Motus Mentis

An important concept, and one that I’ve written about myself, is the idea of “time preference”: how willing a person is to defer present consumption or enjoyment in order to earn a dividend in the future. The classic example is the “marshmallow test”, in which small children are given a marshmallow, told that the adult giving the test will be leaving the room for a few minutes, and given two options: to eat the marshmallow now, or, by waiting until the tester returns, to earn a second one as well. Apparently children who are willing to wait end up having better life outcomes as adults than the kids who can’t resist the temptation to gobble up the marshmallow right away.

That inclination to defer for future gain is called “low time preference”, and it’s arguably the basis of all civilization. Go to any great city and look around; it’s obvious, as Barack Obama might put it, that “you didn’t build that”: it was put together, brick by brick, by people now long dead, who invested their efforts to create things that their future selves, and future generations, would profit from. The importance of low time preference is especially critical for food production, and for economic growth; the seed is only planted in expectation of the harvest.

In order for any of this to be a rational choice, however, there must be stability: one must be able to depend upon a general continuity of rules and conditions over time. The farmer who cannot rely on the weather might be safer eating his seed than planting it; the child given the marshmallow during a bombing raid would be wiser to grab it and run. In short, for low time preference to make sense, one has to be able, to some extent at least, to make confident predictions about the future: to be able to trust that laws will still be in effect, that contracts will still be binding, that goods will retain their value, that property rights will not be abrogated, that crops will grow, and so on. As these conditions erode, low time preference — investing in the future — becomes less and less of a safe bet.

What makes all of this even trickier is that there’s a lot of feedback involved. The more confident people are about stability and predictability, the more likely they are to invest and work for the future — which in turn makes the future more reliable. This is how civilizations deepen their foundations, and build to the sky. But it works the other way, too: the less confidence people have in a secure and predictable future, the higher their time preference becomes, and the more they are inclined to consume at the expense of investment — which in turn destabilizes everything.

Both of these trends are rational orientations for our behavior; in a society descending into war and chaos it would be crazy to invest in shopping malls, while in a healthy, stable community with strong social cohesion and good economic growth it would be crazy not to. But because of the feedback involved, it’s possible for the trend to take off rapidly in either direction once some sort of tipping point — some watershed in the rationality of having confidence in a society’s future — is reached. Moreover, all of this is strongly affected by mass psychology; to make confidence in the future irrational, it might simply be sufficient for everyone to start believing that it is. Add to that genuine concerns such as decreases in social cohesion and stability, economic brittleness, war, rising debt, moral decay, educational decline, global pandemics, and so on, and it becomes more and more reasonable to have less and less confidence in the wisdom of building for the future — and so the negative feedback strengthens.

Where is that watershed, the boundary that separates low and high time preference as the more rational choice? As I’ve pointed out above, one necessarily crosses that boundary at some point in a civilization’s decline — but how can we tell where it is?

I have a feeling it’s somewhere right around where we’re standing.