Title: Selection, Patience, and the Interest Rate

ABSTRACT: The interest rate has been falling for centuries. A process of natural selection that leads to increasing societal patience is key to explaining this decline. Three observations support this mechanism: patience varies across individuals, is inter-generationally persistent, and is positively related to fertility. A calibrated dynamic, heterogenous-agent model of fertility permits us to isolate the quantitative contribution of this mechanism. We find that selection alone is the key to explaining the decline of the interest rate.

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