Small vs. Far away -- humans can't really tell the difference

It's always kind of amusing when economists "discover" something the rest of us had known all along.

When making decisions with immediate consequences, economic actors typically display a high degree of impatience. Consumers choose immediate pleasures instead of waiting a few days for much larger rewards. Consumers want "instant gratification." However, people do not behave impatiently when they make decisions for the future. Few people plan to break their diets next week. Instead, people tend to splurge today and vow to exercise/diet/save tomorrow. From today's viewpoint, people prefer to act impatiently right now but to act patiently later.

No kidding :)

Seriously though, it's a cool article. They have brainscans that show our long-term decisions are decided by "analytic" brain circuits while the decision to put that bigscreen TV on credit are made using both "analytic" and "emotional" brain circuits. And as so happens when we have to make the choice, Americans goes with their heart rather than their head. Our inner Wooster ruling over our long-suffering inner Jeeves, if you will. Exactly how greedily impatient are we? "We find that consumers have a short-run discount rate of 30 percent and a long-run discount rate of 5 percent. In other words, delaying a reward by a year reduces its value by 30 percent, but delaying the same reward an additional year only generates an additional 5 percent devaluation." Still doesn't explain why anyone buys first-run DVDs instead of waiting to rent.

We can call this the "night Jerry/morning Jerry" problem, after that episode of Seinfeld where Jerry does this bit about how he would stay up too late at night and screw himself over the next morning. But he can't do anything about it because "night Jerry" likes to stay up -- the consequences? That's morning Jerry's issue. When we are faced with something abstract and far away, the self is continuous. But when it comes up to a choice between pleasures (or lack of pain) in the here and now and greater good in the future, we become biased because we only really ever exist in the present. This is why I ate half a batch of home-made spritz cookies yesterday (That, and the fact that they were "substandard" and thus unfit for the holiday table).

Anyhow, I can tell you right now, I am a famed procrastinator (forgetfulness + inability to delay gratification = I'll get it done later...oops!) My intentions, of course, are always good and there are no shortage of sound plans that suffer on the carry through. After years of struggle, I have come to the conclusion that self-control is an illusion. There are two ways of getting things done, and neither of them involves forgoing short-term pleasures for long-term utility.

1) The "tie thyself to the mast" approach
This is why people who rack up ruinous credit card debts can nevertheless save money through illiquid assets like a house. The immediate disutility of not paying your mortgage (getting turfed out of your castle) is so great that the minimum of discipline is required to pay it, assuming that one has the means. For a less serious example, consider the "reading 52 books in 52 weeks" New Year Resolution I'm stealing from Roxanne. Unlike previous resolutions, this is public. Expect a capsule book review every Monday. I'm counting on the shame I will feel at breaking my resolution in front of y'all to provide enough disutility to overcome my lazy desire to blog (or watch the TeeVee) more are read less.

2) The "nugget of immediate utility" approach
Economists used to wonder "why do people brush their teeth?" It seems like given the standard discount rate and the number of years it takes for the result of errant oral hygiene to become painful cavities, it would seem that the 3 minutes daily it takes to do this task should not be "worth it". I would posit that we would all be walking around with horrible teeth in a few year if this was a new problem and they just came up with the solution. But we were all taught to brush as kiddies, to make it a routine without which the day is not complete. I'd feel uncomfortable and unpleasantly stale if I missed a brushing. That minty burst of freshness after brushing is the "nugget of immediate utility". This, I posit, is also why many of us don't floss -- it's not really more of a pain than brushing, and the long-term benefits are significant. But there's no immediate payback we can look forward to keep it going on a day to day basis.