Exponential Growth Bias and the Law: Why Do We Save Too Little, Borrow Too Much, and Fail to React on Time to Deadly Pandemics and Climate Change?

By Doron Teichman & Eyal Zamir Many human decisions, ranging from the taking of loans with compound interest to fighting deadly pandemics, involve phenomena that entail exponential growth. Yet a wide and robust body of empirical studies demonstrates that people systematically underestimate exponential growth. This phenomenon, dubbed the exponential growth bias (EGB), has been documented in numerous contexts, across different populations, using both experimental and observational methods. Despite its centrality to human decision making, legal scholarship has thus far failed to...