RUNNINGHEADTemporalDiscounting.docVIP

RUNNING HEAD: Temporal Discounting Temporal Discounting of Environmental Outcomes: Effects of Valence Outweigh Domain Differences David J. Hardisty and Elke U. Weber Columbia University KEYWORDS: Temporal Discounting, Intertemporal Choice, Environment, Health Abstract In two studies, participants (N=183) made choices between hypothetical financial, environmental, and health gains and losses that took effect either immediately or with a 1-year delay. In all three domains, choices indicated that gains were discounted more than losses. While there were no significant differences between discounting of monetary and environmental outcomes, health gains were discounted more and health losses were discounted less than gains or losses in other domains. Correlations between implicit discount rates for these different choices suggest that discount rates are influenced more by the valence of outcomes (gains vs. losses) than by domain (money, environment, or health). Overall, results indicate that when controlling as many factors as possible, at short delays, environmental outcomes are discounted in a similar way to financial outcomes. Temporal Discounting of Environmental Outcomes: Effects of Valence Outweigh Domain Differences Understanding the factors that affect the discounting of future outcomes is critical for individual and policy decisions involving long time horizons. At the individual level, prudent pension investment choices are often inhibited by temporal myopia (Thaler Benartzi, 2004). At a policy level, leading economists assert that the biggest uncertainty of all in the economics of climate change is the uncertainty about which interest rate to use for discounting (Weitzman, 2007). While much of this debate has evolved around the philosophical and ethical issues that might dictate what discount rate(s) should be used to make cost-benefit calculations for different courses of action in such policy contexts, behavioral research on the discount r