it made its decision. It would be hardly satisfying to hear the answer, "We took a vote of all those present and decided to follow our own time preferences."
In the selfish altruism version of the present value criterion so far discussed, there is no way of resolving a conflict between generations over how resources should be allocated. Everything is done from the point of view of the present; it is their time preference, and everything is discounted back to them. While many economists realize the inability of the present value criterion to resolve conflicts across generations, they may not recognize it as a serious failure. They tend to think that the world economy is not a hardtack one, but an investment one in which the future will be better off than the present. For this reason, they argue that such a failure of consistency is not important. Conservationists, on the other hand, tend to think that the world has certain hardtack tendencies and may, unless steps are taken, drift irrevocably into a hardtack economy. For them the failure is more serious.
Productivity is a slippery concept that can be defined in many ways. For the purposes of this book, we take "productive asset" to mean one that generates something of value. In contrast, a "nonproductive asset" stores but does not generate something of value. This is all a little imprecise, but the idea may become clear in the examples that follow. A bag of flour is not productive. It has value, but the only way to obtain it is to use it up. It only stores value. Similarly, ore in a mine is not productive. The "something of value" in this case is the metal stored underground. This something may become more or less valuable as market conditions change, but the metal is only stored, not generated. The defining characteristic of a nonproductive asset is that there is no way to obtain its value without depleting it. There are three types of productivity important for our discussion:
|1. Machine. A machine is productive when it saves more time and trouble than is embodied in the machine itself. By cleverly designing more roundabout and elaborate processes of production, people are able to generate a greater saving of effort than was originally embodied in the construction of the machine.|