Innuendo of home rule. Tourists, you know, from the isle of Man.
The key way that economists model behavior is by assuming that people have preferences about things. Often, but not always, these preferences are expressed in the form of a utility function. But there are some things that could happen that could seriously mess with this model. Most frightening are “framing effects”. This is when what you want depends on how it’s presented to you. […]
One of the most important tools we have to describe people’s behavior over time is the notion of time preference, also called “discounting”. This means that we assume that people care about the future less than they care about the present. Makes sense, right? But while certain kinds of discounting cause people’s choices to be inconsistent, other kinds would cause people to make inconsistent decisions. For example, some people might choose not to study hard in college, even though they realize that someday they’ll wake up and say “Man, if I could go back in time I would have studied more in college!”. This kind of thing is called hyperbolic discounting. It would make it a lot harder to model human behavior. But the models would still be possible to make.
But what would be really bad news is if people’s time preferences switched depending on framing effects! If that happened, then it would be very, very hard to model individual decision-making over time.
Unfortunately, that is exactly what experimental economist David Eil of George Mason University has found in a new experiment.
