Question

Richard Thaler discussed the idea of "time value." His conclusion on this idea was...

(Answer this in three sentences and be detailed)

Answer 1

The economist discussed about three broad areas of human behavior – self-control, limited rationality, and perceptions of fairness.

The research reveals the following thoughts:

Self-control: people in general do not have adequate self-control. Suppose they can’t resists themselves from eating junk foods, since these are tasty.

Limited rationality: people do not understand time value of money properly; or they are so foolish to understand. Therefore, their decisions (like spending today or spending tomorrow) are not rational. They can’t do anything by the understanding of time value of money unless they improve their self-control.

Example: Saving for an occasion could be done my keeping money in a savings account; but, people usually do not do so, and save money in a forcible recurring account (although there is no interest); this is so because they know that they don’t have such self-control for keeping money regularly in a savings account.

Perceptions of fairness: since people do not have rational thinking, they do not understand which is fair and which is wrong. In most of the times they mixed up with these.