Time Preference, Growth and Civilization: Economic Insights into the Workings of Society

By Patruti, Alexandru; Topan, Mihai Vladimir | Economics & Sociology, July 1, 2012 | Go to article overview

Time Preference, Growth and Civilization: Economic Insights into the Workings of Society


Patruti, Alexandru, Topan, Mihai Vladimir, Economics & Sociology


ABSTRACT. Economic concepts are not mere ivory tower abstractions disconnected from reality. To a certain extent they can help interdisciplinary endeavours at explaining various non-economic realities (the family, education, charity, civilization, etc.). Following the insights of Hoppe (2001), we argue that the economic concept of social time preference can provide insights - when interpreted in the proper context - into the degree of civilization of a nation/region/city/group of people. More specifically, growth and prosperity backed by the proper institutional context lead, ceteris paribus, to a diminishing of the social rate of time preference, and therefore to more future-oriented behaviours compatible with a more ambitious, capital intensive structure of production, and with the accumulation of sustainable cultural patterns; on the other hand, improper institutional arrangements which hamper growth and prosperity lead to an increase in the social rate of time preference, to more present-oriented behaviours and, ultimately, to the erosion of culture.

JEL Classification: B53, D90, E21, E43, O10, O16, O43.

Keywords: time preference, social time preference, the interest rate, savings, growth, present-orientation, future-orientation.

Introduction

Economics as a science is today in an odd position. On the one hand, economic issues are among the most debated topics anywhere: in the media, in parliaments, governments or even over private dinners. On the other hand, it (economics) is a rather young science1, with relatively few established truths (if any) in the eyes of the general cultivated public. Add to that a peculiar nature ("the science without experiment") which makes possible (or easier, at least) the survival of the oldest doctrines, schools and theories (say mercantilism) alongside new contributions (say rational expectations), undisturbed by contradiction, and you have got a more complete profile of the "dismal" science. Against this background we will try to argue that economics should become an element of the general culture because it has very important contributions to the understanding of human nature, society and civilization. It should have its own place at - in the words of the Romanian philosopher Constantin Noica - "the table of universal culture".

We will proceed in two steps. First, after briefly reconstructing the poor image that economics presently has in general (and among other social sciences in particular), we will tackle two instances in which it can be put to work to explain aspects of two important cultural phenomena, for which it is usually deemed utterly unfit: the creative genius, and asceticism. Secondly, we will belabour to a certain extent a few theses of Hans-Hermann Hoppe (2001), as laid out in "Democracy - the God That Failed: The Economics and Politics of Monarchy, Democracy, and Natural Order", with the purpose of showing economics at work in giving important insights which throw light on the broad notion of civilization. More specifically, we will explain the relation between economic progress, civilization and a concept which economists commonly use in their analysis, namely, time preference. In the last part of the article we will discuss which indicators can be used and which cannot be used in order to gauge people's time preferences.

Literature review on economics, cultural phenomena and civilisation

For a long period of time, economics was considered a science which could only explain a narrow part of the human conduct, respectively those actions of men which have the goal of acquiring material wealth (Mill, 1874). The term "homo economicus", describing an agent eager to maximize utility as a consumer and profit as a producer, began being used in the late nineteenth century even in relation to the works of classical economists such as Adam Smith or David Ricardo.

However, more recent works began testing the ability of economics to offer results even in domains which were traditionally considered outside the sphere of economic investigation. …

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