The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Time Preference

  • Murray N. Rothbard
Reference work entry


Time preference is the insight that people prefer ‘present goods’ (goods available for use at present) to ‘future goods’ (present expectations of goods becoming available at some date in the future), and that the social rate of time preference, the result of the interactions of individual time preference schedules, will determine and be equal to the pure rate of interest in a society. The economy is pervaded by a time market for present as against future goods, not only in the market for loans (in which creditors trade present money for the right to receive money in the future), but also as a ‘natural rate’ in all processes of production. For capitalists pay out present money to buy or rent land, capital goods, and raw materials, and to hire labour (as well as buying labour outright in a system of slavery), thereby purchasing expectations of future revenue from the eventual sales of product. Long-run profit rates and rates of return on capital are therefore forms of interest rate. As businessmen seek to gain profits and avoid losses, the economy will tend toward a general equilibrium, in which all interest rates and rates of return will be equal, and hence there will be no pure entrepreneurial profits or losses.


Austrian economics Azpilcueta Navarrus, M. de Bailey, S. Böhm-Bawerk, E. von Capital theory Capitalization Fetter, F. A. Fisher, I. Galiani, F. Interest rates Interest theory Longfield, M. Lottini da Volterra, G. F. Marginal productivity Menger, C. Mises, L. E. von Rae, J. Summenhart, C. Time preference Turgot, A. R. J. Usury Value and distribution theory Value theory 

JEL Classifications

This is a preview of subscription content, log in to check access.


  1. Bailey, S. 1825. A critical dissertation on the nature, measure, and causes of value. New York: Kelley, 1967.Google Scholar
  2. Böhm-Bawerk, E. von. 1884–9. Capital and interest, vols. 1–2, 4th ed. South Holland: Libertarian Press, 1959.Google Scholar
  3. Fetter, F.A. 1902. The ‘roundabout process’ in the interest theory. Quarterly Journal of Economics 17: 163–180. Repr. in Fetter (1977).Google Scholar
  4. Fetter, F.A. 1915. Economic principles, vol. 1. New York: The Century.Google Scholar
  5. Fetter, F.A. 1977. In Capital, interest, and rent: Essays in the theory of distribution, ed. M. Rothbard. Kansas City: Sheed Andrews and McMeel.Google Scholar
  6. Fisher, I. 1907. The rate of interest. New York: Macmillan.Google Scholar
  7. Fisher, I. 1930. The theory of interest. New York: Kelley & Millman, 1954.Google Scholar
  8. Gordon, B. 1975. Economic analysis before Adam Smith: Hesiod to Lessius. New York: Barnes & Noble.CrossRefGoogle Scholar
  9. Kauder, E. 1965. A history of Marginal utility theory. Princeton: Princeton University Press.CrossRefGoogle Scholar
  10. Longfield, S.M. 1971. In The economic writings of Mountifort Longfield, ed. R.D.C. Black. Clifton: Kelley.Google Scholar
  11. Menger, C. 1871. In Principles of economics, ed. J. Dingwall and B. Hoselitz. Glencoe: Free Press, 1950.Google Scholar
  12. Mises, L. von. 1949. Human action: A treatise on economics, 3rd revised ed., Chicago: Regnery, 1966.Google Scholar
  13. Monroe, A., ed. 1924. Early economic thought. Cambridge, MA: Harvard University Press.Google Scholar
  14. Noonan, J.T. Jr. 1957. The scholastic analysis of usury. Cambridge, MA: Harvard University Press.Google Scholar
  15. Rae, J. 1834. Some new principles on the subject of political economy. In John Rae: Political economist, ed. R.W. James. Toronto: University of Toronto Press, 1965.Google Scholar
  16. Turgot, A.R.J. 1977. In The economics of A.R.J. Turgot, ed. P.D. Groenewegen. The Hague: Martinus Nijhoff.Google Scholar
  17. Wicksell, K. 1911. Böhm-Bawerk’s theory of interest. In Selected papers on economic theory, ed. E. Lindahl. Cambridge, MA: Harvard University Press, 1958.Google Scholar
  18. Wicksell, K. 1924. The new edition of Menger’s Grundsatze. In Selected papers on economic theory, ed. E. Lindahl. Cambridge, MA: Harvard University Press, 1958.Google Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Murray N. Rothbard
    • 1
  1. 1.