Ifcher and Zarghamee (2011) on Positive Affect and Time Preference

John Ifcher and Homa Zarghamee, “Happiness and Time Preference: The Effect of Positive Affect in a Random-Assignment Experiment.” American Economic Review 101: 3109–3129, December 2011.

• Mild positive affect has many beneficial correlates, including increased self-control. But does happiness cause low discounting of the future or does low discounting cause happiness? 

• This article describes an experiment that tries to get at the causality question. The experiment allows discount rates to be measured fairly well, but instead of examining happiness directly, only positive affect is tested. 

• The experiment revealed that indeed, people with an induced positive affect discount at a lower rate, they display more self-control, or less present bias. 

• One of the hurdles that the experiment works hard to overcome is to be able to compare present and future payments where the transaction costs and hassle of receiving the payments are similar in both cases. 

• The experiment involved questions such as: How much money would you need to be paid today to forgo the opportunity to receive m dollars t days from now? The questions involved m’s ranging from about $11 to about $51, and t's ranging from one day to 56 days. 

• The experiment reproduces the usual finding that longer delays to receive a payment fixed in size are less valuable to someone in the here and now.