Present bias

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Present bias is the tendency to settle for a smaller present reward rather than wait for a larger future reward, in a trade-off situation. [1] [2] It describes the trend of overvaluing immediate rewards, while putting less worth in long-term consequences. [3] The present bias can be used as a measure for self-control, which is a trait related to the prediction of secure life outcomes. [4]

Contents

In the field of behavioral economics, present bias is related to hyperbolic discounting, which differ in time consistency. [3]

History

Even though the term of present bias was not introduced until the 1950s, the core idea of immediate gratification was already addressed in Ancient Greece. [5] A historical record of a display of concern regarding procrastination is known from the Greek poet Hesiod, who wrote:

"Do not put your work off till to-morrow and the day after; for a sluggish worker does not fill his barn, nor one who puts off his work: industry makes work go well, but a man who puts off work is always at hand-grips with ruin." [6]

Present bias and economics

The term of present bias was coined in the second half of the 20th century. In the 1930s economic research started investigating time preferences. The findings led to the model of exponential discounting, thus time consistent discounting. However, later research led to the conclusion that time preferences were indeed not consistent, but inconsistent. In other words, people were found to prefer immediate advantages to future advantages in that their discount over a short period of time falls rapidly, while falling less the more the rewards are in the future. Therefore, people are biased towards the present. As a result, Phelps and Pollak introduced the quasi-hyperbolic model in 1968. [7] In economics, present bias is therefore a model of discounting. [5]

Only when the preference for the present is time inconsistent do we call it biased. [8] In recent years, the concept of present bias has also found its way into research concerning law and criminal justice. [8]

Brain areas

Decisions concerning the choice between an immediate or a future reward are mediated by two separate systems, one dealing with impulsive decisions and the other with self-control. [9]

Brain areas that are associated with emotion- and reward-processing, are much rather activated by the availability of immediate rewards than by future rewards, even if the future rewards are larger. Hence individuals tend to make decisions in favor of immediate outcomes rather than future outcomes. [9]

The brain areas involved in present-biased decisions can be dissociated into three main groups. [9] The medial prefrontal cortex and the medial orbitofrontal cortex respond to both the presence and the gain of an immediate reward, whereas the ventral striatum is sensitive to the availability and gain of a reward. The pregenual anterior cingulate cortex on the other hand is only responsive to the presence of an immediate reward. [9] All these areas are associated with activity in response to an immediate reward. [9]

McClure's dual-system model claims that these brain areas are impulsively triggered by immediate benefits and not so much by future rewards. Future rewards do not activate emotion- and reward-processing areas as much, because people tend to downgrade future benefits in respect of available immediate benefits. [9]

The medial prefrontal cortex, pregenual anterior cingulate cortex and ventral striatum show different activity patterns, depending on whether the choices lead to an immediate reward or a future reward for oneself. [9] This is not the case if these decisions affect another individual, which implies that more patience and less self-focus is involved in self-irrelevant decision-making. People who consider their present and future self as more alike also exhibit more patience when choosing a reward. [9]

Activity in the ventral striatum, medial prefrontal cortex, orbitofrontal cortex, pregenual anterior cingulate cortex and posterior cingulate cortex is associated with an immediate reward merely being available for oneself. All these areas, which are also part of the rostral limbic system, build a network connected to the expectation and the gain of immediate gratification. [9]

The dorsal anterior cingulate cortex, posterior cingulate cortex and precuneus get activated more if the rewards is immediate and less when the reward is available in the future, regardless of whether it affects the individual itself or another person. [9]

Ventral striatum

The ventral striatum gets activated both when an individual personally decides for an immediate reward, as well as when an individual watches someone else making that decision for them. It is responsive to both the likelihood of getting an anticipated reward as well as its size. It also plays a role in evaluating after a choice has been made. [9]

Medial prefrontal cortex

The medial prefrontal cortex is responsible for self-related attention and judgement, for example comparing the self to someone else. These evaluations take place even if the individual has not made the choice themselves. The ventral part of the medial prefrontal cortex, just like the ventral striatum, evaluates the outcome also after the decision was made. [9]

Pregenual anterior cingulate cortex

The pregenual anterior cingulate cortex is a structure located close to the corpus callosum, which plays a role in positive emotions and responds to success reward when gambling. [9]

Ventral posterior cingulate cortex

This brain area is playing a role in reflection on the self and emotions. [9]

Delayed gratification

Delayed gratification is the ability to not give in to immediate rewards and instead strive for the more beneficial future rewards. [10]

Stanford Marshmallow Experiment

The first Marshmallow Experiment was conducted at Stanford University by Walter Mischel and Ebbe B. Ebbesen in 1970. [11] It led to a series of Marshmallow Experiments, which all tested children's ability to delay gratification. The children were offered an immediate reward and were told that if they manage to not eat the reward right away, but instead waited for a certain period of time (approximately 15 minutes), they would get another treat. Age correlated positively with the capability of delayed gratification. There has also been a correlation found between ability to delay gratification as a child and the child's success in follow-up studies several years later.

Political elections

Present bias is also reflected in the choice of whether an individual participates in political elections. Political elections are usually characterized by an immediate effort, for example making a political decision and casting the vote on election day, whereas the benefits of voting, such as favored political changes, often only occur later in the future. [12] Patience is therefore a relevant factor that influences peoples’ decision whether to take part in elections. [12] Individuals who exhibit more patience with future political changes, also show a greater willingness to take part in political elections. Whereas others, who focus more on the efforts to be paid, are less likely to take part in elections. [12]

Brain areas

The ability to perform delayed gratification increases as the lateral prefrontal cortex and the medial prefrontal cortex mature. Particularly the left dorsolateral prefrontal cortex shows increased activity during delayed gratification. [10] The thickness of these cortical areas as well as the volume of the left caudate nucleus is also linked to a better ability in delayed gratification and suppressing impulsivity. The frontal cortex involvement in self-regulation and self-control also play an important role. [10]

Procrastination

Present-biased preferences often result in procrastination. [13]

Procrastination mostly occurs when actions are followed by immediate costs. However, when actions are instead followed by immediate rewards, people tend to perform their tasks faster in order to get the reward. [13]

The findings of a study in which students had to set deadlines for completing certain tasks for themselves, suggested that an interaction of present-bias as well as personal characteristics, e.g. overconfidence, may appear to be "procrastination". [14] However, internal self-control and sophistication regarding the tasks may reduce present bias, whereas it has the opposite effect for naïve people. [14] [13]

Brain areas

Another study further investigates the common hypothesis that self-regulatory failure results in procrastination. Furthermore, there appears to be a decrease in functional correspondence between the following brain areas: Between VMPC and DLPFC, dACC and caudate and in the right VLPFC. [15] They posited that self-regulatory failure is associated with procrastination, although a body of replicated results would lend more credibility to this hypothesis. [15]

Health

Present bias has an impact on people's individual health care decision-making. It affects a range of health-related behaviors, for example precaution with potential illnesses, such as breast cancer, living an unhealthy life style, like smoking, drinking alcohol and drug use and showing risky behavior, such as drunk driving. [2]

Present bias often occurs when the negative consequences of a certain behavior are believed to be in distant future. It is characterized by short-term impatience. [2] This impatience with the future benefits to occur minimizes the motivation for people to take unpleasant actions for their health, like maintaining a diet, refraining from a cigarette or regularly visiting a professional for check-ups. [2]

Present biased decision-making often underlies the notion that a certain health care behavior induces costs first, while benefits occur only quite some time later. [2] People are often more focused on the short-term benefits than on long-term consequences. For example, drunk-drivers exhibit less long-term concern than non-drunk drivers. [2]

The lacking adherence to health care can also be explained by the naïve thinking about one's own present bias. [2] People overestimate that they will take care of their behaviour's consequences in the future, which is often not the case. They tend to underestimate their own self-control and the effects of their present behavior on their future well-being and therefore postpone taking action before it is urgent. [2] Many people procrastinate because they underestimate how their future selves are being affected by the present bias. [2]

Present bias can explain failure to adhere effective health care guidelines, such as mammography. People tend to forget that precaution with their own health can maximize their lifetime and minimize their life time medical spending. [2] A lot of people who are already diagnosed with an illness underestimate the importance of following health care guidelines, even though they are beneficial for their own health. Mostly, increasing age and nearing death eventually leads individuals to focus more on their own health. [2]

Overcoming the present bias could lead to earlier detection of illnesses, such as breast cancer, to start treatment in time. These individual decisions not to take care early negatively affects the health care systems, whose costs could be minimized by a more precaution of their clients. [2]

Visceral states

The educator and economist George Loewenstein described how strongly visceral states (e.g. hunger, thirst, strong emotions, sexual desire, mood or physical pain) can influence decision-making in ways that are not in one's long-term interest. According to Loewenstein, visceral factors have a direct hedonic impact and they influence how much one desires different rewards and actions. [16] When visceral factors influence one highly, it can lead to self-destructive behavior such as overeating. Visceral factors lead one to focus on the present more than on some time in the future when making decisions that are associated with the visceral factor. In Loewenstein's opinion, visceral states have the most enormous impact on the following behaviors: drug addiction, sexual behavior, motivation and effort, and self-control. [16]

Those factors are known as "hot states", because temporary emotions can have an influential effect on our behavior. Therefore, there are "cooling off" periods for many important purchases. Other factors such as age, gender, cultural background, education and self-control also play a role in making discounting decisions – but those can be dealt with more easily than with visceral states. [3]

Wealth distribution

Economical models use present bias, also referred to as dynamic inconsistency, to explain distribution of wealth. If everybody would be present-biased wealth distribution would be unaffected. As this is only possible in an ideal economy, wealth inequality spurts from time-consistent individuals benefiting from the irrational monetary decisions present-biased economic rivals make. [17] Indeed, present bias in economics is often linked to lack of self-control when making monetary decisions. It is associated with high desires to spend money and failure to commit to a saving plan. [4]

A present-biased society is represented by individuals reaching an earlier peak in their mean wealth and trend to lose accumulated wealth as they reach retirement. Loss of wealth can be attributed to tendency to bend under the temptation to over-consume and under-save. Such irrational behavioral biases lead to lower average wealth and shortened planning horizons. [17] Present-biased people fail to complete a consumption saving plan are more likely consistently re-optimize factors influencing their wealth accumulation. An association between deciding to obtain less education, lower lifetime earnings, and lower retirement consumption was observed in present-biased individuals. [17]

Tourism

Present bias plays a role in tourism concerning travel costs and impulsivity of tourist's decision-making. Impulsivity is reasoned to be triggered by the escape of daily routines and a feeling of the moment. Hence present bias would specially apply while traveling. Although reference prices frame expenses, present bias which is influenced by the prospect theory, that grades the value of gains, and the attachment effect, tourists tend to overspend. Individual differences such as risk aversiveness play into overspending caused by the effect of present bias. Group decisions and a prior commitment to not overspend can reduce the bias and inhibit impulsivity. [18]

See also

Related Research Articles

<span class="mw-page-title-main">Procrastination</span> Avoidance of doing a task that needs to be accomplished by a certain deadline

Procrastination is the act of unnecessarily and voluntarily delaying or postponing something despite knowing that there will be negative consequences for doing so. It is a common human experience involving delays in everyday chores or even putting off important tasks such as attending an appointment, submitting a job report or academic assignment, or broaching a stressful issue with a partner. It is often perceived as a negative trait due to its hindering effect on one's productivity, associated with depression, low self-esteem, guilt, and feelings of inadequacy, However, it can also be considered a wise response to certain demands that could present risky or negative outcomes or require waiting for new information to arrive.

The mesolimbic pathway, sometimes referred to as the reward pathway, is a dopaminergic pathway in the brain. The pathway connects the ventral tegmental area in the midbrain to the ventral striatum of the basal ganglia in the forebrain. The ventral striatum includes the nucleus accumbens and the olfactory tubercle.

<span class="mw-page-title-main">Cingulate cortex</span> Part of the brain within the cerebral cortex

The cingulate cortex is a part of the brain situated in the medial aspect of the cerebral cortex. The cingulate cortex includes the entire cingulate gyrus, which lies immediately above the corpus callosum, and the continuation of this in the cingulate sulcus. The cingulate cortex is usually considered part of the limbic lobe.

Neuroeconomics is an interdisciplinary field that seeks to explain human decision-making, the ability to process multiple alternatives and to follow through on a plan of action. It studies how economic behavior can shape our understanding of the brain, and how neuroscientific discoveries can guide models of economics.

<span class="mw-page-title-main">Dopaminergic pathways</span> Projection neurons in the brain that synthesize and release dopamine

Dopaminergic pathways in the human brain are involved in both physiological and behavioral processes including movement, cognition, executive functions, reward, motivation, and neuroendocrine control. Each pathway is a set of projection neurons, consisting of individual dopaminergic neurons.

In economics, hyperbolic discounting is a time-inconsistent model of delay discounting. It is one of the cornerstones of behavioral economics and its brain-basis is actively being studied by neuroeconomics researchers.

<span class="mw-page-title-main">Prefrontal cortex</span> Part of the brain responsible for personality, decision-making, and social behavior

In mammalian brain anatomy, the prefrontal cortex (PFC) covers the front part of the frontal lobe of the cerebral cortex. The PFC contains the Brodmann areas BA8, BA9, BA10, BA11, BA12, BA13, BA14, BA24, BA25, BA32, BA44, BA45, BA46, and BA47.

<span class="mw-page-title-main">Gratification</span> Pleasurable emotional reaction of happiness in response to a fulfillment of a desire or goal

Gratification is the pleasurable emotional reaction of happiness in response to a fulfillment of a desire or goal. It is also identified as a response stemming from the fulfillment of social needs such as affiliation, socializing, social approval, and mutual recognition.

Delayed gratification, or deferred gratification, is the resistance to the temptation of an immediate pleasure in the hope of obtaining a valuable and long-lasting reward in the long-term. In other words, delayed gratification describes the process that the subject undergoes when the subject resists the temptation of an immediate reward in preference for a later reward that is more favorable. Generally, delayed gratification is associated with resisting a smaller but more immediate reward in order to receive a larger or more enduring reward later. A growing body of literature has linked the ability to delay gratification to a host of other positive outcomes, including academic success, physical health, psychological health, and social competence.

<span class="mw-page-title-main">Orbitofrontal cortex</span> Region of the prefrontal cortex of the brain

The orbitofrontal cortex (OFC) is a prefrontal cortex region in the frontal lobes of the brain which is involved in the cognitive process of decision-making. In non-human primates it consists of the association cortex areas Brodmann area 11, 12 and 13; in humans it consists of Brodmann area 10, 11 and 47.

Frontostriatal circuits are neural pathways that connect frontal lobe regions with the basal ganglia (striatum) that mediate motor, cognitive, and behavioural functions within the brain. They receive inputs from dopaminergic, serotonergic, noradrenergic, and cholinergic cell groups that modulate information processing. Frontostriatal circuits are part of the executive functions. Executive functions include the following: selection and perception of important information, manipulation of information in working memory, planning and organization, behavioral control, adaptation to changes, and decision making. These circuits are involved in neurodegenerative disorders such as Alzheimer's disease and Parkinson's disease as well as neuropsychiatric disorders including schizophrenia, depression, obsessive compulsive disorder (OCD), and in neurodevelopmental disorder such as attention-deficit hyperactivity disorder (ADHD).

<span class="mw-page-title-main">Reward system</span> Group of neural structures responsible for motivation and desire

The reward system is a group of neural structures responsible for incentive salience, associative learning, and positively-valenced emotions, particularly ones involving pleasure as a core component. Reward is the attractive and motivational property of a stimulus that induces appetitive behavior, also known as approach behavior, and consummatory behavior. A rewarding stimulus has been described as "any stimulus, object, event, activity, or situation that has the potential to make us approach and consume it is by definition a reward". In operant conditioning, rewarding stimuli function as positive reinforcers; however, the converse statement also holds true: positive reinforcers are rewarding.

<span class="mw-page-title-main">Ventromedial prefrontal cortex</span> Body part

The ventromedial prefrontal cortex (vmPFC) is a part of the prefrontal cortex in the mammalian brain. The ventral medial prefrontal is located in the frontal lobe at the bottom of the cerebral hemispheres and is implicated in the processing of risk and fear, as it is critical in the regulation of amygdala activity in humans. It also plays a role in the inhibition of emotional responses, and in the process of decision-making and self-control. It is also involved in the cognitive evaluation of morality.

<span class="mw-page-title-main">Impulsivity</span> Tendency to act on a whim without considering consequences

In psychology, impulsivity is a tendency to act on a whim, displaying behavior characterized by little or no forethought, reflection, or consideration of the consequences. Impulsive actions are typically "poorly conceived, prematurely expressed, unduly risky, or inappropriate to the situation that often result in undesirable consequences," which imperil long-term goals and strategies for success. Impulsivity can be classified as a multifactorial construct. A functional variety of impulsivity has also been suggested, which involves action without much forethought in appropriate situations that can and does result in desirable consequences. "When such actions have positive outcomes, they tend not to be seen as signs of impulsivity, but as indicators of boldness, quickness, spontaneity, courageousness, or unconventionality." Thus, the construct of impulsivity includes at least two independent components: first, acting without an appropriate amount of deliberation, which may or may not be functional; and second, choosing short-term gains over long-term ones.

The biology of obsessive–compulsive disorder (OCD) refers biologically based theories about the mechanism of OCD. Cognitive models generally fall into the category of executive dysfunction or modulatory control. Neuroanatomically, functional and structural neuroimaging studies implicate the prefrontal cortex (PFC), basal ganglia (BG), insula, and posterior cingulate cortex (PCC). Genetic and neurochemical studies implicate glutamate and monoamine neurotransmitters, especially serotonin and dopamine.

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<span class="mw-page-title-main">Inhibitory control</span> Cognitive process

Inhibitory control, also known as response inhibition, is a cognitive process – and, more specifically, an executive function – that permits an individual to inhibit their impulses and natural, habitual, or dominant behavioral responses to stimuli in order to select a more appropriate behavior that is consistent with completing their goals. Self-control is an important aspect of inhibitory control. For example, successfully suppressing the natural behavioral response to eat cake when one is craving it while dieting requires the use of inhibitory control.

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The dorsal nexus is an area within the dorsal medial prefrontal cortex that serves as an intersection point for multiple brain networks. Research suggests it plays a role in the maintenance and manipulation of information, as well as supporting the control of cognitive functions such as behavior, memory, and conflict resolution. Abnormally increased connectivity between these networks through the dorsal nexus has been associated with certain types of depression. The activity generated by this abnormally high level of connectivity during a depressive state can be identified through magnetic resonance imaging (MRI) and positron emission tomography (PET).

The dual systems model, also known as the maturational imbalance model, is a theory arising from developmental cognitive neuroscience which posits that increased risk-taking during adolescence is a result of a combination of heightened reward sensitivity and immature impulse control. In other words, the appreciation for the benefits arising from the success of an endeavor is heightened, but the appreciation of the risks of failure lags behind.

References

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  17. 1 2 3 "Research". Tristan J. Nighswander. Retrieved 2019-05-14.
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