Talk to a young adult who is planning to skip college so they can get a job and start working today. Try to explain to them that they could eventually make a lot more money if they graduated from college in four years with a marketable degree. Quite often they will be unmoved because $100 today is simply worth more to them than $400 four years from now. Psychologists call this relative judgment of worth “delay discounting.”
Many of us think that delay discounting affects young people more than older adults, perhaps because greater maturity and wisdom enables older adults to more clearly see the benefits of waiting until our earning power has increased. There are actually several different theories to explain why delay discounting lessens as we age, but some of those theories predict that delay discounting isn’t linear with age but rather “U-shaped” where delay discounting decreases with age up to a point and then increases again as we continue to grow older. Such a U-shaped discounting effect may make sense to us if we consider that a delay of ten years, say, may loom larger to a seventy year old than to a thirty year old.
Lu and colleagues decided to test the predictions of various theories of delay discounting by performing a meta-analysis of 105 relevant research studies. They found that those theories that predict a U-shaped discounting effect were indeed correct, but that the reasons for the U-shape are more complicated than just how many years one has left.
Continue reading “How Much More Is $100 Today Worth To You Than $200 Next Year? It Depends!”
Dr Martin Fracker 