Chapter 1 On Time Preference, Government, and the Decivilization Process

"Once upon a time, there was a little red hen who lived on a farm.  She was friends with a lazy dog, a sleepy cat and a noisy duck. One day the little red hen found some seeds on the ground.  The little red hen had an idea.  She would plant the seeds."  The Little Red Hen, folklore.

This familiar children's tale captures the idea of time preference.  The little red hen has foresight, engages in planning, delays gratification and works for the future.  All of these actions were once generally seen as evidence of her good character and of socially desirable behavior. The failure of the other lazy animals to engage in this socially desirable conduct is appropriately punished at the end, when they must do without eating the bread made by the little red hen.  [Green text is used to indicate this is my commentary and not drawn from Hoppe's text. I thought it would be helpful to use a simple example most of us are familiar with to introduce the concept of time preference].

As his a priori thesis, Hoppe begins by noting that humans prefer more of a good rather than less and like to have it sooner rather than later; however,a falling time preference(by which Hoppe means a declining preference for immediate gratification) is better for human beings and better for the development of civilization than a rising time preference (an increasing need for immediate gratifcation).  The preference for more rather than less and sooner rather than later are in tension with each other. A person may have immediate needs that must be satisfied prior to engaging in a process that will satisfy longer term needs, e.g. one can catch more fish with a net than a pole, but constructing the net may take time during which the person will need to catch fish in order to eat. "[M]ore round-about, lengthier production processes yield a larger output....[and one must be able to save] to accummulate present consumption goods needed to provide for...wants...during the waiting period."

To return to the Little Red Hen, she can perceive she can have more later if she engages in the production process of planting the seeds and she can only save the seed [that is, accumulate capital goods] since she has adequate daily food.

Many factors (one's family, one's environment, one's social class) can influence a person's time preference, including a person's own subjective evaluation of what is important; however, without regard to any single person's original preference, once a population begins to save, time preference for the population fallsi.e. people delay gratification.  Hoppe sees the benefits of falling time preferences are myriad--increased real income even for non-savers, better health, increased life expectancy and ability to make even more far ranging plans.  Hoppe attributes much to a falling time preference. "By virtue of the saver's saving, even the most present-oriented person will be gradually transformed from a barbarian to a civilized man....[his life] becomes longer, increasingly refined, and comfortable."

Let's shift our focus to the concept of appropriation for a moment. The Little Red Hen appropriated the seeds from nature and engaged in a production process of growing the seeds into grain, which was harvested to create bread. 

To appropriate something is to find and make use of  a "previously unowned, nature given good." One must distinguish "appropriation" from "expropriation." Goods are expropriated when violations of property rights occur, when the goods are stolen or damaged or if a third party restricts the use of the goods by the person who appropriated the good. Expropriation can occur through criminal activity or governmental interference.  When goods are expropriated, either by criminals or by government, the fall in time preference may be halted or even reversed.  We know intuitively that if an individual perceives his goods are likely to be stolen he may use them more quickly or devote resources to their preservation; however, since the individual can insure for sporadic losses to criminals, the impact on time preference is "temporary and unsystematic" if expropriation is only due to theft.

"Matters fundamentally change and the process of civilization is permanently derailed whenever the property-rights violations take the form of government interference." [emphasis added]

The government has many means of expropriation at its disposal.  Not only does a tax on property or income deprive the property owner of his good, but he may also be deprived of it through the process of inflation or regulation.  "Because of their legitimacy government violations of property rights affect individual time preferences systematically differently and much more profoundly than does crime." [emphasis added].  Because the takings are viewed as legitimate, they become systematic and increase in number, i.e. all activities directed towards the future are inherently riskier; consequently, humans become more present oriented, i.e. their time preference rises. It becomes wiser to enjoy ones goods today than to plan for their use tomorrow.

"Every government...that engages in...(expropriations) is by its nature a territorial monopolist."  There can be only one government over a geographic area. If there were competing authorities with legitimate means to expropriate goods, soon there would be nothing left for the producers or for the government. Hoppe goes on to note, that it is unlikely that a democractic government will arise naturally in a given locality for who would trust their neighbors to choose the leader from among equals. Instead, the natural order would be that a person of superior wisdom and/or bravery and/or judgment would possess "natural authority" and be regarded by themselves and by their community as the personal owner of the monopoly privilege accorded to a government.  In the past the personal owner would have been a monarch.  This type of personal ownership of the governmental function by a particular person having inherent authority (as opposed to someone having power, which can only be maintained through the use of force) is distinguished from public ownership of the government that arises in a democratic setting.

The type of ownership -whether private or public--of the monopoly power of government has fundamentally different impacts on the time preference of individuals. "Contrary to conventional wisdom, the decivilizing forces inherent in any form of government are systematically strengthened [in a democracy]."  Because the monarch owns the resources that he expropriates personally and can pass these on to his heirs, he considers both their current and their future value, i.e. his time preference falls.  He also recognizes the limits of his ability to expropriate since he desires that the producers continue to produce so that his heirs can expropriate, i.e. he restrains his impulse to tax heavily.  (Hoppe's footnote indicates that monarchs were not able to extract more than 8% of the national income prior to the second half of the 19th Century and often their tax rates did not exceed 5%.) Further, the monarch recognizes the importance (i) of respecting private property rights since his rights are likewise private, and (ii) of using his monopoly power to punish crimes as they threaten his income, not just the producer's--he knows that the more the criminals expropriate, the less there remains for the monarch.

Other important consequences of personal ownership of the power of government are:

(i) "the exclusive status of the individual ruler and his family...stimulates...'class consciousness' on the part of the governed public and promotes opposition...to any expansion of the governement's power to tax."  The governed recognize that they are unlikely to ever become part of the government, so they diligently monitor its taxation of themselves.  

(ii) since it is the natural tendency of government to attempt to expand its territorial monopoly, it is the natural tendency of government to engage in war.  "Owing to its exclusive character and the developed class consciousness of the ruled, government attempts [by a monarch] at territorial expansion tend to be viewed by the public as the ruler's private business, to be financed and carried out with his own personal funds."

The constraints on the monarch who privately owns government do not restrain the democratically elected public government. The public government only has the current use of resources available to the government, which causes it to consume as much of them as he can during his term in office for what is not used by him then may never be available to him again.  A second deleterious effect is the loss of class consciousness of the ruled.  In theory, anyone can become a member of the government.  "The illusion even arises that such a distinction [between the government and the ruled] no longer exists; that with a democractic government no one is ruled by anyone but everyone instead rules himself....[which illusion led to the idea] that the transition from monarchy to democracy ...[was] progress."

When there was a monarchy, the monarch needed to maintain personal legitimacy for it was only by avoiding arousing the resistance of the ruled to his personal authority that he could maintain his office.  Now with public governance we have a fiction that government represents the "general will--but that is clearly a fiction--today as ways Power is in the hands of a group of men who control the power house." (See footnote 26, quoting Bertrand de Jouvenel). Jouvenal goes on to note that no one truly attempts to limit the power of government as each recognizes that one day he may be able to use it as he prefers).

Other deleterious changes will manifest when the government is public, such as: 

  • an increase in public debt since no one is personally liable (a monarch could and did become bankrupt)
  • exemption of government agents from personal liability
  • "public" (legislative) law will replace "common" law, especially in the area of positive law with the purpose of redistributing wealth, through the mechanisms of:
  1.      transfer payments
  2.      free or below cost provision of services
  3.      business and/or consumer regulations or "protection" laws.

As the law becomes increasingly unpredictable,  the future is more uncertain, i.e. the time preference of producers will rise.They will consume more now and save less for the future. Further, as redistribution makes non-producers wealthier and producers less wealthy, the number of people not producing will increase and their number will grow over time, "leading to continuously rising time-preference rates and a progressive decivilization-infantilization and demoralization--of civil society."

Finally, and perhaps most deleterious of all, "democratic republicanism inevitably leads to nationalism....Interstate wars are transformed into national wars....which can only be resolved through cultural, linguistic, religious domination and subjugation (or extermination)." The public State, with its powers to tax, to conscript and to embody the public good, can now wage the most awful wars ever seen with no distinctions between civilians and soldiers. 

Hoppe ends Chapter 1 by noting that we can retrospectively see the civilizing influence of monarchy from the early Middle Ages throughout the 19th Century and the devastating consequences of democratic governance following World War I. "[D]emocractic republicanism produced communism (...and government sponsored mass murder...) facism, national socialism, and...social democracy ('liberalism')....Foreign and civil wars have increased in frequency and in brutality, and the process of political centralization has advanced....[It] led to rising taxes, debts, and public employment...destruction of the gold standard, unparalleled paper-money inflation and increased protectionism and immigration controls...falling savings rate [and a decline in] the cognitive prowess of the political and intellectual elites and the quality of public education...."

Given the destructive impact of democratic rule, he hopes for nothing less than that democracy "might someday be regarded as morally illegitimate and politically unthinkable." In its place he sees the source of human civilization as "private property rights, contractualism, and individual responsibility." 

 


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