"Time Preference and Investment Expenditure": Comment on Hülsmann

Hülsmann (2008) argues that the neglect of time preference changes on the demand side of the time market renders Rothbard's (1993) analysis incomplete in that it unduly portrays a rise in the volume of investment as a necessary counterpart to a fall in the pure interest rate. Focusing on the determinants of the demand for present goods, this paper shows that though Hülsmann's strictures are essentially valid, Rothbard has actually explained why the direct impact of time preference changes should display itself mostly on the supply side. However, the implications have been neglected both by Hülsmann and Rothbard. We explore these implications, demonstrating that the present demand schedule and the volume of investment should be considered as mostly independent from present time preferences and determined instead by past production decisions. We show how this approach allows for a more "dynamic" understanding of the time market and growth processes.