Income shock increases delay discounting independently of emotion
How to distribute resource consumption over time is a critical optimization problem. If an agent were to consume all available resources, they would be left with insufficient resources in the future. Inversely, if an agent were to save all their resources for later, they might not live long enough to consume them. The first error is common due to “temporal discounting” - the tendency to value immediate rewards over equivalent future rewards. A major research goal is to identify the factors that influence the temporal discounting rate, so that policy makers could develop interventions to correct for imbalance. It has been shown that a negative change in life circumstances, such as loss of income, is associated with an increase in temporal discounting. Interestingly, negative affect is also associated with increased temporal discounting. Here, we test whether both negative income shock and negative affect lead to greater temporal discounting, and whether they do so independently. We tested 1,145 individuals as the market was crashing in late March 2020 and unemployment rising due to the COVID-19 crisis and then retested 200 individuals as the market was recovering in June 2020. We found that income shock was strongly related to an increase in delay discounting using cross-sectional and longitudinal data. Importantly, this relationship was independent of the negative impact on affect. These findings suggest that the link between income change and delay discounting is a direct result of liquidity constraints, not of changes in affect. This independence may be adaptive, as affect is a noisy reflection of environmental constraints, which may introduce noise to the decision problem leading to suboptimal choice.