Intergenerational discounting & parental investment in education: Evolutionary basis for a zero discount rate heuristic

I will be presenting at the ‘Cooperation and Conflict in the Family’ conference – UNSW in Sydney, Australia from February 2-5 2014. This is a multidisciplinary conference drawing together evolutionary economics, sociology & anthropology.

ABSTRACT This paper discusses the absence of intertemporal discounting in human parent decision making behaviour associated with choices and investments in their children’s education. This behaviour is inconsistent with standard rational choice theory where parents should maximise the present value of the utility of their consumption choices over time. Nor is it consistent with behavioural economics’ expectation that individuals discount consumption choices across time periods hyperbolically. Parents applying a zero discount rate to the expected future returns from investments in their children’s education is however consistent with evolutionary theory. We propose that the proximate cause of this behaviour is a meta-heuristic, intergenerational temporal empathy, which is constructed from a core set of cognitive biases and heuristics so as to cancel out hyperbolic discounting behaviour normally associated with non-offspring investment related consumption across time periods. The ultimate cause of this meta-heuristic is to eliminate the propensity of hyperbolic discounting behaviour to under-invest in offspring development, thereby ensuring that inclusive fitness is maximised. Intergenerational temporal empathy also has characteristics of a positive feedback mechanism ensuring that beneficial educational strategies are propagated forward and may help explain divergent outcomes for low socio-economic groups where poor educational investment decisions tend to be reinforced across generations.

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