Cognitive biases
Hyperbolic discounting: why “now” pulls harder than “later”
On Sunday evening Mark makes a firm decision: “From Monday I go to bed before midnight, I run in the morning before work, and sweets only on weekends.” On Monday morning the alarm rings, and Mark hits “ten more minutes.” On the way to work he passes the bakery near his home, the smell of fresh baking drifts out, and he goes in for a pastry. And in the evening Mark is sure again: tomorrow everything will go to plan.
This is hyperbolic discounting. A closely related idea is present bias, a pull toward “now.” A reward now pulls harder than the same reward later. The closer the moment, the stronger the urge to take it right away. That is why our plans for “later” are patient, but when “later” becomes “now,” we choose what is pleasant immediately.
Below, we look at what research has shown, what scientists still argue about, and how to come to terms with yourself. In the middle of the article you will choose a bakery gift for Mark twice.
Contents
In short: how the pull of “now” works
What hyperbolic discounting is
“Discount” means a reduction in price. Waiting seems to put a discount on a reward: a pastry in a week seems “cheaper” than a pastry today. In itself that is normal: waiting has a cost, too. What is unusual is something else. The discount is not the same all the way through. The first stretch of waiting “costs” a lot, and after that it gets cheaper and cheaper.
This is clearly visible in a survey by the economist Richard Thaler. We retell it from a 2002 review, because we could not read Thaler’s paper itself. People were asked: how much money would you need to be given later to agree to give up $15 now? Typical answers were: after a month, $20; after a year, $50; after ten years, $100. Do the math yourself: for a month of waiting, people asked for $5 more. And for ten years, 120 times as long, only $85 more.
Such a discount is described by a curve that mathematicians call a hyperbola. Hence the word “hyperbolic.”
What people argue about. In a large review from 2002, scientists called a discount for waiting that gets smaller over time the best-documented departure from the standard economic model, where that discount is always the same. But the exact shape of the curve is in question. In experiments where the wait is longer than a year, the discount hardly decreased any further. And the fact that the discount drops with waiting can be explained in other ways, too. There is one more caveat. With money on paper, the pull toward “now” in experiments is often weak, and with effort it is noticeably stronger. According to a summary of studies, on average people lean toward “now,” but the spread between experiments is large. So from here on we talk not about an exact curve but about the pull itself.
Try it yourself: Mark’s pastries
The game takes a couple of minutes. Here is what will happen.
Step 1. The bakery near Mark’s home celebrates its birthday in a year and hands out pastries. You choose Mark’s gift in advance: one pastry, or two but a week later.
Step 2. You fast-forward the year with a slider and see on a timeline how the gifts come closer.
Step 3. The day of the celebration arrives, and the shop assistant lets you choose again.
Why pastries and not money? With sums on paper, the pull toward “now” is often weak in experiments, while with real food it shows up well. All players see the same offers.
What usually happens. The hyperbolic curve predicts that a choice can flip. While both rewards are far away, we choose the bigger one, even though it comes a little later. When the smaller one is close, we grab it. This has been tested. In one experiment, people were offered a smaller reward sooner or a larger one later, and then both rewards were brought closer. Almost all the participants at some point switched from the larger reward to the smaller but earlier one. And in an experiment with snacks, people chose a week ahead what they would get: a piece of fruit or something tasty and unhealthy. A week later they were allowed to change their minds on the spot. And they chose the unhealthy one much more often than they had in advance.
What the game can and can’t show. The pastries on the screen are not real, and you fast-forwarded the year in a second. Besides, you remembered your first answer, and nobody wants to contradict themselves. So in the game you may not change your mind, and that is fine. The game shows how a flip of choice works, but it does not measure your willpower.
When it is not a mistake. Taking it now is reasonable if “later” is unreliable or you truly want it today. It becomes a mistake when you yourself decided in advance that waiting was worth it, changed your mind at the last moment, and then regret it.
Why “now” pulls harder
Imagine two trees: a short one and a tall one, with the tall one standing a little farther away. From a distance it is clear which is taller. But walk right up to the short one, and it blocks the tall one from view. It is the same with rewards: while both are far away, we see which is bigger. When the small one is close, it hides the big one. This is an image, not a description of what happens in the head. But it conveys how a choice unfolds.
One reason is that closeness awakens desire. The authors of the 2002 review write that the smell, the sight, and the sheer nearness of a reward can whet the appetite. Then it is harder to hold out. In the snack experiment, hungry participants more often chose the unhealthy option, even when ordering it a week ahead. The thought of a pastry a month from now hardly works on us. A pastry in the display case does.
Where it gets in the way
Health. Going to bed earlier, getting to a workout, skipping the second slice of cake: the benefit comes some time later. And the pleasure of one more episode or a pastry is right now. So it is easy to make such plans in the evening and hard to carry them out in the morning.
Gyms and memberships. In a study of fitness clubs, people who bought a membership paid by the month went on average a little over four times a month. Each visit cost them more than it would have with a ten-visit pass. The authors explain this by people overestimating their future willpower. When buying a membership, they were counting on a patient “future self.”
Money. “I’ll start saving on Monday,” and on Monday something turns up to spend it on. Economists use the pull toward “now” to explain why people often spend more than they themselves intended when they planned in advance.
Don’t confuse it with the planning fallacy. There we underestimate how long a task will take. Here we know it is better to wait, but at the last moment we choose “now.”
How to come to terms with yourself
Hyperbolic discounting is one of the biases on the cognitive bias map, in the section on decisions and risk. Right there is loss aversion: why a loss weighs more than a gain of the same size.
Frequently asked questions
So is anyone who chooses “now” just lazy?
No. In experiments, the pull toward “now” shows up on average in people in general, not only in those who “lack willpower.” It is more useful not to scold yourself but to arrange things so that the right choice is easier at the right moment.
Is taking the reward now always a mistake?
No. Taking it now is reasonable if “later” is unreliable or you truly want it today. It becomes a mistake when you yourself decided in advance that waiting was worth it, changed your mind at the last moment, and then regret it.
