If you know anything about capitalism, you'd realize that an actor in the market would choose to accept either the annuity or the $5 based upon not only the amount of money involved but the demand for capital and the likelihood of payment in each instance.
To flesh out Russ' example (hey Russ, fellow Potsdamite here, I'm a ugrad at CU):
Russ issues his offer to me. I now judge several things.
My need for five dollars right away.
My assessment of his ability to pay me the annuity of $1 over the long-term (if I know he's got a terminal illness and might die next year, would I still take the annuity? of course not, that would mean I wait for a year and get $2, when I could get $5 up front).
Economic variables. If I'm worried about inflation, do I want the annuity? No. To outpace inflation, I would want the $5 up front to invest as I see fit, in order to reap greater dividends in the long term.
True free markets are nowhere near as near-sighted as you would suggest. The problem lies in the fact that there does not exist (nor has there ever existed) a true free market.
Some good reading for those interested would be "Human Action", by Ludwig von Mises and "The Ethics of Liberty", by Murray Rothbard. Both can be found at www.mises.org
Capitalism. Don't knock it before you try it. And you haven't tried it.:-)
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To flesh out Russ' example (hey Russ, fellow Potsdamite here, I'm a ugrad at CU):
Russ issues his offer to me. I now judge several things.
True free markets are nowhere near as near-sighted as you would suggest. The problem lies in the fact that there does not exist (nor has there ever existed) a true free market.
Some good reading for those interested would be "Human Action", by Ludwig von Mises and "The Ethics of Liberty", by Murray Rothbard. Both can be found at www.mises.org
Capitalism. Don't knock it before you try it. And you haven't tried it. :-)