TIME PREFERENCE (IMPATIENCE)

story, but it represents the main parts relevant to thepresent problem.

All preference, therefore, for present over future goodsresolves itself, in the last analysis, into a preference forearly enjoyment income over deferred enjoyment income.This simple proposition would have received definite at-tention earlier in the history of economics had there beenat hand a clear-cut concept of income. The stream offuture enjoyment income plays the essential role.

But, as explained in Chapter I, for practical purposeswe may well stop at the objective services of wealth, asmeasured by its cost—the cost of living—that is, themoney values of nourishment, clothing, shelter, amuse-ments, the gratifications of vanity, and the other miscella-neous items in our family budget. It is the money value ofthis income stream upon which attention now centers.Henceforth, we may think of time preference as thepreference for a dollar’s worth of early real income over adollar’s worth of deferred real income. It is assumed, then,that the income goods are reduced to a common moneydenominator, and that the prices of all items of realincome—the prices of nourishment, shelter, clothing,amusements, etc.—are predetermined.

In these cases, as already noted, no appreciable timeelapses between valuation and realization. We pay fora basket of fruit and eat it forthwith. But we pay for afruit tree and wait years for the fruit. So in the pricesof many other enjoyable services—nourishment, shelter,etc.—no discount element, or rate of interest, enters or,at any rate, it does not enter in the direct way in whichit enters in case of interactions . 4 That is, in the present,

4 It is true, of course, that, in determining economic equilibrium, everyvariable theoretically affects every other, and the rate of interest, as

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