Time Structure of Production and Consumption

“Production and consumption are determined by subjective time preferences. Machlup pointed out that within the Austrian school, the economic notion of time is regarded in different ways.”

From the perspective of the present a good offered in the present has more value than the same good offered in the future. Therefore, for an individual to exchange an item in the present for the same item in the future he will only accept a greater quantity of the good in the future.

This basic concept provides the foundation for the concept of interest and the time structure of production and consumption.

An individual will only forgo the consumption of a good in the present if that means he can have more of the same good in the future. If an individual foregoes consumption in the present, to spend time on developing a production technique, he will only do so if he anticipates that production creating more product for consumption in the future.

[I need a clear way to describe why, when faced with the prospect of having nothing to consume in the future, an individual will forgo consumption in the present. The basic principle continues to hold that consumers will have a high time preference unless other influences change that. Does having something in the future represent an entirely different product? Or does the consumer actually have negative values on his preference scale? Although I know that saving for the future, when possible, makes perfectly good sense, I'm not sure that I know the words to describe it in economic terms.]