Less Wrong is a community blog devoted to refining the art of human rationality. Please visit our About page for more information.

A hypothesis concerning discounting.

2 Post author: abramdemski 12 November 2012 09:51PM

Humans have a value function which is inconsistent over time, discounting roughly with proportion to distance in the future, so that we discount more steeply as an event approaches. This is why we stay up late, ignore the alarm, put off work until close to a deadline, et cetera et cetera.

Yet hyperbolic discounting appears to go away as we mature. I believe this is a result of cognitive mechanisms for maintaining consistency. Cognitive dissonance is painful for us. The consistency mechanism seems to explain some of our irrational behaviour, such as the sunk cost fallacy. It provides a way for us to stick with plans which we previously made, avoiding preference changes due to hyperbolic discounting.

If a hyperbolically discounting agent could perfectly self-modify, it would fix its hyperbola to a specific point in time, resulting in an agent whose discounting would flatten out over the remainder of its life. Perhaps our consistency mechanism approximates this result; but far from perfectly. We can also resolve the inconsistency in a different way, by accepting a specific discount rate. Rather than forcing our future selves to conform to our present preferences, resulting in a gradually flattening function, our present selves may instead accept our future preferences in order to resolve the inconsistency.

Given the difficulty of forcing our future selves to accept a flat distribution, we accept that we will steeply discount in the future as we do in the present. This resolution is popular in some circles; we are often told to "live in the present" or "seize the day". In the extreme case, there is the belief (often associated with mystics) that the present moment is infinitely more important than anything else; the discount factor has collapsed to 0. While this view is intellectually coherent, it seems to be biologically impossible; we will keep taking actions based on future consequences even if we think we are only doing what we desire in the moment. Nonetheless, I suppose we can approach very high discount factors.

Based on this model, my suspicion is that we can approach any discount factor as a self-consistent equilibrium-- it is possible that we learn to make and keep very long-term plans, approximating a very low discount, but it is also possible that we learn to live in the present, or learn anything between these two. The consistency mechanism will want to find a fixed point, but which fixed-point we reach will depend on factors outside these mechanisms.

Comments (8)

Comment author: [deleted] 13 November 2012 01:57:17AM 2 points [-]

I think discounting effects in inter-temporal choice trials are well explained by exponential discount over perceived (logarithmic) time. See Discounting Time and Time Discounting (Zauberman+ 2008) and Psychophysics of time perception and intertemporal choice models (Takahashi+ 2008). For better models of perceived time, see Timing and time perception (Grondin 2010).

Comment author: DanielLC 13 November 2012 01:12:10AM 1 point [-]

I believe this is a result of cognitive mechanisms for maintaining consistency.

That's not enough to explain it. We evolved hyperbolic discounting for a reason. Either the reason goes away as we age, or it's not strong enough to counter this effect.

Comment author: JoshuaZ 14 November 2012 08:20:38PM 1 point [-]

We evolved hyperbolic discounting for a reason.

Careful. Spandrels exist (although it seems likely at this point that Gould overestimated how common they were).

Comment author: DanielLC 15 November 2012 12:47:58AM 0 points [-]

I suppose it could also be a spandrel in its entirety, but that would take more of an explanation than the idea that the change in hyperbolic discounting is a spandrel.

Comment author: abramdemski 15 November 2012 06:31:53AM 0 points [-]

Honestly, I think Gwern's evidence points to there being little or no inconsistent discounting, but the phenomenon seems so real to me that I find it difficult to take-- I would rather ascribe it to an unknown flaw in the way they detected discount rates, than accept that people rally do have consistent values over time. Inconsistent values seem to match very well with the complaints many people have about their own behavior.

So, perhaps positing cognitive consistency mechanisms was a mistake. I do think we have such mechanisms, and I was entertaining hope that they might eventually win over temporal inconsistency... but the honest truth is that I think the cited study "must be wrong or limited somehow" rather than showing that adults overcome temporal inconsistency...


Comment author: lukstafi 15 November 2012 10:02:42AM 0 points [-]

"Temporal inconsistency" or "value inconsistency"? These are different.

Comment author: abramdemski 15 November 2012 05:47:50PM 0 points [-]

I'm talking about the relative weights we assign to good things at different moments changing as a function of how close those moments get. What distinction are you thinking of?

Comment author: lukstafi 16 November 2012 05:50:40PM 1 point [-]

When the changes follow different patterns for different things it starts getting difficult to infer values from choices.