Irrationality And Intertemporal Choice In Early Neoclassical Thought

Abstract:     
Early neoclassical economists presumed an element of irrationality in the context of intertemporal decision making. W.S. Jevons, Irving Fisher, Alfred Marshall, and A.C. Pigou observed a preference for present over future consumption, and each took this as evidence that consumer "foresight" or "will power" was defective. The labouring classes were said to discount future consumption to reflect uncertainty, and such discounting is regarded as "rational." But each of these economists focused on an additional, and purportedly "irrational" reason for discounting: "impatience". Consumers are thus said to make persistent miscalculations when it comes to decisions involving time.

JEL Classifications: B1, B2

Accepted Paper Series