This paper by Gary S. Becker and Casey B. Mulligan explores the endogenous determination of time preference, a fundamental concept in economics that has often been treated as exogenous. The authors develop a model to explain how various factors such as wealth, mortality, addictions, and uncertainty affect an individual's time preference. They argue that even rational individuals may discount future utilities excessively but can offset this by investing resources to reduce the degree of overdiscounting. The model suggests that an increase in future utilities, such as higher life expectancy or increased productivity, leads to higher investments in future-oriented capital, making individuals more patient. The paper also discusses the implications of endogenous time preference for the dynamics of inequality, interest rate determination, and choice under uncertainty. Micro evidence from the Panel Study of Income Dynamics (PSID) supports the model's predictions, showing that a family's consumption growth is positively correlated with its own income and even more closely related to its head's parent's income. The authors conclude by suggesting that their results can be generalized to more complex utility functions and realistic ways of endogenizing time preference.This paper by Gary S. Becker and Casey B. Mulligan explores the endogenous determination of time preference, a fundamental concept in economics that has often been treated as exogenous. The authors develop a model to explain how various factors such as wealth, mortality, addictions, and uncertainty affect an individual's time preference. They argue that even rational individuals may discount future utilities excessively but can offset this by investing resources to reduce the degree of overdiscounting. The model suggests that an increase in future utilities, such as higher life expectancy or increased productivity, leads to higher investments in future-oriented capital, making individuals more patient. The paper also discusses the implications of endogenous time preference for the dynamics of inequality, interest rate determination, and choice under uncertainty. Micro evidence from the Panel Study of Income Dynamics (PSID) supports the model's predictions, showing that a family's consumption growth is positively correlated with its own income and even more closely related to its head's parent's income. The authors conclude by suggesting that their results can be generalized to more complex utility functions and realistic ways of endogenizing time preference.