The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Social Discount Rate

  • Tyler Cowen
Reference work entry


Economists use a social discount rate to evaluate future costs and benefits. To arrive at a suitable magnitude, market interest rates are adjusted for taxes, transactions costs, and risk. Over time the discount rate debate has become more complex. It is agreed that no single discount rate will apply to all choices, and that the proper discount rate will be context-dependent.


Arrow, K. Cost–benefit analysis Crowding out Deadweight loss Environmental issues Gamma discounting Infrastructure investment Inter-generational policies Value of life Posner, R. Productivity of capital Risk Social discount rate Time preference Utility 

JEL Classifications

D6 H43 
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  1. Arrow, K. 1971. Essays in the theory of risk-bearing. Amsterdam: North-Holland.Google Scholar
  2. Cowen, T., and D. Parfit. 1992. Against the social discount rate. In Justice across the generations: Philosophy, politics, and society, sixth series, ed. P. Laslett and J. Fishkin. New Haven: Yale University Press.Google Scholar
  3. Lind, R., et al. 1982. Discounting for time and risk in energy policy. Baltimore: Johns Hopkins University Press.Google Scholar
  4. Posner, R. 2004. Catastrophe: Risk and response. Oxford: Oxford University Press.Google Scholar
  5. Weitzman, M. 2001. Gamma discounting. American Economic Review 91: 260–271.CrossRefGoogle Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Tyler Cowen
    • 1
  1. 1.