Professor Arrow on the Social Discount Rate
In this section I briefly sketch an alternative conceptual framework for measuring the social rate of discount. In it, the discount rate is obtained by tracing through the effects of additional government borrowing on various classes of investment and saving. The resulting figure for the social rate of discount is a weighted average of the marginal rates of productivity of capital in the various sectors from which investment is displaced and of the marginal rates of time preference applicable to the various groups (if any) whose saving is stimulated (through higher interest rates) by the additional government borrowing.
KeywordsForeign Exchange Marginal Rate Social Rate Social Discount Rate Government Demand
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