Time Inconsistency: Why We Initially Prefer A to B, But Later Choose B Over A

In Homer’s Odyssey, the hero Odysseus encounters sirens on an island whose songs are known to charm sailors into madness, causing them to cast themselves into the sea off the sirens’ coast, and perish.

Odysseus had the reputation of using guile to overcome stronger opponents. He fills the ears of all his men with wax, to the point of total deafness, and has himself tied to the mast. The sailors are under strict instructions not to release him. As they approach the sirens, the sound of a music comes that is so ravishing that Odysseus struggles to get loose, expending an inordinate amount of energy. His men tie him even further, until they are safely past the venomous sounds.

Odysseus’ most spectacular use of his guile was against no other opponent but himself.

We may not get to face sirens in the sea, but we do face similar challenges where we have to fight our own temptations.

Let’s take a familiar situation. On Saturday morning you might plan to go for a run later in the day rather than sit at home doing nothing, but once afternoon arrives, you are on the couch binging on that new thriller on Netflix.

Similarly, every night I plan to wake up at 5 o’clock next morning. But the moment I’m awake once the alarm goes off, I’m overpowered by the sirens’ song and delve into deep sweet slumber yet again.

In the context of behavioural economics, this phenomenon is called time inconsistency. It is related to how a decision-maker may have different preferences over current and future choices. Initially people prefer A to B, but they later choose B over A. How can such behaviour be understood?

Let’s consider the two end points, A and B. We’ll call them hot and cold. When you is very hungry and appetising aromas are emanating from the fast food joint in the street, we can say you are in a hot state. When you are thinking abstractly on a Tuesday about the right amount of carbs you should consume at the dinner party in the weekend, you are in a cold state.

Similarly, when I decide to wake up at 5 in the morning, that’s cold me. The one who kills off the alarm and goes back to sleep, the hot me is an entirely different self.

The ‘cold’ self is a far-sighted “Planner” guided by System 2 and the ‘hot’ self is a myopic “Doer” under the influence of arousal via System 1.

System 2 is trying to promote your long-term welfare but must cope with the feelings, mischief, and strong will of System 1, who is exposed to the temptations that come with arousal. As discussed previously, when all goes smoothly, which is most of the time, System 2 adopts the suggestions of System 1 with little or no modification.

Unlike Odysseus, when in a cold state, we do not appreciate how much our desires and our behaviour will be altered when we are “under the influence” of arousal. He successfully solved his problem. For most of us, however, self-control issues arise because we underestimate the effect of arousal. Similar problems affect those who have problems with smoking, drinking, failure to exercise, excessive shopping, and insufficient savings.

What we have to understand is that we are not strong enough to even try to fight our System 1 emotions. To wakeup in the morning and to make sure that your System 1’s emotions don’t ruin your System 2’s plans, you need somebody with wax in their ears to jolt you up from bed (at least until your System 1 has had enough practice) despite your many pleas when you are under the influence of the sirens.

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