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  • Saransh Sharma

Present Bias - Definitions, Causes, Risks, Advantages & Debiasing

Updated: Feb 20, 2020



 

DEFINITION & HISTORY

Present bias is defined as the tendency to want things now rather than later, as the desired result in the future is perceived as less valuable than one in the present (O’Donoghue & Rabin, 1999). This tendency has been known through the ages. For instance, the ancient Chinese philosopher Confucius noted that ‘Cunning words confound the mind; petty impatience confounds great projects.’

Economists have traditionally represented this tendency in terms of discounting. E.g. We may prefer receiving $100 today over $200 in a year. In this case, we are discounting the delayed reward of $200 at 50% annually by valuing it as much as $100 in the present. The most widely accepted model for time discounting, known as hyperbolic discounting, was proposed by the American psychologist George Ainslie in the 1970s (Ainslie, 1975). This model was able to explain a critical experimental observation, known as preference reversal, which can be seen in the following experiment - participants are given a choice to receive $100 immediately or $120 in a month. In this case, most people are likely to pick the sooner payoff of $100 and not wait an additional month for $20. But now consider a choice to receive $100 in a year or $120 in a year and a month. Pause and consider which option you’ll pick in this case. As we see with most participants, your preference is likely to switch to the larger later reward of $120 in this case, even though you still need to wait for an additional month for $20. Hyperbolic discounting explains this preference reversal by proposing that impatience decreases as the delay for the sooner payoff increases (Prelec, 2004).


COGNITIVE CAUSES

Cognitive causes are the psychological mechanisms that explain the bias. It is likely that no one of the multiple explanations can explain every instance of the bias, and each explanation is valid in some cases and invalid in others.

Our perception of time is not perfect and has many errors. To observe your own time perception errors, start a timer, don’t look at it and stop it when you think a minute has passed. Now you can compare a minute in your mental time to actual time. Your estimate of a minute is likely to be slightly or maybe highly off the 1 minute mark on the timer. Now, as time intervals get longer, such as a month or a year, our mental estimation gets more erroneous. Such time perception errors may lead to phenomenon such as preference reversal that we discussed in the previous section (Kim & Zauberman, 2009).

Temporal construal theory suggests that options can be described in terms of core and peripheral features. For example, the core feature while buying a car may be the mileage for a daily use car or ruggedness for an SUV, while the peripheral features might be the numerous comfort, aesthetic or entertainment features. People are more focused on core features when deciding for distant future, while they may be swayed by peripheral features in the present and immediate future. According to researchers, how long one has to wait to receive a payoff may be a secondary, peripheral feature, compared with the actual magnitude of the payoff itself (Liberman & Trope, 2003). Therefore, duration of delay only matters in the short-term and with longer durations we are more patient which explains preference reversal.

Some researchers suggest that preference reversal can be explained in terms the visceral drives associated with certain goods and experiences. When hungry we are impulsive about food, when caffeine deprived we crave coffee, and so on. These visceral drive states lead to impulsiveness and impatience (Loewenstein, 1996). In cases that do not involve appetite or emotion, such as monetary payoffs, the visceral state may be either by habit, curiosity or self-initiated through rationalization of its value and need (Ainslie, 2012).


BIOLOGICAL CAUSES

How much we value a reward is determined in ventral striatum, medial prefrontal cortex and posterior cingulate cortex. Activity in these brain regions increases as the amount of a reward increases and decreases as the delay to a reward increases (Cai, Kim & Lee, 2011). So we are hardwired to undervalue delayed rewards. We need to override this hardwiring to choose rewards in the future. Regions associated with cognitive control and planned action, such as the dorsolateral prefrontal cortex and parietal cortex, are associated with preference for the delayed rewards (McClure et al., 2004). During adolescence, impulsiveness starts to decline with age and this decline is associated with changes in activation in the ventromedial prefrontal cortex which is involved in decision making and emotional regulation (de Water et al., 2017).


DECISION ADVANTAGES

For the bias to be passed down genetically or culturally to us from our ancestors, it must be beneficial in certain conditions.

Only consequences in the present or immediate future can be totally certain whereas future consequences are uncertain by their very nature. For instance, a promised reward may, due to unforeseen circumstances, materialize later or turn out to be smaller than expected, or may never materialize. This would’ve been especially true for hunter-gatherer societies where rewards like food had to be acquired regularly for immediate consumption, and anything left for future could be stolen or go bad. Therefore, rewards in future are considered risky and undervalued compared to immediate rewards (Epper et al., 2011).


DECISION RISKS

Awareness of one’s own present bias can actually lead to worse decisions. If a person knows they’re going to be impulsive in the future, they may reason that they might as well be impulsive now (O’Donoghue & Rabin, 1999).

Procrastination is a result of impulsiveness and impatience where we obtain instant gratification by pushing a stressful or effortful task to the future.

A variety of studies have found that drug-dependent individuals and gamblers are more impatient than an average individual, suggesting that extreme present bias and need for instant gratification is a fundamental cause of addictive behavior (Reynolds, 2006).

Present bias also leads to people not saving enough, as needs and desires of the present loom larger compared to potential needs and contingencies in the future.

Our response to problems with delayed negative consequences suffers due to present bias. Overconsumption is an example of such a problem - we may consume our resources and exhaust them e.g. fossil fuels, or we may overconsume food leading to health problems. Global response to climate change is another example of delayed consequences being overlooked in the present.


DE-BIASING STRATEGIES

Firstly, a delayed reward can be made more attractive by framing it to be emotionally salient and evocative, and providing a richer context to make the reward feel certain and tangible. Also, attention should be drawn to the costs or undesirable aspects of immediate reward (Scholten et al., 2019). E.g. to beat procrastination, positive experiences associated with completing the task like relief, pride or satisfaction should be highlighted, along with the undesirable aspects of the immediately rewarding alternative.

Next, make the future easier to imagine by building empathy with the future self and drawing attention away from the delay (Scholten et al., 2019). E.g. to save more for retirement, visualize life after retirement and anticipate the problems you may face post retirement, while ignoring the time left till retirement.

Self control is the key to counter impatience and impulsiveness. Self control improves with repetition i.e. in situations where people have to repeatedly make similar immediate vs. future decisions (Bisin & Hyndman, 2019). With repetition, people may firstly, learn the patterns of their present bias from previous cases and secondly, perceive a current choice as a test case or an example that predicts their own future behavior and therefore may be more inclined to practice self-control (Ainslie, 2012). E.g. Imagine a person who wants to quit smoking, and is visited by a time traveler who tells him that he will successfully quit smoking the next day for the rest of his life. This information would give an excuse to the man to smoke as much as he likes that day. But if the time traveler tells him that he’ll never be able to quit and will continue smoking the rest of his life, then he’ll give up any hope and continue smoking. Only if future smoking behavior is in doubt does self-control in the present seem worth the effort because the person sees current smoking choice as test case for future smoking choices.

Precommitment is the act of taking steps in the present to limit our own options in the future because we anticipate bad choices in the future due to impulsiveness. E.g. saving in fixed deposits which cannot be broken until a certain duration or locking away food so you can’t over-eat later. The Nobel Prize winning behavioral economist Richard thaler explains this as two-selves - a doer who acts in the present and is impulsive, and a planner who plans for future and is self-aware. The planner is aware of the impulsiveness of the doer and plans to avoid bad decisions that doer might make (Thaler & Shefrin, 1981).


 

REFERENCES

O'Donoghue, T., & Rabin, M. (1999). Doing it now or later. American economic review, 89(1), 103-124.

Ainslie, G. (1975). Specious reward: a behavioral theory of impulsiveness and impulse control. Psychological bulletin, 82(4), 463.

Prelec, D. (2004). Decreasing impatience: a criterion for Non‐stationary time preference and “hyperbolic” discounting. Scandinavian Journal of Economics, 106(3), 511-532.

Kim, B. K., & Zauberman, G. (2009). Perception of anticipatory time in temporal discounting. Journal of Neuroscience, Psychology, and Economics, 2(2), 91.

Liberman, N., & Trope, Y. (2003). Temporal construal. Psychological Review, 110(3), 403-421.

Loewenstein, G. (1996). Out of control: Visceral influences on behavior. Organizational behavior and human decision processes, 65(3), 272-292.

Cai, X., Kim, S., & Lee, D. (2011). Heterogeneous coding of temporally discounted values in the dorsal and ventral striatum during intertemporal choice. Neuron, 69(1), 170-182.

McClure, S. M., Laibson, D. I., Loewenstein, G., & Cohen, J. D. (2004). Separate neural systems value immediate and delayed monetary rewards. Science, 306(5695), 503-507.

de Water, E., Mies, G. W., Figner, B., Yoncheva, Y., van den Bos, W., Castellanos, F. X. & Scheres, A. (2017). Neural mechanisms of individual differences in temporal discounting of monetary and primary rewards in adolescents. NeuroImage, 153, 198-210.

Epper, T., Fehr-Duda, H., & Bruhin, A. (2011). Viewing the future through a warped lens: Why uncertainty generates hyperbolic discounting. Journal of risk and uncertainty, 43(3), 169-203.

Reynolds, B. (2006). A review of delay-discounting research with humans: relations to drug use and gambling. Behavioural pharmacology, 17(8), 651-667.

Scholten, H., Scheres, A., de Water, E., Graf, U., Granic, I., & Luijten, M. (2019). Behavioral trainings and manipulations to reduce delay discounting: A systematic review. Psychonomic bulletin & review, 26(6), 1803-1849.

Bisin, A., & Hyndman, K. (2019). Present-bias, procrastination and deadlines in a field experiment. Games and Economic Behavior.

Ainslie, G. (2012). Pure hyperbolic discount curves predict “eyes open” self-control. Theory and Decision, 73(1), 3-34.

Thaler, R. H., & Shefrin, H. M. (1981). An economic theory of self-control. Journal of political Economy, 89(2), 392-406.

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