Abstract
Time preference is the insight that people prefer ‘present goods’ (goods available for use at present) to ‘future goods’ (present expectations of goods becoming available at some date in the future), and that the social rate of time preference, the result of the interactions of individual time preference schedules, will determine and be equal to the pure rate of interest in a society. The economy is pervaded by a time market for present as against future goods, not only in the market for loans (in which creditors trade present money for the right to receive money in the future), but also as a ‘natural rate’ in all processes of production. For capitalists pay out present money to buy or rent land, capital goods, and raw materials, and to hire labour (as well as buying labour outright in a system of slavery), thereby purchasing expectations of future revenue from the eventual sales of product. Long-run profit rates and rates of return on capital are therefore forms of interest rate. As businessmen seek to gain profits and avoid losses, the economy will tend toward a general equilibrium, in which all interest rates and rates of return will be equal, and hence there will be no pure entrepreneurial profits or losses.
This is a preview of subscription content, log in via an institution.
Buying options
Tax calculation will be finalised at checkout
Purchases are for personal use only
Learn about institutional subscriptionsBibliography
Bailey, S. 1825. A critical dissertation on the nature, measure, and causes of value. New York: Kelley, 1967.
Böhm-Bawerk, E. von. 1884–9. Capital and interest, vols. 1–2, 4th ed. South Holland: Libertarian Press, 1959.
Fetter, F.A. 1902. The ‘roundabout process’ in the interest theory. Quarterly Journal of Economics 17: 163–180. Repr. in Fetter (1977).
Fetter, F.A. 1915. Economic principles, vol. 1. New York: The Century.
Fetter, F.A. 1977. In Capital, interest, and rent: Essays in the theory of distribution, ed. M. Rothbard. Kansas City: Sheed Andrews and McMeel.
Fisher, I. 1907. The rate of interest. New York: Macmillan.
Fisher, I. 1930. The theory of interest. New York: Kelley & Millman, 1954.
Gordon, B. 1975. Economic analysis before Adam Smith: Hesiod to Lessius. New York: Barnes & Noble.
Kauder, E. 1965. A history of Marginal utility theory. Princeton: Princeton University Press.
Longfield, S.M. 1971. In The economic writings of Mountifort Longfield, ed. R.D.C. Black. Clifton: Kelley.
Menger, C. 1871. In Principles of economics, ed. J. Dingwall and B. Hoselitz. Glencoe: Free Press, 1950.
Mises, L. von. 1949. Human action: A treatise on economics, 3rd revised ed., Chicago: Regnery, 1966.
Monroe, A., ed. 1924. Early economic thought. Cambridge, MA: Harvard University Press.
Noonan, J.T. Jr. 1957. The scholastic analysis of usury. Cambridge, MA: Harvard University Press.
Rae, J. 1834. Some new principles on the subject of political economy. In John Rae: Political economist, ed. R.W. James. Toronto: University of Toronto Press, 1965.
Turgot, A.R.J. 1977. In The economics of A.R.J. Turgot, ed. P.D. Groenewegen. The Hague: Martinus Nijhoff.
Wicksell, K. 1911. Böhm-Bawerk’s theory of interest. In Selected papers on economic theory, ed. E. Lindahl. Cambridge, MA: Harvard University Press, 1958.
Wicksell, K. 1924. The new edition of Menger’s Grundsatze. In Selected papers on economic theory, ed. E. Lindahl. Cambridge, MA: Harvard University Press, 1958.
Author information
Authors and Affiliations
Editor information
Copyright information
© 2018 Macmillan Publishers Ltd.
About this entry
Cite this entry
Rothbard, M.N. (2018). Time Preference. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_1896
Download citation
DOI: https://doi.org/10.1057/978-1-349-95189-5_1896
Published:
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-95188-8
Online ISBN: 978-1-349-95189-5
eBook Packages: Economics and FinanceReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences