Production & the Market Process

Robert P. MurphyMises AcademyAugust 3, 2011

Lecture 3: 2nd Half of Chapter 6 of Man, Economy, and State

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

I. Individual Time-Preference Scale

II. Individual Time Preference Schedule

III. Supply and Demand Curves in “Time Market”

IV. The Law of Time Preference

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.

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.

C. Alleged Counterexamples

V. Importance of Gross Saving

VI. Critique of “Loanable Funds Market” Approach