Motivation and emotion/Book/2024/Intertemporal choice

Intertemporal choice:
What are intertemporal choices and how can they be effectively negotiated?

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Overview

Scenario 1 - Sophie's dilemma Sophie is trying to decide whether to start a new exercise routine. She knows that exercising regularly will lead to better health, more energy, and a longer life. However, sticking to the routine requires her to wake up early and endure some initial discomfort. Every morning, Sophie feels tempted to hit the snooze button and stay in bed, enjoying the immediate comfort. But she also feels a sense of guilt, knowing that skipping her workout undermines her long-term health goals. As Sophie weighs her options, her emotions, motivation, and cognitive biases all come into play. She experiences the pull of immediate gratification (staying in bed) versus the delayed rewards (better health). Sophie starts thinking about strategies to make it easier to choose long-term benefits, such as setting a goal, finding a workout buddy, or reminding herself of positive outcomes of exercising. This chapter aims gives the reader an in-depth understanding of intertemporal choice, the cognitive processes behind it and its relevance to our lives. Focus questions What is Intertemporal Choice? What mental processes are involved when making an Intertemporal choice? What role does emotion have? What role does motivation have? What are the applications and implications for Intertemporal choices? Introduction to Intertemporal Choice Figure 1. Making a choice can often be difficult, especially when that choice involves your future self. Definition and Relevance of Intertemporal choice Intertemporal choice can be defined as the decisions that involve trade-offs between costs and benefits which occur at different times (Frederick et al., 2002). It involves the process in which individuals evaluate and prioritise rewards or consequences that could take place in the present or in the future. These choices can vary from the small and ordinary, such as deciding how much to eat for lunch, to the life-changing decisions regarding one's education or health (Berns et al., 2007). The concept of Intertemporal choice is pivotal in understanding behaviours that are related to one's health choices, financial choices and emotional wellbeing (Frederick et al., 2002). Historical overview Intertemporal choice has its roots in economics with its early foundations going back to the early 19th century where Scottish economist and philisopher John Rae explored the notion of how individuals value future benefits. Rae found that indvidual's prefer immediate consumption over future gains. It wasn't until the late 20th century where the psychological processes behind Intertemporal choices were examined. More recently, the field of "neuroeconomics" has emerged which is the combination of neuroscience, psychology and economics. This field involves the study of the brain to gain insight into the processes behind Intertemporal choice. For example, through the use of neuroimaging techniques, McClure (2004) found that different parts of the brain are involved in short-term vs long-term decision making. The history of Intertemporal choice is relatively short, but has seen large growth and has much room to grow. Cognitive Processes in Intertemporal Choice The nature of Intertemporal choice requires an individual to be able to weigh the immediate versus delayed rewards. The cognitive processes that underly a decision like this are complex and involve certain mechanisms of the mind that can influence how people perceive, evaluate and ultimately make a decision that has the potential to bring present or future benefit or consequence. Time Discounting and Future Perception A principal cognitive process that is involved in Intertemporal choice is time discounting. Time discounting refers to the concept that when individuals are required to make an Intertemporal choice they place more value towards a rewards that is avaliable immediately, compared to a reward in the future (Zauberman et al., 2009). Research has shown that people possess a heavy bias towards the present (Zauberman et al., 2009). Research has also shown that people tend to place priority on immediate gains over future benefits due to how they perceive future events as less valuable (Ainslie, 1975). This tendency is referred to as hyperbolic discounting, which is a type of non-linear discounting where the longer the delay in receiving a reward, the more the value decreases in the mind of the individual (Ainslie, 1975). In contrast to this type of discounting, exponential discounting is where the decrease in value of future rewards occurs at a constant rate as opposed to it dependent of how long the delay. A substantial contributor to this type of bias towards discounting is the subjective perception of time. Zauberman et al. (2009)'s research on subjective time perception in the context of intertemporal choices suggests that people perceive time intervals unevenly, that is that future and its events seem abstract and distant, making an individual less salient in decision-making (Zauberman et al., 2009). This leads an individual to prefer the immediate reward, which can lead to impulsive decision-making (Zauberman et al., 2009). Dual-System Theory The dual-system theory proposes that decision making is governed by two interacting and competing cognitive systems. These two systems being an automatic system 1 and a deliberative system 2 (Diederich & Zhao, 2019). Dual-system theory, has played an important role in understanding why we make certain decisions, and is crucial to understanding the construct of intertemporal choice. The automatic system 1 has been described as "quick to activate but behaves impulsively" (Diederich & Zhao, 2019, p. 1). This system is associated with the limbic system and regions in the brain where emotional processing takes place (McClure et al., 2004). The deliberative system 2 is described as "slower to activate but makes decisions in a rational and controlled manner." (Diederich & Zhao, 2019, p. 1). This system involves higher-order cognitive processes such as reasoning, future planning and self-control which is linked to the prefrontal cortex (Diederich & Zhao, 2019; McClure et al., 2004). As one would expect, this system assists individuals in evaluating the long-term consequences of decisions, thus favouring delayed rewards (Loewenstein et al., 2015). The interplay between these two systems and their different characteristics are crucial in how we make intertemporal choices. Self-Control and Cognitive Control Self-control is an essential part of the cognitive processes involved in intertemporal choice, especially when a decision involves the delaying of gratification. Self-control is vital to optimal decision making, and when done effectively, an individual is able to inhibit the desire for immediate rewards in favour of larger, delayed benefits, for which the prefrontal cortex plays a central role (Hare et al., 2009). Self-control can also be enhanced through certain cognitive strategies such as the "explicit-zero" framing intervention or focusing more attention on the future rewards, making them feel more real and immediate (Radu et al., 2011). However, it is vital to mention the individual differences in self-control. Some individuals may find it easier to delay gratification, while others struggle. Personality traits also play a part in how self-control is exercised, traits such as impulsivity and conscientiousness. Indiviudals high in impulsivity are more likely to favour immediate rewards, while those high conscientiousness tend to prioritise long-term outcomes. The Role of Emotion Emotion also has a role to play in intertemporal choice, with it influencing how individuals weigh immediate versus delayed rewards. Emotion can often be what drives the individual toward immediate gratification, intensifying the attraction towards short-term rewards. The construct of emotion is multidimensional comprised of components such as subjective feelings, physiological response, motor expression, action tendency, and evaluation or appraisal (Lempert et al., 2016). Emotion is complex and the interplay between an individuals cognitive processes, environment and the context in which they find themselves are all major factors in the decision-making process. Immediate Gratification and Emotional Arousal Emotional arousal, such as excitement, desire, or stress have the ability to "directly influence the evaluation of the outcomes" (Lerner et al., 2015, p. 815). For example, when someone is emotionally aroused, they might pay more attention to the immediate gratification of their actions than the long-term effects of their choices. Research has shown that individuals who are in a heightened emotional state are more likely to discount future rewards, and choose the immediate gratification (Lerner et al., 2015). This tendency to choose the immediate gratification in a heightened state of emotional arousal, regardless of whether its positive or negative, has been linked to impulsivity, specifically impulsive decision making (Sohn et al., 2015). Negative Emotions and Impulsive Decision-Making Negative emotions, such as stress or anxiety, also play a significant role in the decision-making process. Stress in particular has been found to have a relationship with impulsivity and impulsive decision-making (Agrawal et al., 2023). Agrawal et al. (2023) found that during the COVID-19 pandemic " stress increases impulsivity and that less stressed and more patient individuals socially distanced more throughout the pandemic." (p. 2695). The naturalistic context of the study provides an interesting and unique perspective towards stress and decision-making. Another study found that acute stress amplified the sex differences in risk-taking when making decisions (Lighthall et al., 2009). In pursuit of gains, men became more risk seeking while woman became more conservative, and risk avoidant (Lighthall et al., 2009). Emotions play a vital role in decision-making and intertemporal choice by making rewards more appealing and difficult to resist. The interaction between automatic system 1 and deliberative system 2 shapes influences wether or not an individual makes impulsive, emotionally driven choices or uses self-control to chase long-term goals. Emotions such as stress or anxiety can influence an individual to make decisions that favour short-term gratification or motivate them towards future-oriented decisions. The Role of Motivation Motivational mechanisms also has a role to play in intertemporal choice. Certain motivations of an individual have the ability to influence them to either prioritise immediate gratification or delayed rewards. Both intrinsic and extrinsic motivational factors influence the way in which individuals make intertemporal choices. These different types of motivational factors affect how individuals perceive and value future rewards, guiding their own decision-making process. Intrinsic Motivation and Future Orientation According to Ryan and Deci (2000) intrinsic motivation can be defined as "the doing of an activity for its inherent satisfactions rather than for some separable consequence." (p. 56). When an individual is intrinsically motivated to engage in a behaviour or make a certain decision, they are driven by the internal positive experience associated with that behaviour or decision (Ryan & Deci, 2000). In regards to intertemporal choice, an individual who is intrinsically motivated is looking to satisfy or align with personal values and goals which influences wether or not they choose the immediate gratification or the delayed reward. An example of this would be when a person's goal is to maintain good health, they are more likely to choose long-term health benefits such as exercise or healthy eating rather than immediate pleasures such as eating unhealthy food. So an individual who possesses strong intrinsic motivation may possess a higher level of resilience to present bias. Their goal is future oriented which encourages them to engage in intertemporal choices that benefit their future selves. Extrinsic Motivation and Immediate Rewards Extrinsic motivations contrasts with intrinsic motivation, in that when an individual engages in an activity it is done in order to attain a "separable outcome" (Ryan & Deci, 2000, p. 60). In other words, an activity is done in order to obtain external rewards or avoid punishment. A person who is extrinsically motivated may favour immediate rewards especially when the reward is tangible. An example of this being, financial incentives or social recognition have the ability to drive a person to make decisions that place priority of short-term gains. Loewenstein et al. (2015) highlighted that when extrinsic motivational factors, such as money, are present individuals are more likely to discount future outcomes and go for the immediate gratification. However, extrinsic motivation can also promote delayed rewards when those future rewards are seen as valuable. An example of this would be an individual saving money for a large purchase or retirement, being driven by extrinsic motivations such as financial security or social status. Applications and Implications Intertemporal choices, which involve decisions that an individual makes where rewards or consequences are distributed over time, possess a broad range of applications across domains, from the small day-to-day decisions to decisions that have the potential to be life-changing. Personal Finance A significant application of intertemporal choice in many peoples lives is in personal finance. The nature of finance involves an individual having to frequently make decisions that require a balancing act between immediate consumption and long-term financial security. An example of this would be an individual deciding wether or not to save money for their retirement in the future or use that money to invest. Zauberman et al. (2009)'s research has shown that people possess a present bias, that is people devalue future rewards in favour of immediate gratification. This provides an explanation as to why some struggle to save money, however, interventions like savings plans which minimise the amount of decisions that need to be made, help people to reduce the temptation of immediate spending. Figure 2. Empowering smokers to envision a healthier smoker enhances their self-control supports successful cessation efforts. Health Behaviour and Self-Control Intertemporal choices also play a role in health-related behaviours such as exercise and smoking cessation. An example of an individual having to make an intertemporal choice is when they have to decide between smoking, indulging in unhealthy foods or committing to the long-term benefits of health and well-being. Smoking cessation programs or weight loss programs often aim to reduce the impulsivity of the individual and enhance their self-control in order to encourage delayed rewards (Petry, 2002). Intertemporal choice has practical applications in areas such as personal finance or health. Understanding the psychological processes behind intertemporal choice allows for more tailored interventions that allow for better long-term outcomes. Conclusion Intertemporal choice refers to the process of making decisions that involve trade-offs between immediate gratification and delayed rewards. Intertemporal choice has been and continues to be a significant field of study amongst psychologists and economists. There are various cognitive processes that influence intertemporal choices and the decision-making process as a whole. The interplay between the automatic system 1 and deliberative system 2 highlights how emotions can lead to impulsive decision making that favour immediate gratification over delayed rewards. Both intrinsic and extrinsic motivational factors also shape an individuals willingness to delay immediate gratification for future gains. Understanding the cognitive processes that are behind intertemporal choices reveal why we choose to make the decision that we make, along with the possible influences that had a role to play. The role of emotional arousal and immediate gratification and negative emotions such as stress and anxiety how it tends to increase the impulsivity of an individual. Intrinsic and extrinsic motivation also plays a crucial role in giving us an understanding of the influences in the decision-making process. Intertemporal choices have far-reaching implications in areas such as personal finance and health behaviour, so getting an understanding of all these cognitive processes that form the decision-making process allows us to create tailored intervention plans and strategies that priortise long-term outcomes. Overall, the study of intertemporal choice not only deepens our understanding of human behaviour but gives insight into some of the practical applications for the improvement of decision-making process. Understanding the complexities of time, emotion and motivation and the effect on our choices, gives us space to develop strategies that foster long-term outcomes for individuals and society. See also Intertemporal choice (Book chapter, 2023) Dual Process Theory (Wikipedia) Time Preference (Wikipedia) References Ainslie, G. (1975). Specious reward: a behavioral theory of impulsiveness and impulse control. 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Journal of Physiological Anthropology, 34(1), 8. https://doi.org/10.1186/s40101-015-0047-5 Zauberman, G., Kim, B. K., Malkoc, S. A., & Bettman, J. R. (2009). Discounting time and time discounting: subjective time perception and intertemporal preferences. Journal of Marketing Research, 46(4), 543–556. https://doi.org/10.1509/jmkr.46.4.543 External links Individual Differences in Intertemporal Choice (Keidel, 2021) Scarcity and Intertemporal Choice (Sharma et al., 2023)