Time Preference Theory of Interest

Discipline: Economics

Developed first by Austrian economist CARL MENGER (1840-1921), time preference theory of interest is the analysis of how individuals or firms will sacrifice present utility in the hope of greater future returns. The expected rate of return is highly subjective.

Also see: random walk hypothesis, term structure of interest rates

Source:
C Menger, Principles of Economics, J Dingwall and B Hoselitz, eds (Glencoe, 111., 1950)

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