Author’s note: The main themes of this series are further expounded upon in my book Anarcho-Monarchism, which you can buy here.
Time preference is a measure of valuing present goods versus future goods. High time preference (hereafter HTP) is a condition of preferring present goods, of being unable or unwilling to wait before engaging in consumption. Low time preference (hereafter LTP) is an ability and willingness to save for the future. LTP requires both that the cost of waiting is sufficiently low and that one have the self-discipline to avoid the temptation of HTP. Note that if all else is equal, the value of a good is inversely proportional to the time that one must wait before making use of it. For practical purposes, people with LTP are able to invest more aptly than those with HTP, as they can put off their present wants more easily for the sake of their future wants.
LTP in Economics
Murray Rothbard claimed that there is no ethical or economic value which would place LTP above HTP, nothing that makes one inherently better than the other. He even criticized conservatives for favoring LTP as it is supposedly equivalent to HTP, at least in economic terms. When people derive more value from the present than from the future, then the total value in the economy is the same. LTP is only relevant insofar as an individual with LTP is able to have more value in the future while a person with HTP will have more value in the present, though at the cost of less in the future.
This is an extremely hedonic view of economics. Total value may be same in both cases, but people with HTP will still have less quantifiable wealth. In other words, any sane person with HTP would rather have LTP, as this would make them better able to accumulate wealth. The higher the time preference of a civilization, the more there is capital consumption at the cost of capital creation. As time preference approaches infinity, wealth creation halts and the economy will be on a downward trend, even under a completely free market system. The hedonistic HTP cannot be valued on the same level as the civilization-producing LTP in economic analysis.
But why is creating wealth objectively better than consuming wealth? Why should we inherently value civilization over decivilization? The answer to this is simple: we do so because that is the purpose of economics. We do not engage in economics simply to be a value-neutral observer treating all possibilities as having the same worth. Rather, we engage in economics to find the best way of organizing the economy. To say that HTP is equivalent to LTP as both produce the same amount of value is to say that communism is equal to capitalism, provided that equality is more valuable than food. It may be true that some people view the world in such a warped manner that they would rather not eat than have a boss, but this does not make their view of the world economically correct.
If our goal is to create civilization and prosperity, then it is necessary to embrace LTP in economics, as not doing so would ultimately lead us to ruin. This is done not to worship economic growth for the sake of economic growth, but for the sake of future generations and human development. The more capital is consumed, the less the next generation will have capital. The more the economy is developed, the fewer people have to live in misery and poverty. Growing the economy is a way in which we grow civilization, though it is not the entirety of creating civilization.
LTP and Civilization
LTP is vital in social organization; there can be no valuable social organization that is built around HTP. Social organization inherently means that each person puts aside their own goals and desires to some extent in order to cater to that which others want. For example, in the division of labor, people relegate themselves to the most important tasks, as they are the most profitable. These tasks are both the most socially important and the ones the person is most apt to undertake. When an occupation is highly priced on the market, it must also be in high demand and there must be large amounts of social gain from that occupation.
Furthermore, each person has to do the occupation they are the most capable of in order to maximize their potential on the market. This includes both professional training and natural proclivities. Thus, people put aside their own preferences to do work which will aid the community the most and thus benefit proportionally. The many people choose different work point is accounted for in the following sentence. In simpler terms, is that 90 IQ people do not become neurosurgeons and most choose to work in the highest paid occupation in which they are competent. (This is only false insofar as personal values and ethical principles become involved and price out some occupations on purely moral terms.) Accountability is required for social organization, and this is impossible to manifest with HTP. Though libertarians may turn their noses at the idea of being accountable to a society, it is a vital concept which needs swift integration to distinguish between aristocratic libertarianism and libertine individualism.
Social accountability, simply put, is the notion that people ought to do that which is in accordance with the norms of the wider society. It goes contrary to the libertine principle that all actions are acceptable as long as no force is initiated, provided that the wider society is in ignorance of them. Social accountability consists of trusting people with their privacy and trusting that they are good people even behind closed doors. This does not mean that we should break peoples’ doors in to guarantee that they are not engaging in degenerate behavior. Rather, this means that people ought to hold themselves accountable to the wider society and live up to the expectation that they are conducive to morality. We do not need to defend the undefendable, but focus on that which is moral and desirable.
HTP and Society
Social accountability is the direct counter-force to hedonism and degeneracy; it makes libertarianism compatible with morality. It is a civilizing force which, when coupled with individual liberty, creates the greatest form of society. This is a society in which the actions of all people are not only accountable to themselves, but where all people need to be accountable for their actions to the wider community. This does not mean that the collective is the base view of society; only that societies are generally better off when norms are respected. For example, one of the most vital norms for libertarians is the contract, which is ultimately a promise that should be kept. Promises are kept when people feel responsible to other people and feel that they need to take accountability of their actions in a social context.
However, when people have HTP, they are unable to be socially accountable because they are unable to see how their behavior impacts their society and their future. People cannot put aside their hedonistic desires unless they have LTP. Furthermore, the effects of LTP do not simply stop at social accountability. While social accountability is immensely important for aristocratic libertarianism, it is also true that LTP is conducive to other great virtues within a libertarian society. For example, if we are to have a libertarian society organized in such a manner that would be conducive to family, it must be a society that is LTP. Family is an extremely intensive endeavor without any material value in the present, at least in a society that does not use child labor. The only time when raising a family will be materially useful is in old age, when one needs their care. Having a family is a great drain on resources and as such, people with HTP will easily abandon all notions of a family. This is because they cannot put aside their present desire to consume over the future benefit of creation. Having a HTP society would not only result in capital consumption, but also in the non-replenishment of the foundation of a society; its people.
Creating LTP can be done in a few select ways, all of which can be understood best within the framework of interest rates. The goal is to create LTP in governance by organically causing interest rates to decline. When people place less value on the present over the future, they will settle with having a lesser premium for future goods. When people have a lesser premium for future goods, it means that they are willing to wait longer for goods and that they are willing to engage in civilizing production. Thus, when interest rates lower organically, people will move in the direction of LTP. If we lower interest rates inorganically, it does not change the fundamental society; it only creates a false sense of security.
Security is the first component to creating an LTP society. When a society is insecure, time preference is bound to increase. Conversely, the more security there is, the more LTP a society will be. When people can make plans and be sure that their capital will not be destroyed, they are able to delegate tasks and consumption to the future. When people are unsure whether or not they will even be able to consume in the future, they must have a higher time preference. This does not mean that security forces are inherently good. Both insurance and defense against aggression, the two services that provide material security, require upkeep. This means that the security provided must be valued against the costs of maintaining the systems of insurance and defense against aggression. Thus, a well-ordered defense force is integral to any form of civilization or social organization. But this is not an argument for the state; far from it. The state does not retain a well-ordered police, militia, or military. State-provided defense tends to have a negative impact on a society, as the state is a distinctly anti-social force. We need libertarianism precisely so that we can leave defense to the free market and not suffer state abuses.
Community itself also fosters LTP. When people are isolated, they default to HTP because there is no future for them. A community can provide this future as well as a sense of belonging and meaning. This allows LTP to form organically. Libertarians need to provide a future instead of submitting to the disheartening realities of the current condition. This is even more true with family itself, although incentivizing the most HTP people to raise a family is too dangerous to view as a desirable goal. A person who consumes too much in the present is incapable of providing for children, and even though having a child would lower one’s time preference, it might be insufficient for raising the child in a proper environment. Parents with HTP may also lack the necessary patience for raising a child.
Another way of creating LTP is to create prosperity. The more people have in the present, the more likely they are to put aside for the future. When people have their wants satisfied, they are less likely to consume and are thus more likely to invest. Investing into the future is facilitated by having past investment and current prosperity. In a situation of war rationing or otherwise general poverty, there will be a general sense of HTP because surviving the present becomes enough of an ordeal by itself.
The three best ways to create LTP are to create security, community, and prosperity. All of these go against the sort of libertine individualism that is prevalent in libertarian circles, and all of these are necessary to have a moral form of libertarianism. The need to integrate ethics beyond self-ownership, non-aggression, and private property into libertarianism is debatable, but if this is accepted, then LTP must be encouraged for all of the above reasons. We cannot benefit from an HTP libertarian society. The biggest problem in developing libertarianism is that it might result in a large-scale ghetto and create an undesirable social order; this must be avoided at all costs. Part XI will tackle the issue of immaterial externalities and the complicated situations therein.