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Future Generations and the Social Rate of Discount

Author

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  • C A Nash

    (Department of Economics, University of Southampton, Southampton S09 5NH, England)

Abstract

This paper reexamines the case for discounting for time in public investment appraisal where long-term or irreversible effects on future generations are involved. It is concluded that—while, in the short-term, considerations of equity reinforce the commonly advocated case for discounting for time—in evaluating long-term or irreversible effects, current discounting procedures require the doubtful assumption of perpetual exponential growth of real income. However, if discounting were abandoned, use of the standard cost—benefit-analysis framework would require the forecasting of shadow prices for all future dates, unless an arbitrary time horizon is adopted. Thus cost—benefit analysis does not appear to be a satisfactory method for evaluating effects on future generations.

Suggested Citation

  • C A Nash, 1973. "Future Generations and the Social Rate of Discount," Environment and Planning A, , vol. 5(5), pages 611-617, October.
    • Handle: RePEc:sae:envira:v:5:y:1973:i:5:p:611-617
    DOI: 10.1068/a050611
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    References listed on IDEAS

    as
    1. Otto Eckstein, 1957. "Investment Criteria for Economic Development and the Theory of Intertemporal Welfare Economics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 71(1), pages 56-85.
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    Cited by:

    1. Gijsbers, D. & Nijkamp, P., 1986. "A varying social rate of discount : review of arguments," Serie Research Memoranda 0041, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    2. R. A. Sharma & M. J. McGregor, 1993. "The Social Discount Rate For Land‐Use Projects In India: Reply," Journal of Agricultural Economics, Wiley Blackwell, vol. 44(1), pages 166-167, January.
    3. Gijsbers, D. & Nijkamp, P., 1987. "Non-uniform social rates of discount in natural resource models : an overview of arguments and consequences," Serie Research Memoranda 0073, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.

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