Philosophical essay on economic theory and time discounting

present certainties over future certainties. The reason is studied in a branch of economics called “capital theory”. My next generation theory, really Petty’s of 1662, proposes what the average-risk time discount rate is and why. Present value of each expected instant of future satisfaction grows at that rate as time shortens the discount period. It disappears, as apples from the tree, when expectation matures into reality. This diamond ring parable is full of useful lessons. | think it contains substantially all of economics. “Consider the lilies of the field.” “They also serve who only stand and wait.” A chemist would testify that the ring has done nothing. An economist sees plenty happening. Economics is abstraction. Physical capital is not things, and human capital is not people. It’s all in the mind. What an economist sees is present value evolving with time as expectations ripen and eventuate. Output is not what we do, although it has to do with what we do. It is the passage of time. Exhaust is the fruition of time and the harvest reaped. Only when we allow psychic values can we say that all behavior is economic behavior. It is choices among alternatives. That’s what makes economics philosophy. Axioms Then what should its axioms be? We would like empirical or real-world certainties. | find none beyond Descarte’s cogito. Philosophy is certain of next to nothing. We settle for working assumptions. We want ones as safe and few as possible. Those of economics have usually been left implicit since the marginalist revolution. I dropped the course because | felt their need. It should do no harm, at this point, to risk the opposite extreme. Let’s try putting everything on the table. My first axiom, in that spirit, will be unguided natural causality. This need not alarm the devout. It is the working assumption of all science. Working assumptions are not creeds. | cannot rule out the possibility of occasional or even continuous intervention by God to explain what we see. But we know to act as if we ruled it out Chapter 3: Foundations 1/11/16 4 HOUSE_OVERSIGHT_010975