Valuing the Future

Abstract

Normative discounted utility theory specifies that the values of all future outcomes (for example, those related to health and money) should be discounted at a constant rate. Two experiments demonstrated that, contrary to this prescription, decision makers use different discount rates for health-related decisions and money-related decisions. Temporal discountings for health and money were similar in that both demonstrated two biases previously found in monetary decisions: discount rates were inversely related to magnitude of outcome and length of delay. The relatively large discount rates used by the subjects suggest why it is often difficult to implement preventive health measures that improve future health.