A Decrease in Time Preference

Pavel Potuzak
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Pavel Potuzak: Prague University of Economics and Business

Chapter Chapter 4 in Austrian Theory of Capital and Business Cycle, 2022, pp 39-63 from Springer

Abstract: Abstract This chapter introduces five simultaneous short production methods that provide consumption goods in one period. A shock to time preference then triggers a gradual restructuring of the production apparatus. The model shows how production processes are transformed into longer methods. The typical U-shaped dynamics of the flow of consumption goods is generated, and new capital goods are created that take the form of intermediate products. The reallocation of the labour force across specific labour markets is examined in detail, together with changes in the discounted marginal value product of labour in these markets. The last part discusses the possibility of perpetual growth caused by a decrease in time preference, as predicted by some Austrian economists. The graphical model is supported and compared with advanced neoclassical growth models to shed light on this issue.

Keywords: Time preference; Natural interest rate; Discounted marginal value product of labour (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-18728-5_4

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DOI: 10.1007/978-3-031-18728-5_4

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