Valuing the Future, Discounting in Random Environments: A Review

We address the process of discounting in random environments which allows to value the far future in economic terms. We review several approaches to the problem regarding different well-established stochastic market dynamics in the continuous-time context and include the Feynman-Kac approach. We also review the relation between bond pricing theory and discount and introduce the market price of risk and the risk neutral measures from an intuitive point of view devoid of excessive formalism. We provide the discount for each economic model and discuss their key results. We finally present a summary of our previous empirical studies on several countries of the long-run discount problem.

It’s now or never! Future discounting in the application of the online privacy calculus

Many people engage in extensive use of networked digital systems despite concerns over their privacy, a phenomenon called the “online privacy paradox.” Although privacy calculus research has argued that the benefits of usage usually outweigh the expected privacy losses, it is unclear why people come to this conclusion. We argue that users treat decisions about digital media use as intertemporal choices; that is, they mentally shift into the future the potential damage connected with risk-taking while being convinced of the immediate enjoyment of the benefits of technology use. An online survey conducted among German users for three use cases—e-commerce, online political participation, and self-tracking—indicated that users expect benefits to materialize earlier than associated costs and that the earlier the benefits occur, the higher the amount of benefits users expect. The expected time of the occurrence of benefits and risks explains digital media use in addition to cost–benefit calculations, suggesting a time-discounting bias.

Perceived food palatability, blood glucose level and future discounting: Lack of evidence for blood glucose level’s impact on reward discounting

Some previous studies have shown that an increase in blood glucose level makes people more future oriented, however, results are inconsistent, other studies failing to replicate this effect. Here, we tested whether psychological factors (in this instance, perception of food pleasantness after consumption of more palatable or less palatable meal) can play a moderating role. We hypothesized that consuming more palatable food (perceived as rewarding) should cause blood glucose levels to affect future discounting, but that this should not occur for the consumption of less palatable food. A high-powered, independent groups experiment (N = 149, power β = .90) showed that, subsequent to performing an initial discounting task, the two groups consuming a meal (a control group consumed no meal) displayed a significant increase in blood glucose levels 10 minutes after meal consumption and just before repeating the discounting task. However, the increased blood glucose levels did not cause changes in delay discounting in either experimental group.

Jump-Diffusion Models for Valuing the Future: Discounting under Extreme Situations

We develop the process of discounting when underlying rates follow a jump-diffusion process, that is, when, in addition to diffusive behavior, rates suffer a series of finite discontinuities located at random Poissonian times. Jump amplitudes are also random and governed by an arbitrary density. Such a model may describe the economic evolution, specially when extreme situations occur (pandemics, global wars, etc.). When, between jumps, the dynamical evolution is governed by an Ornstein–Uhlenbeck diffusion process, we obtain exact and explicit expressions for the discount function and the long-run discount rate and show that the presence of discontinuities may drastically reduce the discount rate, a fact that has significant consequences for environmental planning. We also discuss as a specific example the case when rates are described by the continuous time random walk.

Jump-Diffusion Models for Valuing the Future: Discounting Under Extreme Situations

We develop the process of discounting when underlying rates follow a jump-diffusion process, that is, when, in addition of diffusive behavior, rates suffer a series of finite discontinuities located at random Poissonian times. Jump amplitudes are also random and governed by an arbitrary density. Such a model may describe the economic evolution specially when extreme situations occur (pandemics, global wars, etc.). When between jumps the dynamical evolution is governed by an Ornstein-Uhlenbeck diffusion process, we obtain exact and explicit expressions for the discount function and the long-run discount rate and show that the presence of discontinuities may drastically reduce the discount rate, a fact that has significant consequences for environmental planning. We also discuss as a specific example the case when rates are described by the continous time random walk.

Why It Matters What Might Have Been

Genuinely counterfactual thought concerns situations that typically both are, and are known, not to exist. This raises a puzzle about the point of counterfactual thinking, and in particular in connection with the counterfactual conditional. It is unclear why a conditional whose truth turns on what happens in imaginary situations should occupy the central role that counterfactuals do have in our serious intellectual practices, in particular in connection with decision-making. This paper sets out the ways in which thinking about the non- actual constrain deliberation about the actual, and locates the value of these constraints in their effect on (a) risk-aversion and (b) future discounting.

Discounting The Future

This chapter asks whether it is rationally permissible to assign less weight to the values of my other selves in line with the degree of psychological connectedness between us. This draws on Derek Parfit’s (1984, ‘Personal Identity’, in Philosophical Review, 80) rational reconstruction of temporal discounting. The chapter considers an argument by Arif Ahmed (2018, ‘Rationality and Future Discounting’, in Topoi, February) that such weights result in temporal discounting of a variety that makes the individual vulnerable to exploitation. It agrees with Ahmed, but argues that such exploitation does not render the individual irrational.

The Sign Effect in Past and Future Discounting

We compared the extent to which people discounted positive and negative events in the future and in the past. We found that the tendency to discount gains more than losses (i.e., the sign effect) emerged more strongly for future than for past outcomes. We present evidence from six studies (total N = 1,077) that the effect of tense on discounting is tied to differences in the contemplation emotion of these events, which we assessed by measuring participants’ emotions while they either anticipated or remembered the event. We ruled out loss aversion, uncertainty, utility curvature, thought frequency, and connection to the future and past self as explanations for this phenomenon, and we discuss why people experience a distinct mixture of emotions when contemplating upcoming events.