According to classical economists, homo economicus always considered their various motivations through conscious deliberation.3 Yet, according to Adam Smith – often called the father of economics – homo sapiens frequently do not do this.5 6 By modelling humans as if they always maximize utility, our decision making processes are confined to a simple black box.3
Behavioral economists Richard Thaler and Hersh Shefrin developed the first economic dual-self model in their 1981 article, “An economic theory of self-control.”4 Inspiration for Thaler and Shefrin’s model came from the researchers who identified the paradoxical nature of the concept of self-control: unless it can be assumed that one’s consciousness contains more than one energy system, and that those energy systems are independent,7 it doesn’t make sense that people would impose constraints on their future behavior.4 As a result, Thaler and Shefrin’s model focused on what they called a “two-self economic man.”
Thaler and Shefrin’s model was developed in the context of behaviors around financial savings, based around the concepts of a far-sighted “planner” and a short-sighted “doer.”4 The planner and doer are in conflict with each other at any point in time, based on their polarizing preferences. The “planner” is concerned with lifetime utility, so the “planner” understands that every single decision should maximize utility. On the other hand, the “doer” only exists for fleeting moments and is completely selfish regarding those immediate desires.
A more recent dual-self model was published by American Economists Drew Fudenberg and David Levine in their 2006 article, “A dual-self model of impulse control.”8 Under this model, the economists considered economic concepts such as temporal discounting and risk aversion. Fudenberg and Levine proposed that many decision-making problems should be viewed as a game between a series of short-term impulsive selves and a long-term, patient self. This idea is consistent with evidence from magnetic resonance imaging studies, which suggested that short-term impulsive behavior is associated with different brain areas than long-term planned behavior.9
In Fudenberg and Levine’s model, the patient long-term self and a series of short-term myopic selves ultimately share the same preferences over stage-game outcomes.8 Stage games require players to consider the impact of their current actions on the future actions of other players, since there are repetitive turns. This means that both the patient long-term self and the short-term myopic selves want the same outcomes for the decision maker. However, they differ in how they regard the future. The short-term self has baseline preferences in the game that is dependent on the outcome of the current stage, which allows them to be completely myopic. On the other hand, the long-term self tries to maximize utility across time.
It’s easy to see the similarities between Thaler and Shefrin’s 1981 two-self model, and Fudenberg and Levine’s 2006 model of impulse control: Thaler and Shefrin’s “planner” is similar to Fudenberg and Levine’s patient long-term self; Thaler and Shefrin’s “doer” is similar to Fudenberg and Levine’s myopic short-term self.4 8 So what’s the difference?
Ultimately, the difference lies in Fudenberg and Levine’s emphasis on different criteria that influence one’s short-term selves and long-term self: concepts like temporal discounting and risk aversion.8 The economists factored in the fact that humans prefer choices that seem more certain, compared to uncertain choices. This risk aversion can make us more inclined to satisfy our short-term selves’ desires, since immediate choices are often more certain than choices that occur in the future. Similarly, for temporal discounting, our long-term self hopes to maximize utility, which includes satisfaction. If smaller, immediate rewards grant us more gratification than larger, delayed rewards, then our myopic selves have another leg to stand on, in their fight with our patient long-term self.
In the case of smoking, for example, Fudenberg and Levine’s model acknowledges the fact that quitting smoking does not guarantee immediate health benefits, especially for those who do not believe smoking is detrimental to their health, in the first place. Compared to the immediate gratification that comes with smoking, improved health as a result of smoking cessation is much more delayed. Considering these factors of risk aversion and temporal discounting, we can better understand why the short-term myopic selves may overpower the patient long-term self.