Discount Rates

In one of my classes yesterday, we were discussing the general topic of bounded will-power: the conflict between the affective self that wants to eat ice cream and the deliberative self that wants to exercise so it will be healthier in the future. This topic brings up an interesting normative question.

The conventional understanding is that the deliberative self is right and the affective self is wrong. For example, if you ask someone if she wants to save more money than she currently is saving, most people will say yes. That’s the deliberative self talking, thinking about the need to have income in retirement. But in practice, even after they say that, people don’t increase their saving, because the deliberative self isn’t strong enough. So, the policy wonks say, we should create devices to strengthen the deliberative self to increase its chances of prevailing against the affective self.

But how do we know that the deliberative self is right and the affective self is wrong? The deliberative self may be more risk-averse, but does that make it right? And what does “right” mean, anyway? Maybe if we led our lives entirely according to the affective self we would be happier than if we led them according to the deliberative self. We would eat more ice cream now, be poorer later, and figure it out then.

There’s a day-long conference on the Dodd-Frank Act at my school tomorrow. I really should go: I might learn something, I would meet people, it would be good for my career, etc. And I was planning to go. But yesterday I decided that I didn’t want to sit in a room all day and listen to economists and lawyers talk about the financial crisis. Sure, it might be healthy, but it didn’t seem all that enjoyable. So I’m skipping it. That is, my deliberative self did a calculation and decided I would be better off letting the affective self win this one. Put another way, I decided that my deliberative self uses too low a discount rate, which is the opposite of the conventional wisdom: most people think the affective self uses too high a discount rate.

In other words, we’ve reached the point where deliberative types like me are using happiness research to try to figure out how to become happier by shutting down the deliberative self.