Pagina:Scientia - Vol. IX.djvu/395

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387 THE “IMPATIENCE THEORY„ OF INTEREST

as by other more clumsy expressions such as « labor of saving », — is simply the very familiar one expressed in daily experience by the term «impatience ». It is because a man is impatient that he thinks « delay » should be penalized; it is because he is impatient that « abstinence » from immediate indulgence or « waiting » for future indulgence, is regarded with disfavor; it is because he is impatient that he puts a premium or « agio » on present goods as compared with future.

The peculiar fitness of the term « impatience » is here emphasized because so much stress has been laid on economic catch-words and because this particular catch-word seems to have escaped notice. In my own book, « The Kate of Interest », for instance, this term was unused because unthought of, and the clumsier and less self-explanatory term « timepreference » was employed instead. The proposal to employ the term « impatience » is here made for the first time. While the use of one term or another does not in the least affect the principles involved, it does affect the popular comprehension of those principles.

Impatience is a fundamental attribute of human nature. As long as people like to have things to-day rather than tomorrow, there will be a rate of interest. Interest is, as it were, impatience crystallized into a market rate. The rate of interest is formed out of the various degrees or rates of impatience in the minds of different people. The rate of impatience in any individual’s mind is his preference for receiving an additional dollar or dollar’s worth of goods at once, over receiving it a year from to-day. In other words, it is the excess of the « marginal utility », or as I prefer to express it, « desirability » of to-day’s money over that of next year’s money viewed from to-day’s standpoint. It can be expressed in numbers as the premium that a man is willing to pay for this year’s over next year’s money. If, for instance, in order to get 1 dollar at once he is willing to promise to pay 1.05 next year, then his rate of impatience is 5 per cent. The present 1 dollar is worth to him so much that, in order to get it, he is willing to pay 5 per cent more than 1 dollar in the future for it. It is because of the willingness to do this to gratify one’s impatience that there is such a thing as a rate of interest. A man will prefer to have a machine to-day rather