Do Monarchs Always Have Low Time Preferences?

Hans-Hermann Hoppe, in his book Democracy: The God That Failed and his 1995 article in the Journal of Libertarian Studies, set forth an interesting theory concerning the difference in time preference between a monarch and a democratic politician. The argument stresses the difference in the use of political power according to the degree to which the ruler is future oriented. Hoppe also says that using the power of the state is in itself an expression of high time preference because the ruler can confiscate wealth from the population instead of producing wealth on his own, but the type and rate of wealth confiscation can express a relatively higher or lower time preference.

We can juxtapose two examples to drive home the point: a democratically elected politician and an absolute monarch who got his power as a birthright. This comparison makes it easy for us to see the point due to the expected large difference in time preference between the two. The politician usually has four years to rule, while the monarch has his entire life. The politician is like a temporary caretaker, while the monarch is like a property owner who knows that his son will inherit his power.

However, this does not imply that monarchs are necessarily good rulers. There is a tendency for the state to also expand under monarchical rule. From history, we learn that not all kings made use of their power with much consideration for the future.

One particularly egregious example is Eric VI of Denmark, who was king from 1293 to 1319. The history of his reign is an extreme example of a monarch with an increasingly high time preference. Danish historians have had a tough time explaining why he took the drastic measures that he did, but if we apply Hoppe’s time-preference theory of power, we find much less difficulty in explaining the rather extreme actions of this particular king.

Eric’s Early Years 1287–1304

Eric’s coronation was in 1287, but the king did not come of age until 1293. During his years of minority, his kingdom was ruled by his advisers and his mother, who merely defended it from attacks from the Norwegian king and his collaborators—a group of powerful outlaw Danish magnates. The only aggressive policy enacted by the king himself at this time was a brief counterattack against the outlaws in 1294.

Early in his reign, King Eric VI chose—through dynastic relations—to ally with Holstein in northern Germany and with Sweden. These areas would be his main focus of foreign policy. Eric wanted to revive the former Danish Baltic empire. In 1301, he found some old documents from 1214 where Emperor Frederick II (1194–1250) had promised Valdemar the Victorious (1170–1241) and his heirs rule of all land north of the Elbe river. With this document in hand, Eric began planning his campaign in northern Germany to restore the Danish kingdom to the greatness of his forefather.

The plan began rolling on 13 March 1304 when the king summoned the magnates of the kingdom to discuss how to finance the expected campaign. At the summit, it was decided to re-form the old Danish military tax in order to be able to produce larger ships matching the navy of the powerful Hanseatic League of merchant cities along the Baltic coast. The agreement also systematized the collection of seigniorage and income from coin debasement using the European monetary system called renovatio monetae.

These methods for royal finance were not new. Eric V (1265–86) had a nickname to the effect of “coin clipper,” likely from the coin debasements in the years leading up to his financial ruin. A few generations back, King Eric IV (1241–50) also had a nickname from collecting taxes on privileged lands, the politically dangerous plough tax.

During this early period, King Eric seemed to follow more or less the time preference of what we colloquially could call a standard king who made agreements with his magnates and bishops to finance his policies. His military conflicts had, to this point, been defensive with only one exception.

Eric’s Middle Period 1305–15

In 1307, the king made his brother his feudal vassal over two territories close to Sweden on the promise that he would never conspire against the king or work to diminish the kingdom. The king’s brother Christopher had assisted him earlier in his successful fight against the archbishop, which ended in 1302, and the gift of territories could be seen as a token of gratitude. Eric also ventured to support his Swedish allies through several wars in this period. These wars became unpopular among the magnates and peasants. In 1309, the Danish magnates committed mutiny against the king while he was on campaign in Sweden.

King Eric then shifted his focus to a military campaign in northern Germany in 1311 that proved expensive but useless in the long run. He had a few short victories but gave up completely on his conquest of northern Germany in 1316, signing a peace treaty with the margrave of Brandenburg in 1317.

While Eric had been busy in northern Germany, the magnates and peasants of Jutland had formed an official alliance against the king and refused to pay taxes to him. The revolt in Jutland in 1313 lasted until the king put it down with his army of German knights in 1314. The king forced the peasants to build three castles and pay an additional tax, which was supposed to be paid eternally, as punishment for disobeying the king.

At this point in time, it seemed like the king was still caring for the future of the coming ruler of the kingdom, strengthening it with additional castles and thereby securing taxes from the nearby region. On the other hand, the expensive policies of the king caused rebellions and led to loss of life, which impeded production. Furthermore, the forced labor to build the castles were another burden on the peasants. In this regard, the king began acting out of the ordinary, and we see signs of increased time preference.

King Eric’s Later Years 1315–19

If the relationship between the king and his brother had been good at the start of Eric VI’s reign, it took a sharp turn for the worse in 1315 when a series of letters were found that documented a conspiracy between his brother Christopher, Swedish dukes, and the Norwegian king to overthrow Eric and give the throne to Christopher.

From 1315, Eric began intensifying tax collection by adding new taxes each year, and after signing the peace treaty with the margrave of Brandenburg in 1317, the indebted king began mortgaging crown land as well. This is a clear example of a shift in time preference of the king, as he would no longer wait for the ordinary taxes to be collected but impaired his long-term power in order to immediately fund his war against his brother. Eric’s power became much weaker as his creditor vassals gained control of the royal castles on the mortgaged lands, which served as the tax collecting and military centers of power. At the same time, his new taxes increased the risk of another rebellion.

The drastic measures taken by Eric VI after 1317 has been explained by historians as the king’s inability to build a solid power base because it cracked when it met resistance, or simply that the king was a victim of circumstances beyond his control. Using Hoppe’s time-preference theory of power, we can explain the unprecedented decisions regarding the changes of time preference on account of two facts, both relating to the royal dynasty.

The king had four sons, but like all of his fourteen children, they died shortly after birth. At some point in time, having lost every child so far, the king may have expected all of his children to share the same cruel fate and no longer believed he would leave an heir to the throne. The heir apparent to the throne then became his brother Christopher, whom he had hated since 1315. On his deathbed in 1319, the king’s dying words were cautions against giving the throne to his unreliable brother. In his last years, Eric VI demonstrated the time preference of a politician for the same reasons politicians have high time preference. They both did not have an incentive to care much for the situation of the next ruler; they both did not really care for the long-term “capital value” of their power.