We integrate time-inconsistent decision making due to hyperbolic discounting into a gerontologically founded life cycle model with endogenous aging and longevity. Individuals can slow down aging and postpone death by health investments and by reducing unhealthy consumption, conceptualized as smoking. We show that individuals continuously revise their original plans to smoke less and invest more in their health. Consequently, they accumulate health deficits faster and die earlier than originally planned. This fundamental health consequence of time-inconsistency has not been addressed in the literature so far. Because death is endogenous, any attempt to establish the time-consistent first-best solution by manipulating the first order conditions through (sin-) taxes and subsidies is bound to fail. We calibrate the model with U.S. data for an average American in the year 2012 and estimate that time-inconsistent health behavior causes a loss of about 4 years of life. We show how price policy can nudge individuals to behave more healthy such that they actually realize the longevity and value of life planned at age 20.
Keywords: Aging; Health behavior; Health policy; Longevity; Present bias; Time-inconsistency.
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