Online Library of Liberty: Economics, vol. 1: Economic Principles

In all such cases and in so far as there is any conscious comparison whatever, it is the net desirability (net present value) of the future goods that is compared with the value of the present goods. If half of the apples probably will rot before it will be time to use them, the present value of the future apples, per bushel, must be somewhat more than twice as great as present apples to make a motive for keeping them, and further allowance must be made for trouble, expense, etc. But, as a part of the present apples are expected to spoil, they represent, and must be compared with, a smaller number of apples in the future. The physical change is an inevitable (or a practical) condition, of the time change. It is, so to speak, a function of time. It happens rarely, perhaps, that it is with respect solely to time, in simple, unadulterated form, that time-choice, timepreference, and time-value are presented to us. Time-value is the present valuedifference between the possible uses of a thing or group of things at different times. If therefore the lapse of time is accompanied by increase or decrease of quantity, or by gain or loss in quality, this enters into choice at the present moment.8

Undoubtedly, the importance of time in many acts of business life is well understood. “Time is money,” is a business maxim. But neither in business nor in the philosophical study of value has the omnipresence of the time element been fully appreciated. This chapter has, perhaps, served to show how time is a factor in practically all economic choice and in practically all valuation. Indeed, time-value and time-preference have aspects that transcend economics; they are universal phenomena of life and conduct.

We have now to see in the next chapter how time-preference is expressed in the values of goods and how in these valuations necessarily a rate of preference, a premium for time, comes to be expressed in each person’s valuations.

Note

Present and future goods, uses, desires. We may not the following distinctions to be kept in mind throughout our discussion.

Present goods are any goods actually available for choice at the present moment. These comprise not only goods that may be used directly, as immediately enjoyable, but indirect agents if present. Future goods are any goods that will not be available for choice until some future moment.

All ready durative goods contain either present or future uses, or both kinds. The uses contained in goods must be distinguished from the concrete goods themselves, e.g., the house from its use as a shelter, an ax from its cutting of the wood. (On this relation between the uses and concrete agents see above, chs. 11 and 12.) A future good when it arrives, may contain uses available at various economic periods. It is not unusual to speak of a choice between present goods and future goods when more exactly one should speak of a choice between present and future uses of goods. As any particular concrete good, as a field, a building, a machine, may be yielding indirect uses of many ranks, and of many degrees of futurity, the time differences involved in this process must be expressed in terms of the uses rather than in terms of the agents.

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Online Library of Liberty: Economics, vol. 1: Economic Principles

In every case the choice made is, at the moment when made, a present choice. We have no future desires tho we may have a present forecast of a future desire. “Future desires” means desires that will be present at some future time. Present desires are all those desires now being weighed in choice. Present desires may be either desires for present uses or for future uses (either in the same or in different goods). A present desire for future uses is but the anticipation of a future desire, tho the two may be of unequal magnitude. It appears therefore that all time-choices are, in the last analysis, reducible to choices between present desires for psychic-incomes occurring at different time-periods.

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