I wrote another article:

quoting
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This is a response to Another round of patience by Max (nprofile…8p0e) .

For the positive presentation of my position, see my previous post HODLing is low time preference.

Here I will focus on responding to specific points raised by Max, primarily his reductio ad absurdam, since he says that was the strongest argument from his original post.

I'll also comment on a few other points.

The Reductio

In Max's words:

[...]if everyone hoards everything, no one lends at any price. Interest rates go to infinity; capital becomes unavailable. And infinite interest rates reflect infinite time preference by the standard Austrian framework.

So...

1. If everyone hoards, there is no lending, regardless of the interest rate offered by potential borrowers

2. This implies that the effective rate of interest is infinite

3. Infinite interest rates reflect infinite time preference

The Mistake

...is in step 3.

In steps 1 & 2, Max is talking about observed, or market interest rates.

In step 3, he is talking about a pure or originary interest rate, which would indeed reflect time preference.

But they are not the same thing. Pure interest rates cannot be observed, because in the real world, interest rates always include an entrepreneurial component. It is not possible to isolate the effect of time preference from the effect of entrepreneurial profit/loss in market interest rates.

The Evenly Rotating Economy

To isolate the effect of time preference, Austrians use an imaginary construction called the Evenly Rotating Economy (ERE).

In the ERE, market interest rates are a pure expression of time preference. No one would hold cash balances; all funds not wanted for immediate consumption would be invested. The reason is not because everyone would have extremely low time preference, but because in the ERE, there is no uncertainty (the definition of the ERE).

A few other points

Max says:

If the hoarder's choice reflects risk tolerance, then you've conceded that hoarding doesn't demonstrate time preference at all.

I don't concede any such thing.

The choice between hoarding and investing does not demonstrate time preference. It reflects risk tolerance (technically it reflects all forms of uncertainty, not only risk tolerance).

Hoarding does demonstrate time preference in the choice between consuming (spending) and hoarding.

Also:

The original article's claim was that hoarders consume the price of uncertainty avoidance. Your postscript agrees.

I don't agree, and I don't see how my postscript can be read as agreeing.

I deliberately avoided addressing that because it seemed like it would be a huge distraction from the main point of my first article. I'll try to explain my view briefly.

The price of uncertainty avoidance that Max refers to is the forgone interest that could have been had by investing. That is certainly an opportunity cost of hoarding.

But an opportunity cost it isn't consumption. Consumption is enjoying the satisfaction provided by a good. You are very much not enjoying the benefit of the forgone interest.

We all know the difference intuitively. Consumption is a source of pleasure (a prior, at least); costs are painful.

I can also provide a reductio: if you want to say opportunity costs are a form of consumption, then you can't just limit that to forgone interest. You would have to say the hoarder is consuming every other good in the world that he could have had if he chose not to hoard!

Why it matters

Max says:

You seem to treat time preference as any choice involving present versus future.

Yes! In fact, I will go further: all action involves substituting a future state for a present state. Therefore, all action involves time preference.

My article uses a narrower definition: time preference is revealed through the exchange of present goods for future goods at an interest rate.

But this isn't only about definitions, because Max also says this:

The HODLer who refuses to lend at any rate isn't demonstrating patience. They're demonstrating that present possession matters more to them than any offered future return. Whether you call that high time preference or something else, it doesn't look like the civilizational virtue the Bitcoin community claims.

If Max was saying, "HODLing is good, it just doesn't demonstrate time preference," that would be purely a question of definitions. I would pack up my keyboard and call it a day.

Unfortunately, Max is using the claim that HODLing doesn't demonstrate time preference to construe it as a vice.