Re: Market failure to sufficently weigh the future?

Date: Sat Oct 28 2000 - 12:13:33 MDT

Robin writes:
> Now imagine that you could break causality and give $1 to yourself ten years
> ago to spend then. How much would you be willing to pay today, and not spend
> today, for this privilege? If you would be willing to pay $2.60 today, your
> preferences are time-consistent. If you would be willing to pay less than
> $2.60, you fit the assumption made by Caplin & Leahy. If you would be willing
> to pay more than $2.60, your preferences are time-inconsistent in the opposite
> direction.

If you would not pay $2.60 to give your ten year ago self $1, isn't this
equivalent to saying that you regret that you didn't save $1 ten years
ago so that you could have $2.60 today?

And if this is the case for most people, doesn't it imply in effect that
most of us regret most of the consumption we have done in the past?

I don't think we do. Hence I think that people's reluctance to "give
themselves $1 in the past" is more due to the difficulty of analyzing
such an impossibly hypothetical scenario.

> It is fundamentally not an issue of learning. It is a conflict of preferences.

I think that constantly regretting most past actions, without changing
our current behavior, can fairly be called a failure of learning.


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