ictor R. fuchs health. The empirical portion of this paper, based on a single cross section survey, cannot distinguish between these two hypotheses, but we can test for possible relations between schooling and time preference Empirical investigation of time preference through survey questions designed to elicit marginal rates of time discount depends critically on capital markets being"imperfect. "If capital markets were perfect (i. e, if individuals could borrow and lend without limit at a single market rate of interest)marginal rates would be equal for all regardless of time prefer ence. Differences across individuals in time preference might still result in differences in nontradeable health-related activities but these would not be predictable from the replies to interest rate questions. However, if capital markets are not perfect(an assumption of this paper), individuals may well have different rates of interest at the margin, and these may be related to health behavior and health status Let us imagine a two-period world. Suppose utility in each period depends upon consumption of goods(G). Utility in the first period also is a function of some activity C(for simplicity assumed to be free with respect to G)which affects health(and therefore utility) in period two For example C1 might be cigarette smokin U1=U1(G1,C1) U2=U2(G2, H2) where H2=H(C1) a wealth compensated increase in the rate of interest(r)will,ceteris paribus, alter the allocation of wealth between G1 and G2. But if the marginal utility of C depends on the quantity of G,(and the marginal utility of H2 depends on the quantity of G2), the change in r will also affect C(and H2). If G, and C(and G2 and H2) are substitutes, an increase inr will lead to an increase in C, and a decrease in H2. If the relationship is complementary (which seems less plausible to me), the reverse would be It should be emphasized that(given imperfect capital markets ) differ- ences across individuals in marginal rates of interest can be the result of differences in underlying preference functions(indifference curves)or differences in opportunities to borrow and lend. In general, it will not be possible to distinguish between these sources empirically, although con trolling for family income(as a proxy for"opportunities" )may move the analysis somewhat closer to a focus on preference functions per se Because time preference is probably only one of many factors affecti the demand for cigarettes, jogging, or other health- related behaviors, we can hardly expect perfect correlation among these activities. Differences in time preference across individuals, however, should result in some positive correlations among these behaviors96 Victor R. Fuchs health. The empirical portion of this paper, based on a single cross￾section survey, cannot distinguish between these two hypotheses, but we can test for possible relations between schooling and time preference. Empirical investigation of time preference through survey questions designed to elicit marginal rates of time discount depends critically on capital markets being “imperfect.” If capital markets were perfect (i.e., if individuals could borrow and lend without limit at a single market rate of interest) marginal rates would be equal for all regardless of time prefer￾ence. Differences across individuals in time preference might still result in differences in nontradeable health-related activities, but these would not be predictable from the replies to interest rate questions. However, if capital markets are not perfect (an assumption of this paper), individuals may well have different rates of interest at the margin, and these may be related to health behavior and health status. Let us imagine a two-period world. Suppose utility in each period depends upon consumption of goods (G). Utility in the first period also is a function of some activity C1 (for simplicity assumed to be free with respect to G) which affects health (and therefore utility) in period two. For example C1 might be cigarette smoking: u1= U1(GI,CJ U2 = U2(G2,H2) where H2 = H(Cl). A wealth compensated increase in the rate of interest (r) will, ceteris paribus, alter the allocation of wealth between GI and G2. But if the marginal utility of C1 depends on the quantity of G1 (and the marginal utility of H2 depends on the quantity of G2), the change in r will also affect C1 (and H2). If GI and C1 (and G2 and H2) are substitutes, an increase in r will lead to an increase in C1 and a decrease in H2. If the relationship is complementary (which seems less plausible to me), the reverse would be true. It should be emphasized that (given imperfect capital markets) differ￾ences across individuals in marginal rates of interest can be the result of differences in underlying preference functions (indifference curves) or differences in opportunities to borrow and lend.5 In general, it will not be possible to distinguish between these sources empirically, although con￾trolling for family income (as a proxy for “opportunities”) may move the analysis somewhat closer to a focus on preference functions per se. Because time preference is probably only one of many factors affecting the demand for cigarettes, jogging, or other health-related behaviors, we can hardly expect perfect correlation among these activities. Differences in time preference across individuals, however, should result in some positive correlations among these behaviors