Editing Time preference (section)

=== Historical understanding of time preference theory in relation to interest rates ===
The Catholic scholastic philosophers firstly brought up sophisticated explanations and justifications of return on capital, including risk and the [[opportunity cost]] of profit forgone, associated with the discount factor.<ref name=":1">{{Citation |last=Langholm |first=Odd |title=Scholastic Economics |date=2016 |work=The New Palgrave Dictionary of Economics |pages=1–6 |url=https://link.springer.com/referenceworkentry/10.1057/978-1-349-95121-5_2755-1 |access-date=2024-09-14 |place=London |publisher=Palgrave Macmillan UK |language=en |doi=10.1057/978-1-349-95121-5_2755-1 |isbn=978-1-349-95121-5|url-access=subscription }}</ref> However, they failed to interpret the interest on a riskless loan and hence denounced the time preference discounter as sinful and usurious.

Later, Conrad Summenhart, a theologian at the University of Tübingen, used time preference to explain the discount loans, where the lenders won't profit usuriously from the loans as the borrowers would accept the price the lenders ask.<ref name=":1" /> A half-century later, Martin de Azpilcueta Navarrus, a Dominican canon lawyer and monetary theorist at the University of Salamanca, held the view that present goods, such as money, will naturally be worth more on the market than future goods (money). At about the same time, Gian Francesco Lottini da Volterra, an Italian humanist and politician, discovered time preference and contemplated time preference as an overestimation of "a present" that can be grasped immediately by the senses.<ref name=":2">{{Citation |last=Rothbard |first=Murray N. |title=Time Preference |date=2016 |work=The New Palgrave Dictionary of Economics |pages=1–5 |url=https://link.springer.com/referenceworkentry/10.1057/978-1-349-95121-5_1896-1 |access-date=2024-09-14 |place=London |publisher=Palgrave Macmillan UK |language=en |doi=10.1057/978-1-349-95121-5_1896-1 |isbn=978-1-349-95121-5|url-access=subscription }}</ref> Two centuries later, Ferdinando Galiani, a Neapolitan abbot, used an analogy to point out that just similar to the exchange rate, the interest rate links and equates the present value to the future value, and under people's subjective mind, these two physically non-identical items should be equal.<ref name=":2" />

These scattered thoughts and progression of theories inspired [[Anne Robert Jacques Turgot]], a French statesman, to generate a full-scale time preference theory: what must be compared in a loan transaction is not the value of money lent with the value repaid, but rather the 'value of the promise of a sum of money compared to the value of money available now;<ref>Turgot, A.R.J. 1977. In The Economics of A.R.J. Turgot, ed. P.D. Groenewegen. The Hague: Martinus Nijhoff.</ref> in addition, he analyzed the relation between money supply and interest rates: If money supply increases and people with insensitive time preference receive the money, then these people tend to hoard money for savings instead of going for consumptions, which will cause interest rates to fall while prices to rise.