Is the Time Preference Theory Compatible with Negative Interest Rates? by Arnaert Brecht and Werner Ende
Dr. Werner Ende’s review of Arnaert Brecht’s: „12 issues contradicting Ludwig von Mises Time Preference Theory (MTPT)“
Basic logic says if a theory postulates to be always true than just a single exception proofs the contrary.
Within your 12 items, there is more than one exception showing a situation, that a universal Time Theory fully based on Interest Rates (IR) does not apply to.
To avoid getting caught in this trap you have to qualify Mises’ statement. The TPT based on IE does only exist in a Free Market without Central Banks. Negative interest rates don’t exist there. In Human Action and Nationalökonomie Ludwig von Mises denies psychological arguments. They are not valid in economic theory.
I think in reality economy is driven by two forces: an irrational, psychopathic striving for power of a tiny group of mighty men contrary to freedom loving people.
The first group has proved that destroying the free market makes them very rich and mighty and the enormous rest, billions of men poorer and in the long run dead.
There is only a big fly in the ointment:
in the end, these psychopaths will be poor or dead too. Parasites always need a living organism and finally there will be none!
To shorten my conclusions:
Negative IR doesn’t apply to MTPT.
The arguments you cited reinforce to a greater or lesser degree your theory of a restricted validity of an IE based MTPT.
ARNAERT BRECHT, NEGATIVE INTEREST RATES THE NEMESIS OF TIME THEORY PREFERENCE
Negative interest: the nemesis of time preference theory? Towards a praxeological foundation of psychology Brecht L. Arnaert1 1. Introduction The concept of time preference, together with the concept of marginal utility, is one of the cornerstones of modern Austrian economic theory. It says that individuals will always prefer to achieve their ends sooner than later and that interest therefore can be understood as a discount on the future, accounting for this difference. The more an individual prefers present goods above future goods, the higher his time preference will be, and hence the higher the interest he will charge and/or be willing to pay. Vice versa, the less an individual prefers present goods above future goods, the lower his time preference is, and the lower the interest he will charge and/or be willing to pay. Time preference theory, more than any other theory, has been very successful in explaining interest rates. However, in recent years, an important issue with the time preference theory of interest has occurred: that of negative interest rates. According to Mises namely, the idea of negative time preference is unthinkable. That would mean that there are individuals who prefer the satisfaction of their wants later than sooner, which directly runs against the axiom of human action. Man acts, and as the very act of pursuing a goal implies that there is a temporal gap between means and ends, it is impossible to assume that this gap could be inverse, that time would run backwards, that ends come before means, or, in short: that human action altogether would not even occur. So the conclusion, from Mises’ point of view, had to be that time preference can only be positive.