Selecting for time consistency

03 Jul 2025

When coordinating investments in a common endeavor you must convince investors to stick to the plan. External factors constantly push against the plan’s success, and investors constantly watch each other to see if one or the other will break. Even if all lose by it, the first to break may lose the least by shaping the terms of defeat. Preventing breaks is an essential part of leadership.

It helps to make it common knowledge that breaking from the plan will be painful. The “self-enforcing agreement” literature is built around this idea: you can make an agreement work if you make unilateral (or “small enough”) deviations worse for the deviator than sticking to the plan. “Time consistency” means that if it is wise to initiate a plan, then it is wise to stick to the plan at any stage of its implementation. Negative consequences for deviation help enforce time consistency, as do histories of sticking to plans, and (of course) benefits from following the plans.

If you believe these models, whether the agreement has legal force or not is secondary to whether deviating from the agreement would hurt more than staying the course.¹ Presumably legal force always helps maintain agreements, or at least never hurts.

Sometimes you have to signal virtue

When you want subcontractors to choose cost effective options to ensure they’ll deliver on budget, you can incent them to do so by various contractual mechanisms. Cost effectiveness is generally a nice thing to have, all else equal. When you’re trying to coordinate investments it helps to increase the shareable portion of pie. But the essence of problems large enough to require cooperation is that great thrift by one is outweighed by moderate commitments from many. Sometimes you genuinely cannot do it alone. If you are going to make a durable and costly commitment to hunting a stag, you need to know that I will not leave you hanging.

Economic development is often a multi-period stag hunt. Sometimes investment architectures have to push for ex ante low-cost technologies to maximize use of the budget. But sometimes the initial investment decisions aren’t enough to guarantee the full trajectory of planned investments and benefits. In those cases, ex ante high cost technologies have the distinct merit of being costly. They are painful to abandon. Their opportunity costs reveal what one is willing to give up to pursue these benefits. High cost technologies can be credible signals of commitment to a venture and belief in its value proposition.²

Technology development is not as often a multi-period stag hunt. When you are pushing the envelope on what is possible or otherwise trying to make a gizmo work you are not, generally, in the same problem domain as “convincing people to not back out.” Cost effectiveness is more often a virtue than conveying credible commitment to a venture. There may be stag hunts within the lab but these tend to reflect general issues in teamwork and project management more than fundamental characteristics of the motivating problem.

Positive-sum solutions to multi-period stag hunts select for time consistency more than cost effectiveness. Hunting a stag requires cooperation. Lower costs can change a particular project from a stag hunt to something else, but short of that their effects on cooperation are, well, complicated. Maybe they make cooperation less costly and thus more sustainable; maybe they lower the relative cost of non-cooperative enterprises more than cooperative ones and have the opposite effect. Regardless, leadership in stag hunts is an equilibrium selection role, and time consistency is an equilibrium selection device. One way lead investors select equilibria where their plans receive more and broader support is by making credible, sometimes costly, commitments.

Values are coordination devices

Shared or mutually legible values are also a way to coordinate actions.³ If I am confident in the principles that guide your decision making, I can trust my understanding of your behavior and act accordingly. If we also share principles, we may find more mutually agreeable opportunities. Time consistency can be a side effect of this kind of alignment between partners. To the extent that successful stag hunts select for partners with shared or mutually legible values, they again select for time consistency.

Inspiring projects motivate extraordinary efforts, and credible promises of payoffs motivate commitment to long and expensive endeavors. Credible governments are positively selected for among early investors in certain advanced technologies. Space industrialization, like many large-scale endeavors, contains both technology and economic development problems.⁴ It is a multi-period stag hunt if ever there was one.

It sounds weird to say “like-minded parties need to virtue signal to find each other and coordinate successful advanced technology investments”, but here we are. Sometimes it’s worth paying for trust. To be clear, this isn’t an argument for any particular set of virtues or to sort along any particular characteristics. It’s more of a predictive or explanatory claim than a normative or aspirational one. It can just as well rationalize a club of spacefaring liberal democracies as it can a space station death cult.⁵ As leviathans step back from coordinating stag hunts and small game becomes scarcer, smaller players will be under greater pressure to coordinate their efforts. I expect costly signals and assortative matching on values to explain greater shares of new physical technology investments in the years to come.