Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

276 Money, Bank Credit, and Economic Cyclesneeds to survive, and he can spend the rest of his time restingor pursuing subsequent goals that are much more importantto him (like building a hut or hunting animals to vary his dietand make clothes).Robinson Crusoe’s production process, like any other,clearly arises from an act of entrepreneurial creativity, theactor’s realization that he stands to benefit, i.e., he can accomplishends more valuable to him, by employing actionprocesses which require a longer period of time (because theyinclude more stages). Thus action or production processesyield capital goods, which are simply intermediate economicgoods in an action process whose aim has not yet beenreached. The actor is only willing to sacrifice his immediateconsumption (i.e., to save) if he thinks that by doing so he willachieve goals he values more (in this case, the production often times more berries than he could gather by hand). FurthermoreRobinson Crusoe must attempt to coordinate as well aspossible his present behavior with his foreseeable future behavior.More specifically, he must avoid initiating action processesthat are excessively long in relation to his savings: it would betragic for him to run out of berries (that is, to consume all hehas saved) halfway through the process of producing a capitalgood and without reaching his goal. He must also refrainfrom saving too much with respect to his future investmentneeds, since by doing so he would only unnecessarily sacrificehis immediate consumption. Robinson Crusoe’s subjectiveassessment of his time preference is precisely whatenables him to adequately coordinate or adjust his presentbehavior in relation to his future needs and behavior. On theone hand, the fact that his time preference is not absolutemakes it possible for him to forfeit some of his present consumptionover a period of several weeks with the hope ofthus being able to produce the stick. On the other hand, thefact that he does have a time preference explains why he onlydevotes his efforts to creating a capital good he can producein a limited period of time and which requires sacrificing andsaving for a limited number of days. If Robinson Crusoe hadno time preference, nothing would stop him from dedicatingall of his efforts to building a hut right away (which, for