Time Preference and Life Cycle Consumption with Endogenous Survival

We provide a structural theory of time preference and derive a functional form of intertemporal preferences by postulating that individuals make their life-cycle consumption choices as if to maximize expected lifetime. This yields a nontime-separable expected utility representation where the inverse of the coefficient of intertemporal substitution exceeds the coefficient of relative risk aversion. The rate of time preference depends on the inverse of expected remaining lifetime and the effect of age on the productivity of consumption in affecting health. The preference formulation is applied in a standard intertemporal consumption model to illustrate the implied life-cycle consumption choices ( JEL D91, B41).     

Me,Myself, and Money II: Relative Deprivation Predicts Disordered Gambling Severity via Delay Discounting,Especially Among Gamblers Who Have a Financially Focused Self-Concept

In the current research, we examined whether the known link between relative deprivation and disordered gambling (via delay discounting; i.e., preferences for immediate smaller rewards relative to delayed larger rewards) is moderated by the extent to which gamblers have a financially focused self-concept. Specifically, we hypothesized that delay discounting would be a strong predictor of disordered gambling among those who base their self-worth on their financial success. To test this moderated-mediation model, a community sample of gamblers (N = 239) completed measures that assessed relative deprivation, delay discounting, financially focused self-concept, and disordered gambling severity. As predicted, people who felt more relative deprivation reported more severe symptoms of disordered gambling and this association was mediated by delay discounting. Importantly, this mediated relationship was moderated by the extent to which participants’ self-concept was focused on financial success. Among participants whose self-concept was high in financial focus, greater delay discounting (stemming from relative deprivation) was a strong predictor of disordered gambling. Among people whose self-concept was low in financial focus, delay discounting (stemming from relative deprivation) was a weak predictor of disordered gambling. Thus, the magnitude of the indirect effect of relative deprivation on disordered gambling severity was larger among people with a more financially focused self-concept—an effect mediated by delay discounting. These findings suggest that targeting gamblers’ financial focus in prevention and treatment interventions may be instrumental in curtailing the development and maintenance of disordered gambling.     

How time preferences differ: Evidence from 53 countries

We present results from the first large-scale international survey on time preference, conducted in 53 countries. All countries exhibit hyperbolic discounting patterns, i.e., the immediate future is discounted more than far future. We also observe higher heterogeneity for shorter time horizons, consistent with the pattern reviewed by Frederick, Loewenstein, and O’Donoghue (2002). Cultural factors as captured by the Hofstede cultural dimensions (Hofstede, 1991) contribute significantly to the variation of time discounting, even after controlling for economic factors, such as GDP, inflation rate and growth rate. In particular, higher levels of Uncertainty Avoidance are associated with stronger hyperbolic discounting, whereas higher degrees of Individualism and Long Term Orientation predict stronger tendency to wait for larger payoffs. We also find the waiting tendency is correlated with innovation, environmental protection, crediting rating, and body mass index at country level after controlling for county wealth. These results help us to enhance the understanding of differences across financial markets and economic behavior worldwide.     

Appropriate discounting of future utilities need not be the dictatorship of the present: A note on Chichilnisky

Positive, but non-excessive discounting of future utilities to take account of possible non-realization/survival is not the dictatorship of the present, contrary to Chichilnisky's argument which is ingenious but contains a slip due to the improper treatment of infinity. As the probability of people existing a trillion to the power of a trillion years from now is close to zero, the fact that their voice now is also close to zero should not be regarded as the dictatorship of the present. Correspondingly, Chichilnisky's criterion which gives the welfare of people in year infinity some extra weight over-and-above their due weight in accordance to the realization probability, is not acceptable. This paper is drafted during my visit to the City University of Hong Kong late in 2001 and revised during my visit to the National University of Singapore in 2002. I am particularly grateful Professors Eden Yu and Euston Quah. The motivation for writing this paper is sparked by my drafting of the theme paper on welfare economics and sustainable development, published as Ng and Wills (2002), for UNESCO and EOLSS.     

INVESTMENT SHOCKS,CONSUMPTION PUZZLE,AND BUSINESS CYCLES

A mass of recent research shows that investment shocks are primary driving forces of business cycles. A thorny issue, however, arises due to countercyclical consumption behavior following the investment shocks. This article contributes to the literature by resolving this anomalous issue in a model that features time inconsistency, modeled as naïve hyperbolic discounting. The proposed model delivers positive responses of consumption to an investment shock and thus produces comovement of key macroaggregates, which is in line with the observed U.S. business cycles. Furthermore, this article also substantiates the validity of the proposed model by producing comovement following an investment news (or anticipated investment) shock. Additional analyses on changes in model structure and parameter value do not reverse the main finding. (JEL E3, E7)     

Consumption,time and the environment

This paper combines a time-allocation approach with a model of economic dynamics, based on the accumulation of human capital, and constrained by the environment. Consumption is modelled as an activity, combining time and commodities, and embedded in the environment. An economic interpretation for a structural shortage of time in consumption activities is suggested. It is also shown, that the environmental embeddedness of consumption can contribute to restoring more balanced proportions of time and commodities in consumption. In a dynamic setting the paper also discusses the effects of discounting on consumption, the use of time and the environment. It is found that, within a certain range of the rate of discount, a ‘discounting trap’ may arise, significantly depressing the level of environmental quality in the long-run equilibrium.     

THE ROLE OF NONCOGNITIVE SKILLS IN EXPLAINING COGNITIVE TEST SCORES

This article examines whether noncognitive skills—measured both by personality traits and by economic preference parameters—influence cognitive tests' performance. The basic idea is that noncognitive skills might affect the effort people put into a test to obtain good results. We experimentally varied the rewards for questions in a cognitive test to measure to what extent people are sensitive to financial incentives. To distinguish increased mental effort from extra time investments, we also varied the questions' time constraints. Subjects with favorable personality traits such as high performance motivation and an internal locus of control perform relatively well in the absence of rewards, consistent with a model in which trying as hard as you can is the best strategy. In contrast, favorable economic preference parameters (low discount rate, low risk aversion) are associated with increases in time investments when incentives are introduced, consistent with a rational economic model in which people only invest when there are monetary returns. The main conclusion is that individual behavior at cognitive tests depends on noncognitive skills. ( JEL J20, J24)     

Adolescents Prefer More Immediate Rewards When in the Presence of their Peers

Adolescents take more risks in the presence of their peers, but the mechanism through which peer presence affects risky decision‐making is unknown. We propose that the presence of peers increases the salience of the immediate rewards of a risky choice. The current study examined the effect of peer presence on reward sensitivity in a sample of 100 late adolescents ages 18 through 20 (M=18.5) using a delay discounting task, which assesses an individual's preference for immediate versus delayed rewards. Participants were randomly assigned to complete the task alone or with 2 same‐age, same‐sex peers observing. Consistent with our prediction, adolescents demonstrated a greater preference for immediate rewards when with their peers than when alone. Heightened risk taking by adolescents in the company of their friends may be due in part to the effect that being with one's peers has on reward sensitivity.     

Settling down and aging out: toward an interactionist theory of desistance and the transition to adulthood

Conceptions of adulthood have changed dramatically in recent decades. Despite such changes, however, the notion that young people will eventually "settle down" and desist from delinquent behaviors is remarkably persistent. This article unites criminology with classic work on age norms and role behavior to contend that people who persist in delinquency will be less likely to make timely adult transitions. The empirical analysis supports this proposition, with both arrest and self-reported crime blocking the passage to adult status. The authors conclude that desisting from delinquency is an important part of the package of role behaviors that define adulthood.     

What the digitalisation of music tells us about capitalism,culture and the power of the information technology sector

This article examines a striking but under-analysed feature of culture under capitalism, using the example of music: that the main ways in which people gain access to cultural experiences are subject to frequent, radical and disorienting shifts. It has two main aims. The first is to provide a macro-historical, multi-causal explanation of changes in technologies of musical consumption, emphasising the mutual imbrication of the economic interests of corporations with sociocultural transformations. We identify a shift over the last twenty years from consumer electronics (CE) to information technology (IT) as the most powerful sectoral force shaping how music and culture are mediated and experienced, and argue that this shift from CE to IT drew upon, and in turn quickened, a shift from domestic consumption to personalised, mobile and connected consumption, and from dynamics of what Raymond Williams called ‘mobile privatisation’ to what we call ‘networked mobile personalisation’. The second aim is to assess change and continuity in the main means by which recorded music is consumed, in long-term perspective. We argue that disruptions caused by recent ‘digitalisation’ of music are consistent with longer term processes, whereby music has been something of a testing ground for the introduction of new cultural technologies. But we also recognise particularly high levels of disruption in recent times and relate these to the new dominance of the IT industries, and the particular dynamism or instability of that sector. We close by discussing the degree to which constant changes in how people access musical experiences might be read as instances of capitalism’s tendency to prioritise limiting notions of consumer preference over meaningful needs.     

Mental discounting and financial strategies

Subjective discount rates have been used as measures of time preference to explain saving behavior, with varying results. There is also a lack of agreement between different explanatory models of subjective discount rates. In this paper, it is argued that a better understanding of subjective discount rates can be reached by using groups with different financial strategies as domains. It is shown by PLS and regression analyses that the mental discounting process differs between groups practicing different financial strategies and that the explained variance of subjective discount rates and thus the understanding of such rates are improved by using financial strategy groups as domains.     

Socioeconomic differences in early childhood time preferences

This article examines the extent to which early childhood socioeconomic differences emerge in hyperactivity, impulsivity and persistence, all of which are psychometric analogues to how economists conceptualise time discounting. We control for a wide range of factors including parental investment and proxies for maternal time preferences. Our results show substantial social class variations across measures at age 3. We find weak evidence that these measures are predicted by differential maternal behaviours (e.g. savings behaviour, smoking) but relatively stronger evidence that these traits are transmitted through the parents’ own non-cognitive skills (self-esteem, attachment) and parental time investments (time spent reading to the child and teaching the child to write, sing).     

Family or friends: what counts more for drinking behaviour of young adults? / Familia o amigos: ¿qué pesa más en los hábitos de consumo de alcohol de los jóvenes?

The scientific literature stresses the importance of culture and social environment in determining what people think about alcohol consumption and consequently do. Several pieces of research have proved the influence on young adults’ alcohol use of proximal social contexts of their family and peers. The present study aimed at investigating the influence of family behaviours and norms compared to the peers’ influence in a context where the culture of alcohol is changing between the different generations. Data were collected by means of a self-report questionnaire on a sample of 598 young adults (average age 22.20 years). The variables investigated were socio-demographic characteristics, the alcohol consumption of parents and friends and the parents’ and peers’ approval of alcohol consumption. The results confirmed the role of family and friends in influencing young adults’ consumption of alcohol, stressing a difference between perceived behaviours and norms. The perceived consumption of parents and friends influenced the participants’ consumption. On the contrary, the effects of the approval of drinking were limited. Globally friends had a stronger influence on alcohol consumption in comparison with family.     

Trading Later Rewards for Current Pleasure: Pornography Consumption and Delay Discounting

Internet pornography is a multi-billion-dollar industry that has grown increasingly accessible. Delay discounting involves devaluing larger, later rewards in favor of smaller, more immediate rewards. The constant novelty and primacy of sexual stimuli as particularly strong natural rewards make Internet pornography a unique activator of the brain's reward system, thereby having implications for decision-making processes. Based on theoretical studies of evolutionary psychology and neuroeconomics, two studies tested the hypothesis that consuming Internet pornography would relate to higher rates of delay discounting. Study 1 used a longitudinal design. Participants completed a pornography use questionnaire and a delay discounting task at Time 1 and then again four weeks later. Participants reporting higher initial pornography use demonstrated a higher delay discounting rate at Time 2, controlling for initial delay discounting. Study 2 tested for causality with an experimental design. Participants were randomly assigned to abstain from either their favorite food or pornography for three weeks. Participants who abstained from pornography use demonstrated lower delay discounting than participants who abstained from their favorite food. The finding suggests that Internet pornography is a sexual reward that contributes to delay discounting differently than other natural rewards. Theoretical and clinical implications of these studies are highlighted.     

De jure naturae et gentium: Samuel von Pufendorf's contribution to social choice theory and economics

Pufendorf's major work on “The Law of Nature and of Nations” has never been considered to have had much influence on economics and on the development of economics as a science. The present paper by no means attempts to propagate a different view. This would be inappropriate. However, what Pufendorf says about the importance of contracts among the members of a community and the formation of supreme sovereignty is highly relevant for the social sciences. But not only this. Economists will, perhaps, be surprised to read something about externalities and future discounting in Pufendorf's work. Also the phenomenon of conspicuous consumption was clearly described. Most stunning for social choice theorists probably will be that Pufendorf more or less explicitly discussed a preference structure that was single-peaked along a single dimension. And the collective result proposed conforms to that of the median voter.     

A Methodological Discourse On Gender, Independence, And Frailty: Applied Dimensions Of Identity Construction In Old Age

In this article, we discuss some of the methodological implications of gender, based on research conducted among seniors in the age group 67 to 100+, living independently (alone, or with minimal assistance) in Victoria, British Columbia, Canada's retirement capital. Our research evolved over time to concern the manner in which people being interviewed altered their presentation of self in discourses on independence and identity, depending on the interviewer's gender as well as their own. There are some significant implications that arise from our analysis for assessing the needs of individuals for home-making services and probably for service delivery, in general. This article discusses initial, qualitative interviews conducted with 39 people (19 men and 20 women) dealing specifically with the concept of independence. The chief methodological significance of these interviews derives from the strategy of doing two separate sets of interviews using the same protocols, but changing the gender of the interviewer/subject dyads from same-gender interviews to cross-gender interviews and assessing the differences between the two sets of conversations. Prior to the discussion, however, some of the most pressing issues surrounding the health care of elderly people in Canada, in general, and Victoria, in particular, will be addressed briefly as they relate to the rationale for conducting the research.     

The Commodification of Time in Two Art Worlds

This article examines how people successfully claim expert status in the art worlds of tattooing and opera by commodifying the time they have spent becoming experts in those art worlds. Temporal commodification happens along five dimensions: educational time, autodidactic time, consumption time, contiguous consumption time, and painful time. In essence, aesthetically-oriented individuals can successfully claim expert status in a given art world when they can convince others that they have learned about a particular kind of art, that they have learned from a legitimate source, that they have spent sufficient time consuming this art, that they have spent this time in contiguous chunks, and that they appreciate the pain (both physical and affective) that often accompanies such consumption.     

Aging male bodies,health and the reproduction of age relations

This article explores the ways in which a group of male factory workers uses bodies as bases for hierarchical categorization of men by age in their talk of mundane aspects of their lives. Analysis of interviews about health (4 focus groups and 5 personal interviews) with Finnish working-class men under 40 years old shows that they portray age groups to which they do not belong as careless, even irresponsible toward health and its maintenance. As they categorize youth and old people by age, they leave themselves unmarked by it, providing no vocabulary to describe their own group. Despite their tendency to distance themselves particularly from old people, they also distinguish among older men by familiarity, providing relatively nuanced accounts of their fathers' aging. We discuss the marking of age groups in terms of social inequality and talk of fathers in terms of intergenerational relations. Even family ties among men of diverse ages involve ageism, which familiarity serves both to mitigate and to make less visible. This article documents the maintenance of age inequality in everyday, mundane behavior.     

Living in the Now: Decision-Making and Delay Discounting in Adolescent Gamblers

Several studies examining the relationship of affective decision-making and delay discounting in disordered gambling demonstrated that adult pathological gamblers differ from healthy controls on both reward-related decision tasks. To date no study analyzed the relative contribution of these variables in adolescent gambling. This study was designed to compare affective decision-making and delay discounting in gamblers and nongamblers Italian adolescents, controlling for alcohol consumption. A total of 138 adolescents took part in the research. Two equal-number groups, defined according to the scoring rules for the South Oaks Gambling Screen-Revised for Adolescents, were administered the Iowa Gambling Task (IGT), the Monetary Choice Questionnaire (MCQ), and the Alcohol Use Disorders Identification Test (AUDIT). Zero-order correlations among all variables revealed a moderate negative association between IGT and MCQ scores only in nongamblers group. Results of mixed-model ANOVAs indicated that, compared with nongamblers, adolescent gamblers performed worse on the IGT, showed steeper delay discounting, and scored significantly higher on the AUDIT. Results of logistic regression analysis indicated that IGT, MCQ, and AUDIT scores are all significant predictors of gambling status. This novel finding provides the first evidence of an association among problematic gambling, maladaptive decision-making, and steep delay discounting among adolescents, as already observed in adults.     

Interacting mechanisms of time inconsistency

We interact two prominent behavioral mechanisms of time inconsistency that have been used to study inadequate saving: hyperbolic discounting and short-term planning. Hyperbolic discounting is a conventional way to model impulsive decision making, and short planning horizons have been used to represent myopia. One might expect that interacting both mechanisms within the same model would compound the inadequacy of saving. However, our key finding takes the form of a paradox: hyperbolic discounting does not affect consumption and saving allocations if the planning horizon is short and fixed, although it will affect allocations if the planning horizon is equal to the remaining life span. We demonstrate analytically that this finding is robust to the shape of the disposable income path, to the coarseness of the time grid, and to alternative forms of the period utility function.