When a businessman takes out a loan for a investment, is he raising his Time Preference?

[nirgrahamUK]

a businessman that takes out a loan so that he can buy capital goods to increase his production is expressing a higher time preference than any businessman in an identical position to him who chooses not take take out the loan. a 3rd businessman in an identical predicament to the first two who chooses a 3rd course; he reduces his own consumption and uses this to buy capital goods to increase his production, is expressing a lower time preference. than the other two.

if someone takes out a loan, they are not themselves saving by so doing.unless there is some bizarre arbitage going on.

[BlackNumero]

So how does a businessman taking out a loan for production mean a greater proportion of consumption to saving? A higher time preference can only come about when there is a greater proportion of consumption to saving. Just trying to sort this in my head.

[nirgrahamUK]

@BlackNumero

? A higher time preference can only come about when

when never…

highter time preferences are not things that ‘come about’ in the way you say, they are things that are supposed as being praxeologically necessary for acting individuals, so we can talk about them being expressed, and we can talk about them changing for a person or people, but they are changed by will/passions (whole debate there!), it is misleading to say that they come about because you observe some change in proportions of economic goods, that confuses cause and effect, its the other way around, any change in propotions between a persons allocation between present and future goods would be explained by peoples change in time preferences.

[BlackNumero]

Okay, so a higher time preference can only be expressed by a greater proportion of consumption to savings. So how is a higher time preference expressed by a businessmen taking out a loan for a productive investment.

[Harry_Felker]

@BlackNumero

Throughout the chapter Rothbard talks about Time Preferences “aggregating” to form the market rate of interest. Remember, he considers both sides (Demand and Supply) to be determined Time Preferences. In my opinion either I am missing something or something does not add up.

Aggregate low TP = low interest rates

@BlackNumero

The question I’m trying to ask is that IF Rothbard considers a businessman taking out a loan for a productive investment as saving, and in order to save you must have a low Time Preference, then doesn’t that mean in certain scenarios (such as this) that Lower Time Preferences, and “more savings”, mean a rise in the interest rate?

Except that saved loan is available for lending (FRB), so it is a wash to the interest rate…

[nirgrahamUK]

@BlackNumero

So how is a higher time preference expressed by a businessmen taking out a loan for a productive investment.

the businessman that takes the loan has shown a higher time preference than one that hasnt because he is foregoing the rights to some quantity of future money to have some money now. so he is dissaving, he is not putting more away for later, he is taking from later to have now.

[BlackNumero]

But if he is dissaving, then how can he be investing? I thought in order to have invested, then one must have saved.

[nirgrahamUK]

The guy who he got the loan from is the one that saved, the guy who he got the loan from is the one who converted the prior savings into an investment by the act of loaning it to the businessman.