Social construction is not fact—and it is not fiction

July 30, JDN 2457965

With the possible exception of politically-charged issues (especially lately in the US), most people are fairly good at distinguishing between true and false, fact and fiction. But there are certain types of ideas that can’t be neatly categorized into fact versus fiction.

First, there are subjective feelings. You can feel angry, or afraid, or sad—and really, truly feel that way—despite having no objective basis for the emotion coming from the external world. Such emotions are usually irrational, but even knowing that doesn’t make them automatically disappear. Distinguishing subjective feelings from objective facts is simple in principle, but often difficult in practice: A great many things simply “feel true” despite being utterly false. (Ask an average American which is more likely to kill them, a terrorist or the car in their garage; I bet quite a few will get the wrong answer. Indeed, if you ask them whether they’re more likely to be shot by someone else or to shoot themselves, almost literally every gun owner is going to get that answer wrong—or they wouldn’t be gun owners.)

The one I really want to focus on today is social constructions. This is a term that has been so thoroughly overused and abused by postmodernist academics (“science is a social construction”, “love is a social construction”, “math is a social construction”, “sex is a social construction”, etc.) that it has almost lost its meaning. Indeed, many people now react with automatic aversion to the term; upon hearing it, they immediately assume—understandably—that whatever is about to follow is nonsense.

But there is actually a very important core meaning to the term “social construction” that we stand to lose if we throw it away entirely. A social construction is something that exists only because we all believe in it.

Every part of that definition is important:

First, a social construction is something that exists: It’s really there, objectively. If you think it doesn’t exist, you’re wrong. It even has objective properties; you can be right or wrong in your beliefs about it, even once you agree that it exists.

Second, a social construction only exists because we all believe in it: If everyone in the world suddenly stopped believing in it, like Tinker Bell it would wink out of existence. The “we all” is important as well; a social construction doesn’t exist simply because one person, or a few people, believe in it—it requires a certain critical mass of society to believe in it. Of course, almost nothing is literally believed by everyone, so it’s more that a social construction exists insofar as people believe in it—and thus can attain a weaker or stronger kind of existence as beliefs change.

The combination of these two features makes social constructions a very weird sort of entity. They aren’t merely subjective beliefs; you can’t be wrong about what you are feeling right now (though you can certainly lie about it), but you can definitely be wrong about the social constructions of your society. But we can’t all be wrong about the social constructions of our society; once enough of our society stops believing in them, they will no longer exist. And when we have conflict over a social construction, its existence can become weaker or stronger—indeed, it can exist to some of us but not to others.

If all this sounds very bizarre and reminds you of postmodernist nonsense that might come from the Wisdom of Chopra randomizer, allow me to provide a concrete and indisputable example of a social construction that is vitally important to economics: Money.

The US dollar is a social construction. It has all sorts of well-defined objective properties, from its purchasing power in the market to its exchange rate with other currencies (also all social constructions). The markets in which it is spent are social constructions. The laws which regulate those markets are social constructions. The government which makes those laws is a social construction.

But it is not social constructions all the way down. The paper upon which the dollar was printed is a physical object with objective factual existence. It is an artifact—it was made by humans, and wouldn’t exist if we didn’t—but now that we’ve made it, it exists and would continue to exist regardless of whether we believe in it or even whether we continue to exist. The cotton from which it was made is also partly artificial, bred over centuries from a lifeform that evolved over millions of years. But the carbon atoms inside that cotton were made in a star, and that star existed and fused its carbon billions of years before any life on Earth existed, much less humans in particular. This is why the statements “math is a social construction” and “science is a social construction” are so ridiculous. Okay, sure, the institutions of science and mathematics are social constructions, but that’s trivial; nobody would dispute that, and it’s not terribly interesting. (What, you mean if everyone stopped going to MIT, there would be no MIT!?) The truths of science and mathematics were true long before we were even here—indeed, the fundamental truths of mathematics could not have failed to be true in any possible universe.

But the US dollar did not exist before human beings created it, and unlike the physical paper, the purchasing power of that dollar (which is, after all, mainly what we care about) is entirely socially constructed. If everyone in the world suddenly stopped accepting US dollars as money, the US dollar would cease to be money. If even a few million people in the US suddenly stopped accepting dollars, its value would become much more precarious, and inflation would be sure to follow.

Nor is this simply because the US dollar is a fiat currency. That makes it more obvious, to be sure; a fiat currency attains its value solely through social construction, as its physical object has negligible value. But even when we were on the gold standard, our currency was representative; the paper itself was still equally worthless. If you wanted gold, you’d have to exchange for it; and that process of exchange is entirely social construction.

And what about gold coins, one of the oldest form of money? There now the physical object might actually be useful for something, but not all that much. It’s shiny, you can make jewelry out of it, it doesn’t corrode, it can be used to replace lost teeth, it has anti-inflammatory properties—and millennia later we found out that its dense nucleus is useful for particle accelerator experiments and it is a very reliable electrical conductor useful for making microchips. But all in all, gold is really not that useful. If gold were priced based on its true usefulness, it would be extraordinarily cheap; cheaper than water, for sure, as it’s much less useful than water. Yet very few cultures have ever used water as currency (though some have used salt). Thus, most of the value of gold is itself socially constructed; you value gold not to use it, but to impress other people with the fact that you own it (or indeed to sell it to them). Stranded alone on a desert island, you’d do anything for fresh water, but gold means nothing to you. And a gold coin actually takes on additional socially-constructed value; gold coins almost always had seignorage, additional value the government received from minting them over and above the market price of the gold itself.

Economics, in fact, is largely about social constructions; or rather I should say it’s about the process of producing and distributing artifacts by means of social constructions. Artifacts like houses, cars, computers, and toasters; social constructions like money, bonds, deeds, policies, rights, corporations, and governments. Of course, there are also services, which are not quite artifacts since they stop existing when we stop doing them—though, crucially, not when we stop believing in them; your waiter still delivered your lunch even if you persist in the delusion that the lunch is not there. And there are natural resources, which existed before us (and may or may not exist after us). But these are corner cases; mostly economics is about using laws and money to distribute goods, which means using social constructions to distribute artifacts.

Other very important social constructions include race and gender. Not melanin and sex, mind you; human beings have real, biological variation in skin tone and body shape. But the concept of a race—especially the race categories we ordinarily use—is socially constructed. Nothing biological forced us to regard Kenyan and Burkinabe as the same “race” while Ainu and Navajo are different “races”; indeed, the genetic data is screaming at us in the opposite direction. Humans are sexually dimorphic, with some rare exceptions (only about 0.02% of people are intersex; about 0.3% are transgender; and no more than 5% have sex chromosome abnormalities). But the much thicker concept of gender that comes with a whole system of norms and attitudes is all socially constructed.

It’s one thing to say that perhaps males are, on average, more genetically predisposed to be systematizers than females, and thus men are more attracted to engineering and women to nursing. That could, in fact, be true, though the evidence remains quite weak. It’s quite another to say that women must not be engineers, even if they want to be, and men must not be nurses—yet the latter was, until very recently, the quite explicit and enforced norm. Standards of clothing are even more obviously socially-constructed; in Western cultures (except the Celts, for some reason), flared garments are “dresses” and hence “feminine”; in East Asian cultures, flared garments such as kimono are gender-neutral, and gender is instead expressed through clothing by subtler aspects such as being fastened on the left instead of the right. In a thousand different ways, we mark our gender by what we wear, how we speak, even how we walk—and what’s more, we enforce those gender markings. It’s not simply that males typically speak in lower pitches (which does actually have a biological basis); it’s that males who speak in higher pitches are seen as less of a man, and that is a bad thing. We have a very strict hierarchy, which is imposed in almost every culture: It is best to be a man, worse to be a woman who acts like a woman, worse still to be a woman who acts like a man, and worst of all to be a man who acts like a woman. What it means to “act like a man” or “act like a woman” varies substantially; but the core hierarchy persists.

Social constructions like these ones are in fact some of the most important things in our lives. Human beings are uniquely social animals, and we define our meaning and purpose in life largely through social constructions.

It can be tempting, therefore, to be cynical about this, and say that our lives are built around what is not real—that is, fiction. But while this may be true for religious fanatics who honestly believe that some supernatural being will reward them for their acts of devotion, it is not a fair or accurate description of someone who makes comparable sacrifices for “the United States” or “free speech” or “liberty”. These are social constructions, not fictions. They really do exist. Indeed, it is only because we are willing to make sacrifices to maintain them that they continue to exist. Free speech isn’t maintained by us saying things we want to say; it is maintained by us allowing other people to say things we don’t want to hear. Liberty is not protected by us doing whatever we feel like, but by not doing things we would be tempted to do that impose upon other people’s freedom. If in our cynicism we act as though these things are fictions, they may soon become so.

But it would be a lot easier to get this across to people, I think, if folks would stop saying idiotic things like “science is a social construction”.

Nuclear power is safe. Why don’t people like it?

Sep 24, JDN 2457656

This post will have two parts, corresponding to each sentence. First, I hope to convince you that nuclear power is safe. Second, I’ll try to analyze some of the reasons why people don’t like it and what we might be able to do about that.

Depending on how familiar you are with the statistics on nuclear power, the idea that nuclear power is safe may strike you as either a completely ridiculous claim or an egregious understatement. If your primary familiarity with nuclear power safety is via the widely-publicized examples of Chernobyl, Three Mile Island, and more recently Fukushima, you may have the impression that nuclear power carries huge, catastrophic risks. (You may also be confusing nuclear power with nuclear weapons—nuclear weapons are indeed the greatest catastrophic risk on Earth today, but equating the two is like equating automobiles and machine guns because both of them are made of metal and contain lubricant, flammable materials, and springs.)

But in fact nuclear energy is astonishingly safe. Indeed, even those examples aren’t nearly as bad as people have been led to believe. Guess how many people died as a result of Three Mile Island, including estimated increased cancer deaths from radiation exposure?

Zero. There are zero confirmed deaths and the consensus estimate of excess deaths caused by the Three Mile Island incident by all causes combined is zero.

What about Fukushima? Didn’t 10,000 people die there? From the tsunami, yes. But the nuclear accident resulted in zero fatalities. If anything, those 10,000 people were killed by coal—by climate change. They certainly weren’t killed by nuclear.

Chernobyl, on the other hand, did actually kill a lot of people. Chernobyl caused 31 confirmed direct deaths, as well as an estimated 4,000 excess deaths by all causes. On the one hand, that’s more than 9/11; on the other hand, it’s about a month of US car accidents. Imagine if people had the same level of panic and outrage at automobiles after a month of accidents that they did at nuclear power after Chernobyl.

The vast majority of nuclear accidents cause zero fatalities; other than Chernobyl, none have ever caused more than 10. Deepwater Horizon killed 11 people, and yet for some reason Americans did not unite in opposition against ever using oil (or even offshore drilling!) ever again.

In fact, even that isn’t fair to nuclear power, because we’re not including the thousands of lives saved every year by using nuclear instead of coal and oil.

Keep in mind, the WHO estimates 10 to 100 million excess deaths due to climate change over the 21st century. That’s an average of 100,000 to 1 million deaths every year. Nuclear power currently produces about 11% of the world’s energy, so let’s do a back-of-the-envelope calculation for how many lives that’s saving. Assuming that additional climate change would be worse in direct proportion to the additional carbon emissions (which is conservative), and assuming that half that energy would be replaced by coal or oil (also conservative, using Germany’s example), we’re looking at about a 6% increase in deaths due to climate change if all those nuclear power plants were closed. That’s 6,000 to 60,000 lives that nuclear power plants save every year.

I also haven’t included deaths due to pollution—note that nuclear power plants don’t pollute air or water whatsoever, and only produce very small amounts of waste that can be quite safely stored. Air pollution in all its forms is responsible for one in eight deaths worldwide. Let me say that again: One in eight of all deaths in the world is caused by air pollution—so this is on the order of 7 million deaths per year, every year. We burn our way to a biannual Holocaust. Most of this pollution is actually caused by burning wood—fireplaces, wood stoves, and bonfires are terrible for the air—and many countries would actually see a substantial reduction in their toxic pollution if they switched to oil or even coal in favor of wood. But a large part of that pollution is caused by coal, and a nontrivial amount is caused by oil. Coal-burning factories and power plants are responsible for about 1 million deaths per year in China alone. Most of that pollution could be prevented if those power plants were nuclear instead.

Factor all that in, and nuclear power currently saves tens if not hundreds of thousands of lives per year, and expanding it to replace all fossil fuels could save millions more. Indeed, a more precise estimate of the benefits of nuclear power published a few years ago in Environmental Science and Technology is that nuclear power plants have saved some 1.8 million human lives since their invention, putting them on a par with penicillin and the polio vaccine.

So, I hope I’ve convinced you of the first proposition: Nuclear power plants are safe—and not just safe, but heroic, in fact one of the greatest life-saving technologies ever invented. So, why don’t people like them?

Unfortunately, I suspect that no amount of statistical data by itself will convince those who still feel a deep-seated revulsion to nuclear power. Even many environmentalists, people who could be nuclear energy’s greatest advocates, are often opposed to it. I read all the way through Naomi Klein’s This Changes Everything and never found even a single cogent argument against nuclear power; she simply takes it as obvious that nuclear power is “more of the same line of thinking that got us in this mess”. Perhaps because nuclear power could be enormously profitable for certain corporations (which is true; but then, it’s also true of solar and wind power)? Or because it also fits this narrative of “raping and despoiling the Earth” (sort of, I guess)? She never really does explain; I’m guessing she assumes that her audience will simply share her “gut feeling” intuition that nuclear power is dangerous and untrustworthy. One of the most important inconvenient truths for environmentalists is that nuclear power is not only safe, it is almost certainly our best hope for stopping climate change.

Perhaps all this is less baffling when we recognize that other heroic technologies are often also feared or despised for similarly bizarre reasons—vaccines, for instance.

First of all, human beings fear what we cannot understand, and while the human immune system is certainly immensely complicated, nuclear power is based on quantum mechanics, a realm of scientific knowledge so difficult and esoteric that it is frequently used as the paradigm example of something that is hard to understand. (As Feynman famously said, “I think I can safely say that nobody understands quantum mechanics.”) Nor does it help that popular treatments of quantum physics typically bear about as much resemblance to the actual content of the theory as the X-Men films do to evolutionary biology, and con artists like Deepak Chopra take advantage of this confusion to peddle their quackery.

Nuclear radiation is also particularly terrifying because it is invisible and silent; while a properly-functioning nuclear power plant emits less ionizing radiation than the Capitol Building and eating a banana poses substantially higher radiation risk than talking on a cell phone, nonetheless there is real danger posed by ionizing radiation, and that danger is particularly terrifying because it takes a form that human senses cannot detect. When you are burned by fire or cut by a knife, you know immediately; but gamma rays could be coursing through you right now and you’d feel no different. (Huge quantities of neutrinos are coursing through you, but fear not, for they’re completely harmless.) The symptoms of severe acute radiation poisoning also take a particularly horrific form: After the initial phase of nausea wears off, you can enter a “walking ghost phase”, where your eventual death is almost certain due to your compromised immune and digestive systems, but your current condition is almost normal. This makes the prospect of death by nuclear accident a particularly vivid and horrible image.

Vividness makes ideas more available to our memory; and thus, by the availability heuristic, we automatically infer that it must be more probable than it truly is. You can think of horrific nuclear accidents like Chernobyl, and all the carnage they caused; but all those millions of people choking to death in China don’t make for a compelling TV news segment (or at least, our TV news doesn’t seem to think so). Vividness doesn’t actually seem to make things more persuasive, but it does make them more memorable.

Yet even if we allow for the possibility that death by radiation poisoning is somewhat worse than death by coal pollution (if I had to choose between the two, okay, maybe I’d go with the coal), surely it’s not ten thousand times worse? Surely it’s not worth sacrificing entire cities full of people to coal in order to prevent a handful of deaths by nuclear energy?

Another reason that has been proposed is a sense that we can control risk from other sources, but a nuclear meltdown would be totally outside our control. Perhaps that is the perception, but if you think about it, it really doesn’t make a lot of sense. If there’s a nuclear meltdown, emergency services will report it, and you can evacuate the area. Yes, the radiation moves at the speed of light; but it also dissipates as the inverse square of distance, so if you just move further away you can get a lot safer quite quickly. (Think about the brightness of a lamp in your face versus across a football field. Radiation works the same way.) The damage is also cumulative, so the radiation risk from a meltdown is only going to be serious if you stay close to the reactor for a sustained period of time. Indeed, it’s much easier to avoid nuclear radiation than it is to avoid air pollution; you can’t just stand behind a concrete wall to shield against air pollution, and moving further away isn’t possible if you don’t know where it’s coming from. Control would explain why we fear cars less than airplanes (which is also statistically absurd), but it really can’t explain why nuclear power scares people more than coal and oil.

Another important factor may be an odd sort of bipartisan consensus: While the Left hates nuclear power because it makes corporations profitable or because it’s unnatural and despoils the Earth or something, the Right hates nuclear power because it requires substantial government involvement and might displace their beloved fossil fuels. (The Right’s deep, deep love of the fossil fuel industry now borders on the pathological. Even now that they are obviously economically inefficient and environmentally disastrous, right-wing parties around the world continue to defend enormous subsidies for oil and coal companies. Corruption and regulatory capture could partly explain this, but only partly. Campaign contributions can’t explain why someone would write a book praising how wonderful fossil fuels are and angrily denouncing anyone who would dare criticize them.) So while the two sides may hate each other in general and disagree on most other issues—including of course climate change itself—they can at least agree that nuclear power is bad and must be stopped.

Where do we go from here, then? I’m not entirely sure. As I said, statistical data by itself clearly won’t be enough. We need to find out what it is that makes people so uniquely terrified of nuclear energy, and we need to find a way to assuage those fears.

And we must do this now. For every day we don’t—every day we postpone the transition to a zero-carbon energy grid—is another thousand people dead.

What is the price of time?

JDN 2457562

If they were asked outright, “What is the price of time?” most people would find that it sounds nonsensical, like I’ve asked you “What is the diameter of calculus?” or “What is the electric charge of justice?” (It’s interesting that we generally try to assign meaning to such nonsensical questions, and they often seem strangely profound when we do; a good deal of what passes for “profound wisdom” is really better explained as this sort of reaction to nonsense. Deepak Chopra, for instance.)

But there is actually a quite sensible economic meaning of this question, and answering it turns out to have many important implications for how we should run our countries and how we should live our lives.

What we are really asking for is temporal discounting; we want to know how much more money today is worth compared to tomorrow, and how much more money tomorrow is worth compared to two days from now.

If you say that they are exactly the same, your discount rate (your “price of time”) is zero; if that is indeed how you feel, may I please borrow your entire net wealth at 0% interest for the next thirty years? If you like we can even inflation-index the interest rate so it always produces a real interest rate of zero, thus protecting you from potential inflation risk.
What? You don’t like my deal? You say you need that money sooner? Then your discount rate is not zero. Similarly, it can’t be negative; if you actually valued money tomorrow more than money today, you’d gladly give me my loan.

Money today is worth more to you than money tomorrow—the only question is how much more.

There’s a very simple theorem which says that as long as your temporal discounting doesn’t change over time, so it is dynamically consistent, it must have a very specific form. I don’t normally use math this advanced in my blog, but this one is so elegant I couldn’t resist. I’ll encase it in blockquotes so you can skim over it if you must.

The value of $1 today relative to… today is of course 1; f(0) = 1.

If you are dynamically consistent, at any time t you should discount tomorrow relative to today the same as you discounted today relative to yesterday, so for all t, f(t+1)/f(t) = f(t)/f(t-1)
Thus, f(t+1)/f(t) is independent of t, and therefore equal to some constant, which we can call r:

f(t+1)/f(t) = r, which implies f(t+1) = r f(t).

Starting at f(0) = 1, we have:

f(0) = 1, f(1) = r, f(2) = r^2

We can prove that this pattern continues to hold by mathematical induction.

Suppose the following is true for some integer k; we already know it works for k = 1:

f(k) = r^k

Let t = k:

f(k+1) = r f(k)


f(k+1) = r^(k+1)

Which by induction proves that for all integers n:

f(n) = r^n

The name of the variable doesn’t matter. Therefore:

f(t) = r^t

Whether you agree with me that this is beautiful, or you have no idea what I just said, the take-away is the same: If your discount rate is consistent over time, it must be exponential. There must be some constant number 0 < r < 1 such that each successive time period is worth r times as much as the previous. (You can also generalize this to the case of continuous time, where instead of r^t you get e^(-r t). This requires even more advanced math, so I’ll spare you.)

Most neoclassical economists would stop right there. But there are two very big problems with this argument:

(1) It doesn’t tell us the value r should actually be, only that it should be a constant.

(2) No actual human being thinks of time this way.

There is still ongoing research as to exactly how real human beings discount time, but one thing is quite clear from the experiments: It certainly isn’t exponential.

From about 2000 to 2010, the consensus among cognitive economists was that humans discount time hyperbolically; that is, our discount function looks like this:

f(t) = 1/(1 + r t)

In the 1990s there were a couple of experiments supporting hyperbolic discounting. There is even some theoretical work trying to show that this is actually optimal, given a certain kind of uncertainty about the future, and the argument for exponential discounting relies upon certainty we don’t actually have. Hyperbolic discounting could also result if we were reasoning as though we are given a simple interest rate, rather than a compound interest rate.

But even that doesn’t really seem like humans think, now does it? It’s already weird enough for someone to say “Should I take out this loan at 5%? Well, my discount rate is 7%, so yes.” But I can at least imagine that happening when people are comparing two different interest rates (“Should I pay down my student loans, or my credit cards?”). But I can’t imagine anyone thinking, “Should I take out this loan at 5% APR which I’d need to repay after 5 years? Well, let’s check my discount function, 1/(1+0.05 (5)) = 0.8, multiplied by 1.05^5 = 1.28, the product of which is 1.02, greater than 1, so no, I shouldn’t.” That isn’t how human brains function.

Moreover, recent experiments have shown that people often don’t seem to behave according to what hyperbolic discounting would predict.

Therefore I am very much in the other camp of cognitive economists, who say that we don’t have a well-defined discount function. It’s not exponential, it’s not hyperbolic, it’s not “quasi-hyperbolic” (yes that is a thing); we just don’t have one. We reason about time by simple heuristics. You can’t make a coherent function out of it because human beings… don’t always reason coherently.

Some economists seem to have an incredible amount of trouble accepting that; here we have one from the University of Chicago arguing that hyperbolic discounting can’t possibly exist, because then people could be Dutch-booked out of all their money; but this amounts to saying that human behavior cannot ever be irrational, lest all our money magically disappear. Yes, we know hyperbolic discounting (and heuristics) allow for Dutch-booking; that’s why they’re irrational. If you really want to know the formal assumption this paper makes that is wrong, it assumes that we have complete markets—and yes, complete markets essentially force you to be perfectly rational or die, because the slightest inconsistency in your reasoning results in someone convincing you to bet all your money on a sure loss. Why was it that we wanted complete markets, again? (Oh, yes, the fanciful Arrow-Debreu model, the magical fairy land where everyone is perfectly rational and all markets are complete and we all have perfect information and the same amount of wealth and skills and the same preferences, where everything automatically achieves a perfect equilibrium.)

There was a very good experiment on this, showing that rather than discount hyperbolically, behavior is better explained by a heuristic that people judge which of two options is better by a weighted sum of the absolute distance in time plus the relative distance in time. Now that sounds like something human beings might actually do. “$100 today or $110 tomorrow? That’s only 1 day away, but it’s also twice as long. I’m not waiting.” “$100 next year, or $110 in a year and a day? It’s only 1 day apart, and it’s only slightly longer, so I’ll wait.”

That might not actually be the precise heuristic we use, but it at least seems like one that people could use.

John Duffy, whom I hope to work with at UCI starting this fall, has been working on another experiment to test a different heuristic, based on the work of Daniel Kahneman, saying essentially that we have a fast, impulsive, System 1 reasoning layer and a slow, deliberative, System 2 reasoning layer; the result is that our judgments combine both “hand to mouth” where our System 1 essentially tries to get everything immediately and spend whatever we can get our hands on, and a more rational assessment by System 2 that might actually resemble an exponential discount rate. In the 5-minute judgment, System 1’s voice is overwhelming; but if we’re already planning a year out, System 1 doesn’t even care anymore and System 2 can take over. This model also has the nice feature of explaining why people with better self-control seem to behave more like they use exponential discounting,[PDF link] and why people do on occasion reason more or less exponentially, while I have literally never heard anyone try to reason hyperbolically, only economic theorists trying to use hyperbolic models to explain behavior.

Another theory is that discounting is “subadditive”, that is, if you break up a long time interval into many short intervals, people will discount it more, because it feels longer that way. Imagine a century. Now imagine a year, another year, another year, all the way up to 100 years. Now imagine a day, another day, another day, all the way up to 365 days for the first year, and then 365 days for the second year, and that on and on up to 100 years. It feels longer, doesn’t it? It is of course exactly the same. This can account for some weird anomalies in choice behavior, but I’m not convinced it’s as good as the two-system model.

Another theory is that we simply have a “present bias”, which we treat as a sort of fixed cost that we incur regardless of what the payments are. I like this because it is so supremely simple, but there’s something very fishy about it, because in this experiment it was just fixed at $4, and that can’t be right. It must be fixed at some proportion of the rewards, or something like that; or else we would always exhibit near-perfect exponential discounting for large amounts of money, which is more expensive to test (quite directly), but still seems rather unlikely.

Why is this important? This post is getting long, so I’ll save it for future posts, but in short, the ways that we value future costs and benefits, both as we actually do, and as we ought to, have far-reaching implications for everything from inflation to saving to environmental sustainability.