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The Evolution of Time Preference with Aggregate Uncertainty

  • Arthur J. Robson
  • Larry Samuelson

We examine the evolutionary foundations of intertemporal preferences. When all the risk affecting survival and reproduction is idiosyncratic, evolution selects for agents who maximize the discounted sum of expected utility, discounting at the sum of the population growth rate and the mortality rate. Aggregate uncertainty concerning survival rates leads to discount rates that exceed the sum of population growth rate and death rate, and can push agents away from exponential discounting. (JEL D11, D81, D91)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.99.5.1925
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 99 (2009)
Issue (Month): 5 (December)
Pages: 1925-53

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Handle: RePEc:aea:aecrev:v:99:y:2009:i:5:p:1925-53
Note: DOI: 10.1257/aer.99.5.1925
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  1. Partha Dasgupta & Eric Maskin, 2004. "Uncertainty and Hyperbolic Discounting," Economics Working Papers 0023, Institute for Advanced Study, School of Social Science.
  2. Arthur J. Robson & Balazs Szentes, 2008. "Evolution of Time Preference by Natural Selection: Comment," American Economic Review, American Economic Association, vol. 98(3), pages 1178-88, June.
  3. Robson, Arthur J., 1996. "A Biological Basis for Expected and Non-expected Utility," Journal of Economic Theory, Elsevier, vol. 68(2), pages 397-424, February.
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  11. Warneryd, Karl, 2007. "Sexual reproduction and time-inconsistent preferences," Economics Letters, Elsevier, vol. 95(1), pages 14-16, April.
  12. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
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  16. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
  17. Larry Samuelson & Arthur J. Robson, 2007. "The Evolution of Intertemporal Preferences," American Economic Review, American Economic Association, vol. 97(2), pages 496-500, May.
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