B. The Principle of Maximum Desirability

It is still true, of course, that the individual decides on the option most wanted. But, in a world of uncertainty there are two features not present in a world of certainty. One (which however does not affect the formulation of the principle) is that what is now desired may prove disappointing. That is, though it seems, when chosen, the most desirable course, it may not prove the most desirable in the sense of deserving, in view of later developments, to be desired. The other new feature is that the most desired income stream is no longer necessarily synonymous with that which harmonizes the rate of preference with the rate of interest.

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Rates of time preference in any one market tend toward equality by the practice of borrowing and lending, and more generally, that of buying and selling, but this equality is no longer, in all cases, attainable, because of limitations on the freedom to modify the income stream at will, limitations growing out of the existence of the element of risk and consequent limitations on the borrowing power.