§ 4. Time-preference rate pervading an economy. The mere physical increments that result from any process or method of production are not necessarily value increments of the same magnitude. Indeed, we have no absolute stand ard by which to measure the magnitude of a person's valuations in two different periods, any more than we have to measure the magnitude of values in the minds of two dif ferent persons at the same time. If one values 100 present fruit now as much as he values 110 next year, we can not say that the 110 when they come will have a value 10 per cent greater than they have now. This year there may be an un usually small crop, next year there may be reason to expect an unusually large crop. Under the conditions one hundred present fruit may have a present worth of two hundred future fruit at the same time that many other choices indicate a time preference rate of not over 10 per cent. Again we must con fess that we have no absolute standard of values that can be carried over from one time period to another.
However, when we stand outside of an individual economy, overlooking the seasonal variations within the years and the changes in productive methods due to science and invention, and we see how on the average, year after year, choice is made, we could form some judgment of the person's prevailing or pervading rate of time-preference. Such a rate each indi vidual has; and these rates of individuals unite into a time price when two or more persons trade present for future pos session of goods. Just as the subjective, individual choices between any two commodities (Chapter 7, sections 3-7) enter into a market-price of objective goods, so the rates of time preferences of individuals trading in a market are adjusted to each other and result in a market-rate of time-preference.
§ 5. Time-preference and moral weakness. Economics touches frequently upon the borders of ethics, and it is well to observe here that abstinence is but an aspect of choice and will-power which has effects in the realm of moral as well as of economic values. If there were to be formulated an economics of personal conduct, it surely would give a large place to the comparison between present and future enjoy ments.
The problems of abstinence and time-value appear in prod igality, in much heedless pleasure, and in many forms of vice. Prudence, always included among the virtues, is the faculty of recognizing not only future costs and dangers to be avoided, but the greater future joys that may be gained at the price of present sacrifice. It is not without reason that in the disci pline of youth in civil and military life, the cultivation of thrift, order, and promptness are in every land deemed to be fitting means, when wisely employed, of developing moral virtues. Shiftlessness in the performance of tasks for one's
own good is almost certain to show itself in failure to fulfil agreements with others, resulting in excuses, falsehood, and degeneration of character.
Time-value is involved in prodigality. Often the estimate of the present good is unduly high, viewed in the light of wider experience. Goods that meet momentary desires make an exaggerated appeal to untrained minds. The child, the spendthrift, the savage, can not properly estimate the relative values of present and future. The drinker exchanges the hopes of a worthy life for the exhilaration of the spree. The reckless, underestimating the future penalties of disease, in sanity, and death, barter health and happiness to gratify the moment's impulse. Indulgence in social pleasures, if secured at the price of lost sleep, weakened health, and debauched character, are loans from the future made by youthful prod igals at usurious cost. If no one ever paid more than a moderate premium for the gratification of his present whims and impulses, most hospitals, drug-stores, and medical col leges would close, and half, if not all, the prisons would be empty.
§ 6. Beginnings of durative direct goods. The illustra tions of time-value thus far hav'e been of consumptive direct use of goods. (See the analysis in Chapter 11, section 1.) These are the nearest to psychic income, and in this class of cases time-value appears in its simplest form. Historically viewed, likewise, this is the starting point of time-value. The animals (with few exceptions) live only in the realm of value that contains present, direct, consumptive uses. The savage's range of vision and choice is wider, but still is limited mainly to direct present uses gained with such aid as his simple tools and weapons afford. He leads necessarily "a hand to mouth" existence. He has no surplus stock except by lucky chance. Lack of success for a few days in the everlasting search for food means hunger, then famine, and the diseases which al ways follow in its train. The increase of wealth in early times, therefore, took largely the form of larger stocks of di rect goods. Some of these were of a kind that could be kept, such as stores of vegetable food, flocks and herds of animals kept to be eaten, hoards of precious ornaments, more and better clothing and shelter, weap ons of the chase, horses, dogs, etc., which were valued also as direct agents in sport, not merely as means of getting food.