Wednesday, August 7, 2019

Time Preference and Getting Two Haircuts in One Day

"I'll take two!"
Joe Weisenthal, co-host of 'What'd You Miss?' on BloombergTV and an editor at Bloomberg, this morning sent out the below tweet to Fernando Ulrich.

No, Joe, you are confused about time preference.

Time preference is always determined based on an individual's value scale.

That is, a person may have on his value scale today, the desire for a haircut but certainly not two haircuts. So your example does not apply to time preference.

Ulrich's point stands. You would never prefer $990 a year from now over $1,000 now.

He is making the point that "negative interest" is really a service charge for the security and the handling of money. It is not different than the bank charges applied on stripped-down basic checking accounts.


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