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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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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 814577000000000087.

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Date of creation: 15 Jan 2009
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Handle: RePEc:cla:levarc:814577000000000087
Contact details of provider: Web page: http://www.dklevine.com/

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  1. Partha Dasgupta & Eric Maskin, 2005. "Uncertainty and Hyperbolic Discounting," American Economic Review, American Economic Association, vol. 95(4), pages 1290-1299, September.
  2. William D. Nordhaus, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 686-702, September.
  3. Bettinger, Eric & Slonim, Robert, 2007. "Patience among children," Journal of Public Economics, Elsevier, vol. 91(1-2), pages 343-363, February.
  4. 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.
  5. Martin L. Weitzman, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 703-724, September.
  6. Hansson, Ingemar & Stuart, Charles, 1990. "Malthusian Selection of Preferences," American Economic Review, American Economic Association, vol. 80(3), pages 529-44, June.
  7. Al-Najjar, Nabil Ibraheem, 1995. "Decomposition and Characterization of Risk with a Continuum of Random Variables," Econometrica, Econometric Society, vol. 63(5), pages 1195-1224, September.
  8. 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.
  9. Robert H. Litzenberger & Cherukuri U. Rao, 1971. "Estimates of the Marginal Rate of Time Preference and Average Risk Aversion of Investors in Electric Utility Shares: 1960-66," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 265-277, Spring.
  10. Larry Samuelson & Arthur J. Robson, 2007. "The Evolution of Intertemporal Preferences," American Economic Review, American Economic Association, vol. 97(2), pages 496-500, May.
  11. Steffen Andersen & Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2008. "Eliciting Risk and Time Preferences," Econometrica, Econometric Society, vol. 76(3), pages 583-618, 05.
  12. Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, vol. 8(3), pages 201-207.
  13. 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.
  14. Michael Gurven & Hillard Kaplan, 2007. "Longevity Among Hunter- Gatherers: A Cross-Cultural Examination," Population and Development Review, The Population Council, Inc., vol. 33(2), pages 321-365.
  15. 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.
  16. Rogers, Alan R, 1994. "Evolution of Time Preference by Natural Selection," American Economic Review, American Economic Association, vol. 84(3), pages 460-81, June.
  17. Curry, Philip A., 2001. "Decision Making under Uncertainty and the Evolution of Interdependent Preferences," Journal of Economic Theory, Elsevier, vol. 98(2), pages 357-369, June.
  18. Warneryd, Karl, 2007. "Sexual reproduction and time-inconsistent preferences," Economics Letters, Elsevier, vol. 95(1), pages 14-16, April.
  19. David M. Bishai, 2004. "Does time preference change with age?," Journal of Population Economics, Springer, vol. 17(4), pages 583-602, December.
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