Short Sightedness

Years go falling in the fading light
--Al Stewart

"Why are people so shortsighted these days?" "It seems like people are becoming so short-term oriented."

I hear these kind of statements frequently. One factor that contributes to a shrinking time horizon is debt and leverage.

Borrowing resources enables people to further satisfy their 'now preference' by elevating consumption today. Saving is sacrificed in the name of instant gratification.

Debt also creates conditions of leverage. People are more sensitive to changes in the here and now because of increased risk of insolvency. People must react quickly and sometimes extremely to avoid balance sheet collapse.

Time preference increases as people shift into survival mode brought on by leverage.

As debt and leverage increase, so does shortsightedness.