The Fisherian Time Preference and the Ebolution of Capital Ownership Patterns in a Global Economy
Conventionally economic growth theory was based on the assumption of a
constant rate of time preference. Uzawa (1968) and Obstfeld (~, 1981)
introduced the rate of time preference that increases with the utility
level. Irving Fisher (The Theory of Interest) has a different opinion,
however, that people are more time impatient at the lower level of income.
This paper assumes a non-monotonic time preference schedule such that
people are more patient at the middle income levels and are less patient
when they are either very poor or rich. Based on a nonlinear saVings
function out of wealth implied by such a time-preference schedule, this
paper develops a single-good, multi-country growth model of a global
economy with free capital mobility. The long-run property of this 3ystem
is characterized by three kinds of long-run equilibrium: the starvation
(fatal attractor) equilibrium, the imperialism equilibria dominated by a
nation or by a group of nations, and the co-prosperity equilibrium where
the wealth and the income of countries in the system grow proportionately.
Bifurcation phenomena and the global stability of the system by the
Lyapunov function will be discussed.
Our system has a strong resemblance to some models of ecology where
species compete for their survival (May, Stability and Complexity in Model
Ecosystems). Here we can properly analyze the transition of a debtor to a
creditor country from a global perspective, and make a case for the
pump-priming foreign aid or debt relief policy.
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