Time Preference

Shopping on line can be easy, simple and save you lots of money. It can also take a lot of your time, frustrate you, and result in unwanted purchases. Now the same can be said for regular high street shopping, but with the vast opportunity presented by the Internet it will pay you to spend a few minutes reading this and understanding how to better optimize your Time Preference shopping experience:

1. Compare - without doubt the biggest advantage that the Time Preference offers shoppers today is the ability to compare thousands of Time Preference at a time. This is a great thing, but not necessarily all the time! Too much can be daunting at times so take advantage of the great comparison sites and where possible let them do the hard work for you.

2. Research - if it has been said it will be on the internet. Ignorance is no longer a justifiable reason for buying the wrong thing. Take the time to research in detail everything that you could possible want to know about

3. Testimonials - don't know anybody that has bought a Time Preference? Wrong! If the Time Preference is good the internet will let you know. Use the Internet as a friend and get testimonials before you buy.

4. Questions - Got a question about Time Preference then search the Forums, FAQ's, Blogs etc. Don't be afraid to ask .....

5. Reputation - Never heard of the company selling Time Preference? Don't worry, no reason why you should know every company in the world, but you know someone that does! Use the internet to find out what people are saying about Time Preference and build up a picture of their reputation for sales, returns, customer service, delivery etc.

6. Returns - still worried that even after all of the above your Time Preference wont be what you want? Check out the returns policy. There is so much competition now that someone, somewhere is bound to offer the terms that you are comfortable with.

7. Feedback - happy with your Time Preference then let people know, after all you are depending on others people input in your buying decision, so why not give a little back.

8. Security - check for the yellow padlock on the Time Preference site before you buy, and the s after http:/ /i.e. https:// = a secure site

9. Contact - got a question about Time Preference, or want to leave a comment then check out the sites contact page. Reputable companies have them and respond.

10. Payment - ready to pay for your Time Preference, then use your credit card or PayPal! Be aware of companies that don't accept them, there may be genuine reasons but given the huge amount of choice you have when buying online there is no reason at all not to buy via credit card or PayPal.

In economics, time preference (or "discounting") pertains to how large a premium a consumer will place on enjoyment nearer in time over more remote enjoyment.

There is no absolute distinction that separates "high" and "low" time preference, only comparisons with others either individually or in aggregate. Someone with a high time preference is focussed substantially on their well-being in the present and the immediate future compared to the average, while someone with low time preference places more emphasis than average on their well-being in the further future.

Time preferences are captured mathematically in the discount function. The higher the time preference, the higher the discount placed on returns receivable or costs payable in the future.

The time preference that an individual exhibits at any given moment is determined by both their personal preferences and external circumstances. Thus, if one "prefers" to save his money but cannot do so in the present, he is still considered to have a high time preference. One of the factors that may determine an individual's time preference is how long that individual has lived. An older individual may have a lower time preference (relative to what he had earlier in life) due to a higher income and to the fact that he has had more time to acquire durable commodities (such as a college education or a house).

The time preference theory of interest is an attempt to explain interest through the demand for accelerated satisfaction. This is particularly important in microeconomics.

In the neoclassical economics theory of interest due to Irving Fisher, the interest rate determines the relative price of present and future consumption. Time preference, in conjunction with relative levels of present and future consumption, determines the marginal rate of substitution between present and future consumption. These two rates must necessarily be equal, and this equilibrium is brought about by the relative prices of present and future consumption.

Austrian School views The Austrian School sees time as the root of uncertainty within economics.

In his book Capital and Interest, the Austrian economist Eugen von Böhm-Bawerk built upon the time-preference ideas of Carl Menger, insisting that there is always a difference in value between present goods and future goods of equal quality, quantity, and form. Furthermore, the value of future goods diminishes as the length of time necessary for their completion increases.

Böhm-Bawerk cited three reasons for this difference in value. First of all, in a growing economy, the supply of goods will always be larger in the future than it is in the present. Secondly, people have a tendency to underestimate their future needs due to carelessness and shortsightedness. Finally entrepreneurs would rather initiate production with goods presently available, instead of waiting for future goods and delaying production.

By contrast, George Reisman says that time preference arises because of the possibility of being less able (say through injury or the effects of aging) or totally unable (through substantial incapacitation or death) to enjoy the use of goods in the futureReisman, pp55-56. The further into the future someone considers, the less likely it is that this someone will be able to enjoy the goods as much as they can be enjoyed now. The root of time-preference in Reisman's view is an internal risk premium that is specific to the owner of the goods, in contrast to an external risk premium that is demanded when the owner invests them in a production process or lends them to another. He then points out that the scarcity of capital combined with the uncertainties he raises, means that time preference is unavoidable and hence a minimum rate of return on that capital (such as in interest and normal profit) is always going to be required by suppliers of capital.

See also

Time value of money
Discounting
Discount function

Notes References George Reisman, (1998) "Capitalism: A treatise on economics", Jameson Books, Ottawa. ISBN 0-915463-73-3. Full book is available online.

Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, vol. 40(2), pages 351-401, June. A comprehensive review

In economics, time preference (or "discounting") pertains to how large a premium a consumer will place on enjoyment nearer in time over more remote enjoyment.

There is no absolute distinction that separates "high" and "low" time preference, only comparisons with others either individually or in aggregate. Someone with a high time preference is focussed substantially on their well-being in the present and the immediate future compared to the average, while someone with low time preference places more emphasis than average on their well-being in the further future.

Time preferences are captured mathematically in the discount function. The higher the time preference, the higher the discount placed on returns receivable or costs payable in the future.

The time preference that an individual exhibits at any given moment is determined by both their personal preferences and external circumstances. Thus, if one "prefers" to save his money but cannot do so in the present, he is still considered to have a high time preference. One of the factors that may determine an individual's time preference is how long that individual has lived. An older individual may have a lower time preference (relative to what he had earlier in life) due to a higher income and to the fact that he has had more time to acquire durable commodities (such as a college education or a house).

The time preference theory of interest is an attempt to explain interest through the demand for accelerated satisfaction. This is particularly important in microeconomics.

In the neoclassical economics theory of interest due to Irving Fisher, the interest rate determines the relative price of present and future consumption. Time preference, in conjunction with relative levels of present and future consumption, determines the marginal rate of substitution between present and future consumption. These two rates must necessarily be equal, and this equilibrium is brought about by the relative prices of present and future consumption.

Austrian School views The Austrian School sees time as the root of uncertainty within economics.

In his book Capital and Interest, the Austrian economist Eugen von Böhm-Bawerk built upon the time-preference ideas of Carl Menger, insisting that there is always a difference in value between present goods and future goods of equal quality, quantity, and form. Furthermore, the value of future goods diminishes as the length of time necessary for their completion increases.

Böhm-Bawerk cited three reasons for this difference in value. First of all, in a growing economy, the supply of goods will always be larger in the future than it is in the present. Secondly, people have a tendency to underestimate their future needs due to carelessness and shortsightedness. Finally entrepreneurs would rather initiate production with goods presently available, instead of waiting for future goods and delaying production.

By contrast, George Reisman says that time preference arises because of the possibility of being less able (say through injury or the effects of aging) or totally unable (through substantial incapacitation or death) to enjoy the use of goods in the futureReisman, pp55-56. The further into the future someone considers, the less likely it is that this someone will be able to enjoy the goods as much as they can be enjoyed now. The root of time-preference in Reisman's view is an internal risk premium that is specific to the owner of the goods, in contrast to an external risk premium that is demanded when the owner invests them in a production process or lends them to another. He then points out that the scarcity of capital combined with the uncertainties he raises, means that time preference is unavoidable and hence a minimum rate of return on that capital (such as in interest and normal profit) is always going to be required by suppliers of capital.

See also

Time value of money
Discounting
Discount function

Time preference - Wikipedia, the free encyclopedia
In economics, time preference (or "discounting") pertains to how large a premium a consumer will place on enjoyment nearer in time over more remote enjoyment.

Stern, Michael L.: Endogenous Time Preference and Optimal Growth
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Social Time Preference - SOAS Research Online
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