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Appropriate discounting for benefit–cost analysis

In: Principles and Standards for Benefit–Cost Analysis

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  • David F. Burgess
  • Richard O. Zerbe

Abstract

Benefit–cost analysis informs which policies or programs most benefit society when implemented by governments and institutions around the world. This volume brings together leading researchers and practitioners to recommend strategies and standards to improve the consistency and credibility of such analyses, assisting analysts of all types in achieving a greater uniformity of practice.

Suggested Citation

  • David F. Burgess & Richard O. Zerbe, 2013. "Appropriate discounting for benefit–cost analysis," Chapters,in: Principles and Standards for Benefit–Cost Analysis, chapter 7, pages 247-263 Edward Elgar Publishing.
  • Handle: RePEc:elg:eechap:15126_7
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    References listed on IDEAS

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    1. Sandmo, Agnar & Dreze, Jacques H, 1971. "Discount Rates for Public Investment in Closed and Open Economies," Economica, London School of Economics and Political Science, vol. 38(152), pages 395-412, November.
    2. Richard Zerbe, 2004. "Should moral sentiments be incorporated into benefit-cost analysis? An example of long-term discounting," Policy Sciences, Springer;Society of Policy Sciences, vol. 37(3), pages 305-318, December.
    3. Steffen Andersen & Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2008. "Eliciting Risk and Time Preferences," Econometrica, Econometric Society, vol. 76(3), pages 583-618, May.
    4. Liqun Liu & Andrew J. Rettenmaie & Thomas R. Saving, 2004. "A Generalized Approach to Multigeneration Project Evaluation," Southern Economic Journal, Southern Economic Association, vol. 71(2), pages 377-396, October.
    5. Martin L. Weitzman, 2001. "Gamma Discounting," American Economic Review, American Economic Association, vol. 91(1), pages 260-271, March.
    6. Orazio P. Attanasio & Guglielmo Weber, 2010. "Consumption and Saving: Models of Intertemporal Allocation and Their Implications for Public Policy," Journal of Economic Literature, American Economic Association, vol. 48(3), pages 693-751, September.
    7. Bradford, David F, 1975. "Constraints on Government Investment Opportunities and the Choice of Discount Rate," American Economic Review, American Economic Association, vol. 65(5), pages 887-899, December.
    8. Goodin, Robert E., 1982. "Discounting Discounting," Journal of Public Policy, Cambridge University Press, vol. 2(01), pages 53-71, February.
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    10. J. Doyne Farmer & John Geanakoplos, 2009. "Hyperbolic discounting is rational: Valuing the far future with uncertain discount rates," Levine's Working Paper Archive 814577000000000356, David K. Levine.
    11. Hall, Robert E, 1988. "Intertemporal Substitution in Consumption," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 339-357, April.
    12. Burgess, David F., 2013. "Reconciling alternative views about the appropriate social discount rate," Journal of Public Economics, Elsevier, vol. 97(C), pages 9-17.
    13. Partha Dasgupta, 2008. "Discounting climate change," Journal of Risk and Uncertainty, Springer, vol. 37(2), pages 141-169, December.
    14. Stephen A. Marglin, 1963. "The Opportunity Costs of Public Investment," The Quarterly Journal of Economics, Oxford University Press, vol. 77(2), pages 274-289.
    15. Harberger, Arnold C, 1971. "Three Basic Postulates for Applied Welfare Economics: An Interpretive Essay," Journal of Economic Literature, American Economic Association, vol. 9(3), pages 785-797, September.
    16. Sjaastad, Larry A & Wisecarver, Daniel L, 1977. "The Social Cost of Public Finance," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 513-547, June.
    17. Revesz, Richard L., 1999. "Environmental Regulation, Cost-Benefit Analysis, and the Discounting of Human Lives," Berkeley Olin Program in Law & Economics, Working Paper Series qt57q8284f, Berkeley Olin Program in Law & Economics.
    18. Simon Gilchrist & Egon Zakrajsek, 2007. "Investment and the Cost of Capital: New Evidence from the Corporate Bond Market," NBER Working Papers 13174, National Bureau of Economic Research, Inc.
    19. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
    20. Weitzman, Martin L., 1998. "Why the Far-Distant Future Should Be Discounted at Its Lowest Possible Rate," Journal of Environmental Economics and Management, Elsevier, vol. 36(3), pages 201-208, November.
    21. Mark A. Moore & Anthony E. Boardman & Aidan R. Vining & David L. Weimer & David H. Greenberg, 2004. "“Just give me a number!” Practical values for the social discount rate," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 23(4), pages 789-812.
    22. Liu, Liqun, 2003. "A marginal cost of funds approach to multi-period public project evaluation: implications for the social discount rate," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1707-1718, August.
    23. Anthony E. Boardman & Mark A. Moore & Aidan R. Vining, 2010. "The Social Discount Rate for Canada Based on Future Growth in Consumption," Canadian Public Policy, University of Toronto Press, vol. 36(3), pages 325-343, September.
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    Cited by:

    1. Scott Farrow & W. Kip Viscusi, 2013. "Towards principles and standards for the benefit–cost analysis of safety," Chapters,in: Principles and Standards for Benefit–Cost Analysis, chapter 5, pages 172-193 Edward Elgar Publishing.
    2. Frits Bos & Thomas van der Pol & Gerbert Romijn, 2018. "Should CBA’s include a correction for the marginal excess burden of taxation?," CPB Discussion Paper 370, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Johansson Per-Olov & Kriström Bengt, 2011. "Comment on Burgess and Zerbe: On Bank Market Power and the Social Discount Rate," Journal of Benefit-Cost Analysis, De Gruyter, vol. 2(3), pages 1-6, August.
    4. 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.
    5. Gillespie, Rob & Kragt, Marit E., 2012. "Accounting for Nonmarket Impacts in a Benefit-Cost Analysis of Underground Coal Mining in New South Wales, Australia," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 3(02), pages 1-29, May.
    6. Hansen Jason & Lipow Jonathan, 2013. "Accounting for systematic risk in benefit-cost analysis: a practical approach," Journal of Benefit-Cost Analysis, De Gruyter, vol. 4(3), pages 361-373, December.
    7. Burgess David F. & Zerbe Richard O., 2013. "The most appropriate discount rate," Journal of Benefit-Cost Analysis, De Gruyter, vol. 4(3), pages 391-400, December.
    8. Donald F Vitaliano, 2016. "Benefits and Costs of the Erie Canal: A New View," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 42(4), pages 581-593, September.
    9. A. Mitchell Polinsky & Paul N. Riskind, 2017. "Deterrence and the Optimal Use of Prison, Parole, and Probation," NBER Working Papers 23436, National Bureau of Economic Research, Inc.
    10. Moore Mark A. & Vining Aidan R. & Boardman Anthony E., 2013. "More appropriate discounting: the rate of social time preference and the value of the social discount rate," Journal of Benefit-Cost Analysis, De Gruyter, vol. 4(1), pages 1-16, March.
    11. Moore, Mark A. & Boardman, Anthony E. & Vining, Aidan R., 2013. "The choice of the social discount rate and the opportunity cost of public funds," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 4(03), pages 401-409, December.

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