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Calculating the Social Opportunity Cost Discount Rate

Author

Listed:
  • Burgess David F.

    (University of Western Ontario)

  • Zerbe Richard O

    (University of Washington, Seattle)

Abstract

Two comments in this issue of the Journal address our recent article in Volume 2, Issue 2. The fundamental issue with both comments is that they confuse the financial rate of return with the opportunity cost rate of return and therefore advocate for an inappropriate basis on which to calculate the government discount rate. That is, both comments confuse the financial cost of funds, or the borrowing rate, with the economic opportunity cost of funds. We hope that this exchange advances the subject by reducing confusion.

Suggested Citation

  • Burgess David F. & Zerbe Richard O, 2011. "Calculating the Social Opportunity Cost Discount Rate," Journal of Benefit-Cost Analysis, De Gruyter, vol. 2(3), pages 1-10, August.
    • Handle: RePEc:bpj:jbcacn:v:2:y:2011:i:3:n:8
    DOI: 10.2202/2152-2812.1106
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    References listed on IDEAS

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    1. Lawrence Summers & Richard Zeckhauser, 2008. "Policymaking for posterity," Journal of Risk and Uncertainty, Springer, vol. 37(2), pages 115-140, December.
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    1. En el largo plazo todos estamos muertos
      by Francisco Mejía in Hacia el desarrollo efectivo on 2013-05-31 22:24:55
    2. Development that Works: In the long run we are all dead
      by Francisco Mejía in Eval Central on 2013-05-31 21:02:30

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