Time Preference in Creating Capital to Finance Innovation: Selected Issues
DOI:
https://doi.org/10.15678/krem.18813Keywords:
time preference, Austrian School of Economics, capital, interestAbstract
Objective: The main objective of this article is to provide an overview of the Austrian School of Economics on time preference, and to analyse selected determinants of time preference in the creation of capital to finance innovation.
Research Design & Methods: An analysis of the subject literature was conducted and coupled with logical deduction.
Findings: A decline in time preference, expressed in stronger investment activity, belongs – together with technological progress and changes in labour resources – to the main sources of economic growth. Time preference is therefore not limited to long-term growth processes. It also influences shorter-term macroeconomic dynamics, including cyclical fluctuations, changes in economic structure and the way markets operate. In this sense, it becomes one of the factors through which the economic order evolves.
Implications / Recommendations: In a theoretical context, the impact of time preference in creating capital to finance innovation and on the functioning of markets was identified.
Contribution: The economy is moving away from equilibrium, striving to change the structure resulting from the advantage of innovation. Development based on innovation takes place in conditions of disequilibrium. Observing the determinants of time preference can help to understand the course of economic processes and technological progress in relation to levels of inflation and capital accumulation. This article contributes to the literature by discussions on the true nature of interest and relations to the money market provide a contrast to mainstream economic theories.
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