Evaluating Utility Streams

This paper proposes a radical alternative to discounting utility streams that allows each payoff in a stream to be treated equally. It is based on the psychology of how humans perceive time—not as the objective clicking of time on a clock—but in terms of the incidents to which attention needs to be paid. The paper’s conclusions receive some support from the discovery of the Peak-End Rule, in which laboratory subjects recall only the worst and the last experience during painful episodes.