1.5: Long- Term Thinking
Ensure long- term thinking Other Information:
In traditional economics, decisions are utility- maximising. Agents rationally evaluate the consequences of their actions,
and take the decision that maximize their utility. However, it is well known that this rationalistic view does not fully capture
human nature. We tend to overestimate short- term impact and underestimate the long term (Saffo). In policy- making, short-
termism is a frequent issue. People are reluctant to accept short- term sacrifices for long- term benefits. Politicians have
elections typically every 5 years, and often their decisions are taken to maximize the impact "before the elections". There
is also the perception that layperson is less sensitive to long term consequences, which are instead better understood by
experts. Overall, long- term impact is less visible and easier to hide. As a result, decision are taken looking at short-
term benefits, even though they will bring long term problems. Climate change is a typical policy area where sub- optimal
decisions were taken because the short- term costs were considered to outweigh the long term consequences. The long term impact
was not visible, while the short term sacrifices were.
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