Time inconsistency

What it means

Time inconsistency is the situation in which a person's preferences at one point in time conflict with their preferences at another, so that plans made in advance are not carried out when the time comes to act. It arises whenever the discount applied to delay is not constant — most notably under hyperbolic or present-biased discounting, where the near term is discounted more steeply than the far term. The result is a predictable preference reversal: from a distance one prefers the patient, virtuous option, but as the tempting alternative draws near it comes to dominate, so the earlier self and the later self effectively disagree. This conflict is what makes self-control a genuine intertemporal problem rather than a mere failure of resolve, and it motivates commitment devices through which a present, far-sighted self deliberately constrains the options of a future, tempted self. The economist's distinction between 'sophisticated' agents who foresee the reversal and 'naive' ones who do not is central to how people cope with it. It matters because it underlies addiction, procrastination, and under-saving, and explains why binding one's future self can be rational.