Time Preference for Investment in the Environment: The Impact of Intrinsic Motivation

Lory Barile, John Cullis, Philip Jones

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Abstract

Insights from behavioural economics suggest that individuals rely on different discount rates to assess the present values of gains and losses (the sign effect). They also suggest that individuals rely on different discount rates to assess investment in financial, environmental and health domains. A first objective is to further consider these valence versus domain effects. The second, novel, objective is to question whether individuals are likely to employ a higher discount rate for the benefits of investment if they also derive intrinsic value from action. The analysis focuses on perceptions of intrinsic value derived from action to conserve the environment. Will intrinsic motivation increase the sign effect and the difference between the discount rate in different domains? In a questionnaire survey, we collected data from 450 undergraduate students. Participants made choices between hypothetical financial, environmental and health gains and losses that took effect either immediately, or with a delay of 10 years. Results suggest the presence of valence and domain effects and further suggest that intrinsic motivation over action is likely to increase present bias by increasing the sign effect. This dimension of time preference is likely to have an impact on differences between discount rates in different domains.
Original languageEnglish
Pages (from-to)31-56
Number of pages26
JournalEconomic Issues
Volume23
Issue numberPart 2
Publication statusPublished - 30 Sep 2018

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