Austrian economist Ludwig von Mises called it time preference.  That is, the assumption that, all else being equal, people prefer attainment of a given end sooner rather than later.  People prefer present satisfaction over future satisfaction.

These days’ people’s time preference is instant.  They want instant gratification.  Mises called this high time preference.

Obviously, the discipline of saving and investing doesn’t conform to such a high time preference.  Nonetheless, people also want more…lots more.  More stuff, nicer, things, a bigger house, exotic vacations.

But to enjoy greater consumption, people must first produce.  The cost of production takes time.  It also takes sacrifice.  Mises called the willingness to sacrifice present consumption for greater future consumption, a low time preference.  The result of having a low time preference is increased savings.

Low time preference people (i.e. savers), are critical to the process of wealth generation and the strength of capital markets.  Without them money would be instantly spent and capital would not be available to improve production. Continue reading →