The intertemporal allocation of consumption, time preference, and life-history strategies
Journal of Bioeconomics, 13:2, 79–95 (2011)
This paper studies the intertemporal allocation of consumption and time preference in both biological and economic framework. By incorporating intergenerational transfers to examine human life-history strategies, this study demonstrates that time discounting and mortality mirror the age-variation in the value of survival, which in turn depends on future reproduction and productive surplus. Consistent with empirical findings, the results suggest that our biologically endowed rate of time preference is positive, and is lowest in early adulthood, but increases thereafter. The results also offers a biological explanation for intertemporal loss aversion, indicating that time preference is higher when exchange transactions involve a reduction in current consumption than when they involve an increase in current consumption. In a broader perspective, this paper looks into the biological foundation of preferences and motivation. Establishing the foundation of preferences with biological models and incorporating the results into economic models enrich the understanding of our decision-making mechanism and behavior.