Can you give a concrete example of someone screwing up due to hyperbolic accounting in a case where there’s an objective measure of utility to compare the person’s estimates against ?
There are no objective measures of utility. But just about everyone who has failed a diet or exercise schedule could be seen as failing beause of hyperbolic discounting.
I don’t know. What I was referring to was that people’s estimates of their future utility of some course of action are not constant. And they often vary in such a way that one choice (dieting, exercising, saving...) appear rational when you are planning for it, and when you evaluate it in retrospect, but is unappealing at the time that you actually do it.
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.
Can you give a concrete example of someone screwing up due to hyperbolic accounting in a case where there’s an objective measure of utility to compare the person’s estimates against ?
There are no objective measures of utility. But just about everyone who has failed a diet or exercise schedule could be seen as failing beause of hyperbolic discounting.
Without objective measures of utility, what could it even mean to speak of someone’s utility judgements as being biased or wrong ?
I don’t know. What I was referring to was that people’s estimates of their future utility of some course of action are not constant. And they often vary in such a way that one choice (dieting, exercising, saving...) appear rational when you are planning for it, and when you evaluate it in retrospect, but is unappealing at the time that you actually do it.
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.