Abstract
To determine the value of public projects, cost-benefit analysis is an important instrument for assessing the profitability of an investment. Discounting is a practice that most economists take for granted almost unquestioningly. Philosophers, on the other hand, largely seem to agree that it is unacceptable to place a lower value on future benefits and costs by means of discounting. This has given rise to a vigorous debate over whether discounting should be allowed at all, and if so, at what level the social discount rate should be set. It is clear, for example, that the pure time preference of economic actors cannot provide any convincing justification for discounting. Greater weight is attached to the argument of social opportunity costs, i.e. the fact that the capital invested in any project could equally be invested elsewhere at a particular rate of interest. Finally, making the link with sustainable development, a further issue must be borne in mind: discounting rests on the implicit assumption that all goods are commensurable and substitutable. Since this implies that natural capital is also substitutable, the question of discounting opens up the debate on “weak versus strong sustainability”: in other words, is it tenable and permissible to treat natural capital as interchangeable with other types of capital? The indications are that the debate over discounting is skirting around the real problem.
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Notes
- 1.
Birnbacher, ‘Verantwortung’, p. 103.
- 2.
Hampicke, ‘Diskontierungsnebel’, p. 127.
- 3.
Lind, ‘Equity’, p. 381.
- 4.
Lind, ‘Equity’, p. 381.
- 5.
See Mathis, Efficiency, pp. 38 ff.
- 6.
Cowen and Parfit, p. 145.
- 7.
Birnbacher, ‘Diskontierung’, p. 118.
- 8.
Likewise e.g. O’Neill, pp. 49 ff.
- 9.
Birnbacher, ‘Verantwortung’, p. 105.
- 10.
O’Neill et al., p. 58.
- 11.
Birnbacher, ‘Verantwortung’, p. 105.
- 12.
Rawls, TJ, § 45, p. 295.
- 13.
O’Neill, pp. 50 f.
- 14.
O’Neill et al., p. 58.
- 15.
O’Neill, pp. 51 f.
- 16.
Lind, ‘Equity’, p. 384.
- 17.
O’Neill, p. 52.
- 18.
Hahn, p. 1026.
- 19.
Sidgwick, p. 381.
- 20.
Rawls, TJ, § 45, p. 294.
- 21.
Rawls, TJ, § 45, p. 295.
- 22.
von Böhm-Bawerk, Positive Theorie, Vol. 1, pp. 332 f.; quotation after von Böhm-Bawerk, Positive Theorie (trans.)
- 23.
Hampicke, ‘Diskontierungsnebel’, p. 129.
- 24.
Hampicke, Ökologische Ökonomie, p. 258.
- 25.
Hampicke, ‘Diskontierungsnebel’, p. 130.
- 26.
Rawls, TJ, § 45, p. 295.
- 27.
Von Böhm-Bawerk, Positive Theorie, Vol. 1, pp. 338 ff.
- 28.
Lind, ‘Equity’, p. 381; in greater depth in Lind , ‘Major Issues’, pp. 24 ff.
- 29.
Mishan and Quah, p. 149.
- 30.
Cf. Weikard, ‘Diskontrate’, p. 158.
- 31.
Broome, pp. 128 f.
- 32.
Parfit, p. 480, therefore expressly states that his critique of discounting is not meant to be aimed at the discounting of monetary values.
- 33.
The most commonly used methods are the “revealed preferences methods” (labour market analyses) and “consumer market behaviour methods” (product market analyses). On the various methods, see e.g. Brannon, pp. 60 ff. See also in this volume Balz Hammer, ‘Valuing the Invaluable?’.
- 34.
Merten, p. 179.
- 35.
Viscusi, ‘Value of Life’, p. 201.
- 36.
Brannon, p. 60.
- 37.
Likewise Posner and Sunstein, p. 557.
- 38.
Posner, p. 197.
- 39.
See Viscusi, ‘Value of Life’, pp. 196 and 201.
- 40.
For a more detailed examination of this issue, see Dasgupta, p. 279.
- 41.
Lind, ‘Equity’, p. 386 (Ċt denotes the derivative with respect to t).
- 42.
Neumayer, p. 30.
- 43.
Nordhaus, Global Commons, p. 123.
- 44.
For example, Cline, p. 4.
- 45.
Samida and Weisbach, p. 169.
- 46.
Neumayer, p. 35.
- 47.
See also Sunstein and Rowell, p. 174.
- 48.
Birdsall and Steer, p. 6.
- 49.
Cf. Mishan and Quah, p. 172.
- 50.
O’Neill, p. 58; Neumayer, pp. 37 ff.
- 51.
Weikard, Wahlfreiheit, pp. 54 f.
- 52.
Weikard, Wahlfreiheit, pp. 55 f.
- 53.
Neumayer, p. 23.
- 54.
Nutzinger, p. 71.
- 55.
Costanza and Daly, pp. 2 f.
- 56.
Weikard, Wahlfreiheit, p. 55.
- 57.
Neumayer, p. 25.
- 58.
O’Neill, p. 59.
- 59.
O’Neill, p. 59.
- 60.
See Mathis, ‘Future Generations’, p. 54.
- 61.
Page, p. 88.
- 62.
Cf. Viscusi, ‘Rational Discounting’, pp. 215 f.
- 63.
Birdsall and Steer, p. 7.
- 64.
On the concept of this trade-off , see Mathis, Efficiency, pp. 195 ff.
- 65.
Cf. Nordhaus, ‘Public Policies’, p. 158.
- 66.
Likewise Lind, ‘Discount Rate’, p. 457.
- 67.
In a similar vein, see Kysar, p. 138.
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Mathis, K. (2012). Discounting the Future?. In: Mathis, K. (eds) Efficiency, Sustainability, and Justice to Future Generations. Law and Philosophy Library, vol 98. Springer, Dordrecht. https://doi.org/10.1007/978-94-007-1869-2_8
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