The Tyranny of the Present: Hyperbolic Discounting, Dynamic Inconsistency, and Intertemporal Choice Architecture in Modern Economic Systems

Abstract

Neoclassical models of intertemporal choice, originating from Paul Samuelson’s Discounted Utility framework (1937), assume that economic agents discount future consumption at a constant, time-invariant exponential rate. Under this assumption, individual preferences remain dynamically consistent across all temporal horizons. However, extensive experimental and empirical evidence in behavioral economics demonstrates that human agents systematically violate stationarity, displaying a pronounced "present bias." This paper examines the mathematical foundations and macroeconomic consequences of quasi-hyperbolic (β-δ) discounting (Laibson, 1997; O'Donoghue & Rabin, 1999). We analyze how the cognitive conflict between short-term dopaminergic impulses and long-term prefrontal planning generates dynamic preference reversals, explaining persistent societal anomalies such as sub-optimal retirement savings, revolving consumer debt accumulation, and procrastination in human capital and environmental investment. Furthermore, we evaluate the political economy of digital platforms that monetize attention and instant gratification by exploiting intertemporal vulnerabilities. Finally, we explore policy-level interventions, evaluating the efficacy of asymmetric paternalism, structural commitment devices, and default choice architecture (e.g., Save More Tomorrow) in restoring long-term intertemporal rationality.