Ask a regular Joe about time preferences and they’ll be clueless. Heck, ask anybody who isn’t initiated in Austrian Economics and you’d expect a similar response. It’s a shame that such a crucially important topic is overlooked and ignored by economists and other social scientists.
One’s time preference refers to how much he values present consumption over future consumption. Someone with a relatively high time preference generally prefers to consume now as opposed to later, even if forgoing immediate consumption would result in a greater number and/or quality of future goods. A relatively low time preference is simply the inverse. Originally, the theory of time preference was elaborated by Eugen Bohm-Bawerk and William Stanley Jevons to explain interest rates on loans in the free market. Interest rates are prices determining how much the creditor wishes to forgo present consumption for future profit. Currently, interest rates are manipulated by central banks, disregarding time preferences, which causes other problems such as setting the boom/bust cycle (a.k.a business cycle) in motion.
Time preferences dictate our lives and the behavior of society in general. Time preferences can make or break civilizations. Society is merely the extension of the family and as Milton Friedman famously pointed out, we are a society of families and not individuals. Understanding this point is key to understanding why low time preferences construct civilization. Low time preferences elicit discipline, foresight, and strategy as the individual becomes more future-oriented. To ensure that a person’s children receives the best possible upbringing, parents must have low time preferences to save, pay bills and leave behind a formidable inheritance. A healthy society’s individual plans far beyond his own lifespan to provide for his offspring. Children motivate the individual to work hard, further his career, make well-aimed investments, and to provide his child with the best education. None of these things can be done without stringent self-improvement. If one is to rise through the ranks in his career or in his business, then he has to become a scarce and irreplaceable member of society through his indispensable specialization. This, of course, requires plenty of learning and avoidance of activities which may impede his self-edification. For the greater society, peaceful interactions with the local community and law-abidance also serve as indicators of relatively low time preference behaviors. Forming bonds takes time and patience. Big city life where individuals primarily exhibit high time preferences, tends to be more unpleasant than in rural areas. This is largely because of ethnic heterogeneity and less usable time to invest in fellow denizens.
Sadly, western societies are becoming increasingly overcome by high-time preferences. Individuals have become very egoistic, hedonistic, solipsistic, nihilistic and indolent. Instead of choosing a productive lifestyle, individuals have elected a life of pleasure-seeking and instant gratification. Instead of self-improvement, there is self-degradation. Instead of thrift, there is profligacy. With high time preferences, there is promiscuity and carelessness, leading to unwanted pregnancies. After flings or throwing caution to the wind with irresponsible sexual partners, single motherhood rates increase. With no male presence in the household, the mother has little choice but to resort to welfare participation or severely hampering her career potential by settling for a low-income job. A fatherless upbringing is one of the worst things the child can be subjected to; as criminality, risk of abuse, mental problems, truancy, and early sexual activity all increase. The child from a single parent household is also likely to emulate the same behaviors of their parent and slip into the cycle. High time preferences place a tremendous burden on the productive in a statist society as poor behaviors such as criminality, drug addiction, alcoholism, voluntary unemployment, violence and costs from their consequent effects are externalized onto the taxpayer. Our great redistributionist social-democratic welfare States help create the aforementioned poor behaviors and drives up time preferences of all members of society.
The welfare State in a nutshell, takes from productive individuals and hands it to largely nonproductive individuals. Immediately, productive individuals subject to higher tax levels become disincentivized to work longer hours or to self-improve, as their marginal utility for extra income in exchange for more work becomes lower than their disutility for work and marginal utility for leisure. Progressive taxation and higher taxation on productive individuals makes raising a family less affordable as a large portion of their income is siphoned away. Nonproductive individuals have a positive incentive to have more children as they receive more welfare stipends per child. Welfare participants also have incentives in place to stop them from engaging in productive labor or a two-parent household as their potential earnings would diminish. Nonproductive individuals are, on the whole, far less intelligent than productive individuals. In terms of intelligence for children, the apple doesn’t fall too far from the nonproductive tree. And the chances are, their children won’t amount to more than a net drain on society; yet more are born, become sexually active younger and have more children than society’s productive citizens, creating a wildly unsustainable welfare State, forcing politicians to print and borrow to keep these social malcontents content for another election cycle.
This ignites another problem. There exists an enormous temptation for politicians to keep the social parasites pleased as long as they’re in office. These social parasites don’t just include long-term welfare recipients, but also lobbyists. By inflating the money supply, politicians can pay off welfare recipients for the rest of an election cycle, but also keep interest rates low and/or subsidize big business. Keeping interest rates low through monetary/credit expansion revs up the business cycle, leading to an eventual crash. Monetary inflation leads to price inflation which pressures middle-class families into making more rash economic decisions as prices rise against their real incomes.
Eventually, their real incomes lose value against the prices of common goods. Inflation, coupled with progressive taxation, discourages long-term economic planning for the family as less disposable income is now available. And, as I previously mentioned, raising a child becomes increasingly difficult. Furthermore, if the middle-class family does decide to raise a family, the financial strain usually results in both parents entering the workforce. When this happens, the earnings potential for the family unit decreases against one sole parent in the workforce. This is because one parent in the workforce can focus on their career or business, rather than shouldering a considerable share of the housework as well. As potential earnings are less, there is less disposable income to invest or save for the future. Now, that economic decisions are more present-oriented, the time preferences for both parents increase as the choice of future consumption no longer becomes optional. An extra financial strain has now been placed on the family unit. Apart from an ever-decreasing relative disposal income, small savings become increasingly undesirable as measly interest rates offered by banks fall far short of the percentage increases in price inflation. And just like in the Weimar Republic, we witness a watered down version of a ‘flight into real values’, where individuals try to exchange their fiat currency for non-monetary assets or services as paper money’s exchange value noticeably falls.
State pensions have been a particularly cruel Ponzi scheme that has risen individual time preferences. The onus of saving for one’s future has been lifted and unchallenged due to the widespread misconception of the financial security in the State. Now that many individuals no longer worry about their retirement, they’re further disincentivized to build a nest-egg for their old age. Without the need to build a large nest egg, there is less need for self-improvements or longer hours at work, adding value to society in the process. State pensions also remove another necessity to raise a strong family: so that the children may help look after their parents in their old age. Given the widening disparity of childbirths between productive and nonproductive individuals, we’re to expect an inexorable shift towards social stultification, cultural decay, and moral perversion.
After a while, we shall see a gradual decline into capital consumption, reduction in the standard of living and eventually barbarism. Imagine as society where everyone lived for the moment. No future planning would take place, everyone would consume what they had today and nobody would bother with self-improvement. We see examples of this all the time. Many individuals partake in self-degradation, hedonism and deliberately avoid more rewarding lifestyles. Western civilization is coming to a grinding halt as there is such a lazy expectation for the State to step in to solve their problems. What they don’t realize is that individual members in the State are affected by a disutility for labor and self-interest too. And, unlike a business, the State doesn’t have to turn a profit, which means that it doesn’t matter how you as an individual are treated by an agent of the State. Our high time preferences solicit State intervention when it is statism itself that has engendered our high time preferences. A hundred years ago, the size of our governments would have been inconceivable. Reliance on the State breeds apathy towards our fellow man and weakens in-group preferences as we turn to the State instead of our neighbor in times of need. At a time where multiculturalism has become a cherished mainstream position, undermining our in-group preference will be a devastating move for native Westerners. Charity and sociability are both traits of low time preferences, and both begin to vanish with the growth of the State, adding to our social withdrawal.
Unless something drastic happens, the West is doomed. It is of the utmost importance that time preferences are learned about and spoken of in public. I have outlined some general causes of high time preferences and I believe that reversing these policies will begin to put Western Civilization back on track. Our high time preferences have left us selfish, petulant, degenerate, prurient, infantilized, rude, backstabbing, untrustworthy and irresponsible. They’ve left us predisposed to voting in larger and more powerful governments, like alcoholics attempting to drink themselves sober. Cries for more social programs in the name of progress, while utterly disregarding our gaping deficits and bottomless national debts. So long as they, the progressive moralists and economic parasites, get theirs; who cares about the future? As long as I can posture, call for open borders, smear anybody who dares to question my progressive views with epithets, I know I’ve done the moral thing – the State-funded media told me and showed me a tear-jerking picture of a dead child either bombed by the very same State or killed by their parents’ negligence. At the moment, we are acting like children. We need to relearn personal responsibility and to wean ourselves off the toxic teat of the State. The State keeps us in a permanent state of childhood. It’s time to wake up. It’s time to grow up.