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The Social Discount Rate

  • Andrew Caplin
  • John Leahy

In welfare theory it is standard to pick the consumption stream that maximizes the welfare of the representative agent. We argue against this position, and show that a benevolent social planner will generally place a greater weight on future consumption than does the representative agent. Our analysis has immediate implications for public policy: agents discount the future too much and the government should promote future oriented policies.

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File URL: http://dx.doi.org/10.1086/424740
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File URL: http://dx.doi.org/10.1086/424740
Download Restriction: Access to the online full text or PDF requires a subscription.

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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 112 (2004)
Issue (Month): 6 (December)
Pages: 1257-1268

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Handle: RePEc:ucp:jpolec:v:112:y:2004:i:6:p:1257-1268
Contact details of provider: Web page: http://www.journals.uchicago.edu/JPE/

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