Which mental phenomenon describes people underestimating future costs?

The correct answer is hyperbolic discounting. This concept refers to the tendency of individuals to favor immediate rewards over future benefits, leading them to underestimate the impact of future costs and consequences. When faced with choices that involve delayed gratification or future expenses, people often give disproportionate weight to the present moment, which results in a skewed perception of future costs.

Hyperbolic discounting arises from the natural human inclination to prioritize short-term gains, as immediate rewards tend to feel more tangible and motivating compared to the abstract notion of future benefits. Consequently, individuals may fail to fully appreciate how their current decisions can lead to significant future costs or losses.

Contextually, temporal myopia pertains to a limited perspective on time, particularly focusing on the near future and neglecting broader long-term implications. Future bias refers to a tendency to overestimate the importance of future events in comparison to the present. Present-focused thinking emphasizes the current moment and may lead to impulsive decisions without regard for future ramifications. While these concepts all relate to how individuals perceive time and make decisions, hyperbolic discounting specifically encapsulates the underestimation of future costs, making it the most appropriate choice for this question.