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Preferences in the Future

  • J.K. Horowitz

    ()

Environmental economics has been much occupied with “the discount rate,” which is the value of future costs and benefits relative to present costsor benefits. But at least as important is the question of whatshould be discounted, that is, what the value of those future environmentalbenefits is to future generations. This paper analyzes the role for futurepreferences and discusses the state of knowledge. I argue that theappropriate discount rate is the market one, and that the real problemis determining future willingness-to-pay. This approach makes clearerthe connection between discounting and the valuation debate. This paper focuses on two features that have been prominent in that debate:existence value and reference dependence. I argue that thereis a vital connection between the two constructs and that this link yieldsimportant implications for future willingness-to-pay. Copyright Kluwer Academic Publishers 2002

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

Volume (Year): 21 (2002)
Issue (Month): 3 (March)
Pages: 241-258

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Handle: RePEc:kap:enreec:v:21:y:2002:i:3:p:241-258
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  18. Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1039-61, November.
  19. Kopp, Raymond & Portney, Paul, 1997. "Mock Referenda for Intergenerational Decisionmaking," Discussion Papers dp-97-48, Resources For the Future.
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  24. Cropper, Maureen & Laibson, David, 1998. "The implications of hyperbolic discounting for project evaluation," Policy Research Working Paper Series 1943, The World Bank.
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