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of the future return he expects from lending out the next unit of money declines enough to be outstripped by the marginal utility of the present use of that unit of money, a utility that must exist given that the lender still has positive time preference. In the meantime, the borrower will continue to borrow until the marginal utility of the next unit of money in the present will decline enough to be outstripped by the marginal utility of having a higher quantity of money in the future. As a result of these transactions, the market rate of time preference will eventually equalize so that no further lending and borrowing will occur, provided that all other things remain equal. The rate of time preference at which this equalization occurs is the pure market rate of interest, arrived at despite the varying time preferences of individuals at the start of the process.

In a real market, of course, other things seldom, if ever, remain equal, and new information and valuations are constantly introduced to shape the behavior of economic actors. Thus, the real market, though it tends toward an equilibrium rate of interest, never quite reaches it. Lending and borrowing, therefore, continue.

Challenges to Time Preference

The universality of positive time preference might be challenged via the following argument. During the present winter, a given individual is offered the choice of having an ice cream cone now or an ice cream come next summer. He prefers and chooses the ice cream next summer. This, however, does not indicate that the individual has a negative time preference. Rather, the ice cream cone during the summer offers a fundamentally different enjoyment from the ice cream cone during the winter. It might, for example, relieve the heat of the summer whereas its counterpart would only augment the winter cold. Since Austrian Economics views economic goods not according to their material properties but according to the values individual actors assign to them, the "ice cream cone in the summer" is a fundamentally different good from "the ice cream cone in the winter." The concept of time preference only applies to a desire for the present good over the same quantity of the same future good. Since the two types of ice cream are fundamentally different goods, the selection of one over the other cannot refute the universality of positive time preference.

Another objection to the Austrian view of time preference invokes the case of a miser who prefers to starve to death

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