Some folks seem to think that every person has a “time preference”. Some have a long one and others have a short one. This doesn’t seem right to me. Most people I know have a time preference that varies with circumstances and wants. For example, if I want a cup of coffee, I generally want it now and will go get one without delay. If I am thinking of buying a house, I’ll put a lot of study into it and account for long term considerations. I don’t have an invariant time preference module in my brain, and I reckon nobody else does either except in some pathological cases.
Some folks sometimes remark that poor people have a short time preference, as if their poverty is attributable to an unwillingness or inability to delay gratification. Why rent to own an appliance when you would be better off saving up and buying it outright? If you’re poor, you know that you will never be able to save up for that appliance and that you will never get it if you go that route. Now your choice is get it or do without it. If you want it, you’re going to have to rent to own or buy it on time. The issue of time preference isn’t so simple.
Why have children out of wedlock when you are young instead of getting established and finding a husband first? Is it because you can’t think ahead? No way. You know that you are never going to find a husband who will stick by you and support you and your children. Marriage isn’t going to happen, and it wouldn’t make any difference if it did. Your husband isn’t likely to have job benefits and property. It makes no sense for you to delay childbearing because your opportunity costs are all but nonexistent. You want children, and you don’t have any good reason not to have them now. You aren’t failing to take the long view. In fact, you’re taking it and making rational decisions based on your prospects.
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2 comments:
If you are talking about the praxeological concept of time preference, it is described as being either high or low, not long and short, so I'm not sure if you are refering specifically to this concept.
It describes an axiom of human behaviour, that we prefer satisfaction sooner rather than later, ceteris paribus. It says nothing about the seriousness of the satisfaction (coffee vs. housing), treating all preferences equally as wertfrei economics should.
General increases in consumption relative to saving, can be said to be caused by heightened time preference, usually caused by some form of government intervention which reduce the value of savings in comparison to expected gains from the increase of consumption.
Poor people, because their higher ratio of consumption to savings, are more effected by government policies which favor consumption over savings, and the purpose of the dismal science is just to note that fact, and not describing some imagined behaviour common to the poor volk in regards to their ability to withhold gratification.
Prof. Hoppe likes to stray into sociology, and attempts to meld these concepts into explanations that describe the present state of society. As all other things in life, I read his books with a lump of salt, as a lot of it came over as too elitist for my sentiments.
Iceberg, I think I understand it a little better thanks to your comment. However, the folks I was referring to don't seem to undertsand it either.
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