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Comment on Burgess and Zerbe's "Appropriate Discounting for Benefit-Cost Analysis"

Author

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  • Szekeres Szabolcs

    (IID Kft., Budapest)

Abstract

This is a comment on a paper by David F. Burgess and Richard O. Zerbe. It derives a different set of conclusions than the cited authors do from the customary premises underlying benefit-cost analysis. It concludes that capital should be shadow priced, and that the appropriate discount rate to use in benefit-cost analysis is the interest rate of the capital market to which the public sector has access. It proposes that a plausible source of the great divergence in approaches to discounting stems from different answers being given to the question of whether present day consumption has a future consumption opportunity cost.

Suggested Citation

  • Szekeres Szabolcs, 2011. "Comment on Burgess and Zerbe's "Appropriate Discounting for Benefit-Cost Analysis"," Journal of Benefit-Cost Analysis, De Gruyter, vol. 2(3), pages 1-11, August.
    • Handle: RePEc:bpj:jbcacn:v:2:y:2011:i:3:n:7
    DOI: 10.2202/2152-2812.1093
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    References listed on IDEAS

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    1. David F. Burgess & Richard O. Zerbe, 2013. "Appropriate discounting for benefit–cost analysis," Chapters, in: Scott O. Farrow & Richard Zerbe, Jr. (ed.), Principles and Standards for Benefit–Cost Analysis, chapter 7, pages 247-263, Edward Elgar Publishing.
    2. Robert J. Brent, 2006. "Applied Cost–Benefit Analysis, Second Edition," Books, Edward Elgar Publishing, number 3477.
    3. Dreze, Jean & Stern, Nicholas, 1990. "Policy reform, shadow prices, and market prices," Journal of Public Economics, Elsevier, vol. 42(1), pages 1-45, June.
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