Medium- and Long-Term Vision
This article is part of the Basic Course on Libertarianism and the Austrian School of Economics-> Module 5: Austrian Economics and Free Market
Last updated: 2026-08-17
The capacity to think in the medium and long term is not simply an economic strategy; it is the cornerstone of civilization.
It is not an “abstract ethical virtue” nor being “foresighted” in the vulgar psychological sense. It is a central economic and civilizational fact: the willingness to value a greater future satisfaction more than a lesser present satisfaction. That willingness is what makes saving, capital formation and, ultimately, civilization itself possible.
This topic is related to several topics that will be seen later, such as: Time Preference and the Theory of Capital
“Roundabout Production” (Roundaboutness)
Eugen von Böhm-Bawerk, one of the pillars of the Austrian School of Economics, introduced the concept of roundabout production (or capital-intensive processes).
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The logic: To be more productive, we must be able to wait. Instead of fishing with his hands (direct production, short term), man builds a net (roundabout production, long term). That net requires time, saving, and the sacrifice of present consumption.
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The Austrian thesis: Capital is, essentially, frozen time. Every technological advance and every increase in the real productivity of a society is the result of someone who gave up immediate gratifications in order to invest in processes that will bear fruit years later. The long term, in economics, is the conversion of saving into productive capital.
“Low Time Preference” as an ethical virtue
For the Austrian School of Economics, time preference is the subjective valuation we give to the present relative to the future.
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High time preference: I want the good now. It is a trait linked to basic animal survival and, in human terms, to impulsiveness and lack of planning.
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Low time preference: I am willing to postpone consumption today in order to have more (or better) goods tomorrow.
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Philosophical implication: Civilization is the triumph of low time preference over immediate instincts. It is not only a financial calculation; it is an exercise of self-mastery. The person who plans for the long term is exercising his freedom against the dictatorship of his own biological impulses and against the pressures of the environment. It is an act of individual sovereignty.
Evolution and higher cognition
From a biological and evolutionary perspective, the capacity to plan for the long term is what differentiates Homo sapiens from other species.
- The brain: The development of the prefrontal cortex allowed our species to project future scenarios, simulate risks, and make abstract decisions detached from the immediate present stimulus.
- The biological trap: Evolutionarily, our brain is programmed for scarcity and immediacy (eat everything there is today because tomorrow there may be nothing). The “long term” is a triumph of reason over instinct.
- The Austrian thesis applied: When public policies (such as chronic inflation or excessive welfarism) eliminate the reward of future effort, the State is, biologically speaking, retraining the population to act like animals: focused solely on immediate satisfaction because the future is uncertain or directly stolen by the system.
Institutions as the “rails” of time
History teaches us that the long term only flourishes when the institutional environment is predictable. Ludwig von Mises argued in Human Action that economic calculation is impossible without private property and sound money.
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Secure private property: Only someone who can appropriate the future fruits of his present abstinence has a real incentive to abstain.
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The problem of money:
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If money loses value (inflation), the long term disappears. The saver is the principal party defrauded, and the speculator (the one who adapts quickly to the short term) is the winner.
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Chronic inflation (especially monetary inflation) is a silent tax on saving.
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It systematically destroys low time preference because it punishes those who postpone consumption.
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That is why the Austrians insist on the gold standard or on currencies of rigid supply: not out of metallic fetishism, but because they protect intertemporal calculation.
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Cultural and civilizational dimension
Hans-Hermann Hoppe radicalizes the argument: the history of civilization can be read as a process of cultural and institutional selection of low time preference. Societies that succeed in lowering the average discount rate accumulate capital, develop science, art, and law, and displace high-time-preference societies.
This is not only economics. It has biological and psychological correlates: the capacity to delay gratification (the famous Marshmallow experiment) is correlated with better life outcomes, and cultures that institutionalize that capacity (stable nuclear family, work ethic, respect for property, achievement-oriented education) reinforce the trait.
High time preference, by contrast, is associated historically with greater impulsiveness, violence, and dependence.
Contrast with Keynes’s short term
The Austrian medium- and long-term attitude is exactly the opposite of “in the long run we are all dead.”
Keynes did not merely prioritize the short term out of pragmatism; he built a theory that treats capital as a more or less homogeneous stock and saving as a “leakage” of demand.
From the Austrian standpoint that is a catastrophic error of Theory of Capital: saving is not a leakage; it is the prior condition of sustainable investment.
Argentine Peronism (and its variants) illustrates the inverse mechanism: by destroying the currency, legal security, and the incentives to save, it artificially raised the time preference of the population.
The result was not only material poverty; it was a change in the structure of valuations: more present consumption, less capital, shorter horizons. More poverty in the long run.
The Austrian view:
You cannot ask a society to think 20 years ahead if the State changes the rules of the game every 4 years. The long term requires institutional stability.
The more arbitrary and intervened the legal framework is, the shorter the planning horizon becomes. The entrepreneur (and the ordinary individual) discounts the future more aggressively when he knows that the rules can change by decree.
For the Austrian, fostering the medium- and long-term attitude does not consist in preaching “think about the future.” It consists in:
- Protecting property.
- Preventing monetary inflation.
- Reducing political uncertainty.
- Allowing the returns of saving and investment to manifest themselves without distortions.
This article is part of the Basic Course on Libertarianism and the Austrian School of Economics-> Module 5: Austrian Economics and Free Market
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Last updated: 2026-08-17
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