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Production & the Market Process
Robert P. MurphyMises AcademyAugust 3, 2011
Lecture 3: 2nd Half of Chapter 6 of Man, Economy, and State
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2nd Half ofChapter 6 of MESI. Individual Time-Preference
Scale
1. Individual TP Schedule
2. Supply and Demand Curves in “Time Market”
3. The Law of Time Preference
V. Importance of Gross Saving
VI. Critique of “Loanable Funds Market” Approach
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I. Individual Time-Preference Scale
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II. Individual Time Preference Schedule
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III. Supply and Demand Curves in “Time Market”
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IV. The Law of Time Preference
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A. Typical Statements
Other things equal, present goods are preferred to future goods.
OR
Other things equal, an individual prefers a given satisfaction in the present to the same satisfaction in the future.
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B. Mises’ Arguments
Without time preference (and its consequence, positive interest rates), people would not pay finite prices for land, which can yield its services indefinitely.
Picture an immortal being who didn’t prefer to achieve an end sooner rather than later. He wouldn’t bother acting today, but then he wouldn’t act tomorrow either when faced with same choice.
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C. Alleged Counterexamples
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V. Importance of Gross Saving
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VI. Critique of “Loanable Funds Market” Approach