receiving the amount specified in each row in the table below (shown as "B") and circle the option you prefer.
Anomalies in Intertemporal Choices
Smaller Amounts Are Discounted More
- The Magnitude Effect
- Increasing Proportionate Sensitivity
- Mental Fixed Costs for Waiting
- Mental Accounting
Furthermore, the increasing relative sensitivity of the magnitude effect is not specific to intertemporal choices. Another reason for the appearance of the magnitude effect may be that waiting involves some kind of mental fixed cost (Thaler 1981).
Gains Are Discounted More Than Losses
- The Sign Effect
- Decreasing Marginal Utility
- Loss Bias
- The Sign Effect and Borrowing Aversion
- Delay/Speed-Up Asymmetry
- The Framing Effect
It thus follows that the gain discount rate is higher than the loss discount rate, as in the sign effect. Research has shown that the delay premium tends to be much higher than the expediting cost.
Choosing Improving Sequences
- Choice of Gratification Sequences
- Choosing the Smaller Lifetime Income
- The Seniority-Based Wage Puzzle
- Improvements Yield Gratification
- Savoring and Habituation
- Sequence as Context
For the same reasons discussed in the voucher example, the savings interest rate (calculated as the rate of the delay premium) will be higher than the loan interest rate (measured at the rate of the acceleration charge) due to the combined effects of discounting and the loss bias. Regarding the monkey example, those who chose "four chestnuts in the morning and three in the evening" behaved optimally.
Conclusions
That is, as hypothesized, students tended to prefer earlier gratification when the decision was framed as a distinct intertemporal choice problem, whereas they tended to postpone greater gratification until after a lesser one when the decision was framed as a choice of sequences. Incorporating the habituation effect, they seemed to favor increases in satisfaction from early but small satisfactions (the Greek dinner) up to later but larger satisfactions.
Introduction
More Impatient for More Immediate Gratification
Proximal Future Choice and Distal Future Choice
With a positive discount rate, satisfaction with a certain length of delay (e.g., a 4-month delay) is valued as less valuable than the same amount of satisfaction with a shorter delay (e.g., a 1-month delay). Would the relative values ​​of the two satisfactions with different delays (eg 1- vs. 4-month delay) be the same if the difference in the length of the delay (eg 3 months) were the same.
Exponential Discounting and Hyperbolic Discounting
In the present case, the discount function is given as an exponential function of periodT, [1/(1Ăľr)]T (for a more formal expression, see item (1) in Figure 3.3). The discount rate determines the percentage decrease in the value of the discount function for a delay of one unit period.
The Matching Law
Quasi-hyperbolic discounting is a hybrid of exponential discounting and hyperbolic discounting; its discount function for aT period delay is given by βδT where 0<β1 and 0<δ1. Unlike exponential discounting, quasi-hyperbolic discounting further discounts future satisfaction by multiplying β, regardless of how far into the future it is.
Inconsistent Choices
- Dual Personality
- Patient Plan with Impatient Behavior
- Procrastinating Tasks and Preproperating Leisure
- Too Much Consumption and Too Little Accumulation
RewardRS represents a short-term gratification (e.g., eating a candy) obtained at an early time,ts; Meanwhile, R is a greater long-term satisfaction (e.g., good health) that is realized in time with a longer delay. The two discounted value curves indicate how high the two rewards RS and R are evaluated at each time point. Thus, to the extent that external environments do not change, one will never change a plan to pursue “health” in favor of “cake” just before it is executed.
Mechanism of Hyperbolic Discounting
Today Is Long: Distortion in Psychological Time
This distortion in the perception of time is related to the Weber-Fechner law in experimental psychology. That is, the increase in perception caused by an increase in stimulus is proportional to the percentage increase in the stimulus.
The Certainty Effect
Therefore, the reward in the immediate future (ie, the reward with a small delay) is discounted more than proportionally, as in the case of hyperbolic discounting. As expected, the difference in discount rates becomes insignificant; hyperbolic discounting disappears in the presence of risk.
The Ant and the Grasshopper in the Brain
The multiple structure is quite consistent with McClure's findings, in which the ventral part of the striatum is identified as part of the β region. This means that the left lateral prefrontal cortex, as part of the δ region, is closely associated with the self-control mechanism to inhibit impulsive behavior for immediate rewards.
Conclusions
Since the medial orbitofrontal cortex is part of the β region, the result contradicts McClure's hypothesis; damage to the β region would lead to weaker preferences for immediate rewards if McClure's hypothesis were valid. In McClure's research, it is not clear what function the δ region has in intertemporal decision making.
Introduction
Problems of the Dual Self
- The Self-Control Problem
- Pessimistic or Optimistic About Their Future Selves?
- When to Clean?: Sophistication Mitigates
- Overly Abstentious Decision-Making
- When to See a Movie?: Sophistication Reinforces
The dotted line I shows that the cleaning effort on the 30th (B30) is reduced by half (A30) when evaluated the day before, on the 29th. The dotted line II shows that the cleaning effort on the 31st (C31) is reduced to similarly to half on previous dates, on the 29th and 30th (A31 and B31 respectively).
Excessive Abstinence and Indulgence
Self-Restraining Smart Choice to See the Grand-Prize
With this movie problem, let's look at the costs of going to see the first week's movie as perceived in the first week. The same can also be repeated as follows: by not seeing the first week's movie, the person guarantees that he or she will be able to see the grand prize winner in the third week.
Excessive Abstinence and Indulgence Due to
In other words, being correctly pessimistic about the future self increases the cost of seeing the first week's film by the difference between A3 and A2. That is, choosing to watch the first week's movie requires the opportunity cost of forgoing such a preconditioning device, resulting in an additional cost of A3 minus A2.
Does Sophisticated Decision-Making Increase or
It literally only mitigates the negative effect of hyperbolic discounting; the consequences of inherent self-control problems are likely to remain somewhat typical in the form of inefficient undersaving.
Pitfalls of “Pursuing Larger Work”
Procrastination Caused by Pursuing Larger Tasks
Furthermore, great work that is worthwhile does not flow in exclusively from the outside: often we identify and create "a great task" as a veiled excuse to leave our current job. 3The discussion above does not argue that trying to work on a big task is always irrational or that it is smart to bury yourself in small tasks.
Benefit of Self-Trapping
Precommitment
The paper, which begins with this sentence, is now frequently cited as one of the most influential studies in the field of dynamic decision making. The button facilitates making a pre-commitment: the pigeon is only allowed to choose the large, delayed feed once it has been pecked.
Illiquid Assets and Education as Commitment Devices
When parents educate their children instead of leaving "fertile field" properties, this can be considered a type of commitment device that prevents children from reducing future assets by overspending, thereby preserving the assets (see Appendix C below ). Because tying your own hands carries the risk of not being able to respond to unexpected environmental changes, there are two sides to using a commitment device: the benefit of ensuring the long-term benefit by limiting the future self and the cost to limit the ability to deal with unexpected situations.
Theory of the “Golden Eggs”
- The Goose That Lays the Golden Eggs
- The Invalidity of the Permanent Income Hypothesis
- Consumption Propensity from Income Higher than
- The Debt Puzzle
- The Ricardian Equivalence Theorem Does Not Hold
- Financial Innovation: Flexibility Versus Precommitment
In standard neoclassical economics, the income that is assumed to determine the level of consumption at a given time is permanent income—the average level of income that someone is expected to earn over a lifetime—rather than current income at that time. For example, because reduced taxes will increase disposable income—even though permanent income has not changed—the current self with a high propensity to consume will spend a larger amount of immediately disposable income.
Naı¨ve or Sophisticated?
Partially Naı¨ve
Such decision makers, somewhat unable to anticipate their own weaknesses, are called “partly naive.” When limiting the sample to respondents who tend to procrastinate and complete homework assignments in the second half of the holidays, as many as 88.7% were naive decision makers who had scrapped their original plan.
Deadlines and Efficiency
There are three jobs, and subjects in the first group are told to submit tasks one at a time to a deadline that comes every 7 days (ie, the “equally spaced deadlines” group). The results were quite simple: work performance was highest among subjects in "equally spaced deadlines."
When to Start Studying for an Examination
Then, by comparing the ideal (answer to Q1) and predicted (answer to Q2) among students who were identified as naive, we can determine how unaware they are of their self-control problems or how naive they are. are. People as people have the wisdom to understand their self-control problems and use devotional tools for themselves.
Willpower and Self-Control
- What Is Willpower?
- Willpower and Present-Oriented Tendency
- Willpower Budget and Efficient Self-Control
- Crowded Out Self-Control
- Depletion and Reproduction of Poverty
- Poverty and Adversity During Childhood
Although we do not know it, our behavior is influenced by this phenomenon of the crowding out of self-control. Such an "easy giving up" can also be seen as an outcome of the crowding out of self-control.
Conclusions
We can imagine that the rapid increase in smoking, drinking and gambling in the areas affected by the Great East Japan Earthquake is due to the exhaustion of willpower as a result of the disaster. If an earthquake threatened efforts to save for the future (self-control), the scale of disaster damage could be immeasurably huge.
Introduction
Another route is the sign effect, which I explained in Chapter 2 as the tendency where a future payment or loss is discounted only at a lower discount rate. In short, the discount rate affects our hoarding behavior in three ways, namely through hyperbolic discounting, the level of the discount rate (ie, impatience), and the sign effect.
Naı¨ve Income-Consumption Cycles
Allowance Cycle
As people try to avoid future interest payments under the sign effect, we can expect this effect to act to limit borrowing.
The Food-Stamp Nutrition Cycle
The Pension-Consumption Cycle
The result is that, while savers showed a flat pattern of food consumption throughout the period, non-savers exhibited a compensatory spending cycle in which they peaked on the day their retirement benefit was paid and gradually decreased consumption subsequently, in a manner similar to that seen with food stamp families in Shapiro's study. Because the difference in caloric intake before and after receiving the benefit is up to 25% and the food consumption of those who do not save falls to less than the minimum daily requirement, their consumption life is the same as that of children who do not are used to using compensation money.
Hyperbolic Discounting and Debt Behavior
- Credit Card Loans
- Swayed by a Teaser Rate But End Up Paying a Higher
- Self-Destructive Behavior of Payday Loan Borrowers
- Hyperbolic Discounting and Debt: The Case of Japan
- Hyperbolic Discounting and Multiple Debts
- The Sign Effect and Borrowing Aversion
While the percentage of subjects with credit card debt is 45% in the “hyperbolic discounting” group, it is only 39% in the “non-hyperbolic discounting” group. The above facts indicate that the behavior of credit card users is irrational in two respects.
Obesity and Underweight
- Choosing One ’ s Body Weight Status
- Obese People Tend to Be Indebted
- Obesity as Self-Destruction
- Choosing Being Underweight
As with the debt problem, this point is especially important when we understand obesity from the perspective of self-defeating choices. An increase in the impatience rate means an increase in the discount rate by 1 SD.
Gambling, Smoking, and Drinking
Figure 5.13 divides the online survey respondents into three groups, including naï¨ve hyperbolic subjects, sophisticated hyperbolic subjects, and non-hyperbolic subjects, in the same way as in the previous section, and compares the percentage of individuals who have gambling, smoking, and drinking habits . Holders of excessive debt are defined as respondents whose propensity index for excessive debt is equal to or greater than 1 SD from the mean.
Conclusions
The solution differs only from the naï¨ve consumer's solution in the MPC in period 1; it is defined by using the effective discount functions fS(τ) instead of off(τ). The distribution in the dark color contains the results of the National Health and Nutrition Survey conducted in November 2004 by the Ministry of Health, Labor and Welfare (MHLW), and the distribution in the light color contains the results of a survey conducted by Osaka University in February 2005 (the Japanese Household Survey on Consumer Preferences and Satisfaction 2005).
Introduction
First, we will look at the ways in which each individual can improve his or her own choices.
Means of Avoiding Self-Destructive Choices
- Taking into Account the Lenient Future Self
- The Self-Control Problem and Willpower That You Can
- Addressing Willpower Depletion
- Two Types of Commitment Device
- Soft Commitment Devices
- Personal Rules
- Dividing Planning Horizon into Shorter Sub-periods
- Rounding Up the Troops While the Enemy Is Still Weak
- Hard to Be Sophisticated
First, it means that some kind of test of willpower is needed to determine the severity of one's own self-control problems. An optimistic estimate of future self-control problems appears to be based on this behavior.
Interventions That Allow Choices
- Libertarian Paternalism
- Nudging Hyperbolic People
- Making People Commit to Future Savings
- Reverse Thinking: Asymmetric Paternalism
- Putting It into Practice
Second, hyperbolic individuals tend to stay in the same plane because they are strongly influenced by status quo bias. A good example is a 401(k) in the US that switched to an automatic enrollment system with "enroll" as the default because many individuals opted out.
Considering Policies
Interventions for Smoking Cessation
According to the National Health and Nutrition Survey in 2008 by the Ministry of Health, Labor and Welfare (MHLW), more than 60% of smokers want to either quit smoking or reduce smoking (see Fig.6.2). Individuals who indicated their intention to quit smoking: Those who said "I want to quit smoking" or "I want to stop smoking" in response to the question "Do you want to quit smoking?".
Reducing Obesity
Under this system, insurers operating health insurance are required to provide health screenings to policyholders aged 40-74 and provide health guidance based on the results. 1 The health care system itself for seniors 75 and over is currently under consideration for a major overhaul, including complete abolition; however, it is possible that in the future a system will be introduced that will “pass on” the increased health care cost burden due to issues such as obesity to insurance premiums.
Intervention in the Consumer Credit Market
Countries such as France and Germany have introduced ceiling interest rates from the standpoint of protecting borrowers who are bound by their rationality. Therefore, it became possible for a debtor to demand a refund for the payment above the maximum interest rate (for example, 20% for loans under JPY 100,000).
Issues and Future Tasks
Whether it concerns borrowing money with a credit card or through consumer financing, non-payment usually carries an extremely high interest rate. However, the amendment prohibited this practice and stipulated that penalty interest and fees should be kept within a reasonable range.
Conclusions
Simultaneous schematic assessment of food preference in cows.Journal of the Experimental Analysis and Behavior. Choice in a 'self-control' paradigm: effects of a fading procedure. Journal of the Experimental Analysis of Behavior.
