TIME PREFERENCE (IMPATIENCE)

§2. Reduction to Enjoyment Income

What are these goods which are thus contrasted? Atfirst sight it might seem that the goods compared may-be indiscriminately wealth, property, or services. It istrue that present machines are in general preferred tofuture machines; present houses to future houses; landpossessed today to land available next year; presentfood or clothing to future food or clothing; present stocksor bonds to future stocks or bonds; present music to fu-ture music, and so on. But a slight examination will showthat some of these cases of preference are reducible toothers.

When present capital wealth, or capital property, ispreferred to future, this preference is really a preferencefor the income expected to flow from the first capitalwealth, or capital property, as compared with the incomefrom the second. The reason why we would choose apresent fruit tree rather than a similar tree available inten years is that the fruit yielded by the first will comeearlier than the fruit yielded by the second. The reasonone prefers immediate tenancy of a house to the right tooccupy it in six months is that the uses of the houseunder the first leasehold begin six months earlier thanunder the second. In short, capital wealth, or capitalproperty, available early is preferred to the capitalwealth, or capital property of like kind, available at amore remote time simply and solely because the incomefrom the former is available earlier than the income fromthe latter.

Thus all time preference resolves itself in the end intothe preference for comparatively early income over com-paratively remote, or deferred, income. Moreover, the

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