Encyclopedia > Time preference theory of interest

  Article Content

Time preference theory of interest

In economics, the time preference theory of interest is the idea that interest is the price that borrowers put on having money now rather than having money later.

This interest rate may be set by the chance of making profit, the estimated inflation, the preference of owning rather than renting an asset or simply a high time preference with consumption.

There is no attempt to link this with marginal production[?] and it rejects the idea that interest is by its nature exploitative.

The theory with its stress on the marginal utility of the loan rather than any use to which it can be put suits the Austrian School's analysis, although other economists also apply this theory.

See also: time value of money



All Wikipedia text is available under the terms of the GNU Free Documentation License

 
  Search Encyclopedia

Search over one million articles, find something about almost anything!
 
 
  
  Featured Article
Brazil

... low-lying Amazon Rainforest in the north, and a more open terrain of hills and (low) mountains to the south, home to most of Brazil's population and its ...

 
 
 
This page was created in 40.6 ms