Climate activism in the United States and Europe is typically framed as sacrifice for the sake of future generations: We must consume less now to extend the expiration date on human civilization as we know it. The New York Times diagnoses our failure to confront climate change as “the reluctance of people … to make the investments and sacrifices necessary to protect future generations.” Concerned novelists and literary critics urge us to “see other times as requiring something of us today.” Christian leaders, including Pope Francis, call for “meaningful sacrifices for the sake of the earth,” which requires “exercising self-restraint.” The European Commission’s deputy chief has issued a similar plea, while environmental scientists substantiate the importance of a willingness to sacrifice to effective climate action.
Implicit in this refrain about our responsibility toward future generations is the reproach that we have preyed on our future through the sin of what economists call “time discounting”: our inveterate habit of caring less about a future consequence than the here and now.
In fact, the language of sacrifice for the future is uncomfortably close to the mindset that landed us at this precipice. It was precisely by training their eyes on the future, with the help of the concept of time discounting and theories of how to overcome it that germinated in the era of European colonialism, that previous generations became profligate with the Earth’s resources—which should give us pause in reprising the language of sacrifice today.
Economists date the establishment of intertemporal choice—decision-making that involves trade-offs among costs and benefits occurring at different times—as a distinct topic in the discipline to 1834, with the publication of the Scottish economist John Rae’s classic text, The Sociological Theory of Capital.
Rae’s subject was “the effective desire of accumulation,” a psychological factor that helped explain why wealth differed among societies. His examination of the psychology of intertemporal choice deeply influenced his contemporary John Stuart Mill before it was rediscovered by economists theorizing capital at the turn of the 20th century, including Eugen von Böhm-Bawerk, who added a chapter on Rae to the 1900 edition of his History and Critique of Interest Theories. This renewed interest prompted a reissue of Rae’s book in 1905, extending his influence deep into the new century. In 1930, the prominent neoclassical economist Irving Fisher dedicated The Theory of Interest to Rae’s memory. Today, Rae’s approach continues to inform 21st-century theories of time discounting.
Rae framed his book as a critical response to Adam Smith’s 1776 The Wealth of Nations, but he shared Smith’s anxiety to allay the moral worry triggered by liberal political economics’ encouragement of the pursuit of self-interest, advocating self-regulation to insure against evil results. In the right settings, regard for “personal interest” would, he assured, induce individuals to overcome the universal aversion to delaying gratification and pursue “the paths of sober industry and frugality.” In short, we can be conditioned to exercise self-restraint in the present for the sake of future payoff.
The requisite setting for this path was a society that bred a desire for “family aggrandizement” and ranking “high in the estimation of the world.” By the same token, “envy of the superiority of other men” was an important stimulus, albeit held in check by “probity, and tenderness of the happiness of others.”