The paper "Golden Eggs and Hyperbolic Discounting" by David Laibson explores the dynamics of consumption and savings in individuals with hyperbolic discount functions, which imply dynamically inconsistent preferences. The model introduces an imperfect commitment technology: an illiquid asset that can be sold only one period before the proceeds are received. This setup allows consumers to track their income and explains why they have different marginal propensities to consume (MPCs) for different types of assets. The model suggests that financial innovation, which increases liquidity and eliminates implicit commitment opportunities, may have contributed to the decline in U.S. savings rates. It also implies that financial market innovations may reduce welfare by providing "too much" liquidity. The paper formallyulates these claims and provides equilibrium strategies for the consumption game, demonstrating that consumption is resource-exhausting and satisfies specific properties related to liquidity constraints and strategic decisions. The analysis covers comovement of consumption and income, aggregate saving, asset-specific MPCs, Ricardian equivalence, and the declining savings rates in the 1980s, offering insights into the complex interplay between economic behavior and financial innovation.The paper "Golden Eggs and Hyperbolic Discounting" by David Laibson explores the dynamics of consumption and savings in individuals with hyperbolic discount functions, which imply dynamically inconsistent preferences. The model introduces an imperfect commitment technology: an illiquid asset that can be sold only one period before the proceeds are received. This setup allows consumers to track their income and explains why they have different marginal propensities to consume (MPCs) for different types of assets. The model suggests that financial innovation, which increases liquidity and eliminates implicit commitment opportunities, may have contributed to the decline in U.S. savings rates. It also implies that financial market innovations may reduce welfare by providing "too much" liquidity. The paper formallyulates these claims and provides equilibrium strategies for the consumption game, demonstrating that consumption is resource-exhausting and satisfies specific properties related to liquidity constraints and strategic decisions. The analysis covers comovement of consumption and income, aggregate saving, asset-specific MPCs, Ricardian equivalence, and the declining savings rates in the 1980s, offering insights into the complex interplay between economic behavior and financial innovation.