§9. Time Preference May be Negative

If these specifications are correct, some, at least, of this family of Willingness curves, especially those far distant from the origin, and low down—that is, representing small future and large present income—will have an inclination less steep than 45° to the horizontal axis and a slope less than 100 per cent. At such income positions the rate of time preference would be negative. It is sometimes said that it is a fundamental attribute of human nature to prefer a dinner or a dollar this year to a dinner or a dollar next year, but this statement is evidently too narrow. Unconsciously it confines our view to regions of the income map where present income is relatively small or future income relatively large. For a starving man it is notably true, that is, the Willingness lines that lie in the left part of the map are far steeper than 45°. Of a man expecting large future income it is also true; that is, the Willingness lines toward the top of the map are also very steep.

But if we turn our attention in the opposite direction—to the right, or downward, or both—we find regions on the map in which, if the foregoing description is correct, the curves flatten out and incline less than 45°; the man's income situation is such that he might even be willing to lend for nothing, or even less than nothing, simply because he would, in such a case, be so surfeited with this year's income and so short, prospectively, of next year's income that he would be thankful to get rid of some of this year's superfluity, for the sake of adding even a trifle to next year's meager real income. His situation would be like a Robinson Crusoe on a barren island, well supplied, but with foods that could serve him only this year. Such Edition: current; Page: [249] situations are rare in practice, but they are certainly imaginable and sometimes even occur. In such situations a man would be willing to save for the future without any incentive in the form of interest. But this takes us beyond our present point; for here we are concerned only with the Willingness lines, not with the Market lines.