MichaelMatulef on Nostr: Constrained by time preference, man will only exchange a present good against a ...
Constrained by time preference, man will only exchange a present good against a future one if he anticipates thereby increasing his amount of future goods. The rate of time preference, which can be different from person to person and from one point in time to the next, but which can never be anything but positive for everyone, simultaneously determines the height of the premium which present goods command over future ones as well as the amount of savings and investment. The market rate of interest is the aggregate sum of all individual time preference rates, reflecting, so to say, the social rate of time preference, and equilibrating social savings (i.e., the supply of present goods offered for exchange against future goods) and social investment (i.e., the demand for present goods capable of yielding future returns).
No supply of loanable funds could exist without previous savings, i.e., without the abstention from some possible consumption of present goods. Furthermore, no demand for loanable funds would exist if no one were to perceive any opportunity to employ present goods productively (i.e., to invest them so as to produce a future output that would exceed current input). Indeed, if all present goods were consumed and none invested in time- consuming production processes, there would be no interest or time preference rate, or rather, the interest rate would be infinitely high, which outside of the Garden of Eden, would be tantamount to eking out a primitive subsistence living by encountering reality with nothing but one's bare hands and with nothing but a desire for instantaneous gratification.
- Hans-Hermann Hoppe
No supply of loanable funds could exist without previous savings, i.e., without the abstention from some possible consumption of present goods. Furthermore, no demand for loanable funds would exist if no one were to perceive any opportunity to employ present goods productively (i.e., to invest them so as to produce a future output that would exceed current input). Indeed, if all present goods were consumed and none invested in time- consuming production processes, there would be no interest or time preference rate, or rather, the interest rate would be infinitely high, which outside of the Garden of Eden, would be tantamount to eking out a primitive subsistence living by encountering reality with nothing but one's bare hands and with nothing but a desire for instantaneous gratification.
- Hans-Hermann Hoppe