The Relationship between Wealth or Income and Time Preference is Empirical, Not Apodictic: A Critique of Rothbard and Hoppe

The Review of Austrian Economics, Vol. 19, pp. 69-80, 2006

12 Pages Posted: 7 Jul 2011  

Walter E. Block

Loyola University New Orleans - Joseph A. Butt, S.J. College of Business

William Barnett II

Loyola University New Orleans

Joseph T. Salerno

Pace University - Lubin School of Business

Date Written: July 5, 2011

Abstract

There is no doubt that when income or wealth increases, impatience for present goods declines. When time preference for the present falls, interest rates decline as well. But is this phenomenon a necessary condition of human action as Rothbard and Hoppe contend? This is widely thought to be true when a man is on the very verge of death. There is an aphorism according to which “a drowning man will grasp even at the blade of a sword.” In this view, someone who is starving will not postpone the consumption of food for tomorrow that is necessary to keep him alive today. But we disagree. And what is the situation under more ordinary circumstances far removed from starvation? We argue in this paper that, contrary to Rothbard and Hoppe, under these conditions it is a reliable but only a broad empirical generalization that time preferences and interest rates are inversely related to wealth or income, it is not a matter of praxeology.

Suggested Citation

Block, Walter E. and Barnett, William and Salerno, Joseph T., The Relationship between Wealth or Income and Time Preference is Empirical, Not Apodictic: A Critique of Rothbard and Hoppe (July 5, 2011). The Review of Austrian Economics, Vol. 19, pp. 69-80, 2006. Available at SSRN: https://ssrn.com/abstract=1879562

Walter E. Block (Contact Author)

Loyola University New Orleans - Joseph A. Butt, S.J. College of Business ( email )

6363 St. Charles Avenue
Box 15, Miller 321
New Orleans, LA 70118
United States
(504) 864-7944 (Phone)
(504) 864-7970 (Fax)

William Barnett II

Loyola University New Orleans ( email )

526 Pine Street
New Orleans, LA 70118
United States

Joseph T. Salerno

Pace University - Lubin School of Business ( email )

1 Pace Plaza
New York, NY 10038-1502
United States

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