Friday, December 14, 2018

Hoffer on the Importance of Time Preference

While looking over recent posts of Terry Teachout's blog About Last Night, I came across a quotation from Eric Hoffer Teachout posted:

“One wonders whether a generation that demands instant satisfaction of all its needs and instant solution of the world’s problems will produce anything of lasting value. Such a generation, even when equipped with the most modern technology, will be essentially primitive—it will stand in awe of nature, and submit to the tutelage of medicine men.”

Eric Hoffer, Reflections on the Human Condition
Hoffer does not use the term time preference, but that is what he is talking about. If someone is not willing to forego present gratification, he will not be willing to save, but spend all his income on consumption. Without savings there can be no investment in capital maintenance let along accumulation. Productivity and incomes will fall, along with the standard of living.

On the other hand, if we have social institutions that foster the accumulation of capital and if people have low enough time preferences, capital accumulation and prosperity will follow. As Mises puts it in Human Action (p. 562):
The characteristic mark of economic history under capitalism is unceasing economic progress, a steady increase in the quantity of capital goods available, and a continuous trend toward an improvement in the general standard of living.

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