Book Review: Time And Public Policy by T. Alexander Smith

University of Tennessee Press, P.O. Box 250, Ithaca, NY 14850 1988 • 299 pages • $29.95 cloth

T. Alexander Smith, a professor of political science at the University of Tennessee, has written an impressive book. It is a book that ranges across several social science disciplines, particularly economics, sociology, and politics—but also involves psychology, philosophy, and history. This review is written from the narrow perspective of an “Austrian” economist (whose objectivity is, it must be confessed, perhaps compromised in the book’s favor by its author’s embrace of the Austrian tradition in economics, and by his general endorsement of free market policies.)

The major thesis of the book can be stated simply. Modern societies, partly as a result of various sociological forces, partly as a result of welfare-state policies and majoritarian “promissory politics,” are systematically biased toward the short run: “Our time horizons have changed radically in the modern era.” This bias, the author claims, poses a serious danger for society’s long run health and viability. Where we ought to be pursuing courses of action that recognize the long run benefits of bourgeois values, frugality, thrift, and self-restraint, there in fact are powerful political and social forces that lead us, as voters and as politicians, to place greater emphasis on short run, fleeting, and ephemeral benefits. What is required, Smith maintains, is a pattern of institutional reform that will encourage long range planning, and the willingness to forgo instant gratification for the sake of future goals.

This thesis is developed in eight chapters of well-written prose enriched by a scholarly apparatus modestly concealed in the endnotes, reflecting an extraordinarily wide range of reading and study. Although this reviewer has several quibbles to express as an economist, as a citizen he finds the overall thrust of the book—especially in its development of themes in sociology and politics—highly persuasive and important. Although at least some economic aspects of Smith’s argument have been developed before (for example, Henry Hazlitt’s classic Economics in One Lesson critique of interventionism is based on the idea that the “art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy . . . .”), the book’s reinforcement of its economic insights by reference to sociology, and to political institutions, adds up to an innovative and powerful case for the free market and the rule of law.

My quibbles will at first seem minor ones, yet on reflection they turn out to be quite disturbing to the economist. The economist who appreciates the social usefulness of free markets, and also understands the importance of the time profiles of production and consumption, will argue that a key virtue of the market economy is that it stimulates economic growth to reflect, with reasonable faithfulness, the wishes of the individual market participants. In other words, the market generates volumes and rates of capital accumulation and depreciation which reflect the time preferences of the citizens in their capacities of consumers and potential investors. Smith’s position seems, if I read him correctly, to argue for the free market economy because it is likely to generate a time profile of savings, capital-using production, and consumption which is faithful to what (in Smith’s judgment) is the “correct” allocation between present and future. Smith sees the economy as sliding into a miasma of instant gratification—at a time when it ought to be planning prudently for capital replacement and long term growth.

One would like to think that Smith’s view of the “correct” allocation over time expresses what he believes to be the true wishes of the public. Yet certain parts of the book—notably chapter two, where the author notes and deplores the modern abandonment of bourgeois values—suggest that he really does hope for a set of institutions which will not permit citizens to exercise their unhealthily high time preferences. This way of thinking may be eminently defensible from a variety of perspectives, but the economist (who sees the virtue of markets to lie in their respect for citizens’ preferences, no matter how degenerate and “wrong” they may be) feels uncomfortable with it.

This discomfort is only deepened by our noticing that Smith, throughout the book, deplores the sacrifice of the future for the pre-sent-never recognizing, it would appear, that beyond some point, surely, additional provision for the future may be entirely too costly for a present generation. Surely Smith does not wish us to postpone all present consumption to the future? Which future? Next year, next century, next millennium? Granted that our present institutions have biased us so strongly in the direction of instant gratification that our immediate social and political agenda may be usefully focused upon urging greater attention to the future. Nonetheless, one would have expected some mention of the free market’s capacity to avoid, not only a time profile tilted too much toward the present, but also one tilted too much toward the future. What the Austrian emphasis on time allocation depends on is not so much any admiration for the bourgeois virtues of frugality and thrift per se, as an understanding of the need for thrift in order to achieve preferred future consumption goals. This aspect of Austrian understanding does not emerge unobscured in Smith’s book.

Related to this complaint must be a certain unease which an Austrian economist feels at Smith’s lengthy (and generally sound) discussion of Say’s Law in chapter seven. One comes away from this chapter with the impression that Smith wishes us to see Say’s Law as teaching the primacy of production over consumption, of supply over demand. But our appreciation for the profoundly valid insights embodied in Say’s Law should surely not (at any rate not for Austrian economists!) take us in that direction. To recognize that general overproduction is, in the proper sense, impossible, does not require us to say that “supply is the driving force behind ‘demand’”—for Austrians the reverse, properly interpreted, is closer to the truth. Keynes’ error was, for Austrians, not his emphasis on demand, but his belief that “aggregate demand” can be deficient in equilibrium. For Austrians an appreciation for the need to save is not based on any virtue of abstinence, but on the desire to consume, more extensively, in the future.

Several further related quibbles: Smith has learnt his Austrian economics well, and with a great deal of depth. Yet he appears not to see that much of his thesis does not really depend on Austrian insights. To be sure, his superb third chapter represents classic Austrian and Rothbardian deployment of a Crusoe example to illustrate the meaning and importance of the time profile of production and consumption activities. But one does not have to be an Austrian to appreciate the importance of planning and saving for the future. Certainly one does not have to have a sophisticated Misesian appreciation for the a priori quality of positive time preference to accept Smith’s thesis. By over-emphasizing the Austrian route by which he apparently arrived at his understanding of the importance of the time dimension, Smith may have unnecessarily limited its potential significance for economists following different approaches. (This Austrian economist mentions this point somewhat diffidently: it must seem loutish to sniff at Smith’s appreciation for Austrian economics—so frequently ignored!)

Nor, one may respectfully submit, is the Austrian economist’s appreciation for the subtleties and complexities of time quite captured by Smith’s treatment of it. Although Smith makes occasional mention of the problems of uncertainty and knowledge introduced by the circumstance that human action occurs in irreversible time, the overall thrust of his book emphasizes only the one dimension: the need to allocate scarce resources between the present and the future. Primordially important though this dimension certainly is, it is a little unfortunate that the book somehow conveys the impression that, by developing its central thesis, the place of time in economic policy has been fully and completely dealt with. For Austrians, surely, far more needs to be discussed and explained, including especially the role of competitive processes, the role of entrepreneurial discovery, and the complications these introduce into propositions concerning the effectiveness of markets.

But these are mere economist’s quibbles. The larger picture presented by the book relies heavily on insights concerning sociology and politics which impressed this lay reader greatly. Smith has undoubtedly put his finger on a central weakness of modern political systems. There can be no question that the future economic and political well-being of society depends significantly on our being able to disentangle ourselves from the web of forces which, as Smith brilliantly shows, distort our focus, mistakenly and tragically, toward the present and immediate future. Smith’s book deserves a wide readership and careful thought and discussion.

Dr. Kirzner is a professor of economics at New York University.