The Social Discount Rate
By Andrew Caplin, John Leahy. Journal of Political Economy, 2004
220 citations recorded by the source corpus.
What discount rate should be applied to social investments? It is standard to use the market interest rate, thereby respecting private preferences. We show that application of this “revealed preference” criterion rests on faith, not on logic. It is justified only if preferences over all choices, including past choices, are time invariant. The conditions for this to be true are stringent. Under more reasonable conditions, policy makers should be more patient than private citizens, whose choices define the most short‐sighted Pareto optimum.
Subfields: Economics and Econometrics, Gender Studies
View Paper: https://www.semanticscholar.org/paper/2e8f9ed5c86b4662edd82cf8e6b31e661a6dd8a0
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In Economics and Econometrics
- Pedro Linares
- Xavier Labandeira Villot
- Alexey A. Voinov
- J. Farley
- David I. Stern
- X. Labandeira
- A. Ramos
- Winnie W. Y. Lau
Citations in the corpus
- Existential risks: analyzing human extinction scenarios and related hazards (2002, unknown): “to find ourselves on one of the exceptional planets that were lucky enough to escape devastation.[15] In this case, our past success provides no ground for expecting success in the future.”
- Reconciling sustainability, systems theory and discounting (2007, background): “Yet other theoretical arguments for a lower social discount rate, both normative and positive, exist (e.g. Marglin, 1963; Caplin and Leahy, 2004; Lind et al., 1982).”
- Energy Efficiency: Economics and Policy (2010, background): “This is a debate which exceeds the scope of this paper, since it affects all social decisions (see for example Baumol, 1968; Caplin and Leahy, 2004).”
- The Brain as a Hierarchical Organization (2008, unknown): “However, it allows a more efficient allocation of the budget between movies at different dates.21 In that respect, our theory provides a rationale for self-handicapping or, 20For a recent perspective on this problem, see Caplin and Leahy (2004).”