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The relationship between wealth or income and time preference is empirical, not apodictic: a critique of Rothbard and Hoppe

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Abstract

There is no doubt that when income or wealth increases, impatience for present goods declines. When time preference for the present falls, interest rates decline as well. But is this phenomenon a necessary condition of human action as Rothbard and Hoppe contend? This is widely thought to be true when a man is on the very verge of death. There is an aphorism according to which “a drowning man will grasp even at the blade of a sword.” In this view, someone who is starving will not postpone the consumption of food for tomorrow that is necessary to keep him alive today. But we disagree. And what is the situation under more ordinary circumstances far removed from starvation? We argue in this paper that, contrary to Rothbard and Hoppe, under these conditions it is a reliable but only a broad empirical generalization that time preferences and interest rates are inversely related to wealth or income, it is not a matter of praxeology.

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Authors and Affiliations

  1. Department of Economics, Joseph A. Butt, S. J. College of Business Administration, Loyola University New Orleans, New Orleans, Louisiana, 70118

    Walter Block

  2. Joseph A. Butt, S. J. College of Business Administration, Loyola University New Orleans, 6363 St. Charles Ave., New Orleans, LA, 70118

    William Barnett II (Harold E. Wirth Endowed Chair in Economics)

  3. Lubin School of Business, Pace University, One Pace Plaza, New York, N.Y., 10038

    Joseph Salerno (Chase Distinguished Professor of International Business and Professor of Economics)

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  1. Walter Block
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  2. William Barnett II
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  3. Joseph Salerno
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Correspondence to Walter Block.

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Block, W., Barnett, W. & Salerno, J. The relationship between wealth or income and time preference is empirical, not apodictic: a critique of Rothbard and Hoppe. Rev Austrian Econ 19, 69–80 (2006). https://doi.org/10.1007/s11138-006-6094-8

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