Tradeoffs among economic, social, and environmental goals, with varying delay
David Hardisty, David Krantz, Elke Weber, Howard Kunreuther, Poonam Arora
This project explores how people make tradeoffs between immediate and future costs and benefits. Often, future consequences are “discounted.” This is particularly important for environmental consequences, which may unfold over thousands of years. Our own intertemporal choice has focused on future losses (rather than gains), because many environmental issues involve the risk of future losses. Our research has also focused on time horizons in social dilemmas, interdisciplinary approaches, and policy applications.
- An integrative approach to intertemporal choice (combing the insights and methods of Anthropology, Psychology, and Economics) yields effective methods for environmental policy to encourage sustainable, energy efficient behavior.
- While a future default leads to lower discount rates for gains, has the opposite effect on losses. As predicted by Query Theory, this is explained by the order in which people consider the options, depending on the default. Reversing thought order eliminates this effect.
- People discount large gains less than small gains, but discount large losses more than small losses. In other words, people may be willing to take care of a small loss immediately, but they are likely to postpone a large loss. With gains, people want small gains immediately but are relatively more willing to wait for large ones.
- Chinese people discount financial and environmental gains more steeply than Americans do.
- People are risk averse for uncertainty in intertemporal contexts, for both gains and losses. In other words, increased future uncertainty leads to a preference for immediate outcomes, while increased immediate uncertainty leads to a preference for future outcomes.
- People want immediate gains more strongly than they want to postpone losses, because dread of losses is more common and more powerful than pleasurable anticipation of gains.
- People are more likely to invest in protection against uncertain future losses in interdependent situations if they must precommit their protection plans.
- One of the publications resulting from this project (see “About time: an integrative approach”) gives specific policy recommendations for encouraging sustainable long term behavior, based on behavioral research
- The results of this project were taught to MBA students at Stanford University in a course called Decisions About the Future. This course was created and taught by Dave Hardisty.
- The results have been published in a number of scientific journals (listed below). Furthermore, all the results and manuscripts are freely available to the public (green open access).
- The results have been presented at a number of academic conferences, including the Society for Judgment and Decision Making, Behavioral Decision Research in Management, the Association for Consumer Research, and the American Marketing Association Summer Educators Conference.
CRED2 Award (2010-2015): Funding was provided under the cooperative agreement NSF SES-0951516 awarded to the Center for Research on Environmental Decisions; CRED1 Award (2005-2010): Funding was also provided under the cooperative agreement NSF SES-0345840 awarded to the Center for Research on Environmental Decisions.