Ludwig von Mises
On the Development of the Subjective Theory of Value
9. The Role of Time in the Economy
Classical economics distinguished three factors of production: land, labor, and capital. Inasmuch as capital can be resolved into land and labor, two factors remain: labor and the "conditions of well-being" made available by nature. If consumption goods are disregarded, these alone, according to the view to be found in the older literature, are the objects of economizing.
The classical economists, whose attention was directed above all to the conduct of the businessman, could not observe that time too is economized. An account for "time" does not appear in the businessman's books. No price is paid for it on markets. That it is, nevertheless, taken into consideration in every exchange could not be seen from the standpoint of an objectivistic theory of value, nor could one be led to this realization by reflection on the popular precept contained in the saying, "Time is money." It was one of the great achievements of Jevons and Böhm-Bawerk that, in carrying on the work of Bentham and Rae, they assigned the element of time its proper place in the system of economic theory.
The classical economists failed to recognize the essential importance of time, which manifests its effect directly or indirectly in every exchange. They did not see that action always distinguishes between the present and the future?between present goods and future goods. Yet the time differential is important for the economy in still another respect. All changes in the data can make themselves felt only over a period of time. A longer or a shorter period must elapse before the new state of equilibrium, in accordance with the emergence of the new datum, can be reached. The static?or, as the classical economists called it, the natural?price is not reached immediately, but only after some time has passed. In the interim, deviations ensue that become the source of special profits and losses. The classical economists and their epigones not only did not fail to recognize this fact; on the contrary, they occasionally overestimated its importance. The modem theory too has paid special attention to it. This is true above all of the theory of indirect exchange. The theory of changes in the purchasing power of money and of their concomitant social consequences is based entirely on this fact. A short while ago, in a spirit of remarkable terminological and scholastic conscientiousness, an attempt was made to deny to the circulation credit theory of the trade cycle its customary name, viz., the monetary theory of crises, on the ground that it is constructed on the basis of a "time lag."
As has been stated, economic theory has failed to see the importance of the fact that a shorter or a longer period of time must go by before the equilibrium of the market, once it has been disturbed by emergence of new data, can again be established. This assertion would never have been made if, for political reasons, repeated attempts had not been made to embarrass the discussion of economic questions with irrelevant objections. The defenders of interventionism have occasionally attempted to confront the arguments of the critics of this policy?arguments supported by the irrefutable deductions of economics?with the alleged fact that the propositions of economics hold true only in the long run. Therefore, it was maintained, the ineluctable conclusion that interventionist measures are senseless and inexpedient cannot yet be drawn. It would exceed the scope of this treatise to examine what force this argument has in the dispute over interventionism. It is sufficient here to point out that the liberal doctrine provides a direct, and not merely an indirect, demonstration of the senselessness and inexpediency of interventionism and that its arguments can be refuted only by pointing to interventionist measures that do not, in fact, bring about effects that run counter to the intentions of those who have recourse to them.
 Cf. Burchardt "Entwicklungsgeschichte der monet?ren Konjunkturtheorie" Weltwirtschaftliches Archiv XXVIII, 140; L?we, "?ber den Einfluss monet?rer Faktoren auf den Konjunkturzylus," Schriften des Vereins f?r Sozialpolitik, CLXXIII, 362.