Unit 7 Lecture Notes

As discussed extensively in Chapter 5 of The Bitcoin Standard, the facet of the shift to easy money that I find most significant and fascinating is the effect it has on people's time preference. As the purchasing power of fiat money is expected to decline over time, and as interest rates are artificially manipulated downward, individuals begin to favor spending and borrowing over saving. While my book discussed this tendency in terms of its impact on consumer decisions and capital markets, it is also worth considering the impact on people's use of their natural environment and its soil, and on their personal health decisions.

As individuals' time preference rises and they start to discount the future more heavily, they're less likely to value the maintenance of a healthy future state of their natural environment and soil. Consider the effect this would have on farmers: the higher a farmer's time preference, the less likely they are to care about the returns their land will be able to offer after ten years, and the more likely they are to care about maximizing their short-term profits. This would incentivise short-term focused management of soil, which would prioritize a quick return over long-term soil health. Indeed, this is exactly what we find with the depletion of the soil leading up to the 1930's, at the time of Price's writing.

The introduction of modern industrial production methods, thanks to the utilization of hydrocarbon energy discussed in detail in the last Bitcoin Stan dard Research Bulletin, has allowed humans to increase the intensity with which they utilize land, and consequently the amount of crops they can get out of it. While the story of increasing agricultural productivity is often touted as one of the great successes of the modern world, the heavy cost it has imposed on the soil goes largely unmentioned. The vast majority of agricultural soil in the world today is largely unable to grow crops without the addition of artificial industrially-produced chemical fertilizers, steadily degrading the nutritional content of the food compared to food grown on rich soil.

In particular, industrialization allows for the extensive indulgence of people's high time preference in utilizing soils. With modern hydrocarbon-powered machinery and technology, nutrients can be extracted from the soil far more rapidly than before, allowing for quicker depletion of the soil and more short-term profits. Fertilizers allow this present-orientation to appear relatively costless in the future, since depleted soil can still be made fertile with industrial fertilizers. After a century of industrial farming, it is clear that this trade-off was very costly as the human toll of industrial farming grows larger and clearer.

It is quite astonishing to find that within the field of nutrition, without any reference to economic or monetary policy, Price had identified the first third of the twentieth century as having witnessed immense degradation of the soil, and a decline in the richness of nutrients in the food produced from it. In my book, I also mention how the great cultural critic Jacques Barzun (in his seminal history of the west, From Dawn to Decadence) had precisely identified the year 1914 as the year in which the decadence and decline of the west had begun, when art began its shift toward the less sophisticated modern forms, and where political and social cultures went from liberalism to liberality. Like Price, Barzun makes no mention of the shift in monetary standards and the link it might have to the degradation he identifies. In the work of these two great men, prime experts in their respective fields, we find compelling evidence of a shift toward more present-orientation across the western world in the early twentieth century. Barzun's work illustrates this for culture and art, while Price illustrates it with the nutrient content of the soil, both of which are natural consequences of an upward shift in time preference.

The work of Alan Savory on the topic of soil depletion is very important here. The Savory Institute has been working on reforestation and soil regeneration across the world with spectacular success.

Their secret? Unleashing large numbers of grazing animals on depleted soil to graze on whatever shrubs they can find, till the land with their hooves, and fertilize it with their manure. The results, visible on their website, speak for themselves and clearly illustrate a strong case for keeping soil healthy by holistically managing the grazing of large mammals on it. Agricultural crop production, on the other hand, quickly depletes the soil of its vital nutrients, making it fallow and requiring extensive fertilizer input to be productive. This explains why pre-industrial societies worldwide usually rotated their land from farming to grazing. After a few years of farming a plot whose out put had begun to decline, the land was abandoned to grazing animals, and farmers moved to another plot. After that one was exhausted, farmers moved on to another plot, or returned to the earlier one if it had recovered.

The implication here is very clear: a low time preference approach to managing land would prioritize the long-term health of the soil, and thus entail the management of cropping along with the grazing of animals. A high time preference approach, on the other hand, would prioritize an immediate gain and exploit the soil to its fullest with little regard for long-term consequences. The mass production of crops, and their increased availability in our diet in the twentieth century, can also be seen as a consequence of rising time preference. The low time preference approach involves the production of a lot of meat, which usually has small profit margins, while the high time preference would favor the mass production of plant crops which can be optimized and scaled drastically with the introduction of industrial methods, allowing for significant profit margins.

Another way of understanding the impact of rising time preference is in the decision-making of individuals when it comes to food choices. As depreciating money drives people to prioritize the present, they are more likely to indulge in foods that feel good in the moment at the expense of damage to their health in the future. The shift to ward short-term orientation in decision-making would invariably favor more consumption of the junk foods mentioned above.