Tobias and time preference

We tend to regard waiting as a cost and prefer a benefit now rather than in the future. This is captured in the notion of time preference and concerns the rate at which we as individuals trade-off present and future outcomes (or consumption).

Children sometimes see things slightly differently, so I tried a small experiment with Tobias a couple of days ago. I asked him the following: Would you like 1 ice cream now or 2 tomorrow? His answer was 1 today. I then asked whether he would prefer 1 ice cream now or 3 tomorrow. His immediate reaction was, wow ... 3 ice creams - that's a lot. After some thought he decided upon 3 tomorrow, although it was a difficult choice. He was very tempted to go with 1 ice cream today.

Tobias clearly has a very high positive rate of time preference. He values the present very highly and does not appear to think much of the future. There are a number of reasons why this might be the case:

• He is very impatient;
• He views the future as very uncertain - if consumption of a good is deferred it may never be enjoyed at all, i.e. we as parents change our opinion tomorrow or forget the deal; and
• He has diminishing marginal utility - additional consumption at a later date may add less to utility than consumption now.

Alternatively, he might have been starving and in need of an energy boost. Of course I carefully designed the experiment to avoid this situation by offering him an ice cream as a dessert after a main meal :-).

For Tobias I think impatience is driving his desire for ice cream. Uncertainty over the future also plays a key role because the future is a difficult concept to grasp at his age. Nevertheless, I hope he understands and appreciates that we as parents keep our promises (or at least try to).

But things are not always as they seem. Today I asked him the same questions again. This time he was unwilling to defer his ice cream consumption to the next day. I even offered him 4 ice creams and to that he responded, shaking his head in disbelief: Dad, 4 is too much!