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Published in:
The Paradox of Self-Destructive Choices Read chapter Read first chapter

2016 | OriginalPaper | Chapter

4. Self-Control Problems of the Dual Self

Author : Shinsuke Ikeda

Published in: The Economics of Self-Destructive Choices

Publisher: Springer Japan

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Abstract

In the previous chapter, I explained hyperbolic discounting, a source of behavioral bias which people exhibit when making intertemporal choices. Taking into account 10 years into the future while discounting tomorrow is an act that reflects humans’ dual nature. Under hyperbolic discounting, when the benefit (or the cost) of a choice is near at hand, people become motivated to prioritize the immediate benefit and revise the original plan, because the subjective discount rate suddenly increases, making them impatient. Of course, people do not always give in to such temptation and choose the “easy” option. In this chapter, I would like to refer to some data, theoretically consider what decision-making problems arise under hyperbolic discounting, and examine how we take actions to deal with these problems.

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previous chapter Hyperbolic Discounting and Self-Destructive Behaviors
next chapter Overborrowing, Overeating, and Addictive Behavior
Appendix
Available only for authorised users
Footnotes
1
More formally, the discussion here is based on the assumption of quasi-hyperbolic discounting (\( {\beta \delta}^{\tau } \)), discussed in Chap. 3, by setting parameter \( \beta \), which relates to present bias, to 0.5 and the long-term discount rate (\( \delta \)) to 1.
 
2
Under exponential discounting, the discount rate would be the same at any given point in time. Because it is assumed that the discount rate for converting the value for the day after tomorrow to the value for tomorrow is 0 under the current setting, the rate used to discount the value for tomorrow to the value for today under exponential discounting must also be 0.
 
3
The above discussion does not argue that trying to work on a large task is always irrational or that burying oneself in small tasks is smart. Whether to work on a small task or a large task—although this question itself is a rough notion—is probably determined based on the person’s ability, the temporal patterns of the cost and outcome, the degree of impatience (i.e., subjective discount rates), the degree of hyperbolic discounting, the degree of naivety, attitudes toward risk, and so on. In addition, as we have frequently seen, scientific discoveries and major undertakings, tasks, and outcomes that bear significant meaning have not always been derived from rational choices. It is not unusual to see an optimistic and naïve undertaking ultimately leading to a very significant outcome.
 
4
Laibson et al. (2003) point out that there is the possibility that sophisticated consumers wind up saving more money when there is no commitment device such as illiquid assets. This seems to be a case of excessive abstinence that occurs with being sophisticated, as described earlier. See also Diamond and Koszegi (2003).
 
5
According to Thaler’s mental accounting, whereas items such as an unexpected bonus increase are classified as part of a mental “checking account” and allocated to daily consumption, financial assets and human capital are managed as savings under a “savings account.”
 
6
Calculations are based on the savings and debts of the age group of the household head in the 2010 fiscal year, as found in the Survey of Household Economy, the Ministry of Internal Affairs and Communications’ Statistics Bureau.
 
7
In cases where one does not feel the pain of the future tax paid by one’s children and future generations as much as when one himself or herself bears the tax, the equivalence theorem will not hold true regardless of the argument made below.
 
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Metadata
Title
Self-Control Problems of the Dual Self
Author
Shinsuke Ikeda
Copyright Year
2016
Publisher
Springer Japan
Book
The Economics of Self-Destructive Choices

Print ISBN: 978-4-431-55792-0

Electronic ISBN: 978-4-431-55793-7

Copyright Year: 2016

DOI
https://doi.org/10.1007/978-4-431-55793-7_4