Reply To: Timing and time preference


Time preference refers to the universal preference every person has for a given satisfaction sooner instead of later. It operates in every inter-temporal choice, regardless of the goods involved. Whether or not a particular good renders the same or a different satisfaction when used at one moment in time instead of another is a separate question. But, as Rothbard puts it, the value scale is unitary. The human mind is able to compare all considerations relevant to choice when deciding to act. A person discounts, according to his time preference, the different future satisfaction to make it comparable to the present satisfaction.

Thus, in your example, it is time preference that dominates the choice between a greater satisfaction later and a lesser satisfaction sooner. After discounting the future satisfaction to take account of his time preference, the person prefers the present satisfaction.

This basic consideration of discounting future valuations is the ground for calculating the present value in money of future revenues to be earned from an investment in the market. If the discount is large enough and the future revenue small enough, then a person will not invest money today into such a project.