The Behavioral Economics of Intrapersonal Conflict: A Critical Assessment
aa r X i v : . [ ec on . GN ] J a n The Behavioral Economics of IntrapersonalConflict: A Critical Assessment
Sebastian Kr¨ugel ∗ Matthias Uhl † February 1, 2021
Abstract
Preferences often change—even in short time intervals—due to eitherthe mere passage of time (present-biased preferences) or changes in envi-ronmental conditions (state-dependent preferences). On the basis of theempirical findings in the context of state-dependent preferences, we criti-cally discuss the Aristotelian view of unitary decision makers in economicsand urge a more Heraclitean perspective on human decision-making. We il-lustrate that the conceptualization of preferences as present-biased or state-dependent has very different normative implications under the Aristotelianview, although both concepts are empirically hard to distinguish. Thisis highly problematic, as it renders almost any paternalistic interventionjustifiable.
JEL classification: D01; D90; D91Keywords: Intrapersonal conflict; State-dependent preferences; Projection bias;Paternalism ∗ Technical University of Munich, Richard-Wagner-Strasse 1, D-80333 Munich, Germany,phone: +49 89 907793 280, e-mail: [email protected] † Technical University of Munich, Richard-Wagner-Strasse 1, D-80333 Munich, Germany,phone: +49 89 907793 280, e-mail: [email protected] he Behavioral Economics of Intrapersonal Conflict 2
According to standard economics, rational actors rank present choices according topreferences over the causal consequences of actions. Causality implies the lapse oftime, and preferences may change between the times of choice and of consequence.Many years of research in economics and psychology have taught us that changesin preferences between these two points in time may be the rule rather thanthe exception. For instance, numerous studies on intertemporal decision-makingdemonstrated that people’s choices might reverse because of the mere passage oftime. Goods that people plan to choose when consumption is in the distant futureare often systematically different from the goods that people actually choose asthe future draws nearer. People’s preferences often are time-inconsistent. Theyare “present-biased” (O’Donoghue and Rabin 1999) in the sense that immediateconsumption appears to be excessively overvalued.However, present-biased preferences are not the only instance of changingtastes. Changes in environmental conditions might also affect people’s prefer-ences. This second source of changing tastes has received increasing attentionin the more recent economic and psychological literature because many of thosechanges follow a systematic and thus predictable pattern (see, e.g., Loewenstein1996, 2000, for a general discussion of systematic fluctuations in tastes). For in-stance, people tend to prefer healthy (e.g., apples) over unhealthy (e.g., chocolatebars) food in a satiated state, but their preferences reverse in a hungry state(Read and Van Leeuwen 1998). The value ascribed to durable cold-weather items(e.g., winter jackets) is higher on a cold than on a warm day (Conlin et al. 2007),and the value attributed to certain types of cars (e.g., convertibles) is different ona sunny compared to a cloudy day (Busse et al. 2014). Such preferences are called state-dependent preferences , with different states being associated with differentpreferences. Whereas preferences under this concept vary with the underlyingstate (of nature), the concept of present-biased preferences captures the idea thatpreferences change with a mere movement along the time line.With changing preferences, rational actors are confronted with the problem ofhow to incorporate those changes into their rankings of alternatives when makingtheir choices. Which preferences should a rational actor obey? Those at the timeof the decision or those at the time of consumption when the consequences of thedecision occur? We use the term of O’Donoghue and Rabin (1999) for the general phenomenon that peopleappear to overvalue immediate satisfaction. Another term for the same phenomenon is, forinstance, (quasi-)hyperbolic discounting. he Behavioral Economics of Intrapersonal Conflict 3Whereas economists are usually concerned about the “pretence of knowledge”(von Hayek 1989) when it comes to social choices, this concern seems to be muchless pronounced when it comes to individual decision-making. In stark contrastto the revealed-preference approach (Samuelson 1938, 1948), many behavioraleconomists appear to be able to tell what people’s relevant (i.e., true) preferencesare even if choices differ between two points in time. Unfortunately, however,the economists’ answers to this question can be very different, depending on theunderlying concept of preferences. In the context of present-biased preferences,the standard belief in economics is that people’s true preferences are those atthe time of the decision, because preferences at the time of consumption are dis-torted by temptation or a tendency for immediate gratification (see, e.g., Strotz1955; Phelps and Pollak 1968; Pollak 1968; Laibson 1997; O’Donoghue and Rabin1999). In the context of state-dependent preferences, on the contrary, the tradi-tional view among economists is that the relevant preferences prevail at the timeof consumption, not at the time of the decision (see, e.g., Read and Van Leeuwen1998; Loewenstein et al. 2003).Rational actors, who behave in accordance with the normative expectations ofmost economists, would thus have to take into account in their decisions whethera change in preferences between choice and consequence is caused by a movementalong the time line or by a change of the state of nature. Truly rational actorsmay be able to do this, but to an outside observer, this is very difficult to tell.The problem gets thorny when it comes to questions of consumer sovereigntyand paternalistic interventions. In light of present-biased preferences, the benevo-lent economist is inclined to promote people’s preferences at the time of the deci-sion. In the case of state-dependent preferences, in contrast, the economist wouldside with people’s preferences at the time of consumption. However, because itis difficult for an external advisor to judge what causes changes in preferences,partisanship for one set of preferences over another is problematic and perhapsprimarily ideologically driven.Although it may seem surprising at first that partisanship for a certain setof preferences in economics would be so arbitrary, there is a unifying elementbetween both approaches to changes in preferences: the Aristotelian view onhuman decision-making that prevails in economics (Moldoveanu and Stevenson2001). People are regarded as unitary decision makers, possibly coupled with var-ious behavioral biases. Examples of self-commitment are interpreted exclusivelyas strategic interventions of rational actors against their own temptations in thecontext of present-biased preferences. The desire at the time of consumption ishe Behavioral Economics of Intrapersonal Conflict 4more of an impulse than a real preference. People with present-biased preferencesare therefore “naive” (O’Donoghue and Rabin 1999) if they fail to suppress theirfuture temptations due to a lack of farsightedness, and they are “sophisticated”(O’Donoghue and Rabin 1999) if they use self-commitment measures to preservetheir current preferences against upcoming changes of mind. Ulysses is the idealconception of rationality here. For people with state-dependent preferences, theopposite is true. Self-commitment measures are out of the question. People withstate-dependent preferences are sophisticated if they abandon their current pref-erences in favor of their future ones and somewhat naive if they fail to please theirfuture preferences.In the present article, we take a stance against the Aristotelian view on humandecision-making that is inherent to the economic literature on present-biased andstate-dependent preferences alike. Clearly, if the usual assumption of unitarydecision makers is complemented with the attribution of behavioral biases, theAristotelian view makes paternalistic interventions into the self-management ofpeople appear attractive, because each person consists of only one true rationale(or telos) that is to be promoted. However, since the idea of a person’s truerationale differs between present-biased and state-dependent preferences, almostany paternalistic intervention is justifiable. In many real-life cases, the underlyingreason for a preference change is hardly detectable by external advisors.An alternative perspective that does not deify the assumption of a unitary de-cision maker and instead takes the notion of multiple selves and intrapersonalconflict seriously would likely lead to a more liberal and less invasive stancetowards a person’s self-management. So far, the idea of multiple selves hasbeen discussed mainly in the context of present-biased preferences (see, e.g.,Strotz 1955; Thaler and Shefrin 1981; Parfit 1984; O’Donoghue and Rabin 1999;Jamison and Wegener 2010). In this article, we will focus on an understandingof multiple selves in relation to the notion of state-dependent preferences. Primafacie, the state-dependency view of preferences could be more open-minded to-wards an interpretation of decision makers in terms of multiple selves, because itdoes not degrade a particular preference to an impulse. However, based on theAristotelian view, it upholds the assumption that the preference at the time ofconsumption is the only preference that counts. According to this view, peo-ple with state-dependent preferences whose choices are not fully in line withtheir own future preferences must be mistaken in predicting them (see, e.g.,Read and Van Leeuwen 1998; Loewenstein et al. 2003; Conlin et al. 2007; Sayette et al.2008; Simonsohn 2010; Busse et al. 2014; Buchheim and Kolaska 2016). It is nothe Behavioral Economics of Intrapersonal Conflict 5an intrapersonal conflict between multiple selves that is observed, but a unitarydecision maker’s inability to properly foresee what she wants.In the following section, we illustrate some exemplary experiments and fieldstudies on state-dependent preferences and outline what has been inferred fromthe results. In section 3, we offer an alternative interpretation of the results anddiscuss what would be necessary to distinguish empirically between the two inter-pretations. In section 4, we critically assess the Aristotelian view on individualdecision-making with regard to state-dependent preferences at a conceptual leveland illustrate that some implausible assumptions are necessary to defend the ap-proach. In the final section, we conclude and outline the different philosophicaland political implications of the two approaches presented for our understandingof self-management.
For many real-life decisions, the temporal separation between choice and conse-quence amounts to several days, weeks or even months and longer. This is thecase when we preorder lunch in the cafeteria for the next day, buy groceries forthe upcoming weekend, order goods via the Internet or a catalog or book a va-cation trip for the upcoming summer. Choices with a marked time lag betweenthe decision and consumption are sometimes termed advance choices and havebeen frequently used to study state-dependent preferences. The greater time lagas such, however, is not of particular interest, but only a means to an end. Thecrucial element in those studies is that the preferences—i.e., the states —differbetween the two points in time.In laboratory or field experiments, state-dependent preferences were investi-gated in various situations involving, for instance, hunger (Read and Van Leeuwen1998), cigarette craving (Sayette et al. 2008), sexual arousal (Ariely and Loewenstein2006) or pain (Read and Loewenstein 1999). Most of these studies employed avery similar procedure. The participants made an advance choice in period 1 fora predefined future period 2 with corresponding state s . In period 1, some of theparticipants were in the same state that they occupied in period 2 (i.e., s = s ),while other participants were in a different state (i.e., s ′ = s ). The participantswere led to believe that their choice in period 1 would count but when period 2arrived, they could in fact remake their choice. The typical results of those studieshe Behavioral Economics of Intrapersonal Conflict 6were that the participants made systematically different advance choices in state s ′ compared to in state s and revised their choices more often in period 2 if theadvance choice was made in state s ′ .Consider, for instance, the classical study of Read and Van Leeuwen (1998).They conducted a field experiment in which office workers made an advance choicebetween healthy (e.g., apples) and unhealthy (e.g., chocolate bars) snacks, whichthey received at a designated time one week later when they were either hun-gry or satiated. Half of the participants made their advance choice in a hungrystate, while the other half chose in a satiated state. Directly before the partic-ipants received their chosen snack at the designated time one week later, theywere asked to remake their choice, but they did not know about this option at thetime of their advance choice. Read and Van Leeuwen (1998) found that advancechoices were indeed influenced by anticipated future hunger levels. People whoexpected to be hungry the next week chose unhealthy snacks more often thanpeople who expected to be satiated. However, advance choices were also affectedby hunger levels at the time of the choice. People who were hungry at the timeof the choice chose unhealthy snacks more often than those who were satiated.Read and Van Leeuwen (1998) therefore concluded that people erroneously pro-jected their current preferences onto the future.Field data studies on state-dependent preferences are not as common, butthey exist as well. Most of these studies have utilized certain weather data toshow that weather conditions systematically influence people’s advance choices ina way that is inconsistent with expected utility theory. For instance, Conlin et al.(2007) investigated catalog orders of cold-weather items and found that the colderthe weather on the order date, the more likely a return of that item was once itwas received. Buchheim and Kolaska (2016) analyzed advance ticket sales for anoutdoor movie theater and found that good weather (i.e., based on sunshine du-ration) increased advance ticket sales even though the weather at the time of thepurchase did not predict the weather on the day of the movie. Busse et al. (2014)studied a large data set of vehicle transactions and found that buying decisionsfor convertibles or four-wheel drives were affected considerably by the weatherconditions on the day of the purchase. Lastly, Simonsohn (2010) even found thatcertain weather conditions (i.e., cloud cover) on the day of the visit to an aca-demically demanding university affected the enrollment decisions of prospectivestudents regarding this university.Clearly, all of these studies demonstrated that people display state-dependent behavior . That is, people’s advance choices appear to be overly influenced byhe Behavioral Economics of Intrapersonal Conflict 7their current preferences (or states). Based on the assumption in economics thatthe relevant preferences prevail at the time of consumption, a widely acceptedinterpretation of the observed behavior is that people systematically mispredicttheir future preferences. People wish to please their future preferences in a dif-ferent state, but unfortunately, they are biased towards their current wants. Thismisprediction is sometimes referred to as an empathy gap (e.g., Loewenstein 1996,2000; Loewenstein and Schkade 1999) or projection bias (e.g., Loewenstein et al.2003; Conlin et al. 2007; Busse et al. 2014). The latter term underlines the viewthat current preferences are illegitimately projected to another state for which adecision is to be made. People seem to understand the direction in which theirpreferences will change but systematically underestimate the magnitude of thischange (Loewenstein et al. 2003).In the framework of state-dependent preferences, projection bias can be intro-duced in the following way (see Loewenstein et al. 2003, who first formalized theidea that people with state-dependent preferences systematically mispredict theirfuture preferences). Suppose a person’s instantaneous utility of consumption inperiod t is given by u ( c t , s t ), where c t is the person’s consumption in period t and s t is the person’s state in period t capturing his or her preferences. Further supposethat this person is currently in period 1 with corresponding state s and is tryingto predict her future instantaneous utility from consuming c in period 2 withcorresponding state s (where s = s ). This prediction is denoted ˜ u ( c , s | s ).If this person has no projection bias, she will predict her future utility correctly.That is, her predicted utility will equal her true utility: ˜ u ( c , s | s ) = u ( c , s ).If, on the other hand, this person is exposed to a projection bias, as describedin Loewenstein et al. (2003), she will understand the qualitative direction of thetaste change but underestimate its magnitude. That is, her predicted utility willbe somewhere in between her true future utility and her utility given her cur-rent state: ˜ u ( c , s | s ) = (1 − α ) u ( c , s ) + αu ( c , s ), with α ∈ [0 , α >
0, with the bias increasing with highervalues of α . Since a person with projection bias misperceives his or her futureutility, such an individual may exhibit dynamic inconsistency even in the absenceof present-biased preferences: she may make a systematically different choice inperiod 1 (for period 2) than if she were asked again in period 2.Importantly, the projection-bias interpretation of state-dependent behavioris based entirely on mistaken beliefs. A person with projection bias behavesexactly as a rational person does with the one exception that she mispredicts herhe Behavioral Economics of Intrapersonal Conflict 8future preferences (Loewenstein et al. 2003). Rationality here means maximizingintertemporal utility. Our main caveat with the interpretations of the empirical results is that the par-ticipants’ intentions at the time of making their advance choices remain unknown.All that is observed is state-dependent behavior. The inference that this behaviorresults from systematic mispredictions of future preferences is based solely on theassumption that the relevant preferences prevail at the time of consumption and,more importantly, that people share this view.An alternative but rarely considered interpretation of the same behavior is thatpeople do not mispredict their future preferences in a different state but ratherdisagree with them and therefore try to impose a “better” judgment on a lateralter ego. A person may generally disapprove of candy in a satiated state buthave a less negative attitude towards sweets in a hungry state (independent of thetime of consumption). Likewise, a person may spend parts of her limited budgeton a certain durable good in one state, whereas she would want to use the samemoney for a different durable good in another state, simply because her overallvaluations diverge in both states. For instance, suppose a person can allocateparts of her budget to either a handcrafted surfboard or a snowboard. Suppose itis currently summer, but since the surfboard is custom-made and making it willtake a few months, it cannot be used before the next summer. The person maystill order the surfboard, knowing that she would decide differently during winter.If people are aware of this disagreement and insist on their valuations at thetime of the decision, they will attempt to impose a “better” judgment at theexpense of a later alter ego. This imposition can be understood as a sympathy gap or conflict of selves . Whereas the empathy gap is an ineffective attempt to pleasepreferences in a different state, the sympathy gap is an attempt to fight them. Noprevious study could potentially rule out the latter explanation. To the best ofour knowledge, no previous study did even attempt to do that.The sole purpose of the concept of state-dependent preferences lies in the pos-sibility that peoples’ ranking of the causal consequences of their choices mightchange. Many studies have shown that this is indeed the case and that changeshappen often in a very systematic and predictable manner. However, the ex-he Behavioral Economics of Intrapersonal Conflict 9pectation that a person with a certain ranking of his or her choices is willing toignore this ranking for a different one at the time of consumption does not strikeus as self-evident. At the very least, this is an assumption that should be em-pirically validated before declaring state-dependent behavior a manifestation ofbiased beliefs about oneself.The problem is that the assumption about state-dependent preferences is no-toriously difficult to address empirically. To be able to observe whether peoplewith state-dependent preferences honor their preferences at the time of the deci-sion or those at the time of the consumption requires keeping state-dependent andpresent-biased preferences apart. Otherwise, a person’s deliberate choice in favorof her preferences at the time of the decision over those at the time of consump-tion could always be an instance of sophistication in the context of present-biasedpreferences.Conceptually, the distinction between state-dependent and present-biased pref-erences is not a very difficult task, but empirically it is so. Present-biased prefer-ences operate on a movement along the time line, and state-dependent preferenceson a change in states. However, state changes always come with a movement alongthe time line. While this is a nomological necessity, the passage of time is concep-tually irrelevant for state-dependent preferences. Therefore, to test the underlyingassumption about state-dependent preferences, it must be ensured that a possibleimposition of current preferences on a later self is indeed due to a disagreementbetween states and not to the mere passage of time.The difficulty of studying empirically the underlying assumption of humandecision-making in the case of state-dependent preferences also illustrates the dif-ficulty of attributing real examples of dynamic inconsistency to one source or an-other of preference change. State-dependent and present-biased preferences mayeasily coexist. Thus, a person’s ranking of choices may vary with the underlyingstate, and on top of this, the person may be exposed to present bias as consump-tion nears. For an impartial, benevolent advisor who observes cases of dynamicinconsistency, it is therefore hardly possible to propose the “right” paternalisticmeasures—even under the Aristotelian view of unitary decision makers.he Behavioral Economics of Intrapersonal Conflict 10 In this section, we take the observation of state-dependent behavior for grantedand critically assess the idea of projection bias on a conceptual level. Notice againthat projection bias is based on the assumption that people view themselves asunitary decision makers who are sympathetic towards changes in their own prefer-ences. In cases of state-induced preference changes, the “true” preferences appearat the time of consumption and it is these that have to be satisfied. Accord-ingly, advance choices that are systematically influenced by current preferencesare a manifestation of systematic mispredictions—the projection bias. Inherentto this concept is the necessary condition that people are unaware of their cur-rent misprediction. If they knew that they would choose differently at the timeof consumption, the supposedly misguided advance choice would not be the re-sult of a misprediction of preferences. Instead, we would have to relinquish theAristotelian view of unitary decision makers in this context of state-dependentpreferences, because the choosing self apparently imposes its current preferenceson the future self.We intend not to argue here that projection bias does not exist at all butmainly to question its scope. Projection bias is usually thought to explain awide range of phenomena, from everyday decision-making to suicide (see, e.g.,Loewenstein et al. 2003). The potential scope of projection bias is explicitly notlimited to once- or twice-in-a-lifetime experiences for which mispredictions mayoccur simply because of lacking experience. However, the projection-bias expla-nation of state-dependent behavior is less convincing in daily or recurrent decisionsituations, precisely because unawareness of the current misprediction is a neces-sary condition of the concept. In recurrent situations, people do not even have toremember how they felt in a certain state in the past to become aware of theirbias. They only need to realize that they previously did not like the consequenceof the same choice they are about to make again.For instance, suppose a person orders a warm winter jacket on a cold day be-cause she overestimates its future value and then returns the jacket upon deliverybecause the temperature increased and the person is no longer overestimating thevalue of the jacket, as suggested in Conlin et al. (2007). So the person orders thejacket because it keeps her warm on cold days and returns the jacket for exactlyhe Behavioral Economics of Intrapersonal Conflict 11the same reason. Could this person unconsciously overvalue and order winterclothing on another cold day just to realize a few days later that this was a mis-take once again? Notice that it is not necessary for the person to understand howweather affects her valuation of winter clothing. She only needs to remember thatshe was split over the value of warm clothing in the past to realize that somethingis wrong. As soon as this happens, the unconscious misprediction becomes a con-scious disagreement with her future self regarding the value of warm clothing. Inour view, this certainly is conceivable, as the essence of individual decision-makingis the weighing of trade-offs. Sometimes the personal ranking of goods goes in onedirection, sometimes in another, and every now and then these rankings may bein conflict with each other.For a decision situation to be recurrent, it is not necessary that iterative statesbe identical. A decision situation is recurrent if states at two different points intime are more similar to each other than they are to another state regarding therelevant criterion. For instance, suppose a person books her summer vacation tripduring the winter and due to projection bias chooses an overly warm destination(the example is borrowed from Loewenstein et al. 2003)—a choice that the personregrets during the summer. The situation becomes recurrent if this person wantsto book a summer vacation trip during the following winter again. It seems highlyimplausible that the person will remain completely unaware of her last summer’smisery if she plans to choose an overly warm destination a second time. Thecorresponding states during summers do not have to be identical. It is sufficientthat it is generally warmer in summer and she might get tired of the heat again,whatever the actual temperature will be in the upcoming summer.The lack of learning in recurrent situations, which is necessary for the conceptof projection bias, should not be mixed up with the apparent lack of learning inthe context of present-biased preferences. Overvaluing immediate consumption orrewards appears to be largely innate and difficult to break off, even if people areaware of their inclination. Learning in the context of present-biased preferencestypically refers to issues of self-control. Projection bias, however, is based entirelyon mistaken beliefs. In recurrent situations, a projection-biased person not onlyholds false beliefs about herself in a future state but must additionally remainunaware of her repetitive mistake. As another illustrative example, suppose aperson who is currently satiated falsely believes that she will prefer a salad toa meat at the next day’s lunch. Therefore, she preorders the salad and findsout on the next day that she would have liked the meat for lunch. If she againpreorders the salad instead of the meat on another day, the concept of projectionhe Behavioral Economics of Intrapersonal Conflict 12bias requires her to have forgotten her previous disappointment and to mispredicther desires during lunch once again. Importantly, in the concept of projectionbias, she preorders the salad because she believes at the time that this is whatshe wants for lunch on the next day, not what she thinks on the day of choosingshe should have for lunch the day after.Overall, the projection-bias interpretation of state-dependent behavior requiresa degree of forgetfulness about (dis)satisfaction with past choices in recurrent sit-uations that appears implausible for an otherwise fully rational person. At thevery least, the assumption regarding forgetfulness should be an explicit part ofthe concept. In recurrent situations, it is not sufficient that people systematicallymispredict their preferences in consumption-relevant states; they must also be for-getful with respect to past choices and corresponding experiences. This certainlyraises the question of what remains of rationality if people act “as if” they choosethe utility-maximizing consumption bundle, but unfortunately for the wrong set ofpreferences and with complete absentmindedness towards their own experiences.
About forty years ago, Thomas Schelling (1984b) proposed that we as economistsadmit “not only unidirectional changes [of preferences] over time, but changesback and forth at intervals of years, months, weeks, days, hours, or even minutes,changes that can entail bilateral as well as unilateral strategy” (p. 6). Schellingcalled these preferences “alternating preferences” and suggested understandingand modeling phenomena such as these as manifestations of multiple selves. Eachof these selves is characterized by its own preferences, which may be identical inmany respects. In some others, however, preferences may differ fundamentallyso that it seems impossible to compare utility differences between these selves oreven add up their utility collectively (Schelling 1984b). Schelling concluded that“this phenomenon of rational strategic interaction among alternating preferencesis a significant part of most people’s decisions and welfare and cannot be left outof our account of the consumer” (Schelling 1984b, p. 5). Economists, Schellingnoted, could of course ignore these phenomena, but if they do not, they should nothave major difficulties in understanding decision makers as a collection of multipleselves (Schelling 1984b). After all, he considered the “art of self-management” asan integral part of the conditio humana (Schelling 1978).Several decades and numerous empirical studies later, we know that prefer-ences can indeed fluctuate systematically, even in short time intervals. The phe-he Behavioral Economics of Intrapersonal Conflict 13nomenon of alternating preferences or, in today’s terms, recurrent situations ofstate-dependent preferences has become difficult to ignore. What in the interimseems to be somewhat forgotten is the idea that these preferences may not simplyadd up and may instead be expressions of different selves with their own rational-ity. The underlying similarity between Schelling’s (1984b) anecdote about himselfas a young boy who saw a movie about Admiral Byrd’s first Antarctic expeditionand subsequently decided to toughen himself against the cold and the observationin Conlin et al. (2007) that people tend to return cold-weather items in warmerperiods is utterly bizarre. The reasons for the relinquishment of warm blanketsor clothes may have been different in both cases, but the fundamental problemis the same. For Schelling (1984b), it was an illustrative example of alternatingselves, while for Conlin et al. (2007), it was an instance of suboptimal behaviorbased on biased predictions of future preferences.According to Spiegler’s (2019) critique of behavioral economics, the interpreta-tion of state-dependent behavior as a misprediction of one’s own preferences andthe resulting model of projection bias falls into the category of “functional-formstyle” modelling, where a standard economic model (here: intertemporal utilitymaximization with state-dependent preferences) is taken and the behavioral phe-nomenon is captured by an additional parameter. Spiegler (2019) points out thatthis type of modelling may distort our understanding of the actual underlyingproblem and urges putting a stronger weight on a more “conceptual framework,”especially in the study of behavioral economic phenomena. Regarding our con-text, we fully agree with Spiegler (2019), because the question of which of people’schanging preferences they themselves consider to be relevant is of fundamental im-portance for theorizing as well as providing policy advice.Moldoveanu and Stevenson (2001) argue that the Aristotelian view prevailingin the social sciences treats persons as unitary decision makers, while the less pop-ular Heraclitean view accepts that inner conflict is at the core of human existence.This latter view focuses on the processes and phenomena by which people resolvetheir internal conflicts. The concept of a person may be no less fuzzy than theconcept of, say, a firm (see also Parfit 1984). Cowen (1991) has noted that partic-ularly influential literature on self-management bifurcates persons into a long-run, The anecdote goes as follows: “As a boy I saw a movie about Admiral Byrd’s first Antarcticexpedition and was impressed that as a boy he had gone outdoors in shirtsleeves to toughenhimself against the cold. I decided to toughen myself by removing one blanket from my bed.That decision to go to bed one blanket short was made by a warm boy; another boy awoke coldin the night, too cold to go look for a blanket and swearing to return it tomorrow. But the nextbedtime it was the warm boy again, dreaming of Antarctica, who got to make the decision, andhe always did it again” (Schelling 1984b, p. 8). he Behavioral Economics of Intrapersonal Conflict 14rational self and a short-run, impulsive or “irrational” self. Because it analyzesthe strategies that the long-run self uses to induce cooperation from the impul-sive self, he refers to this literature as the “command view of self-management.”Cowen argues that good self-management instead unleashes forces that enablepersonality growth. Giving up the asymmetry between the two selves representsa right step in the direction of a new view of self-management that deemphasizescontrol.The labels “irrationality” and “bias” (see, e.g., Bernheim and Rangel 2007) areimportant weapons in the new paternalists’ campaign against the self-determinedcitizen. Behavioral paternalists frequently use the notion of multiple selves (e.g.,Thaler and Shefrin 1981; Bernheim and Rangel 2004). In fact, they are dedicatedAristotelians in modeling torn persons as unitary decision makers who happento have a hyperbolic discounting function or other biases. Originally, the Aris-totelian view used to emphasize normative individualism—i.e., the dictum thatyou can’t argue about taste (Stigler and Becker 1977). This changes dramaticallywhen the view is complemented with the attribution of behavioral biases. Theexponential discounting function, for instance, then becomes a person’s telos andthus a normative benchmark. However, the behavioral paternalists’ conceptionof rationality may be overly narrow (Rizzo and Whitman 2019). Intrapersonalconflict may not be reducible to myopia whereby an impulsive self does not in-ternalize the effect of its “selfish” behavior on future alter egos. On the contrary,the impulsive self may be the only self that understands the true magnificence ofa blissful moment of indulgence (Schelling 1984a). The Heraclitean perspectivecasts doubts on the naturalness with which the new paternalists take sides.he Behavioral Economics of Intrapersonal Conflict 15
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