The author of the Jerusalem Post piece (”The Austrian School Flunks”),makes the naïve assumption that an individual, knowing his personal time preference, knows as well the aggregate market’s time preference. Under this assumption the two problems raised could be true.
Regarding problem one, investors that know the market’s time preference and learn from past mistakes should be able to recognize whether central the bank’s arbitrary interest rates are in line with it. The mistake is even more evident in the second problem he points out: since investors are consumers as well, they should be able to transfer the degree of their willingness to buy to their investor decision, therefore being able to take decisions that are in line with the aggregate consumers sentiment.
Clearly there is no way to guess the aggregate market’s time preference. My preference is different form the others’ and the possibility to observe people’s preferences does not exist, since these are subjective and continuously evolving.
But even if that simplistic assumption held, the two critics would not survive against the “evidence” offered by any Austrian textbook for beginners: as Mises teaches and Rothbard> reinforces, time preference is just one of the three component’s that determine the market’s interest rate, the other two being the risk premium (in case of business investments) and the change in money’s purchase power.
