jmherbenerCertainly, our time preferences can be raised by government policies, social security being a prime example. Trade deficits could be caused by currency manipulations of the government. Monetary inflation and credit expansion can increase our consumption by lowering interest rates.
And, hypothetically, if everyone in the world had extremely high time preferences, then we would begin to consume our capital stock and our standards of living would collapse. But our world economy is not like that, at least not yet. As we would expect, there is a spectrum of time preference that people have from extremely low, like the Chinese who currently save 45 percent of their incomes, to extremely high, like those in Denmark who have slightly negative saving rates.
So, in our world, people with different time preferences mutually satisfy them through lending and borrowing. Because all these different people live in an integrated market economy, they all enjoy the standards of living that the division of labor and capital stock built from the past produce. Those with higher time preferences shift their lifetime income from the future toward the present. By borrowing. they are able to consume more than they otherwise could sooner and must consume less than they otherwise could later. But their lifetime consumption is determined by their lifetime production. Those with lower time preferences shift their lifetime income from the present toward the future. By lending, they must consume less than they otherwise could sooner and get to consume more than they otherwise could later. But their lifetime consumption is also determined by their lifetime production.