Time Preference Fallacy

There is a theory that Bitcoin can lower human time preference.

Value derives from the human perception of utility. A person who trades a car for a horse objectively values the usefulness of owning the horse more than the car. This implies nothing about why one is more valuable than the other to the person. It also implies nothing about the the valuations made by others, or by the same person at any other time. The value placed on one thing over another is a preference. The reason for the preference is not knowable in economic theory.

Time preference is the axiom of rational economic theory that states all people always value a "present good" over the same "future good". As a conflict with the subjective theory of value, this idea cannot be proven, it must be assumed. Time is the one thing assumed to have inherent value. Given that value is subjective, it cannot be shown why people value time more or less highly. Finally, given that value is subjective, nothing can be known about what will change a given person’s time preference. It is, as the name implies, a preference.

The theory of diminishing marginal utility implies that each additional unit of a given thing acquired by a person has a lower value to the person than the previous. This implies that, for a given time preference and interest rate, increased wealth implies a greater willingness to lend. Similarly, a higher interest rate implies a greater willingness for a person of a given time preference to lend. It is a fundamental error to assume that either interest rates or wealth imply any change to time preference. Human preferences can change for any number of reasons, but the actual reasons are unknowable. Due to its reversal of cause and effect, the theory is invalid. Bitcoin helps people express their preferences, no ability to change them can be assumed.

A related theory states that lower time preference is objectively better than higher. The theory presumes an objective morality. Economics does not make value judgments, it infers their necessary consequence. Aggression differentiates the free market from market intervention, such as by the state. However, even if one accepts nonaggression as the moral divide, no moral distinction between higher and lower time preference exists.

Infinite time preference implies no lending and therefore no production. Zero time preference implies no consumption of what is produced. Given that the production exists only to satisfy eventual consumption, zero time preference also implies no production, as there is no value attributable to the consumption of products. So even absent a moral distinction, assuming people want products, no given time preference is inherently more successful in delivering them.

Wealth is nothing more than people satisfying preferences, including those for present and deferred consumption. In the attempt to maximize tax revenue, states employ contradictory market interventions. Fiscal and monetary stimulus are employed to increase consumption and increase production respectively. Yet both come at the cost of taxing both. The outcome is the shifting of capital allocation decisions from the market to the state. This implies people are less able to satisfy preferences. However it implies no change to actual preferences.

It can be enlightening to consider subjectivity in terms of sexual preference.

• { X, Y }
• { X->X, Y->Y }
• { X->X|Y, Y->X|Y }
• { X->Y, Y->X }

One might consider these groups ordered in terms of increasing productivity (i.e. producing more humans). Many states attempt to reduce the expression of these sexual preferences to the set { X->Y, Y->X }. Both outright criminalization of expression and explicit financial incentive for it are employed to this end. This has a discernible impact on expression of sexual preference, but cannot be said to have any impact on the preference itself.

Similarly it should be clear that an increase in productivity is not objectively good. People doing what they want is the moral good, again assuming the moral principle of nonaggression. Even if we assume all people prefer continuation of the species, this implies no effect on individual sexual preferences.