Intertemporal choice: Choosing for the future

Perhaps the majority of our choices are intertemporal ones, in which the options under consideration differ in their timing as well as (perhaps) a host of other things. Often these demand we choose between ‘smaller sooner’ (SS) and ‘larger later’ (LL) options, in which receiving more or better outcomes comes at a cost in timing. We make such a choice when deciding between immediately going on a short trip or saving our holiday allowance towards a longer but later getaway; or when choosing between getting the current version of a smartphone today or the next version once it is released. More broadly, you might choose to spend your money on consumption today, or invest the money to let yourself consume more later (since your investment will earn you interest). Choices might not even be between similar things: you might deliberate between buying a new TV now or saving towards a new car in a few months’ time or having a more comfortable retirement. This choice is still intertemporal, though the options differ in many ways apart from their timing and magnitude. Discussion of intertemporal choice has a long history. In around 450 bc, Plato provided a surprisingly modern account in his dialogue Protagoras. He suggested (through his spokesperson Socrates) that outcomes further away in time are diminished in perception just as are objects farther away in space. Plato considered this a bias, asserting that the correct way to choose between was to ignore outcome delay and focus on outcome size, just as we should ignore distance when estimating the heights of distant objects: ‘Do not objects of the same size appear larger to your sight when near, and smaller when at a distance? … And the same holds of thickness and number; also sounds, which are in themselves equal, are greater when near, and lesser when at a distance … Now suppose doing well to consist in doing or choosing the greater, and in not doing or avoiding the less, what would be the saving principal of human life? Would it be the art of measuring or the power of appearance?’. (Plato, translated 1956, Section 356d) Plato's normative account is based on the view that it is rational to take the larger of two outcomes, regardless of when they occur.