If hyperbolic discounting is commonplace, this throws into question a basic assumption within neoclassical economics—that economic agents discount utility at a time insensitive rate, such that each temporal unit of delay in consuming a good reduces the utility assigned to that good by a set percentage. This procedure yields the exponential time-utility curve. While with hyperbolic discounting, the devaluation per unit of time changes depending on the total delay, with exponential discounting, valuation falls by a constant factor per unit delay.
The exponential model certainly describes how certain economic actors reason under particular circumstances. For example, banks discount the future exponentially when they calculate interest rates.45 However, the exponential model is less convincing as a general explanation for how people behave. Ainslie notes that the exponential time-utility discounting model does not cover apparently self-destructive and irrational behavior in which average utility over the long term is radically compromised in exchange for a short-term reward. One instance of such behavior is drug use, but there are many examples in consumer behavior, impulsive and compulsive buying for example, and perhaps also a fixation on the immediate gratification of higher wages and more spending, as opposed to increasing free time. In such cases, people apparently do not adjust utility over time delay until just before the point of consumption (or some other utility-yielding behavior), at which point expected utility spikes dramatically.46
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Time for Things