Environmental Choices and Hyperbolic Discounting: An Experimental Analysis

Abstract

Environmental goods such as carbon abatement or green space development often generate benefit streams that may not occur until far into the future. How individual consumers value such amenities, therefore, depends critically on the discount rate. The usual assumption is that agents discount future values using constant, exponential rate, but there is some evidence from the lab suggesting that discount functions are more likely quasi-hyperbolic. We compare estimates of subjects' rate of intertemporal time preference for financial rewards and environmental goods using multiple price-list and a new matrix multiple price list approaches. Our objective is to determine if discount functions for environmental and monetary goods differ, and to estimate the structure of discounting in both contexts. We find that financial discount functions are not hyperbolic, but those for environmental goods are. Discount rates for environmental goods are generally lower than for financial rewards, but are still above zero. Consumers, therefore, value long-lived environmental goods differently than financial goods.

The Value of Clean Air: Comparing Discounting of Delayed Air Quality and Money Across Magnitudes

“…This hypothesis was tested across longer delays (i.e., 75 years) than typically used in delay discounting research (e.g., 25 years). We extended the longest delay typically used, as increases or decreases in emissions resulting from decisions or policies that are enacted currently will affect air quality well into the future, and beyond 25 years (i.e., Richards & Green, 2015). …”

“…For example, by decreasing delay discounting of air quality and engaging in more future-oriented decision-making, individuals may be more likely to engage in behaviors producing fewer emissions (e.g., riding a bike instead of driving to work) and policy makers may also be more likely to support initiatives that reduce pollution now. Reducing pollution immediately will be critical to produce both immediate and prospective air quality improvements—as carbon abatement and emissions reduction programs frequently produce some benefits that may not occur until far in the future (Richards & Green, 2015). Substantial reductions in emissions will be required to decrease the extensive morbidity resulting from poor air quality such as ischemic heart disease, stroke, lung cancer, and premature death (WHO, 2014, 2016).…”

Does Power Increase Self-Control? Episodic Priming May Not Provide the Answer

“…Regarding the nature of the discounted reward, an improvement in air quality for 21 days may seem relatively intangible (and maybe irrelevant) in comparison to receiving (hypothetical) monetary rewards for oneself. However, previous studies showed that temporal discounting occurs when environmental rewards are in question (e.g., air and water quality, Guyse, Keller, & Eppel, 2002;nuclear and hazardous wastes, Moser, Stauffacher, Smieszek, Seidl, Krütli, & Scholz, 2013; improvements in green space and stormwater control as well as reducing greenhouse gasses, Richards & Green, 2015). Furthermore, we did not find an effect of social power on monetary temporal discounting either 2 (see supplementary material available at osf.io/ j67ep).…”

Physical activity and time preference

“…Zhang and Rashad (2008) also find a link between time preference and BMI, especially for males, using data from the Behavioral Risk Factor Surveillance System. Richards and Hamilton (2012) also show a positive relationship between discount rates and both drinking and obesity.…”

“…They also suggest educational programs to influence individuals' time horizons. Richards and Hamilton (2012) also suggest it might be better to focus anti-obesity policies on informational programs geared to educating individuals about the tradeoffs between short-term gratification and long-term benefits, rather than by taxing certain types of foods. These recommendations tie into our call for more research into understanding the determinants of individual discount rates.…”