Human beings seem to be filled to the brim with this uncontrollable, driving force; a force that brings us miniscule amounts of pleasure, yet makes us animals in the way we chase its gratification. It reigns above logic in many cases, pulling our mind’s strings, and keeping us in its unforgiving cycle. However desire does not hide from the world of economics: we see its effects in abundance if we look into where and how consumers spend their money.
A study conducted in 2024 decided to look into a phenomenon titled ‘hyperbolic discounting’ - zooming into how humans decide to spend money on short term ‘irrational’ purchases rather than in more logical ways. The study states: ‘when future benefits are excessively devalued, individuals may opt for choices that provide immediate satisfaction but lower overall utility over time.’ The key phrase being ‘immediate satisfaction’ - a clear sign that people’s decisions are geared towards short term pleasure.
The study goes on to state the importance of financial literacy, and shows, with examples, how it can mitigate the bias and push people towards making more mature financial decisions. However the downsides to phenomena such as hyperbolic discounting are also seen in a wider context in economics - an example being its effects on market volatility through premature liquidation.
A different study in 2025 linked hyperbolic discounting to investment, and described how hyperbolic discounters tended to have a lower liquidation threshold due to impulsive behaviour. This creates a longer term issue, as investors displaying this type of behaviour struggle to navigate markets in rough patches - leading to preventable consequences. These small losses add up, and link to a concept called systematic risk: where smaller, individual actions add up to produce large scale effects in the economy. Additionally, panic selling and undersaving lead to low amounts of consumer resilience - often needed after recessions.
Overall, desire leads a large part of our population into a position where decision making only lives in the short term and long term effects seem too distant to be a concern. This is why financial literacy is so important not to just hold, but share. Our economy works as a collective so it only makes sense that we follow, and keep sight of what really benefits us and not just receptors in our brain.
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