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How Sustainable is Discounting?

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Economics, Sustainability, and Natural Resources

Part of the book series: Sustainability, Economics, and Natural Resources ((SENR,volume 1))

Abstract

Discounting has caused disquiet because it trivializes the very long term. Several arguments have been advanced for reducing the discount rate over time. They include justice to future generations, and conformity with the discount profile that people seem in practice to apply. However, a declining discount rate leads to inconsistent preferences through time. In a variety of circumstances where components of value are aggregated across consumers, products and scenarios, components with a low rate of diminishing marginal utility become increasingly dominant in forming the aggregate discount factor. The reasons given for disaggregation throw light on weaknesses in the justifications of discounting: reinvestment at compound interest to compensate for future damage may not take place; time preference, if interpreted as preference for immediacy, has no implications for discounting of futurity. The declining aggregate discounting protocol has political allure, but may lead to indefinite postponement of worthwhile investment.

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Author information

Authors and Affiliations

  1. School of Agricultural and Forest Sciences, University of Wales, Bangor, Gwynedd, LL57 2UW, UK

    Colin Price

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  1. Colin Price
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Editor information

Editors and Affiliations

  1. Faculty of Forestry, University of Toronto, Canada

    Shashi Kant

  2. Munk Centre for International Studies, University of Toronto, Canada

    R. Albert Berry

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Price, C. (2005). How Sustainable is Discounting?. In: Kant, S., Berry, R.A. (eds) Economics, Sustainability, and Natural Resources. Sustainability, Economics, and Natural Resources, vol 1. Springer, Dordrecht. https://doi.org/10.1007/1-4020-3518-7_6

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