Time discounting
Also known as: Delay discounting, Temporal discounting
The further off a reward sits, the less it is worth to us right now.
What it means
Time discounting is the reduction in the present subjective value of an outcome as the delay to receiving it grows. Every intertemporal decision — saving, dieting, studying, investing, taking on debt — depends on how steeply a person discounts the future, and the rate and shape of that discounting predict impulsivity, addiction, and health behavior. The classical economic benchmark is exponential discounting at a constant rate, which keeps preferences consistent over time, but human behavior departs from it: people discount the near future far more steeply than the distant future, a hyperbolic pattern that produces preference reversals. Measured discount rates are also not a single trait; they vary with the size of the reward (smaller rewards are discounted more steeply), the domain, and the framing of the delay. Steep discounting is robustly associated with substance use, obesity, and under-saving, which makes it a practical target for intervention. It matters because almost every consequential life choice trades present costs against future benefits, and the exchange rate the mind uses is systematically biased toward now.
Examples
Most people prefer $50 now to $55 in a year, revealing a discount rate far steeper than any bank would charge.
A smoker weighs a cigarette's pleasure now against lung damage decades away; the distant harm is discounted so heavily it barely registers in the moment.
Shoppers take 'buy now, pay in three months' deals at interest rates they would never accept as a loan, because the payment's delay shrinks its felt cost.
First described in Formalized by Samuelson (1937).
Where this comes up
- More Than Motivation: Understanding Executive Functioning Skills Using Behavioral ScienceIncreasing your Executive Functioning Skills can help create a more balanced and sustainable life.