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Social Discounting and the Cost of Public Funds: A Practitioner’s Perspective

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  • Spackman, Michael

Abstract

Social discounting conventions vary widely. Some differences reflect institutional constraints, but many reflect differing assumptions about how a social discount rate should be derived and applied. The divide between advocates of social opportunity cost and social time preference (STP) frameworks seems unbridgeable. There is no consensus among STP advocates on whether the social cost of funding $1 of public spending is barely more than $1 of consumption or perhaps more than $2; or on whether the covariance of public service benefits with income merits a discount rate premium that is trivial or a few percentage points. The practicalities of government fund raising are sometimes overlooked. The issues are here reviewed in the light of the literature and of experience with developing and applying social discounting regimes and extended debates within government.

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  • Spackman, Michael, 2020. "Social Discounting and the Cost of Public Funds: A Practitioner’s Perspective," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 11(2), pages 244-271, July.
    • Handle: RePEc:cup:jbcoan:v:11:y:2020:i:2:p:244-271_5
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    Cited by:

    1. Szekeres, Szabolcs, 2023. "Opportunity Cost of Capital, Marginal Cost of Funds and Numeraires in Cost-Benefit Analysis," MPRA Paper 118725, University Library of Munich, Germany.
    2. Szekeres, Szabolcs, 2023. "The simple answer to the Social Discount Rate question," MPRA Paper 117843, University Library of Munich, Germany.
    3. Martin, Will, 2021. "Tools for measuring the full impacts of agricultural interventions," IFPRI-MCC technical papers 2, International Food Policy Research Institute (IFPRI).
    4. Monika Foltyn-Zarychta, 2021. "Future-Generation Perception: Equal or Not Equal? Long-Term Individual Discount Rates for Poland," Energies, MDPI, vol. 14(24), pages 1-19, December.
    5. Szekeres, Szabolcs, 2023. "Opportunity Cost of Capital, Marginal Cost of Funds and Numeraires in Benefit-Cost Analysis," MPRA Paper 120058, University Library of Munich, Germany, revised 06 Feb 2024.
    6. Asplund, Disa, 2022. "The welfare-maximizing discount rate in a small open economy," Working Papers 2022:2, Swedish National Road & Transport Research Institute (VTI).
    7. Monika Foltyn-Zarychta & Rafał Buła & Krystian Pera, 2021. "Discounting for Energy Transition Policies—Estimation of the Social Discount Rate for Poland," Energies, MDPI, vol. 14(3), pages 1-21, January.
    8. Rafał Buła & Monika Foltyn-Zarychta, 2022. "Declining Discount Rates for Energy Policy Investments in CEE EU Member Countries," Energies, MDPI, vol. 16(1), pages 1-27, December.

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