Tag: market

An Introduction to Time Preference

Jack Parkos | United States

Suppose someone offers to pay you 20 dollars. You have the choice to receive the money today or tomorrow. In choosing the former, you are like everyone else. You would prefer wealth sooner rather than later. This economic concept is Time Preference. Time Preference affirms that current satisfaction is preferred over future satisfaction. People would prefer not to wait for wealth when it is easily achievable now. Wealth could be monetary, assets, experience, etc.

“Satisfaction of a want in the nearer future is, other things being equal, preferred to that in the farther distant future. Present goods are more valuable than future goods” – Ludwig Von Mises

However, the choice is not always equal and simple. Suppose someone offers you 20 dollars today, or 30 dollars tomorrow. The choice becomes a bit more complicated. We see a divide in people with high time preference and those with low time preference. Someone with high time preference puts their focus on their present well being. They would take the 20 dollars today. On the other hand, A person with low time preference puts emphasis on future satisfaction. This person would take 30 dollars tomorrow. A good example would be comparing savers and spenders. Those with low time preference tend to save their money and make wiser investments. Those with high time preference are more likely to blow through cash.

Real World Examples

Criminals tend to have extremely high time preferences. They are not willing to work to obtain wealth as that involves waiting for future wealth (paychecks). They would rather steal to achieve wealth in the present.

Another example of high vs. low time preference is in the context of college students. One who chooses to stay in and study over going out and partying has a lower time preference. The reasoning being, there will be a future benefit; a better chance at a higher grade, meaning better opportunities down the road. On the other hand, one who chooses to go out has a higher time preference; they prefer the instant short term gratification of partying.

Furthermore, different goods could be preferable in the future than in the present. During winter, ice has a low demand and is preferable in future (summer). However, it still is a general rule people value current wealth to future wealth.

Different groups of people tend to have different levels on time preference. Age is one of the biggest factors in determining one’s time preference. Young children tend to have high time preferences as they are not concerned with the future. A child would likely spend all of his money on ice cream. Adults tend to have lower time preference as they need to save for the future. However, The elderly tend to have higher time preference as they have less time for future consumption. Moreover, someone who has (or is planning to have) kids tends to have lower time preference as they need to save for the future.

Relation to Interest

In “Man, Economy, and State”, Murray Rothbard writes

“The time-market schedules of all individuals are aggregated on the market to form market-supply and market-demand schedules for present goods in terms of future goods. The supply schedule will increase with an increase in the rate of interest, and the demand schedule will fall with the higher rates of interest. A typical aggregate market diagram may be seen in Figure 44. Aggregating the supply and demand schedules on the time market for all individuals in the market, we obtain curves such as SS and DD. DD is the demand curve for present goods in terms of the supply of future goods; it slopes rightward as the rate of interest falls. SS is the supply curve of present goods in terms of the demand for future goods; it slopes rightward as the rate of interest increases. The intersection of the two curves determines the equilibrium rate of interest—the rate of interest as it would tend to be in the evenly rotating economy. This pure rate of interest, then, is determined solely by the time preferences of the individuals in the society, and by no other factor”.

The Time Preference Theory of Intrest explains how rates relate to one’s time preference. Demand for capital is driven by investment and the supply of capital is driven by savings. Interest rates fluctuate, eventually reaching a level at which the supply of capital meets the demand for capital.

Relationship to Civilization

In “Democracy the God That Failed”, Hans Hermann Hoppe notions that concern for future wealth is a key to the prosperity of civilization. If the majority holds a low enough time preference for the process of production, civilization would then be able to thrive. When one allows someone to use capital and resources, an economy forms with Division of Labor and private property. As previously mentioned, criminals have high time preference and will steal resources, slowing down production.

Hoppe describes that the state also has a high time preference. The state violates property rights and steals resources to give to others. The recipients in turn usually also have a high time preference. Hoppe describes this as “decivilizing”.

Time preference is arguably one of the most important parts of economic thought. It is the foundation of saving and interest. Furthermore, it distinguishes spending and saving.

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Does Capitalism Unite or Divide People?

Joshua D. Glawson | United States

Capitalism is an economic system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state. More specifically, capitalism is the free and voluntary exchange of goods and services.

Before the implementation of money, the differences between people was a matter of Nature or God. Some, by their own free will or by location, had more than others and created more than others. Some are stronger, some are smarter, some are more intelligent, some are better looking, some need less, some utilize what they have better, etc. It is the very nature of being human that we have differences between us before ever even initiating money or property, i.e. capital, into the equation. This is most likely why Marx and Engles do not provide an origin of ‘property’ or ‘property rights’ because to take away what is someone else’s is unjust and immoral, as well as least pragmatic or least utilitarian.

Prior to the introduction of capitalism in the world, much fewer people had wealth, and all struggled to get by aside from those wealthy few. A world GINI coefficient would clearly show a lopsided distribution of wealth, in the words of Communists and Socialists, and provide evidence of the daily struggles once suffered while unknown in most parts of the world today.

We live far better lives today thanks to capitalism. Abject poverty since the implementation of capitalism in the world, especially after 1980, is nearing its very end. Prior to capitalism, people had to work longer hours, work harder, children worked more, and people married for practical reasons more than for love. It can be easily and confidently declared that capitalism made way for more love and individualism, simultaneously, more than any other approach prior.

Actual Capitalism does not infringe on the rights of others, because the philosophy of it is based on free and voluntary exchange. Typically, this also implies that there is a legal system that ensures the negative Liberties, Natural Rights, of everyone. Some economists and philosophers differ on the need of a State in order for capitalism to exist.

What most people criticize as being ‘capitalism’ today, as many Communists and Socialists have espoused, is in fact NOT CAPITALISM. A State that allows the infringement of rights while protecting a company that wishes to exploit is CRONYISM, or CRONY CAPITALISM, not capitalism itself.

Remember, government, by its definition, has the sole monopoly on coercion and initiation of force. A coercive monopoly, crony capitalism, coercion through labor unions, involuntary redistribution, taxes, etc. are only continually possible through a government, not a free and voluntary market.

Envy, jealousy, theft, coerced redistribution schemes through government, etc. are what keep people apart by force. Capitalism betters the lives of everyone in the end, generally speaking. In fact, this principle of capitalism that encourages free trade, as in laissez-faire capitalism, is one point that more economists agree on than anything else, no matter the economist’s political affiliation.

  • Isn’t it ironic that Communists and Socialists always complain about so-called “bourgeoisie” living easy lives while exploiting the “proletariat,” but Communists and Socialists want everyone to live like the “bourgeoisie” by forcefully stealing with threat of murdering the “bourgeoisie?”

Capitalism has done more to unite people than divide them. The fact that we can sit here reading and writing on the internet in the middle of the day rather than hunting, farming, collecting water, or making things to live day-to-day, etc. attests to the benefits brought by capitalism. The fact that a writer such as Marx could have existed while freely and voluntarily living off the dime of Engels, a “bourgeoisie,” is further proof that capitalism has done more to unite us than divide us. Without capitalism, our focus and worry is more on the immediate rather than the philosophy brought on by leisure for the masses which is only a result of capitalism.

When people begin making copious amounts of money more than others, sure their status and quality of life differs than the layman, but the wealthy must still spend or store their money somewhere that benefits those in lesser positions. This is a key principle, as living in a wealthier society is far superior to that of living in one where only a few are wealthy. But if everyone is forced to be the same, nothing has the same worth as it does now. When everyone has the same wealth, the cost of things becomes more expensive, subjectively and comparably speaking. If all we looked at was the GINI of two countries in order to compare wealth distribution, we could compare Morocco and the US. I am confident that more people would rather live in the US than in Morocco, aside from political and social differences, and simply based on economic reasons for equality and unity. Nevertheless, the two countries have pretty similar distributions of income as seen below:

Or we can compare the US with the Czech Republic, where the average person makes more like that of their neighbor than in the US.

I can still confidently say that more people would rather live in the US than in the Czech Republic. Not only does this suggest that there is more to living a good life than the balanced distribution of wealth, but also that when we get closer to actual capitalism we live better lives.

I will admit that Socialism and Communism in their truest forms have never been successfully attempted. Likewise, Capitalism in its purest form has never been successfully attempted. However, the near-Capitalism has done more to help unify and better humankind more than near-Socialism or near-Communism. While, near-Communism and near-Socialism have done more to destroy and divide people than any other system, records that suggest close to 100,000,000 (one hundred million) deaths from the two.

Capitalism provides solutions for people, as there is an incentive to provide these solutions in the market, and working with the marketplace. Such things as technology, medicine, art, transportation, architecture, clothing, food, etc. all help to better our lives and unify us, while more competition drives down costs of production and makes things better for most if not all, in the immediate. Capitalism does more to unify us rather than divide us, while other systems, such as Communism or Socialism, do more to divide us.


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Cronyism, not the Free Market, Causes Unfair Wealth Distribution

By Joshua D. Glawson | United States

Cause and Consequence:

The world consists of income inequality, and some nations even greater disparity between the rich and the poor than others. In the United States, it is suggested that the wealthy have a far more significant amount of money and capital than that of the lower socioeconomic classes. For some, this is a moral issue, for others it is a legalistic issue that deserves to be addressed. I find it to be neither of these, if the contracts between the working classes and those of the wealthy were voluntary and free.

Despite this, there should be major moral and legal concern when this wealth difference is acquired through unjust cronyism. Conducted between governments and businesses or individuals, this is a way to redistribute wealth from one class to give to another through coercive means. There are many instances where we are well aware of cronyism taking place. This includes governments privileging particular companies, preventing competition, or creating strong barriers to enter the market place. This leads to coercive monopolies, which can only legally be produced with government threats.

Without a doubt, these companies should be stripped of their privileges. The restrictive governmental barriers for others to enter the market should be erased. Cronyism and other barriers restrict a market from flourishing to its fullest potential, and the outcome is greater disparity between the poor and the rich.

Thusly, the strong arm of government restriction on the market is causing unjust income inequality. On the contrary, the marketplace does not need restrictions and more regulations. As stated previously, the market, and capitalism in general, has done more to save people from poverty than any king, army, or government could possibly dream of.

Responsibility:

When governments utilize acts of cronyism, rent-seeking, labor unions, coercive monopolies, etc., the politicians, as well as they business owners, are behaving immorally. This is an act of ‘theft and threat’ by creating wealth solely for a particular group, while threatening punishment to those that dare challenge such restrictions. Additionally, it subsidizes these groups through coercive taxation on the public. An optimally flourishing market consists more of unrestricted, legally speaking, free trade, as in a laissez-faire capitalist economy.

There is a great deal of difficulty in approaching this issue of cronyism and addressing it in the US. Doing so relies on the people of the economy and politicians in Congress to act in unison to correct the relation between government and the market. For the same reasons Church and State are separate, so too should Market and State. They corrupt one another absolutely.

Without a cultural change, any violent measure to force governments and businesses to cease their cronyism would jeopardize the newly established government to subjective force by others later. A democratic republic requires peaceful engagement in civil acts within society to establish justice and equality under the law, which also ensures a large degree of freedom exists. A government, in order to maintain justice, not only needs clear and objective laws for protecting Life, Liberty, and Property. It also needs to be able to correct and prevent overreach such as cronyism.

This leaves only perspective shifts within government as a reflection of the people’s motivation through a new Enlightenment to actively make positive change towards ending cronyism. The power lies in the people’s hands to change those in power, or become those in power, and the initial resources will be up to the market to decide. If it is possible to convince Congress to abide by the Constitution, then there would not be cronyism, so this could potentially be changed immediately by Congress but it is highly unlikely they will act since many of them currently benefit from the corruption of the system.

Policies:

The first policy to propose is maintaining a unilateral form of justice and equality under the law within the US. It is an ongoing issue seen in the news and online that certain people and businesses are pardoned or exonerated of their crimes against others because of their status in society or state. The pro of this policy is that it would create more confidence in the US market, and nation as a whole, for investors and entrepreneurs around the world. When policies threaten the incentive of success, i.e. unjust high taxes for the wealthy over a certain income or even high taxes for everyone, it forces production to go to places that will benefit them the most.

The second policy to propose is to end all forms of favoritism and cronyism in the US. This would require a system overhaul of eliminating privileges, subsidies, class related protections, many business regulations and license requirements, etc. This often scares people into thinking chaos would emerge, but it can be demonstrated through the market that the market would begin to regulate itself as varying organizations and businesses that keep a watchful eye on the market will naturally sprout.

As Dr. Steve Horwitz points out, since Adam Smith and forward, “We do not need ‘regulation’ in the sense of State intervention for markets to generate socially beneficial outcomes.  And when we do attempt to ‘regulate’ them through the State, the result is a variety of undesirable unintended consequences.” The pro of such a policy is that it creates an equal platform for everyone to compete in and benefit from a free market.

The con of such a policy is that some major companies will leave or fail because they will no longer be granted favoritism or cronyism. This could have a negative impact on the economy upon the immediacy of such an act, therefore it would require a strictly scheduled progression. Without a transitional period, many people in protected industries would lose jobs and money until they find work elsewhere. Due to the precarious nature of such a drastic and positive turn towards equality under the law and preventing favoritism, and for the mistakes made by those of the past, people will understandably need a transition into a freer market.

Conclusion:

The rich are not getting richer, the poor are not getting poorer. Capitalism has helped not only those at the top, but it has surely helped most people escape abject poverty. Those that say otherwise and complain how capitalism has made the rich wealthier, should now consider how ending the greatest human social mechanism, i.e. capitalism, will help the poor.

If the wealthy have benefited drastically better than the poor, then it would behoove everyone to be a part of such a system. Viz., ending cronyism, rent-seeking, political power and regulations of labor unions, coercive monopolies, and various other regulations and license requirements in the market, etc. would benefit everyone in the long run, as tendencies towards free trade has already proven. This would also alleviate any of the governmental coercive means of income inequality, allowing for people to live and trade more freely. This is not faith in a system. Rather, this is allowing people to live and trade as they see fit, with a government that will protect those that are infringed upon, instead of favoring and benefiting a few.


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The Free Market: Everybody Wants It, Everybody Hates It

By FritzCast | United States

Over the course of the past two weeks (and if we want to get technical, even longer than that), two major subjects have taken the national spotlight, both of which are heavily involved in the marketplace.

One was a Supreme Court Decision in a case of one man and his bakery refusing to bake a cake for a same-sex couple for their wedding; the other was regarding the end of Net Neutrality regulations of the President Obama era.

It was odd, to me, that both subjects take on such heated, passionate debate. Many were upset over the Supreme Court’s narrow 7-2 decision in favor of Masterpiece Cakeshop; some will even argue that the court essentially voted that it is ok to discriminate against the LGBTQIA community, but there are ways I humbly disagree with such a sentiment.

First, and foremost, it should be noted that this case, in particular, went to the Supreme Court in a battle against not the same-sex couple, but the Colorado Civil Rights Commission. Masterpiece Cakeshop owner Jack Phillips felt as though that Commission was inappropriately hostile toward him, his first amendment freedom of expression and his freedom of religious practice; including statements from a representative of the commission who stated that freedom of religion was often used as a basis for discrimination and also directly stated “it is one of the most despicable pieces of rhetoric that people can use” (See this good Op-Ed considering Justice Kennedy on the matter).

Regardless of the statements and the situation as a whole, I always wondered what was wrong with the free market approach to the problem. In this case, let me present my argument:

I do not believe Jack Phillips or Masterpiece Cakeshop discriminated against a same-sex couple solely on the basis of them being a same-sex couple; on the contrary, as I argued in my latest FritzCast Podcast episode “Survey Says,” that the same-sex couple could probably frequent the cake shop on a regular basis buying deserts all the time, like delicious blueberry muffins, for example. Masterpiece Cakeshop only refused the service when the same-sex couple requested a cake for a same-sex marriage ceremony (meaning that if a straight person had wanted to come in and solicit Masterpiece Cakeshop to bake a cake for a same-sex marriage ceremony, they too would have been declined).

That being said, that does not mean I agree with Mr. Phillips reasoning, nor would I be willing to support his business with my dollars. I merely mean to say I would not, at Government Gunpoint more or less, make him bake a cake for a ceremony that he did not wish to participate in. I imagine the same-sex couple, even if they had frequented Mr. Phillips shop and bought delicious desserts every day, probably would wish to no longer support him either (there is, however, a distinct possibility that same-sex couple may just love the blueberry muffins so much, they keep going for them). Mr. Phillips then faces the market force, and if you want a highlight of that, just Google Masterpiece Cakeshop…their overall rating has plummeted from consumer response, some of which are strictly reviews from people who have never even been to the shop and experienced the product. And that is fine.

I would probably feel differently, for example, if Mr. Phillips refused to serve any LGBTQIA people solely on the basis that they are LGBTQIA people, however the same concept applies: A private establishment can make a set of rules it states it will follow, and the market force, in turn, can respond to whether or not they support that establishment. I once heard Austin Petersen, former Libertarian Presidential Candidate and current Missouri Senate Candidate, say in the Libertarian Debate “let the bigots out themselves. Who wants to buy a cake from someone who hates them?”

Now, for Net Neutrality, first we must look at the fact that the subject itself is not a simplistic topic. Net Neutrality, though first initially spoken of and declared in 2005, is heavily an Obama-Era regulation of the internet (our most prized commodity), which generally seemed to argue that there needs to be some amount of Government Regulation to ensure the Internet remains open, and that all data be treated the same so that a service provider (such as Comcast, or Verizon) couldn’t block, filter, or “throttle” internet speeds and services.

On the surface, the intentions seem vital and noble, and arguably they are. We all love the internet, most all of us even have mobile devices that remain linked to the World Wide Web. Is access really that equal though? Geographically speaking, some of us are stuck with a sole provider, one-speed options, while others may have multiple companies they could solicit. Back when I lived in my Apartment circa 2012, I had Verizon FiOS, a nice bundled package with really fast upload/download speed on a fiber optic network.

The neighborhood where I bought my house? Verizon isn’t there. No, there is only one internet provider outside of satellite service from DISH, and that is Comcast. Even the higher data plan that I have purchased doesn’t really scratch at what I used to have with Verizon, and the price definitely is skewed, paying a lot more for less than I had with Verizon.

By free market standards, as there is no legitimate other option, the only thing I can do (and often do), is solicit Verizon and those in my neighborhood to make the endeavor worthwhile for Verizon to speed up their process, set up the hardware in my neighborhood and buy services from them.

We can take it a step further, however. Let us say Verizon was in my neighborhood, and they could directly compete with Comcast. Maybe Verizon packages a “streamers internet deal” for people who stream video games, use Netflix and Hulu, and that was some bundle thrown together for $30/mo. So they broke down some of the internet services…maybe that is all I want? Maybe they have an “all-inclusive” package that encompasses every last bit of internet access. Is it THAT horrible an idea?

I’m not suggesting it is the best idea, but I am suggesting that the free market and competition can often bring desired results, and the consumer in both of these cases yield a lot more power than the masses seem willing to admit. In the 21st century, it isn’t the consumer that buckles to “big business,” it’s big business that has to justify to the consumer why its the best product or best provider.

That is the free market: it’s a lot less of a gamble than you think it is.


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Kodak Raising Crypto Funds for Image Copyright Blockchain

Eli Ridder | @EliRidder

Kodak, famed for its photography products, is working with Wenn Digital in raising money for its blockchain image copyright system in a token offering for a partner cryptocurrency. 

On May 21, the Wenn-created KODAKCoin will be offered to the public with the aim of raising $50 million USD and to fund the KODAKOne blockchain that seeks to protect the copyright of image media registered on the platform.

Shares in Kodak bounced upwards to $13.25 in January when the Wenn deal was announced, before dropping to below half that when news of the blockchain’s rollout delay was announced due to regulatory issues.

“We really took a step back and decided that we would ensure that all Ts were crossed and Is dotted before we embark on a public sale,” Cam Chell, chairman and co-founder of KODAKOne, told Reuters news agency in an interview.

“I think $50 million is our sweet spot,” Mr. Chell said.

Blockchain is the digital system behind the likes of Bitcoin, and is a shared database of information that maintained and kept in check by a network of computers connected to the internet.

A similar strategy was utilized by Filecoin in the late summer and early Autumn of last year, and some $200 million was raised by the network that facilitates the storage, retrieval and transmission of data, reported Reuters.


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