Putting a Price on the Welfare of Our Children and Grandchildren
In "The Globalization of Cost-Benefit Analysis in Environmental Policy", edited by Michael A. Livermore, and Richard L. Revesz. New York: Oxford University Press, 2013.
Maria Damon, Kristina Mohlin, and Thomas Sterner
Discount rates have a profound effect on estimates for costs and benefits that accrue over time or in the future. Given that minute differences in discount rates can result in enormous differences in future values, discounting implicates moral as well as technical issues. This chapter reviews some of the main issues that discounting presents and discusses some important recent debates over time-varying discount rates and the importance of relative prices when examining effects of public policy in the far future. The authors also collect and discuss the discount rates currently used by decision makers around the world, and explain how differences in level of development should and should not affect the discount rates used by analysts.