scholarly journals Nondogmatic Social Discounting

2020 ◽  
Vol 110 (3) ◽  
pp. 760-775 ◽  
Author(s):  
Antony Millner
Keyword(s):  
Social Welfare ◽  
Discount Rate ◽  
Time Preferences ◽  
Climate Mitigation ◽  
Social Discount Rate ◽  
Public Projects ◽  
Social Time ◽  
Long Run ◽  
Social Discounting

The long-run social discount rate has an enormous effect on the value of climate mitigation, infrastructure projects, and other long-term public policies. Its value is however highly contested, in part because of normative disagreements about social time preferences. I develop a theory of “nondogmatic” social planners, who are insecure in their current normative judgments and entertain the possibility that they may change. Although each nondogmatic planner advocates an idiosyncratic theory of intertemporal social welfare, all such planners agree on the long-run social discount rate. Nondogmatism thus goes some way toward resolving normative disagreements, especially for long-term public projects. (JEL D61, H43)

scholarly journals Discounting Disentangled

2018 ◽  
Vol 10 (4) ◽  
pp. 109-134 ◽  
Author(s):  
Moritz A. Drupp ◽  
Mark C. Freeman ◽  
Ben Groom ◽  
Frikk Nesje
Keyword(s):  
Discount Rate ◽  
Time Preference ◽  
Wealth Effect ◽  
Social Discount Rate ◽  
Economic Values ◽  
Public Projects ◽  
Highly Sensitive ◽  
The Social ◽  
Ramsey Rule

The economic values of investing in long-term public projects are highly sensitive to the social discount rate (SDR). We surveyed over 200 experts to disentangle disagreement on the risk-free SDR into its component parts, including pure time preference, the wealth effect, and return to capital. We show that the majority of experts do not follow the simple Ramsey Rule, a widely used theoretical discounting framework, when recommending SDRs. Despite disagreement on discounting procedures and point values, we obtain a surprising degree of consensus among experts, with more than three-quarters finding the median risk-free SDR of 2 percent acceptable. (JEL C83, D61, D82, H43, Q58)

scholarly journals More appropriate discounting: the rate of social time preference and the value of the social discount rate

2013 ◽  
Vol 4 (1) ◽  
pp. 1-16 ◽  
Author(s):  
Mark A. Moore ◽  
Anthony E. Boardman ◽  
Aidan R. Vining
Keyword(s):  
Discount Rate ◽  
Time Preference ◽  
Shadow Price ◽  
Private Investment ◽  
Social Discount Rate ◽  
Benefit Cost Analysis ◽  
Public Projects ◽  
Social Time ◽  
The Social ◽  
Benefit Cost

Recently, a number of authors, including Burgess and Zerbe, have recommended the use of a real social discount rate (SDR) in the range of 6–8% in benefit-cost analysis (BCA) of public projects. They derive this rate based on the social opportunity cost of capital (SOC) method. In contrast, this article argues that the correct method is to discount future impacts based on the rate of social time preference (STP). Flows in or out of private investment should be multiplied by the shadow price of capital (SPC). Using this method and employing recent United States data, we obtain an estimate of the rate of STP of 3.5% and an SPC of 2.2. We also re-estimate the SDR using the SOC method and conclude that, even if analysts continue to use this method, they should use a considerably lower rate of about 5%.

Discounting under Risk

2021 ◽  
pp. 67-89
Author(s):  
Maddalena Ferranna
Keyword(s):  
Climate Change ◽  
Discount Rate ◽  
Public Policies ◽  
Social Discount Rate ◽  
Climate Policies ◽  
The Social ◽  
Ramsey Rule ◽  
Climate Damages

The debate on the economics of climate change has focused primarily on the choice of the social discount rate, which plays a key role in determining the desirability of climate policies given the long-term impacts of climate damages. Discounted utilitarianism and the Ramsey Rule dominate the debate on discounting. The chapter examines the appropriateness of the utilitarian framework for evaluating public policies. More specifically, it focuses on the risky dimension of climate change, and on the failure of utilitarianism in expressing both concerns for the distribution of risks across the population and concerns for the occurrence of catastrophic outcomes. The chapter shows how a shift to the prioritarian paradigm is able to capture those types of concerns, and briefly sketches the main implications for the choice of the social discount rate.

Positive Social Time Preference

2021 ◽  
pp. 230-268
Author(s):  
Joseph Heath
Keyword(s):  
Discount Rate ◽  
Death Rate ◽  
Time Preference ◽  
Temporal Discounting ◽  
Social Discount Rate ◽  
Carbon Abatement ◽  
Social Time ◽  
Social Rate ◽  
The Social

Recent debates have made it clear that the choice of a social discount rate has enormous consequences for the amount of carbon abatement that will be recommended. The social discount rate determines how future costs are to be compared to present costs. Philosophers have been almost unanimous in endorsing the view that the only acceptable social rate of time preference is zero, a view that, taken literally, has either absurd or extremely radical implications. The first goal of this chapter is to show that the standard arguments against temporal preference are much less persuasive than they are usually taken to be. The second goal is to explore three different avenues of argument that could be adopted in order to show that temporal discounting of welfare may be permissible. The chapter concludes with a suggestion for how deontologists could accept a pure time preference derived from the current global death rate.

Social Discounting

1989 ◽  
Vol 5 (1) ◽  
pp. 33-46 ◽  
Author(s):  
Susan Tenenbaum
Keyword(s):  
Discount Rate ◽  
Social Discount Rate ◽  
Government Investment ◽  
Public And Private ◽  
Economic Allocation ◽  
Social Discounting ◽  
The Social ◽  
The Status ◽  
Intergenerational Obligations ◽  
Selection Of

The social discount rate – the rate at which future benefit flows from government investment are discounted to present value – has been a frequent subject of technical debate among professional economists. From a broader perspective, however, the selection of an appropriate rate enjoins consideration of questions that define the very contours of our public philosophy. It carries implicit assumptions about the nature of citizenship, the relation between public and private spheres, and, most singularly, the status of a political society as it is located in time. A key determinant of intertemporal economic allocation, the social discount rate provides a unique registry of a polity's historical consciousness and perceptions of its intergenerational obligations. Yet the highly technical nature of the debate over the discount rate has proven inhospitable to scholars otherwise inclined to investigate its ethical dimensions. Some, notably A. K. Sen, have begun to address these philosophical issues, though much territory remains to be explored.

Climate Ethics: Justifying a Positive Social Time Preference

2017 ◽  
Vol 14 (4) ◽  
pp. 435-462 ◽  
Author(s):  
Joseph Heath
Keyword(s):  
Discount Rate ◽  
Time Preference ◽  
Reflective Equilibrium ◽  
Climate Change Policy ◽  
Temporal Discounting ◽  
Social Discount Rate ◽  
Social Time ◽  
Change Policy ◽  
Social Rate ◽  
The Social

Recent debates over climate change policy have made it clear that the choice of a social discount rate has enormous consequences for the amount of mitigation that will be recommended. The social discount rate determines how future costs are to be compared to present costs. Philosophers, however, have been almost unanimous in endorsing the view that the only acceptable social rate of time preference is zero, a view that, taken literally, has either absurd or extremely radical implications. The first goal of this paper is to show that the standard arguments against temporal preference are much less persuasive than they are usually taken to be. The second goal is to explore two different avenues of argument that could be adopted, in order to show that temporal discounting of welfare may be permissible. The first involves simply an application of the method of reflective equilibrium, while the second involves consideration of the way that our abstract moral commitments are institutionalized.

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