Time Preference
Crusoe has started a little business, constructing tree houses for the other inhabitants of his island in exchange for coconuts. In order to increase his long-run return on his efforts, he decides to spend some time fashioning his cutting rock (with the aid of a second rock), shaping it into a more efficient axe with which he can make bamboo poles more effectively. He thus adds another higher stage to this portion of his structure of production. This capital improvement will enable him to produce more tree houses per hour of labor in the long run. On the other hand, because of the time required to generate the new capital good (that is, the axe), it will take him longer to bring even a first house off his assembly line. Consequently, he will receive his first payment from customers later, and his consumption of their coconuts will be delayed (). What consequences might such delays have for his actions? Will Crusoe always be willing to postpone consumption in order to increase his marginal product?  

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