Think about our evolutionary history. Presumably, life was less stable, deals less predictable than they are today. In that case it would have been better to have a strong hyperbolic discount rate, while now, when outcomes are increasingly reliable, then that rate should be dropped but it (presumably) hasn’t.
Of course, our intuitive discount rate should never reach the exponential that a model would predict, because there are always new unforeseen factors, but I would contend that the uncertainties have dropped substantially. This would make the particular hyperbolic rate that we intuitively discount payoffs at today biased, while in our evolutionary past it presumably would have been a better approximation of a suitable discount rate.
Think about our evolutionary history. Presumably, life was less stable, deals less predictable than they are today. In that case it would have been better to have a strong hyperbolic discount rate, while now, when outcomes are increasingly reliable, then that rate should be dropped but it (presumably) hasn’t.
Of course, our intuitive discount rate should never reach the exponential that a model would predict, because there are always new unforeseen factors, but I would contend that the uncertainties have dropped substantially. This would make the particular hyperbolic rate that we intuitively discount payoffs at today biased, while in our evolutionary past it presumably would have been a better approximation of a suitable discount rate.