I wouldn’t blame readers who think I’ve gone on too much about Nozick, but he is an important thinker, and his way of looking at problems differs so greatly from that of Mises and Rothbard that it’s useful to contrast the two different approaches. I’d like to begin by continuing the discussion in my last ...
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I wouldn’t blame readers who think I’ve gone on too much about Nozick, but he is an important thinker, and his way of looking at problems differs so greatly from that of Mises and Rothbard that it’s useful to contrast the two different approaches.
I’d like to begin by continuing the discussion in my last column about time preference. One of the keys to understanding Nozick is the great stress he places on evolutionary explanations. Although he rejects Mises and Rothbard’s view that time preference is an a priori category of action, he himself accepts that, as an empirical matter, people have time preference. He does so because he has an evolutionary explanation for it.
First let’s recall what time preference is. “He who consumes a nonperishable good instead of postponing consumption for an indefinite later moment thereby reveals a higher valuation of present satisfaction as compared with later satisfaction” (Mises, Human Action, p. 796).
Nozick’s evolutionary account begins with animals.
Such preference has been discovered in animal experiments, where the effectiveness of a reward declines with its distance forward in time in accordance with some concave curve..…The time preference found in animal experiments is not, I assume, to be explained by their performing rational calculations, even implicitly.…Supposing such a time-preference tendency arose by random mutation and was transmitted genetically, and the desires involved themselves were connected with survival to reproductive age, ability to protect progeny, etc., then time-preference would be selected for in the process of evolution, once it appeared. If some such explanation accounts for its presence in lower organisms, it is reasonable to think that we too have some genetically based time-preference. The evolutionary process has built time-preference into us, for within that process the rationality of time preference is reflected as adaptive value. (Nozick, “On Austrian Methodology,” in Socratic Puzzles, pp.139–40, emphasis in original)
Economists, he suggests, should take account of this evolutionary explanation. “Economists should no more hesitate to use this biologically based fact about people than Mises hesitated to incorporate the general (non–a priori) statement that labor has disutility” (ibid., p. 140).
But now we have a problem.
The evolutionary process builds time-preference into organisms who do not calculate, as a (rough) rule of thumb to approximate what calculation would lead to.…let us now consider the situation of organisms who do calculate, and who can in their deliberations take into account various future contingencies. If these organisms (call them people) do such explicit calculation, and also feed into these calculations magnitudes of (future) desires which have been discounted to take such calculations into account already, then isn’t there double-counting, or rather, double-discounting? Time preference first discounts, and our later calculations explicitly take into account factors and lead, in effect, to explicit discounting. (p. 140)
There’s an obvious problem with including the evolutionary account in economic theory. The disutility of labor is a fact that Mises thinks economists should add to praxeology. Nozick’s evolutionary account is just speculation. So far as I know, it hasn’t been shown that human beings have a genetic tendency to discount the future, let alone that Nozick’s evolutionary explanation of that alleged fact ought to be accepted. Adding a speculative story to economic theory isn’t quite the same as adding an uncontroversial fact. Maybe Nozick can escape this criticism if all he means is that time preference should be added to economic theory as an empirical fact, not his explanation for it as well.
But I doubt that he accepts this more limited view, because the problem he raises depends on his speculative theory. The problem, remember, is that we’ve got time preference built into us genetically, so if we consciously discount, we are double-discounting. Nozick thinks that when we picture, say, getting an orange now and getting a similar-quality orange a year from now, the orange a year from now will seem less desirable to us without having to think “if I have to wait a year to get the orange, I want a premium—one orange isn’t enough.”
One way to escape this problem would be to claim that the way human beings discount the future is by explicit calculation. Even if Nozick is right that time preference in human beings is biologically based, maybe we don’t do this automatically. But I suspect that he would answer, piling speculation on top of speculation, that human beings discounted the future before they were able to calculate numerically.
The best response, I think, to the double discounting problem doesn’t require us to challenge the account on its biological details. Suppose Nozick is right: time preference gives animals that have it a reproductive advantage, and we have time preference built into us. Who says that the biologically based time preference rate is the optimal rate? The fact, if it is one, that our ancestors survived at a higher rate than competitors with other rates hardly shows that this rate is “better” from an evolutionary point of view, than the genetically based rate plus conscious discounting.
And what if it is? Why should we try to maximize “inclusive fitness,” as evolutionists call it? Why shouldn’t people adopt the time discount rate that seems best to them, for whatever reason they wish? Nozick seems to assume that people consciously discount for time only because they don’t realize that discounting is already built into them genetically. Why assume this?
I gave Nozick a version of this objection in a conversation I had with him in April 1980. I said that maybe all he has shown, if his explanation is right, is that people have higher time preference rates than they think they do. He paused for about fifteen or twenty seconds, and responded in the way I’ve suggested in the previous paragraph. Later that month, I visited Murray Rothbard in Manhattan and told him about the exchange. Murray said, “That’s great, David! You stopped the flow!” Murray was referring to a technique of gamesmanship discussed by the British humorist Stephen Potter, a favorite author of his.