Estimation of agents’ intertemporal choices is a major concern in both economics and philosophy. It enables us to understand how agents envisage the future and make decisions, particularly about investment and savings. The central problem for economists is to determine whether time preference is based on a time-stable or rational system of preferences.

It is generally accepted that there is a preference for the present. Jean de la Fontaine expressed it with the maxim “A bird in the hand is worth at least two in the bush”. Far from being a catchall concept, preference for the present makes it possible to compare satisfactions (or utilities) at different points in an individual’s life. Nevertheless, many economists believe that preference for the present is misguided and reflects an inability to project oneself into the future. Such economists draw on a certain philosophical conception of the “self”, which remains unchanged throughout life.

A review of the existing literature reveals a growing interest in the subject of preference stability. One influential model is that of the impatient agent, proposed by Strotz (1956), in which the individual strongly favours the present over the near future, but behaves reasonably in the longer term.

In this new issue of the Opinion & Débats series, Luc Arrondel (CNRS and Paris School of Economics) and André Masson (CNRS, EHESS and Paris School of Economics) propose an existential conception of time preference. The decision-making horizon is subjective and dynamic, in response to an uncertain environment and the individual’s life trajectory. The two economists base their approach on the Covid–19 pandemic in particular, studies of which show that it did not significantly alter people’s preferences.

Their empirical analysis is based on the PATER household wealth survey, carried out in five waves between 2007 and 2020. The authors used the responses to construct individual preference scores, from which they conclude that time preference is stable overall.

Based on their findings, Luc Arrondel and André Masson provide a number of recommendations for financial and savings management. On the one hand, these considerations argue in favour of flexible savings management, tailored to each individual. On the other, Luc Arrondel and André Masson advocate mandatory mutualisation of the cost of long-term care, since they believe it is unreasonable to expect savers to insure themselves against the greatly diminished “self” that everyone hopes to avoid.

Enjoy your reading!

Jean-Michel Beacco
Delegate General of the Institut Louis Bachelier