Present bias
The tendency to give extra weight to what happens now compared with any later time, so a plan made for next month is dropped when next month arrives. Saving starts on Monday, and on Monday the start moves to the following week.
What drives it
Favouring the present gets urgent wants met and makes the day bearable. For identification it explains the gap between what someone plans for their future self and what they do, and why people pay for arrangements that limit their own later choices.
How it shows
Work
Promising to raise the pension contribution after the next pay rise, leaving the tax return until the night before, taking the cash payout over the larger deferred bonus.
Relationships
Agreeing a savings goal with a partner and breaking it within the month, buy now pay later on small things, promises about next month’s spending that are repeated every month.
Self
Notice how sure you are about what you will do next month, and how that compares with what you did this month when it was next month.
What tells it apart
Delay of gratification: Delay of gratification is the capacity to wait for a larger later reward. Present bias is the pattern where patience for distant choices collapses as the moment arrives, so the same person can plan well and still not follow through.
Procrastination: Procrastination is delaying tasks against one’s own intention, often to avoid bad feelings about the task. Present bias is a broader weighting of now over later that covers spending and pleasure as well as tasks.
Scarcity and the bandwidth tax: Scarcity effects should come and go with the shortage. Present bias is more likely when the same now-over-later choices appear in months with plenty of money.
A test
Ask what the person planned to do with last month’s money at the start of last month, then what they did. Repeated gaps between plan and action, with the plan renewed each time, point more likely to present bias.
Questions to carry
- When the saving plan was dropped, what was on offer right then that won?
- What am I promising my future self that I have already promised before?
How strong the research is
moderate. A meta-analysis of 220 estimates (Imai, Rutter and Camerer, 2021) finds people are present-biased on average, with large variation between studies and some selective reporting. In one study choices over money showed very little present bias while choices over effort showed much more (Augenblick, Niederle and Sprenger, 2015), and a field measure of present bias predicted credit card borrowing (Meier and Sprenger, 2010).
Where it comes from
David Laibson, 1997 (Golden eggs and hyperbolic discounting, Quarterly Journal of Economics), formalising earlier work on time-inconsistent choice