Behavioural economics
Hyperbolic Discounting
Definition
Hyperbolic discounting is a pattern of time preference in which people apply disproportionately high discount rates to short delays and lower rates to long delays, producing preferences that reverse over time — choosing a smaller-sooner reward today yet preferring a larger-later one when both are pushed into the future. Unlike the exponential discounting assumed in standard economics, it matches observed human behaviour and explains procrastination, under-saving, and short-termism.
References
definition and behavioural evidence
Overview
What it means
Sustainability problems are structurally hyperbolic: the costs of action are immediate, the benefits deferred. Present bias helps explain why societies underinvest in climate mitigation, building retrofits, and prevention even when long-run returns are large — and why commitment devices, defaults, and binding targets (which lock in the future self's preferred choice) are effective policy responses.
It also informs debates over the social discount rate used to value future climate damages.
How it is used
The concept appears in behavioural public policy, climate-economics debates over discounting, and the design of incentives and defaults.
Why it matters
It names the psychological engine of short-termism — sustainability's most persistent adversary.