Intertemporal choice is the study of how people make choices about what and how much to do at various points in time, when choices at one time influence the possibilities available at other points in time. These choices are influenced by the relative value people assign to two or more payoffs at different points in time. Most choices require decision-makers to trade off costs and benefits at different points in time. These decisions may be about savings, work effort, education, nutrition, (...) exercise, health care and so forth. Since early in the twentieth century, economists have analyzed intertemporal decisions using the discounted utility model, which assumes that people evaluate the pleasures and pains resulting from a decision in much the same way that financial markets evaluate losses and gains, exponentially 'discounting' the value of outcomes according to how delayed they are in time. Discounted utility has been used to describe how people actually make intertemporal choices and it has been used as a tool for public policy. Policy decisions about how much to spend on research and development, health and education all depend on the discount rate used to analyze the decision. (shrink)

The life-cycle theory of saving behavior (Modigliani, 1988) suggests that humans strive towards an equal intertemporal distribution of wealth. However, behavioral life-cycle theory (Shefrin & Thaler, 1988) proposes that people use self-control heuristics to postpone wealth until later in life. According to this theory, people use a system of cognitive budgeting known as mental accounting. In the present study it was found that mental accounts were used differently depending on if the income change was positive or negative. This was shown (...) both in a representative nationwide sample of households and in a student sample. Respondents were more willing to cut down on their propensity to consume when faced with an income decrease than to raise it when the income increased. Furthermore, contrary to the predictions of behavioral life-cycle theory, it was found that the respondents adjusted their propensity to consume the most when the income increases or decreases took place immediately. Hence, it is suggested that theories of intertemporal choice (e.g., Loewenstein, 1988; Loewenstein & Prelec, 1992) provide a better account of the data than does the behavioral lifecycle theory. (shrink)

Mental accounting is a concept associated with the work of Richard Thaler. According to Thaler, people think of value in relative rather than absolute terms. They derive pleasure not just from an object’s value, but also the quality of the deal – its transaction utility (Thaler, 1985). In addition, humans often fail to fully consider opportunity costs (tradeoffs) and are susceptible to the sunk cost fallacy. Why are people willing to spend more when they pay with a credit card than (...) cash (Prelec & Simester, 2001)? Why would more individuals spend $10 on a theater ticket if they had just lost a $10 bill than if they had to replace a lost ticket worth $10 (Kahneman & Tversky, 1984)? Why are people more likely to spend a small inheritance and invest a large one (Thaler, 1985)? According to the theory of mental accounting, people treat money differently, depending on factors such as the money’s origin and intended use, rather than thinking of it in terms of the “bottom line” as in formal accounting (Thaler, 1999). An important term underlying the theory is fungibility, the fact that all money is interchangable and has no labels. In mental accounting, people treat assets as less fungible than they really are. Even seasoned investors are susceptible to this bias when they view recent gains as disposable “house money” (Thaler & Johnson, 1990) that can be used in high-risk investments. In doing so, they make decisions on each mental account separately, losing out the big picture of the portfolio. (See also partitioning and pain of paying for ideas related to mental accounting.) . (shrink)

Two experiments with undergraduates as subjects were carried out with the aim of replicating and extending previous results showing that the implication of the behavioral life-cycle hypothesis (H. M. Shefrin & R. H. Thaler, 1988) that people classify assets in different mental accounts (current income, current assets, and future income) may explain how consumption choices are influenced by temporary income changes. In both experiments subjects made fictitious choices between paying for a good in cash or according to a more expensive (...) installment plan after they had received an income which was either less, the same, or larger than usual. In Experiment 1 subjects were supposed to have savings so that the total assets were equal, whereas in Experiment 2 the total assets varied. The results of both experiments supported the role of mental accounts in demonstrating that subjects were unwilling to pay in cash after an income decrease even though they had access to saved money. Thus, in effect they chose to pay more for the good than they had to. Indicating a need for further refinement of the concept of mental account, choices to pay in cash after an income decrease tended to be more frequent when the consumption and savings motives were compatible than when they were incompatible. Furthermore, increasing the total assets made subjects more willing to pay in cash after an income decrease. (shrink)

Two experiments with undergraduates as subjects tested explanations of how a prior temporary income change influences choices between buying and deferred buying. In Experiment 1 predictions from the behavioral life-cycle theory (Shefrin & Thaler, 1988), the renewable resources model (Linville & Fischer, 1991) and the loss-sensitivity principle (Garling & Romanus, 1997) were contrasted. The results are inconsistent with the latter two explanations since the framing of buying as positive (buying a new model of a product) or negative (replacing a broken (...) product) did not interact with the income change. Congruent with the behavioral life-cycle theory, willingness to buy was greater when subjects received a temporary income increase than when they received a temporary income decrease although total assets were equal. Further support for the behavioral life-cycle theory is obtained in Experiment 2 where four income-change conditions and durable and nondurable goods are compared. (shrink)

In lieu of an abstract, here is a brief excerpt of the content:Epistemic Leaks and Epistemic Meltdowns: A Response to William Morris on Scepticism with Regard to Reason Mikael M. Karlsson I. In an excellent paper which appeared in the April, 1989 issue of this journal,2 William Morris attemptsto demonstrate thatthe arguments which make up Hume's notorious chapter, "Of scepticism with regard to reason, are, in the first place, coherent—both internally and with the overall strategy of the Treatise—and, in (...) the second place, successful. Morris' paper is an exercise in the noble art of what I style constructive exegesis, an enterprise to which many readers of Hume Studies, and myself as much as any, are committed. It is a guiding principle ofthis art that we donotunderstandaphilosophical textuntil we can interpret it in such a way as to render it both coherent and correct. From this point ofview, coherence and correctness are not as independent of one another as they may seem to be to others who are differently committed. Some texts, such as Hume's chapter, "Ofscepticism with regard to reason," are notoriously resistant to constructive exegesis, despite the formidable bag of tricks which scholars and interpreters have developed; so resistant, that in gloomier moments we may be brought to wonder about our interpretative enterprise itself. Constructive exegesis is indeed a strange, and peculiarly optimistic, enterprise. Someday, I imagine, in a leisurely moment, I will think more reflectively about the principles ofour art. But not now.6 As a fellow practitioner of constructive exegesis, I am in full sympathy with what Morris tries to do in his paper; and I think that he does contribute substantially to our understanding of what Hume is up to in the chapter, "Ofscepticism with regard to reason." The third section of Morris' paper is, in my judgement, particularly successful in showing how Hume's chapter fits into the larger framework of the Treatise: Hume is, we see, attacking both what Morris labels "intellectualist rationalism" and its counterpart, which we may call 'unmitigated scepticism', although the chapter's two main arguments go primarily to the former. I also think that Morris gives very helpful, Volume XVI Number 2 121 MIKAEL M. KARLSSON and to my mind accurate, accounts of these two arguments, which I dub, respectively, the epistemic leak argument, and the epistemic meltdown argument. However, I have personally never found either of these arguments remotely convincing; and I still do not, despite Morris' clarification and defense. In what follows, I shall indicate some ofthe reasons for my dissatisfaction.?. Theepistemicleakargumentpurportsto"prove"(in Hume's sense)that reason or demonstration cannot support knowledge. Morris rightlyreminds us that whatHume meansby knowledge is perfect assurance or conviction: Knowledge is, in short, subjective certainty. This has caused confusion, for this is not what we usually mean nowadays by knowledge; nor was it what people, philosophers included, generally meant prior to Descartes. In Hume itis the product ofthe attempttoresolve all epistemic statesintomental eventsorwhat he calls "perceptions." In any case, we must—as Morris rightly explains—be clear that the epistemic leak argument is aimed at showing that demonstration cannot supportperfect conviction. Inoutline, the argumentissimple: Itworks, asMorrismakes clear, by shifting attention away from the subject-matter or "objects" of demonstration, that is, relations of ideas, to the exercise of demonstrative reason by human agents. The necessity of relations of ideas may suggest to us that we can be certain about them. Against this, one may point out that people do err in the conclusions arrived at by demonstration; this presumably shows that our (rational) understandingis fallible. And once we recognize this, our confidence in any conclusion produced by exercising this facultyislessened—thus do we move from knowledge, or subjective certainty, toprobability: belief, or imperfect conviction. Arguments ofthis general type (we can call them, using Descartes' famous figure, Totten-apple arguments ) were around long before Hume, although they were more commonly directed against the senses than against reason. We find them in antiquity—in Plato and Sextus Empiricus, for instance —and in Descartes, in parallel passages in the Discourse on Method, the First Meditation and the Principles of Philosophy, wherein one can discern a version directed precisely against reason and demonstration.12 To find out what, if anything, Hume has... (shrink)

Logophilosophy is based on the philosophical system of doctrines developed by Viennese psychiatrist and doctor of philosophy Viktor Frankl (1905-1997). The two consisting elements of this philosophical system of doctrines i.e. Logophilosophy, are Existential analysis and Logotherapy. Existential analysis aims to explore, understand and explain being-in-the-world concerning both humankind in general and each human individually. Logotherapy applies Existential analysis in practice. Logophilosophy is a purpose-centered philosophy, which includes basic pillars of the purposeful nature of life, the human will to find (...) a purpose, and the freedom of human will. However, implementing purposes in everyone's own life is very different from creating meanings for one's life. Purposes are always outside of a human, in the world, to which we are related through and in accordance with our own existence. Purposes cannot be invented or created, but they are found. A purposeful life also always commits to values that are objective and the same for everyone. Together, purpose and values form the logophilosophical backbone of human activity in the world, which needs selflessness and joint efforts to become what it can be at its best. (shrink)

Logophilosophy is based on the philosophical system of doctrines developed by Viennese psychiatrist and doctor of philosophy Viktor Frankl (1905-1997). The two consisting elements of this philosophical system of doctrines i.e. Logophilosophy, are Existential analysis and Logotherapy. Existential analysis aims to explore, understand and explain being-in-the-world concerning both humankind in general and each human individually. Logotherapy applies Existential analysis in practice. Logophilosophy is a purpose-centered philosophy, which includes basic pillars of the purposeful nature of life, the human will to find (...) a purpose, and the freedom of human will. However, implementing purposes in everyone's own life is very different from creating meanings for one's life. Purposes are always outside of a human, in the world, to which we are related through and in accordance with our own existence. Purposes cannot be invented or created, but they are found. A purposeful life also always commits to values that are objective and the same for everyone. Together, purpose and values form the logophilosophical backbone of human activity in the world, which needs selflessness and joint efforts to become what it can be at its best. The authors of the book are professional logotherapists and logotherapy instructors with philosophical education. Their Institute for Purpose-centered Philosophy Finland is an accredited member of the International Association of Logotherapy and Existential Analysis at the Viktor Frankl Institute Vienna. (shrink)

Jakob Friedrich Fries (1773-1843): A Philosophy of the Exact Sciences -/- Shortened version of the article of the same name in: Tabula Rasa. Jenenser magazine for critical thinking. 6th of November 1994 edition -/- 1. Biography -/- Jakob Friedrich Fries was born on the 23rd of August, 1773 in Barby on the Elbe. Because Fries' father had little time, on account of his journeying, he gave up both his sons, of whom Jakob Friedrich was the elder, to the Herrnhut Teaching (...) Institution in Niesky in 1778. Fries attended the theological seminar in Niesky in autumn 1792, which lasted for three years. There he (secretly) began to study Kant. The reading of Kant's works led Fries, for the first time, to a deep philosophical satisfaction. His enthusiasm for Kant is to be understood against the background that a considerable measure of Kant's philosophy is based on a firm foundation of what happens in an analogous and similar manner in mathematics. -/- During this period he also read Heinrich Jacobi's novels, as well as works of the awakening classic German literature; in particular Friedrich Schiller's works. In 1795, Fries arrived at Leipzig University to study law. During his time in Leipzig he became acquainted with Fichte's philosophy. In autumn of the same year he moved to Jena to hear Fichte at first hand, but was soon disappointed. -/- During his first sojourn in Jenaer (1796), Fries got to know the chemist A. N. Scherer who was very influenced by the work of the chemist A. L. Lavoisier. Fries discovered, at Scherer's suggestion, the law of stoichiometric composition. Because he felt that his work still need some time before completion, he withdrew as a private tutor to Zofingen (in Switzerland). There Fries worked on his main critical work, and studied Newton's "Philosophiae naturalis principia mathematica". He remained a lifelong admirer of Newton, whom he praised as a perfectionist of astronomy. Fries saw the final aim of his mathematical natural philosophy in the union of Newton's Principia with Kant's philosophy. -/- With the aim of qualifying as a lecturer, he returned to Jena in 1800. Now Fries was known from his independent writings, such as "Reinhold, Fichte and Schelling" (1st edition in 1803), and "Systems of Philosophy as an Evident Science" (1804). The relationship between G. W. F. Hegel and Fries did not develop favourably. Hegel speaks of "the leader of the superficial army", and at other places he expresses: "he is an extremely narrow-minded bragger". On the other hand, Fries also has an unfavourable take on Hegel. He writes of the "Redundancy of the Hegelistic dialectic" (1828). In his History of Philosophy (1837/40) he writes of Hegel, amongst other things: "Your way of philosophising seems just to give expression to nonsense in the shortest possible way". In this work, Fries appears to argue with Hegel in an objective manner, and expresses a positive attitude to his work. -/- In 1805, Fries was appointed professor for philosophy in Heidelberg. In his time spent in Heidelberg, he married Caroline Erdmann. He also sealed his friendships with W. M. L. de Wette and F. H. Jacobi. Jacobi was amongst the contemporaries who most impressed Fries during this period. In Heidelberg, Fries wrote, amongst other things, his three-volume main work New Critique of Reason (1807). -/- In 1816 Fries returned to Jena. When in 1817 the Wartburg festival took place, Fries was among the guests, and made a small speech. 1819 was the so-called "Great Year" for Fries: His wife Caroline died, and Karl Sand, a member of a student fraternity, and one of Fries' former students stabbed the author August von Kotzebue to death. Fries was punished with a philosophy teaching ban but still received a professorship for physics and mathematics. Only after a period of years, and under restrictions, he was again allowed to read philosophy. From now on, Fries was excluded from political influence. The rest of his life he devoted himself once again to philosophical and natural studies. During this period, he wrote "Mathematical Natural Philosophy" (1822) and the "History of Philosophy" (1837/40). -/- Fries suffered from a stroke on New Year's Day 1843, and a second stroke, on the 10th of August 1843 ended his life. -/- 2. Fries' Work Fries left an extensive body of work. A look at the subject areas he worked on makes us aware of the universality of his thinking. Amongst these subjects are: Psychic anthropology, psychology, pure philosophy, logic, metaphysics, ethics, politics, religious philosophy, aesthetics, natural philosophy, mathematics, physics and medical subjects, to which, e.g., the text "Regarding the optical centre in the eye together with general remarks about the theory of seeing" (1839) bear witness. With popular philosophical writings like the novel "Julius and Evagoras" (1822), or the arabesque "Longing, and a Trip to the Middle of Nowhere" (1820), he tried to make his philosophy accessible to a broader public. Anthropological considerations are shown in the methodical basis of his philosophy, and to this end, he provides the following didactic instruction for the study of his work: "If somebody wishes to study philosophy on the basis of this guide, I would recommend that after studying natural philosophy, a strict study of logic should follow in order to peruse metaphysics and its applied teachings more rapidly, followed by a strict study of criticism, followed once again by a return to an even closer study of metaphysics and its applied teachings." -/- 3. Continuation of Fries' work through the Friesian School -/- Fries' ideas found general acceptance amongst scientists and mathematicians. A large part of the followers of the "Fries School of Thought" had a scientific or mathematical background. Amongst them were biologist Matthias Jakob Schleiden, mathematics and science specialist philosopher Ernst Friedrich Apelt, the zoologist Oscar Schmidt, and the mathematician Oscar Xavier Schlömilch. Between the years 1847 and 1849, the treatises of the "Fries School of Thought", with which the publishers aimed to pursue philosophy according to the model of the natural sciences appeared. In the Kant-Fries philosophy, they saw the realisation of this ideal. The history of the "New Fries School of Thought" began in 1903. It was in this year that the philosopher Leonard Nelson gathered together a small discussion circle in Goettingen. Amongst the founding members of this circle were: A. Rüstow, C. Brinkmann and H. Goesch. In 1904 L. Nelson, A. Rüstow, H. Goesch and the student W. Mecklenburg travelled to Thuringia to find the missing Fries writings. In the same year, G. Hessenberg, K. Kaiser and Nelson published the first pamphlet from their first volume of the "Treatises of the Fries School of Thought, New Edition". -/- The school set out with the aim of searching for the missing Fries' texts, and re-publishing them with a view to re-opening discussion of Fries' brand of philosophy. The members of the circle met regularly for discussions. Additionally, larger conferences took place, mostly during the holidays. Featuring as speakers were: Otto Apelt, Otto Berg, Paul Bernays, G. Fraenkel, K. Grelling, G. Hessenberg, A. Kronfeld, O. Meyerhof, L. Nelson and R. Otto. On the 1st of March 1913, the Jakob-Friedrich-Fries society was founded. Whilst the Fries' school of thought dealt in continuum with the advancement of the Kant-Fries philosophy, the members of the Jakob-Friedrich-Fries society's main task was the dissemination of the Fries' school publications. In May/June, 1914, the organisations took part in their last common conference before the gulf created by the outbreak of the First World War. Several members died during the war. Others returned disabled. The next conference took place in 1919. A second conference followed in 1921. Nevertheless, such intensive work as had been undertaken between 1903 and 1914 was no longer possible. -/- Leonard Nelson died in October 1927. In the 1930's, the 6th and final volume of "Treatises of the Fries School of Thought, New Edition" was published. Franz Oppenheimer, Otto Meyerhof, Minna Specht and Grete Hermann were involved in their publication. -/- 4. About Mathematical Natural Philosophy -/- In 1822, Fries' "Mathematical Natural Philosophy" appeared. Fries rejects the speculative natural philosophy of his time - above all Schelling's natural philosophy. A natural study, founded on speculative philosophy, ceases with its collection, arrangement and order of well-known facts. Only a mathematical natural philosophy can deliver the necessary explanatory reasoning. The basic dictum of his mathematical natural philosophy is: "All natural theories must be definable using purely mathematically determinable reasons of explanation." Fries is of the opinion that science can attain completeness only by the subordination of the empirical facts to the metaphysical categories and mathematical laws. -/- The crux of Fries' natural philosophy is the thought that mathematics must be made fertile for use by the natural sciences. However, pure mathematics displays solely empty abstraction. To be able to apply them to the sensory world, an intermediatory connection is required. Mathematics must be connected to metaphysics. The pure mechanics, consisting of three parts are these: a) A study of geometrical movement, which considers solely the direction of the movement, b) A study of kinematics, which considers velocity in Addition, c) A study of dynamic movement, which also incorporates mass and power, as well as direction and velocity. -/- Of great interest is Fries' natural philosophy in view of its methodology, particularly with regard to the doctrine "leading maxims". Fries calls these "leading maxims" "heuristic", "because they are principal rules for scientific invention". -/- Fries' philosophy found great recognition with Carl Friedrich Gauss, amongst others. Fries asked for Gauss's opinion on his work "An Attempt at a Criticism based on the Principles of the Probability Calculus" (1842). Gauss also provided his opinions on "Mathematical Natural Philosophy" (1822) and on Fries' "History of Philosophy". Gauss acknowledged Fries' philosophy and wrote in a letter to Fries: "I have always had a great predilection for philosophical speculation, and now I am all the more happy to have a reliable teacher in you in the study of the destinies of science, from the most ancient up to the latest times, as I have not always found the desired satisfaction in my own reading of the writings of some of the philosophers. In particular, the writings of several famous (maybe better, so-called famous) philosophers who have appeared since Kant have reminded me of the sieve of a goat-milker, or to use a modern image instead of an old-fashioned one, of Münchhausen's plait, with which he pulled himself from out of the water. These amateurs would not dare make such a confession before their Masters; it would not happen were they were to consider the case upon its merits. I have often regretted not living in your locality, so as to be able to glean much pleasurable entertainment from philosophical verbal discourse." -/- The starting point of the new adoption of Fries was Nelson's article "The critical method and the relation of psychology to philosophy" (1904). Nelson dedicates special attention to Fries' re-interpretation of Kant's deduction concept. Fries awards Kant's criticism the rationale of anthropological idiom, in that he is guided by the idea that one can examine in a psychological way which knowledge we have "a priori", and how this is created, so that we can therefore recognise our own knowledge "a priori" in an empirical way. Fries understands deduction to mean an "awareness residing darkly in us is, and only open to basic metaphysical principles through conscious reflection.". -/- Nelson has pointed to an analogy between Fries' deduction and modern metamathematics. In the same manner, as with the anthropological deduction of the content of the critical investigation into the metaphysical object show, the content of mathematics become, in David Hilbert's view, the object of metamathematics. -/-. (shrink)