Time preference

Time preference

Lately It is becomming important to describe economic reality in more efficient and clear ways than just presenting economic and statistical models which suffer from being complex and even a little bit confusing.

The time preference describes the relative valuation of receiving an economic good at an earlier date than receiving it later. One commonly find the time preference theory applied to the interest rate. But I would like to touch the subject around the fact that time preference defines the whole civilization process.

At the most basic setting we aknowledge that any production process involves the use of one or more factors. The finished production values more than the mere sum of the factors value. That is because time is involved here. And the more time needed to get desired outputs, the more valuable a product or service will be.

The fact is that present consumption is determined by past investment. In order to consume more goods previous time investment have been put in practice long ago. Actual economies are the outcome of previous man efforts in a continued and prolongued timeline since centuries ago.

It’s very intersting to understand that personal planning, ideas and beliefs applied to our daily life constitutes our time preference. Societies exhibiting high rates of wealth and development surely have a low time preference meaning they as a whole, prefer to deterr today consuption in order to save and invest to get in the future more and valuable outputs because of the time invested in the process. Sadly the contrary means a society showing high time preference, that is, consuming more than investing.

Now, It is obvious that planning more far away in time ensures higher levels of output and development. In fact this perfectly applies to the intimate and personal life of man and women. People who plan and invest correctly will get better outcomes, fulfilling familiar plans and endeavors. The contrary is a decivilization process, turning people to mere day by day consumers wasting time daydreaming or getting involved in destructive antisocial behavior.


Hans-Hermann Hoppe, 2001 “Democracy The God That Failed. The Economics and Politics of Monarchy, Democracy and Natural Order” Transaction Publichsers, New Brunswick, New Jersey