The Evolution of Time Preference with Aggregate Uncertainty
Arthur J. Robson, Larry Samuelson
American Economic Review · 2009 · Volume 99 · Issue 5
Abstract
We examine the evolutionary foundations of intertemporal preferences. When all the risk affecting survival and reproduction is idiosyncratic, evolution selects for agents who maximize the discounted sum of expected utility, discounting at the sum of the population growth rate and the mortality rate. Aggregate uncertainty concerning survival rates leads to discount rates that exceed the sum of population growth rate and death rate, and can push agents away from exponential discounting. (JEL D11, D81, D91)
Keywords
Consumer Economics: Theory, Criteria for Decision-Making under Risk and Uncertainty, Intertemporal Consumer Choice, Life Cycle Models and Saving
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