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A note on discounting and the social time preference rate

Author

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  • John Creedy

    () (University of Melbourne)

Abstract

This paper examines the discounting of money values in social evaluations using 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 a growth rate). It is shown that this procedure can give a different 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).

Suggested Citation

  • John Creedy, 2008. "A note on discounting and the social time preference rate," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 11(3), pages 249-255, September.
  • Handle: RePEc:ozl:journl:v:11:y:2008:i:3:p:249-255
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    Citations

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    Cited by:

    1. Alberto Bucci & Chiara Del Bo, 2009. "On the interaction between public investment and private capital in economic growth," UNIMI - Research Papers in Economics, Business, and Statistics unimi-1092, Universitá degli Studi di Milano.
    2. John Creedy & Hemant Passi, 2017. "Public Sector Discount Rates: A Comparison of Alternative Approaches," Treasury Working Paper Series 17/02, New Zealand Treasury.
    3. David EVANS & Erhun KULA, 2009. "Social discount rates and welfare weights for public investment decisions under budgetary restrictions – the case of Cyprus," Departmental Working Papers 2009-19, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.

    More about this item

    Keywords

    Allocative Efficiency; Cost-Benefit Analysis Intertemporal Choice and Growth: General General Welfare;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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