Time Preference
TL;DR
Time preference is the ratio of valuation between a good today and the same good in the future.
Types of Time Preference
- High Time Preference: Valuing the present much more than the future. “I want it now.” This leads to consumption, debt, and decay.
- Low Time Preference: Valuing the future highly. Being willing to sacrifice consumption today to build a better tomorrow. This is the foundation of civilization.
Why It Matters
The quality of our money dictates our time preference:
- Hard Money (Bitcoin/Gold): Encourages Low Time Preference. If your money gains value over time, you are happy to wait and save.
- Soft Money (Fiat): Encourages High Time Preference. If your money loses value every year, you are forced to spend it immediately before it evaporates.
The Civilizational Cycle
Low time preference allows for Saving, which allows for Innovation, which leads to Prosperity. This cycle is what built the modern world, and it is what the fiat system is currently destroying.