Often it can be extremely simple to make the choice whether to have goodies now or later. When the amount of gratification is equal across time periods, the choice is usually easy, writes Peter A. Ubel in Free Market Madness: Why human nature is at odds with economics – and why it matters ( www.landmarkonthenet.com ). He explains through an example, thus: “If your spouse offers to have, um, relations with you either tonight or tomorrow night, then anyone in the mood for sex right now would choose tonight. Who knows: by tomorrow, your spouse might have lost interest.”

But in many domains of life, the choice between now and later is a real trade-off, between having a little bit now or significantly more later, Ubel adds. Situations that he mentions include the options before a student (IM'ing friends vs studying), a dieter (short-term joy of eating a cake vs long-term benefits of shedding weight), and a young couple (splurging on an expensive trip vs investing in a retirement fund).

Discount at work

What would you decide if you have just won a small lottery and must choose between receiving a $10,000 prize now or waiting for one year and receiving $11,000? To those who think this involves a rational decision, the short answer is no, says Ubel. At work are ‘discount rates,' he notes. In this kind of situation, though it is rational to value the present more than the future, there is no ‘correct' discount rate that everyone would agree upon.

“One college kid decides to become a heart surgeon, well aware that he won't achieve this goal for more than a decade. His roommate opts, instead, for the more rapid gratification of a consulting job right after graduation.”

Reasons Ubel that some people are much more focused on short-term gains than others, and they base their decisions on higher discount rates than other people. “But is it ever irrational to have a high discount rate – to care too little about the future?”

As you progress in the chapter, a tougher problem comes your way: Choosing between receiving $100 in one year or $110 in one year and one day. If you are like most people, you will choose the larger sum of money, figuring that a 10 per cent increase is a nice reward for waiting just one day, the author suggests.

Multiple selves

How inconsistent we are, you may fret. Well, that is because of the multiple selves battling within us all, whose preferences vie for domination in our lives, instructs Ubel, citing the work of Nobel laureate Thomas Schelling. “My long-term self wants to invest in a safe retirement account, while my short-term self wants to throw money at a high-risk start-up company. One of my selves wants to wake up at 5 am, and the other wants to hit the snooze button…”

Acknowledging that people deserve a large amount of freedom, Ubel reminds that they also deserve to live well. And when freedom and well-being collide, he insists that we should be open-minded enough to recognise that carefully calibrated restrictions on our freedom are a small price to pay for a healthier, happier populace.

A book that can push you closer to making the apt choices.

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