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Empirical and public choice evidence for hyperbolic social discount rates and the implications for intergenerational discounting

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  • Norman Henderson
  • Ian Bateman

Abstract

The derivation of the correct discount rate for intergenerational projects in Cost Benefit Analysis is particularly contentious. Public choice has resulted in lower discretionary exponential discount rates for many intergenerational projects in Britain and the USA. This is shown to be strong indirect evidence that the true social discount rate may be a hyperbolic (rather than an exponential) function. There is also empirical evidence for this hypothesis. The hyperbolic nature of discounting is also a standard finding in the behavioural sciences. For intergenerational time frames hyperbolic discount rates should be employed together with exponential discount rates in cost-benefit sensitivity analyses. Copyright Kluwer Academic Publishers 1995

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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental & Resource Economics.

Volume (Year): 5 (1995)
Issue (Month): 4 (June)
Pages: 413-423

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Handle: RePEc:kap:enreec:v:5:y:1995:i:4:p:413-423

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: Cost benefit analysis; social discount rate; hyperbolic discounting; intergenerational discounting;

References

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