I would first like to say I love this course and I think you have done a wonderful job on it. I just completed Human Action and now I am reading Man, Economy & State. I was wondering if I may ask you to clarify a concept for me? Murray Rothbard writes the following:
“If two consumer’s goods have the same expected marginal utility in daily serviceability and have the same period of waiting time, but one is more durable than the other, the actor will choose to invest in production of the former. On the other hand, if the total serviceableness of two expected consumer’s goods is the same, and their length or period of production is the same, the less durable good will be invested in, since it’s total satisfactions arrive earlier than the other.”
Any help is greatly appreciated. Thanks for your time.
Rothbard is dealing with the logical implications of time preference in this paragraph, i.e., the preference to have a given satisfaction sooner instead of later. Each consumer good has a period of production, i.e., the length of time necessary to produce the consumer good, and a duration of serviceability, i.e., the length of time the consumer good can be used before it is rendered useless.
The first case Rothbard looks at is between two consumer goods that have the same period of production and render the same satisfaction for each use, but one outlasts the other.
Symbolically, for two goods the period of production is days 1-5, the satisfaction per day of use is X.
Good 1: Day 1, day 2, 3, 4, 5; X, X, X, X, X, X.
Good 2: Day 1, day 2, 3, 4, 5; X, X, X, X, X, X, X, X, X.
Good 2 would be chosen over good 1. In other words, a person would choose the more durable good.
In the second case, the two consumer goods again have the same period of production, but now the same satisfaction for all uses (instead of the same satisfaction from each use).
Symbolically, production takes from day 1-5 for either good, the total satisfaction from using each good for its entire usable life is X:
Good 1: Day 1, 2, 3, 4, 5; X (evenly acquired each day over 5 days).
Good 2: Day 1, 2, 3, 4, 5; X (evenly acquired each day over 3 days).
Good 2 would be chosen over good 1. In other words, a person would chose the good that rendered the same satisfaction sooner rather than later.