TIME PREFERENCE (IMPATIENCE)
Thus the demand schedule might be that a certain pro-spective borrower is willing, for each successive one hun-dred dollars added to his present income, to give, out ofnext year’s income, as follows:
For the first $100, $120, his impatience rate being, therefore, 20%
it
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second
$100, $115,
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15%
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third
$100, $110,
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10%
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fourth
$100, $106,
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6%
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fifth
$100, $105,
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5%
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sixth
$100, $104,
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4%
Such a schedule is expressed geometrically in ChaptersX and XI.
Since the time preference of an individual is a deriva-tive of his marginal want for present and his marginalwant for future income, the above schedule is likewisea sort of derivative of the ordinary want schedules (util-ity schedules) of present and future income. But themore general schedule previously given, not restrictedto two years, but recognizing uncertainty and variabilityof the person’s income stream at all its points, is moreappropriate for our present purpose.
We see then that each individual has a rate of im-patience dependent on his own personal nature and onthe nature of his income. If all individuals’ incomes wererigid, that is, incapable of being modified, and if therewere no loan or money market by which immediate andfuture income could be exchanged, there could be no com-mon market rate of interest. There would be a separaterate of time preference for each individual. One manwould be willing to part with $100 today for the sake of$101 next year, while another would require $200 or$1000. But nothing would happen toward equalizing thesedivergent rates.
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