Christianity and Time Preference

Adaptation of a Swedish blog post.

If you are acquainted with “Austrian” economics, you know what is meant by “time preference”: it refers to the fact that, everything else equal, a need satisfaction today is more important and higher valued than the same need satisfaction  at some time in the future. You also know that time preference is the ultimate determinant of the level of profit and interest in the economy, of what is commonly called “originary interest”.[1]

Is time preference a good thing or a bad thing? Well, if we had no time preference at all, we would not consume anything in the present and save and invest everything we have. But this, of course, is not possible: if we consume nothing in the present, we would quickly starve to death, and then, what point would there be to saving and investing? (I know this is a drastic example.) But neither would it be a good thing if our time preference were infinite and we were to consume everything today with no provision at all for the future. So we weigh the past against the future and decide how much we can consume today against saving and investing for the future.

A poor man tends to have a higher time preference than a rich man. For example, a homeless person is not in a position to plan very far ahead; he lives “from hand to mouth”. A multimillionaire, on the other hand, does not have to worry at all about how to get his next meal or finding shelter for the night, and is in a position to plan how to best invest his millions. And the rest of us are somewhere in between those extremes.

On the other hand, even a poor man can have relatively low time preference – if he is struggling to rise above poverty. (Many millionaires have started their lives as relatively poor.) And the other extreme would be the worthless heir who is squandering his wealth.

Time preference also varies with age. A baby or a toddler has high time preference, simply because he is not yet aware of such a thing as a “future”. But it is rather early in life that a child starts to think about what he wants to become when he is grown up. And old people may have high time preference, because they do not have much of a future to plan for; but this is mitigated if one has heirs and cares for their future.

But what has Christianity to say about time preference? Let me quote the Sermon on the Mount:

Therefore I tell you, do not worry about your life, what you will eat or drink; or about your body, what you will wear. Is not life more than food, and the body more than clothes?  Look at the birds of the air; they do not sow or reap or store away in barns, and yet your heavenly Father feeds them. Are you not much more valuable than they?  Can any one of you by worrying add a single hour to your life?

And why do you worry about clothes? See how the flowers of the field grow. They do not labor or spin.  Yet I tell you that not even Solomon in all his splendor was dressed like one of these.  If that is how God clothes the grass of the field, which is here today and tomorrow is thrown into the fire, will he not much more clothe you—you of little faith?  So do not worry, saying, ‘What shall we eat?’ or ‘What shall we drink?’ or ‘What shall we wear?’  For the pagans run after all these things, and your heavenly Father knows that you need them.  But seek first his kingdom and his righteousness, and all these things will be given to you as well.  Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own. (Matthew 6:25–34.)

In short: Why care about the future? God will take care of you! Well, is God really taking care of the homeless? No. The homeless are able to survive, because they live in a world where even the poorest enjoy some standard of living – a standard of living provided by capitalists and business men, i.e. by people with a very low time preference. (For more on this, see George Reisman’s article In Praise of the Capitalist 1 Percent, also available on Reisman’s blog.)

Now, I do not think many Christians actually live by Jesus’ recommendation here – if they did, they would all be homeless and beggars, and if they live in a world of Christians following Jesus’ advice, from whom would they beg? – Nevertheless, this is what he preaches.

Is this idea compatible with capitalism or with civilization? The question is rhetorical.

[1]) See on this Eugen von Böhm-Bawerk, Capital and Interest, Vol. II, Book IV; Ludwig von Mises, Human Action, chapter XVIII. – On exactly how time preference determines the profit and interest rate, see George Reisman, Capitalism: A Treatise on Economics, especially p. 492ff.


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