What are infinite-horizon models?

Infinite-horizon models are like planning for life, not just a single day or even a few days.

Imagine you're playing a game where you can keep taking turns forever, there's no end in sight. That’s what an infinite-horizon model is: it helps us think about choices we make today that will affect the future, not just tomorrow or next week, but all the way into the far distant future.

Think of it like saving up for a never-ending adventure. Every time you save a coin, you're preparing for something exciting that might happen later, maybe a big journey, a new toy, or even a surprise party. You don't know when the adventure will start, but you keep saving anyway because you want to be ready.

In real life, this kind of thinking helps people and businesses decide things like how much to save each month, how many hours to work, or what investments to make, all with the idea that they'll be making these choices for a long time, maybe even forever.