Which term refers to prioritizing short-term gains over long-term welfare?

Which term refers to prioritizing short-term gains over long-term welfare?

• A. Long-Termism
• B. Short-Termism
• C. Intertemporal Optimization
• D. Weighted Average Cost of Capital

Answer: (B)

The idea being tested is time preference: whether decisions value present benefits more than future ones. Short-termism is the tendency to prioritize quick gains now, even if this reduces welfare in the future. This matches the description of prioritizing short-term gains over long-term welfare. For example, a firm cutting maintenance or R&D to boost current profits or a government boosting spending this year to win votes illustrates short-termism in action. Long-termism would focus on outcomes over the entire horizon, intertemporal optimization is the method of balancing costs and benefits across time, and the weighted average cost of capital is a financing measure, not a preference about time.

The idea being tested is time preference: whether decisions value present benefits more than future ones. Short-termism is the tendency to prioritize quick gains now, even if this reduces welfare in the future. This matches the description of prioritizing short-term gains over long-term welfare. For example, a firm cutting maintenance or R&D to boost current profits or a government boosting spending this year to win votes illustrates short-termism in action. Long-termism would focus on outcomes over the entire horizon, intertemporal optimization is the method of balancing costs and benefits across time, and the weighted average cost of capital is a financing measure, not a preference about time.