How to lower your discount rate

Mark Broski, a loyal MR reader, asks:

If you woke up one morning and said to yourself, "You know what my problem is? My damn discount rate is too high."  What would you do, if anything, to lower it?

Maybe Mark should lower his discount rate later, not now, thus solving the problem right away. 

Alternatively, you can view lack of patience and lack of concern for his future self as conceptually distinct problems.  To cure lack of patience, develop routines for interrupting episodes of irresponsible present-oriented behavior.  Ring up each purchase at a separate store register, or write a journal entry before each cookie you eat.

When it comes to lack of concern for your future self, whoop de doo.  If you are going to ignore anyone else’s interest, your future self is a good place to start.  This is only a problem if you attach special status to your future self, in which case maybe you are not ignoring its interests, at least not relative to your other moral omissions in life. 

If you need to be more altruistic more generally, precommit to developing personal ties to those you wish to help.  As for your future self, start adopting some old people’s habits now, to build the tie between the 2007 you and the 2027 you.

Do you all have any other advice for Mark?

Comments

The probelm most people have is that they discount the event they wish to avoid(getting fat, failing the exam) at a low rate ,i.e they fear it's consequences if you ask them. The problem is tommorow's procastination is discounted heavily. Any solution will have to essentially attack these hump-in-the middle type of yield curve problem for discount rates for most people.

My suggestion:
1)break whatever objective you have into shorter weekly type goals, but this is much harder than it sounds and if could have done this you wouldn't ahve ended up in this mess.
2)get yourself in good company-people who are trying to accomplish the smae goals as you are. This is again hard to implement advice.
3) Lastly, my favourite. Stop thinking of high disc rate as a problem. High disc. rates are one of reasons why the US is fountainhead of consumerism and entrepreuship. There are some goals for which getting your disc rate low is useful(having grandchildren, avoiding a bruising extra-marital affair) while for others like saving up to buy a car to impress the neighbours it just ins't worth it. Life is too short to ingnore the present for the future.

Maybe use your impatience and impulsivity to
commit yourself to a state of affairs that
requires a lower discount rate.

Knock someone up, seriously. And if that doesn't work, adopt a baby.

I have noticed in myself that high fixed costs can create real problems. So, for instance, doing chores around the house. Because of my high discount rate, the immediate costs I must incur (getting off my butt and mentally preparing for the work seems itself like a fixed cost) keep me from making the first step. When I finally do get in chore-mode, and incur that fixed cost, then I can knock it all out, because the additional chores have more reasonable marginal costs. My struggle then is to get over the first chore.

Intriguing idea Ross. Sounds like a good plot to a
movie too!

A group here used data in Andrew Hacker's NYRB 11 Oct 07 article "They'd much rather be rich." to calculate the rate of return to getting a BA or advanced degree. We did an IRR estimate to get about 7%. Then we imposed a 0%, 3%, and 10% discount rate on opportunity costs, tuition and earnings differentials. As expected with a high discount rate, further study does not pay. It just confirmed earlier MR findings about differences in earnings but also differences in personal discount rates that govern actual behavior. At least one student in the class was awestruck at the results.
Discount rates matter a lot, and rates differ between people. I just decided NOT to eat the cookie on my desk. bill mcgreevey

Yeah, if you're gonna live like you only have a year or two to go, live like J.J. Cale sang about in "It's Easy":

"If cash is your problem, you might regret
Use that old plastic, slide two third in debt
It's easy
Easy you see
If tomorrow never comes, everything is free"

However, I like living like I'm going to die any minute and like I'm going to live forever .... simulataneously (From Zorba the Greek by Nikos Kazantzakis):

"Look, one day I had gone to a little village. An old grandfather of ninety was busy planting an almond tree. 'What, grandad!' I exclaimed. 'Planting an almond tree?' And he, bent as he was, turned around and said: 'My son, I carry on as if I should never die.' I replied: 'And I carry on as if I was going to die any minute.' Which of us was right, boss?"

The trick is trying to do both simultaneously...

discount rates are determined by brain activity?

http://mywiki.jp/neuroeconomics/taiki/

I would advice gifting urself with a dollar everytime who do something good for the future, like if you are a smoker, and you start smoking only 1 pack instead of 2, coz u r worried about ur future health, or consumption in future, gift urself some additional money, or reward urself with something. This works for me.

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