WHAT IS PICOECONOMICS?

Picoeconomics (micro-micro-economics) explores the implications of an experimental discovery: that people (often) and lower animals (always) discount the prospect of future rewards in a curve that is more deeply bowed than a "rational," exponential curve. Over a range of delays from seconds to decades, there are pairs of alternative rewards such that subjects prefer the smaller, earlier reward over the larger, later alternative when delay to the smaller reward will be short, but prefer the larger, later reward when the smaller alternative will be more delayed, even though the time from the earlier to the later reward stays the same. The curves that fit the observed data best are hyperbolic, that is, show value as inversely proportional to delay.

The existence of regular temporary preferences for small-early rewards predicts the development of a relationship of limited warfare among successive selves. At any given moment, a person is motivated to lock in her current preferences by creating influences or commitments to constrain her own future choices. Such strategic behavior suggests that patterns seen in the interpersonal marketplace may underlie intrapersonal decision-making. The clearest implication is that the elusive power and freedom of the human will may represent an intertemporal bargaining situation analogous to a repeated prisoner's dilemma. Many other predictions are beginning to be explored.