The Bitcoin Standard: The Decentralized Alternative to Central Banking

by Saifedean Ammous

As humans reduce their time preference, they develop the scope for carrying out tasks over longer time horizons, for satisfaction of ever-more remote needs, and they develop the mental capacity to create goods not for immediate consumption but for the production of future goods, in other words, to create capital goods. Whereas animals and humans can both hunt, humans differentiated themselves from animals by spending time developing tools for hunting. Some animals may occasionally use a tool in hunting another animal, but they have no capacity for owning these tools and maintaining them for long-term use. Only through a lower time preference can a human decide to take time away from hunting and dedicate that time to building a spear or fishing rod that cannot be eaten itself, but can allow him to hunt more proficiently. This is the essence of investment: as humans delay immediate gratification, they invest their time and resources in the production of capital goods which will make production more sophisticated or technologically advanced and extend it over a longer time-horizon. The only reason that an individual would choose to delay his gratification to engage in risky production over a longer period of time is that these longer processes will generate more output and superior goods. In other words, investment raises the productivity of the producer. Economist Hans-Hermann Hoppe explains that once time preference drops enough to allow for any savings and capital or durab...