□ Wujin Chu, Dean of the Graduate School of Technology and Innovation Management at DGIST (President Kunwoo Lee), has, by advancing the “dual-self theory,” developed a new life-cycle-based “optimal saving model” that reflects human psychological friction.
□ At the core of the dual-self theory is the idea that people comprise both a “myopic doer,” who seeks immediate gratification, and a “farsighted planner,” who plans from a long-term perspective, and the conflict between these two selves shapes economic choices. However, existing dual-self saving models assume an infinite lifetime, leading to the unrealistic conclusion that people save at a constant rate throughout their lives.
□ To overcome the limitations of existing theory, Wujin Chu incorporated the fundamental reality that human lifespans are finite, extending the existing discrete model into a finite-horizon model based on continuous time.
□ By applying the calculus of variations, a new optimal saving function was derived, which showed that people maintain a high and stable saving rate through middle age, but sharply reduce their savings and increase consumption as they enter old age and their remaining lifespan declines. This provides a rigorous mathematical demonstration of real-life asset management patterns across the human life cycle.
□ In particular, the study clearly distinguished between the effects of human “impatience (discount rate)” and “impulsivity (self-control costs)” on savings. It found that people with greater impatience began reducing their savings earlier in old age and experienced a steeper decline, while those with stronger impulsivity had substantially lower savings levels throughout their lives.
□ Wujin Chu, Dean of the Graduate School of Technology and Innovation Management at DGIST,[A1] said, “This study transcends the limitations of existing theory and offers a realistic answer to how people can optimize savings across their entire lives,” adding, “It is expected to serve as an important theoretical foundation not only for life-cycle-based financial planning for individuals, but also for the development of national pension and retirement policies.”
□ The findings of this study, conducted in collaboration with Gyujin Kim, a student from the Department of Physics and Astronomy at Seoul National University, were published in the “Journal of Behavioral and Experimental Finance,” a leading international academic journal in the field of behavioral and experimental finance.
