One of the most profound but least discussed effects of Bitcoin is its impact on “time preference” – the degree to which people value the present over the future. Austrian economists have long argued that sound money encourages low time preference (planning for the future), while unsound money encourages high time preference (living for today). Bitcoin, as the soundest money ever created, is already beginning to shift human behavior toward long-term thinking.
What Is Time Preference?
Time preference is the tendency of people to value present goods more highly than future goods. A person with high time preference prefers to consume now and save later. A person with low time preference is willing to delay gratification and invest in the future.
Time preference is not fixed – it is influenced by the monetary environment. When money loses value over time (inflation), people are incentivized to spend now rather than save for later. When money maintains or increases its value over time (deflation or stability), people are incentivized to save and invest.
Fiat Money Encourages High Time Preference
The fiat monetary system, with its constant inflation, encourages high time preference:
- Why save money that will be worth less next year? Spend it now.
- Why invest for the long term when you can make quick profits in the stock market?
- Why build a business when you can flip houses or trade crypto?
- Why think about the future when the government will bail you out?
The result is a society that is increasingly focused on short-term gratification and increasingly unable to plan for the long term. Consumer debt is at record levels. Infrastructure is crumbling. Climate change goes unaddressed. The future is sacrificed for the present.
Bitcoin Encourages Low Time Preference
Bitcoin’s fixed supply creates the opposite incentive. When money increases in value over time (as Bitcoin has historically done), people are incentivized to:
- Save rather than spend: Why spend Bitcoin today that will be worth more tomorrow?
- Invest for the long term: Bitcoin’s long-term appreciation makes patient investing more profitable than short-term speculation.
- Build rather than consume: When your savings are growing, you can afford to invest in long-term projects.
- Think about the future: Sound money makes the future more predictable, enabling long-term planning.
This shift toward low time preference has profound implications. A society with low time preference invests in education, infrastructure, and innovation. It takes care of the environment. It plans for future generations. It is, in every meaningful sense, more civilized.
The Bitcoin Standard
In a Bitcoin standard, the economic incentives that currently encourage short-term thinking would be reversed. Saving would be rewarded. Long-term investment would be more profitable than short-term speculation. The future would be valued more highly than the present.
This is not just an economic argument – it is a moral one. A society that values the future is a society that takes responsibility for its actions. A society that lives only for today is a society that mortgages its children’s future for present comfort.
The Bottom Line
Bitcoin’s impact on human behavior may be its most important effect. By providing a monetary system that rewards saving and long-term thinking, Bitcoin has the potential to shift society from short-term gratification to long-term planning. This is not just about money – it is about the kind of society we want to build. Sound money is the foundation of a sound society.