My husband has always admired certain things about Eastern cultures, particularly their view of time. The Chinese did not sell the island of Hong Kong to the United Kingdom, they leased it for 99 years. When the deal was made, Britain was a superpower and China was unstable, to say the least. A little over a century later, Great Britain is not so great anymore, and Hong Kong — with all its wealth and innovations — is a jewel in the crown of China. A long game, indeed.

The concept of time preference is an interesting one, and one given a lot of credence to in Austrian circles. The Wikipedia article explains the it as “the relative valuation placed on a good at an earlier date compared with its valuation at a later date. […] Someone with a high time preference is focused substantially on his well-being in the present … while someone with low time preference places more emphasis than average on their well-being in the further future.” So, a person with a high time preference wants instant gratification, while someone with a low time preference is willing to delay their pleasure.

There have been studies done on this, such as the one by Walter Mischel, the Stanford professor of psychology. Young kids were given the option of eating a marshmallow immediately or waiting (say, for 15 minutes) to get two marshmallows. Most kids ate the first marshmallow but about 30% were willing to wait to get two. In a follow-up, the researchers found a correlation between those who waited and high SAT scores in later life. Low time preference, then has its rewards.

As the Ludwig von Mises Institute notes:

Savings remain key to this process of capital construction, and it is the time preference, that manifests itself in savings. If people enjoy current consumption so much, that the promise of an increased future consumption cannot bring them to save (and sacrifice the current level of consumption), the production will not be improved.

When one talks of “the Protestant work ethic,” one is talking about a lower time preference. As a young person, just starting out, you may start with a high time preference and blow through a lot of money. But, as you accumulate wealth, your savings go up as your time preference goes down. The same goes for nations, says Hans Hermann Hoppe in Democracy: the God that Failed:

Hoppe argues that in general an advancing society will see a decline in time preference towards zero (but never reaching zero), because as individuals become wealthier they will require a lower portion of their wealth to satisfy present needs and thus have a higher supply to dedicate to future needs. Or in other words, as society advances on average individuals will have a higher savings rate.

In other words, the process of civilization is that of reducing the time preference of its people. As people become more civilized, their time preference reduces. Ditto for individuals.

This only holds true, though, to an extent. Imagine that in the experiment involving children who were given incentives to wait for additional marshmallow, there was a bully lurking around who ate their marshmallow before the rewards were handed out. Would any kid wait for the second marshmallow? This is where the state comes in. Only the state can disrupt the “lowering of time preference” in a country, by implementing policies that counteract it. Does a “stimulus” increase or decrease time preference? If you knew that, like in Argentina, the state would confiscate 401k savings, would you continue to save? If you knew that currencies were devaluating, would you save more or less? Does Social Security encourage savings? Does welfare? In Hoppe’s view, while the process of reducing time preference (saving, accumulating wealth) is “civilizing,” the actions and policies of the state are the opposite: i.e. “Un-civilizing”.

So where does this leave us? What is your time preference? While most of us are looking to save for retirement, the Chinese in the 1800s were looking 100 years in advance; not just at their lifetime but at that of their offspring. My husband is not (only) looking to save for a retirement, but looking to build a legacy. He wants to leave an impact not just on the next generation, but for many to come.

This is why I feel that while the next election has significant in our lives, what matters more the the next generation, and the next.