Among the influential economic concepts elucidated by the Austrian school of thought, the theory of time preference holds particular salience to Bitcoin’s role as an emergent monetary evolution. This notion of prioritizing present goods over future goods based on varying individual circumstances aligns with Bitcoin’s disinflationary supply schedule and game theory dynamics incentivizing its adoption.
At its core, time preference describes the tendency for humans to value present consumption more highly than equivalent future consumption. All else being equal, economic actors will rationally choose to receive a good or service sooner rather than later.
This theory was pioneered by Austrian economist Eugen von Böhm-Bawerk, who posited that since humans have diverse time preferences based on factors like income levels, consumption needs, and uncertainty about the future, interest rates must emerge to incentivize delaying present satisfaction. Higher interest compensates by increasing future value.
Böhm-Bawerk’s time preference insights were further expanded by Frank Fetter and Ludwig von Mises, who integrated the concept as a foundational axiom underlying human action and market pricing mechanisms.
Bitcoin’s Scheduled Hardening of Money Supply
So how does this principle of time preference manifest itself through Bitcoin’s novel monetary design? The key connection relates to Bitcoin’s capped supply and disinflationary issuance rate over time.
As discussed previously, only 21 million bitcoins can ever be mined into existence, and the rate at which new coins enter circulation slows by 50% roughly every 4 years in an event called “the halving.”
This predictable, constricting schedule hardens Bitcoin’s future scarcity and purchasing power compared to the present. In the language of time preference, forsaking present consumption of bitcoins gets compensated by greater future value of that saving as the money supply progressively dries up.
The Bitcoin halving mechanism effectively automates and formalizes Böhm-Bawerk’s theory by coding distilled time preferences directly into the protocol’s monetary policy in a publicly auditable manner.
Opportunity Cost Driving Adoption
From the vantage point of rational economic actors evaluating Bitcoin, its scheduled supply hardening means delaying consumption (spending/selling bitcoins) today gets compensated by a higher future purchasing power of those held coins. This creates an incentive to acquire and retain the asset now rather than later.
Moreover, this incentive compounds over successive halvings as Bitcoin’s scarcity relationally increases against other monetary goods and assets with perpetual inflation baked into their supplies. The opportunity cost of not adopting Bitcoin as a store of value becomes higher the longer one waits.
This opportunity cost dynamic is what Austrian economists like Hans-Hermann Hoppe and Saifedean Ammous theorize will drive more rapid Bitcoin adoption over traditional moneys as its relative hardening becomes too compelling for rational actors to ignore.
Time preference therefore acts as an accelerant for Bitcoin’s game theory adoption cycle – forgoing spend of appreciating bitcoins today rationally leads to greater reserves of future purchasing power, which incentivizes even more adoption as the pattern self-reinforces.
Potential for a Revaluation of Time Preference
Perhaps the most profound implication of Bitcoin’s unique time preference model extends beyond just driving adoption, but potentially inspiring a broader societal revaluation of time preferences themselves.
In traditional fiat monetary systems with constant devaluation of currency through inflation, economic incentives skew heavily toward present consumption over future investment. Why delay gratification or save when money’s future value is perpetually dwindling?
Conversely, Bitcoin’s monetary hardening essentially penalizes excessive present consumption while rewarding delayed gratification through an appreciating currency supply. A Bitcoin standard could thereby incentivize societies to reduce time preference toward longer-term planning, sustainability, and investment in production over wasteful present consumption.
This could have immense positive impacts in areas like environmental protection, deferred infrastructural development, scientific research, and any activity where current costs need to be weighed against future gains for humanity.
As the hardest form of digital money, Bitcoin’s revolutionary integration of time preference into its core monetary policy stands to profoundly influence human behavior, economic activity, and potentially even cultural philosophies around saving, investing, and achieving future prosperity over temporary present indulgence.
Whether this impacts just Bitcoin’s specific sphere of adoption, or gradually reconfigures the world’s relationship to time preference on a civilizational scale remains speculative but tantalizing food for economic thought. One thing is certain – Böhm-Bawerk’s seminal theory takes on new significance through Bitcoin’s innovative synthesis of time preference into a monetary singularity.