EVOLUTION OF TIME PREFERENCE BY NATURAL-SELECTION

This paper entertains the hypothesis that human time preferences are i n evolutionary equilibrium (i.e. that no mutation changing time prefer ences could be favored by natural selection). This hypothesis implies that the marginal rate of substitution (MRS) holding Darwinian fitness constant must equal the MRS holding utility constant. Furthermore, in a market economy the latter must equal the MRS in exchange. Exploitin g these principles, I find that the long-term real interest rate shoul d equal ln(2) per generation (about 2 percent per year) and that young adults should discount the future more rapidly than their elders.