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Discounting and the Social Time Preference Rate

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Author Info
John Creedy

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Abstract

This paper shows that the emphasis on a social time preference rate (defined as the sum of a pure time preference rate and the product of the elasticity of marginal valuation and the growth rate) in social evaluations where money values are discounted using the social time preference rate, is not advisable. It can give an entirely different, and arbitrary, ranking of alternative streams compared with the direct use of the pure time preference rate to discount ‘social welfare’ in each period (where social welfare is a — usually isoelastic — function of money values).

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File URL: http://www.economics.unimelb.edu.au/SITE/research/workingpapers/wp07/989.pdf
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Publisher Info
Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 989.

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Length: 12 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:mlb:wpaper:989

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Friedrich Wu, 2006. "What Could Brake China’s Rapid Ascent in the World Economy?," World Economics, World Economics, Economic & Financial Publishing, PO Box 69, Henley-on-Thames, Oxfordshire, United Kingdom, RG9 1GB, vol. 7(3), pages 63-87, July. [Downloadable!]
  2. William D. Nordhaus, 2006. "The "Stern Review" on the Economics of Climate Change," NBER Working Papers 12741, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kögel, Tomas, 2009. "On the Relation between Discounting of Climate Change and Edgeworth-Pareto Substitutability," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 3(27), pages 1-12. [Downloadable!]
  2. Lawrence, C, 2009. "Identifying an Australian 'Shadow' Benefit / Cost Ratio for Public Projects," MPRA Paper 13336, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  3. John Creedy & Ross Guest, 2007. "Discounting and the Time Preference Rate: An Introduction," Department of Economics - Working Papers Series 993, The University of Melbourne. [Downloadable!]
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This page was last updated on 2009-11-23.

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