By Insula Qui
Author’s note: The main themes of this series are further expounded upon in my book Anarcho-Monarchism, which you can buy here.
Introduction
Time preference is a measure of valuing present goods versus future goods. High time preference (hereafter HTP) is a condition of preferring present goods, of being unable or unwilling to wait before engaging in consumption. Low time preference (hereafter LTP) is an ability and willingness to save for the future. LTP requires both that the cost of waiting is sufficiently low and that one have the self-discipline to avoid the temptation of HTP. Note that if all else is equal, the value of a good is inversely proportional to the time that one must wait before making use of it. For practical purposes, people with LTP are able to invest more aptly than those with HTP, as they can put off their present wants more easily for the sake of their future wants.
LTP in Economics
Murray Rothbard claimed that there is no ethical or economic value which would place LTP above HTP, nothing that makes one inherently better than the other. He even criticized conservatives for favoring LTP as it is supposedly equivalent to HTP, at least in economic terms. When people derive more value from the present than from the future, then the total value in the economy is the same. LTP is only relevant insofar as an individual with LTP is able to have more value in the future while a person with HTP will have more value in the present, though at the cost of less in the future.
This is an extremely hedonic view of economics. Total value may be same in both cases, but people with HTP will still have less quantifiable wealth. In other words, any sane person with HTP would rather have LTP, as this would make them better able to accumulate wealth. The higher the time preference of a civilization, the more there is capital consumption at the cost of capital creation. As time preference approaches infinity, wealth creation halts and the economy will be on a downward trend, even under a completely free market system. The hedonistic HTP cannot be valued on the same level as the civilization-producing LTP in economic analysis.
But why is creating wealth objectively better than consuming wealth? Why should we inherently value civilization over decivilization? The answer to this is simple: we do so because that is the purpose of economics. We do not engage in economics simply to be a value-neutral observer treating all possibilities as having the same worth. Rather, we engage in economics to find the best way of organizing the economy. To say that HTP is equivalent to LTP as both produce the same amount of value is to say that communism is equal to capitalism, provided that equality is more valuable than food. It may be true that some people view the world in such a warped manner that they would rather not eat than have a boss, but this does not make their view of the world economically correct.
Read the entire article at ZerothPosition.com