Price of Time

Question 1

The French expression for a public loan, rentes…

Answer 1

Originated with the French monarch borrowing against the rents of the Hotel de Ville in Paris

Question 2

Alberti’s Time 1430s

Answer 2

Alberti’s time is a secular phenomenon – what Braudel called ‘merchant’s time’ Prior to the fourteenth century, the main purpose of timekeeping in Western Europe had been to maintain the punctuality of monastic life. The secularization of time that occurred during the Renaissance coincided with advances in the technology of timekeeping. By the date of Alberti’s birth all large Italian cities boasted public clocks. Work time could now be measured in hours, and later minutes, providing a boost to productivity.

Question 3

Adam Smith Quotes

Answer 3

In The Wealth of Nations, Smith describes the individual as one who ‘By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.’ A similar thought is expressed in another famous line, in which Smith writes that ‘It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.’

Question 4

‘time preference’

Answer 4

Our propensity to place a higher value on immediate pleasures. For Turgot, a sum of money delivered immediately and the promise of the same amount of money at some future date could not possibly have the same value. Time preference explains why Aristotle was wrong. Interest is the difference in monetary values across time, the rate at which present consumption is exchanged for future consumption. Interest represents the time value of money.

Question 5

Malinvestment

Answer 5

If interest rates are kept below their natural level, misguided investments occur: too much time is used in production, or, put another way, the investment returns don’t justify the initial outlay. ‘Malinvestment’, to use a term popularized by Austrian economists, comes in many shapes and sizes. It might involve some expensive white-elephant project, such as constructing a tunnel under the sea, or a pie-in-the-sky technology scheme with no serious prospect of ever turning a profit.