Peter Sozou: London School of Economics

Discounting occurs when an immediate benefit is systematically valued more highly than a delayed benefit. This talk is concerned with understanding both the causes and effects of discounting from an evolutionary point of view, as reflected in physiological and behavioural strategies of organisms.
I’ll start by looking at the evolutionary theory of ageing. Extrinsic mortality (together with population growth where applicable) means that immediate reproduction makes a greater contribution to fitness than an equivalent amount of potential reproduction after a delay. This leads to the principle of the diminishing importance of the future. Ageing may be the outcome of a trade-off between short-term fertility and long-term maintenance. I will (briefly) present some new results showing conditions which determine whether an ageing or a non-ageing strategy will be favoured under such a trade-off.
The effects of ageing – declining fertility and increasing mortality – give an organism additional reason to prefer immediate over delayed reproduction in its behavioural time-preference choices. That is, an animal should discount the future not only because of external factors (extrinsic mortality, population growth), but also because of its own evolutionary response to those factors in the form of ageing. By this analysis, ageing is both a consequence and a cause of discounting.
Using this framework, a series of models is developed, making different assumptions about external hazards and biological ageing. With realistic ageing assumptions – increasing mortality and an accelerating rate of fertility decline – the time-preference rate increases in old age. Under an uncertain external hazard rate, young adults should also have relatively high time-preference rates because their (Bayesian) estimate of the external hazard is high. The middle-aged may therefore be the most long-term in their outlook.
http://www.bec.ucla.edu/papers/Sozou_9-29-03.pdf