I understand that many people with a regular monthly salary take very-high-interest paycheck loans, every month, over long periods of time.
I.e., they are not just desperate a few times and showing a strong time preference. Rather, every month for decades, they timeshift their salary back two weeks with paycheck loans. They should scrimp a little for a few months, and just shift consumption forward two weeks, but over decades, they never do that.
So, looking at this in the steady state, they can’t even be said to have a high discount rate.
And what about people who buy a lottery ticket or gamble repeatedly; and when they win, re-gamble their winnings.
They could easily be said to have a high discount rate, and it’s consistent. They give a finite value (sum of an infinite series of discounted amounts) to the infinite amount of money they lose to get more two weeks early, and it’s always less than the added value of getting it two weeks early this month. I think many of them don’t actually discount that much, they just judge their expenses more by urgency than by importance.
I understand that many people with a regular monthly salary take very-high-interest paycheck loans, every month, over long periods of time.
I.e., they are not just desperate a few times and showing a strong time preference. Rather, every month for decades, they timeshift their salary back two weeks with paycheck loans. They should scrimp a little for a few months, and just shift consumption forward two weeks, but over decades, they never do that.
So, looking at this in the steady state, they can’t even be said to have a high discount rate.
And what about people who buy a lottery ticket or gamble repeatedly; and when they win, re-gamble their winnings.
They could easily be said to have a high discount rate, and it’s consistent. They give a finite value (sum of an infinite series of discounted amounts) to the infinite amount of money they lose to get more two weeks early, and it’s always less than the added value of getting it two weeks early this month. I think many of them don’t actually discount that much, they just judge their expenses more by urgency than by importance.