Cooperating with yourself

Abstract

We address time-inconsistent decision making by studying two types of intrapersonal cooperation in the Ramsey model with quasi-hyperbolic discounting. First, we consider temporal selves following the Golden Rule principle (do unto others as you would have them do unto you). Second, we consider temporal selves following Kant's categorical imperative (act as you would want all others to act towards all others). We introduce the corresponding cooperative policies and characterize them for economies with respectively log-utility and Cobb–Douglas technology, and isoelastic utility and linear technology. We compare cooperative behavior with non-cooperative (naive and sophisticated) behavior in terms of saving rates, and show that intrapersonal cooperation improves welfare according to all commonly used welfare criteria.