Today’s dollar will be worth less tomorrow.
That is the premise on which temporal discounting, a major tool in economic theory, is based on. If we want to compare present and future payoffs, we must account for the fact that we tend to value the same payoff less if it’s in the future.
It’s easy to think about it in terms of inflation: If prices will be higher in the future, the same amount of money wouldn’t buy us as much tomorrow as it could today. So it makes sense that we’d prefer getting the same amount of money today than tomorrow.
And logically, it makes sense that if the monetary payoff is the same today and in the future, we can be no worse off by receiving it today. We can simply wait to spend it until the time is right.
But people are impatient. A lot of us would prefer $50 now rather than $100 next year. Unless you fear hyperinflation or think your average annual portfolio is more promising than Warren Buffet’s, justifying this choice is no easy task. Yet many make it nonetheless.
Similarly, our propensity to discount the future is so great it makes us spend money today rather than save for tomorrow.
Investing our money doesn't just preserve the purchasing power of our money — it increases it. Even if we consider the safest of investments — say, a nine-month CD — our returns would outpace inflation. Instead of investing, however, American consumers throw their money at the next shiny item: They often purchase non-essentials with money they don’t own.
Discounting doesn’t only apply to cash. We college students prefer to go out tonight and study tomorrow. Children prefer one marshmallow now to two 15 minutes later.
When it comes to pleasure, we don’t like to wait.
Many studies have suggested that we might do a lot better individually and collectively if we were only more patient. If we weighed payoffs with logic rather than emotion, we could start thinking of choices as long-term investments. No new dress is worth going under for. No Halloween party is worth failing a midterm for. No fifteen-minute wait is painful enough to make it worth getting one marshmallow instead of two.
The literature on patience is rich — the first studies go back to the 1930s — and online advice on how to achieve it is plentiful. But there hasn’t been much investigation into the legitimacy of temporal discounting. Though no major studies have proven its validity — and the few that did only went so far as arguing that it manifests differently in different people — many accept temporal discounting as fact, as an inescapable influence on our behavior. While it does influence our decisions — both monetary and otherwise — it’s still just a theory. One could even argue that its influence on us stems directly from our blind acceptance of it. And we can use that to our advantage.
I find that, in many areas of my life, temporal discounting does not apply. And it’s not because I’m a patient person — my parents will testify to that. It’s because in some situations, the same reward is better in the future because it is in the future.
For a lot of things, we know this already. Imagine how disappointed you’d be if Christmas were tomorrow. You’d be taken off-guard. You wouldn’t have had any time to savor the magic leading up to the big day. And that’s the best part. If you’re anything like me, every year you remember that there’s nothing particularly special about Christmas Day.
The utility we get from Christmas is immense. Yet most of the value we garner comes earlier in the season. Hearing the first Christmas songs of the season come on the radio. Reserving your Christmas tree. Little joys compounded. What makes Christmas so wonderful is the wait.
While some might argue that counting these “little joys” that come earlier in the season is cheating, I disagree. Even if we put those aside and focus only on Christmas day, our anticipation in the months prior magnifies the utility we get on the day of.
This might explain why the party planner often gets more utility from a surprise party than the birthday boy or girl. It turns out, a lot of us love to plan parties. Or, at the very least, be on the invite list. We love to think about what we’ll wear and what food we’ll bring — all while trying to keep the surprise party a secret. But few of us like to get the other end of the stick. We are relieved to find out about our surprise party a few days early. God forbid our friends actually manage to keep it a secret and catch us off-guard.
This goes for a lot of things in life. Our stress levels rise if we find ourselves on a different path to the one we thought we were on — even if it’s a good path. Think of being asked to go up on the stage for receiving an award during school assembly or bumping into an old teacher at the mall.
We love knowing our destinations in advance. We love looking forward to them.
Succeeding academically, finding true love and building our careers are sweeter because they don’t come to us easily. Fighting for them takes diligence. And waiting for them takes lots and lots of patience.
But that’s not a bad thing. We’d be better off if we changed our mindsets. Instead of giving in to the narrative that we hate having to wait, we should challenge our tendency to discount future rewards. We’ll be waiting for something for most of our lives. It’s in our interest to become better at it.
It’s often true that future rewards are better than present ones. And it’s not because of compound interest. It’s because the wait is the very thing that makes them valuable.
Anna Garziera is a Trinity sophomore. Her pieces typically run on alternate Tuesdays.
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