Book Reviews

2013 ◽  
Vol 51 (3) ◽  
pp. 894-897
Keyword(s):  
Term Structure ◽  
Discount Rate ◽  
Parametric Uncertainty ◽  
Fat Tails ◽  
Social Discount Rate ◽  
The Social ◽  
The University ◽  
Alternative Decision ◽  
Ramsey Rule

Explores recent advances in the field of the social discount rate and considers how society should value the future in this context. Discusses three ways to determine the discount rate; the Ramsey rule; extending the Ramsey rule to an uncertain economic growth; random walk and mean-reversion; Markov switches and extreme events; parametric uncertainty and fat tails; the Weitzman argument; a theory of the decreasing term structure of discount rates; inequalities; discounting nonmonetary benefits; alternative decision criteria; evaluation of risky projects; the option value of uncertain projects; and evaluation of nonmarginal projects. Gollier is Professor of Economics at the University of Toulouse and Director of the Toulouse School of Economics.

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)

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.

Discounting and intragenerational equity

2017 ◽  
Vol 23 (1) ◽  
pp. 19-36 ◽  
Author(s):  
Johannes Emmerling
Keyword(s):  
Discount Rate ◽  
Analytical Formula ◽  
The United States ◽  
The Other ◽  
Social Discount Rate ◽  
The Social ◽  
Intragenerational Equity ◽  
The One ◽  
Over Time ◽  
Ramsey Rule

AbstractWe study the social discount rate, taking into account inequality within generations, that is, across countries or individuals. We show that if inequality decreases over time, the social discount rate should be lower than the one obtained by the standard Ramsey rule under certain but reasonable conditions. Applied to the global discount rate and due to the projected convergence across countries, this implies that the inequality adjusted discount rate should be about twice as high as the standard Ramsey rule predicts. For individual countries on the other hand, where inequality tends to increase over time, the effect goes in the other direction. For the United States for instance, this inequality effect leads to a reduction of the social discount rate by about 0.5 to 1 percentage points. We also present an analytical formula for the social discount rate allowing us to disentangle inequality, risk, and intertemporal fluctuation aversion.

scholarly journals A time preference measure of the social discount rate for Iran

2018 ◽  
Vol 7 (1) ◽  
Author(s):  
Arian Daneshmand ◽  
Esfandiar Jahangard ◽  
Mahnoush Abdollah-Milani
Keyword(s):  
Discount Rate ◽  
Time Preference ◽  
Social Discount Rate ◽  
The Social ◽  
Preference Measure

A New Look into the Determinants of the Ecological Discount Rate: Disentangling Social Preferences

2012 ◽  
Vol 12 (1) ◽  
Author(s):  
Luciana Echazu ◽  
Diego Nocetti ◽  
William T. Smith
Keyword(s):  
Term Structure ◽  
Discount Rate ◽  
Environmental Quality ◽  
Social Preferences ◽  
Inequality Aversion ◽  
The Social ◽  
Representative Consumer ◽  
Change Mitigation ◽  
Over Time

Abstract How should changes in environmental quality occurring in the future be discounted? To answer this question we consider a model of “ecological discounting”, where the representative consumer has a utility function defined over two attributes, consumption and environmental quality, which evolve stochastically over time. We characterize the determinants of the social discount rate and its behavior over time using a preference structure that disentangles attitudes towards intertemporal inequality, attitudes towards risk, and tastes over consumption and environmental quality. We show that the degree of substitutability between consumption and environmental quality, the degree of risk aversion, the degree of inequality aversion, and the rate at which these attitudes change as natural and man-made resources evolve over time are all important aspects of the ecological discount rate and its term structure. Our analysis suggests that over medium and long term horizons the ecological discount rate should be below the rate of time preference, supporting recent proposals for immediate action towards climate change mitigation.

Against the Social Discount Rate

2018 ◽  
pp. 144-161 ◽  
Author(s):  
TYLER COWEN ◽  
DEREK PARFIT
Keyword(s):  
Discount Rate ◽  
Social Discount Rate ◽  
The Social

scholarly journals The Social Discount Rate

2004 ◽  
Vol 112 (6) ◽  
pp. 1257-1268 ◽  
Author(s):  
Andrew Caplin ◽  
John Leahy
Keyword(s):  
Discount Rate ◽  
Social Discount Rate ◽  
The Social
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