My (admittedly sketchy) understanding of the argument for exponential discounting is that any other function leaves you vulnerable to a money pump, IOW the only rational way for a utility maximizer to behave is to have that discount function. Is there a counter-argument?
Do things become any clearer if you figure that some of what looks like time-discounting is actually risk-aversion with regard to future uncertainty? Ice cream now or more ice cream tomorrow? Well tomorrow I might have a stomach bug and I know I don’t now, so I’ll take it now. In this case, changing the discounting as information becomes available makes perfect sense.
Yes, there’s actually a literature on how exponential discounting combined with uncertainty can look like hyperbolic discounting. There are apparently two lines of thought on this:
There is less hyperbolic discounting than it seems. What has been observed as “irrational” hyperbolic discounting is actually just rational decision making using exponential discounting when faced with uncertainty. See Can We Really Observe Hyperbolic Discounting?
Evolution has baked hyperbolic discounting into us because it actually approximates optimal decision making in “typical” situations. See Uncertainty and Hyperbolic Discounting.
I guess you’re referring to this post by Eliezer? If so, see the comment I just made there.
Do things become any clearer if you figure that some of what looks like time-discounting is actually risk-aversion with regard to future uncertainty? Ice cream now or more ice cream tomorrow? Well tomorrow I might have a stomach bug and I know I don’t now, so I’ll take it now. In this case, changing the discounting as information becomes available makes perfect sense.
Yes, there’s actually a literature on how exponential discounting combined with uncertainty can look like hyperbolic discounting. There are apparently two lines of thought on this:
There is less hyperbolic discounting than it seems. What has been observed as “irrational” hyperbolic discounting is actually just rational decision making using exponential discounting when faced with uncertainty. See Can We Really Observe Hyperbolic Discounting?
Evolution has baked hyperbolic discounting into us because it actually approximates optimal decision making in “typical” situations. See Uncertainty and Hyperbolic Discounting.