IDEAS home Printed from https://ideas.repec.org/p/lsg/lsgwps/wp68.html
   My bibliography  Save this paper

Government discounting controversies: the valuation of social time preference

Author

Listed:
  • Michael Spackman

Abstract

The conceptual basis and numerical quantification of the time discount rate (or rates) to use for the comparison of policies or projects from a national perspective have been extensively debated for over half a century. Many differences remain, some continuing over many decades and some emerging more recently. Over recent decades the concept of a social time preference rate, derived from estimates of pure time preference (d) and an elasticity of marginal utility (n), has become fairly well established in practical application, at least in Europe. There has however been much recent debate about the ethical basis of d and possibly?. It is suggested here that the arguments made for a zero or near zero value for d do not stand up well to close investigation, and that the case for any significant ethical element to n is weak. Also discussed are the valuation of marginal utility in developing countries and the application of government discounting to the very long term.

Suggested Citation

  • Michael Spackman, 2011. "Government discounting controversies: the valuation of social time preference," GRI Working Papers 68, Grantham Research Institute on Climate Change and the Environment.
  • Handle: RePEc:lsg:lsgwps:wp68
    as

    Download full text from publisher

    File URL: http://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2011/11/WP68_government-discount-controversies_2.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Kathryn Smith, 2010. "Stern, climate policy and saving rates," Climate Policy, Taylor & Francis Journals, vol. 10(3), pages 289-297, May.
    2. Richard Blundell & Martin Browning & Costas Meghir, 1994. "Consumer Demand and the Life-Cycle Allocation of Household Expenditures," Review of Economic Studies, Oxford University Press, vol. 61(1), pages 57-80.
    3. Martin L. Weitzman, 2001. "Gamma Discounting," American Economic Review, American Economic Association, vol. 91(1), pages 260-271, March.
    4. Rabl, Ari, 1996. "Discounting of long-term costs: What would future generations prefer us to do?," Ecological Economics, Elsevier, vol. 17(3), pages 137-145, June.
    5. Lind, Robert C, 1995. "Intergenerational equity, discounting, and the role of cost-benefit analysis in evaluating global climate policy," Energy Policy, Elsevier, vol. 23(4-5), pages 379-389.
    6. 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.
    7. Layard, R. & Mayraz, G. & Nickell, S., 2008. "The marginal utility of income," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1846-1857, August.
    8. Schelling, Thomas C, 1995. "Intergenerational discounting," Energy Policy, Elsevier, vol. 23(4-5), pages 395-401.
    9. Atkinson, A. B., 1996. "Public Economics in Action: The Basic Income/Flat Tax Proposal," OUP Catalogue, Oxford University Press, number 9780198292166.
    10. Ben Groom & Cameron Hepburn & Phoebe Koundouri & David Pearce, 2005. "Declining Discount Rates: The Long and the Short of it," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(4), pages 445-493, December.
    11. Sen, Amartya, 1997. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198292975.
    12. Dietz, Simon & Asheim, Geir B., 2012. "Climate policy under sustainable discounted utilitarianism," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 321-335.
    13. Newell, Richard G. & Pizer, William A., 2003. "Discounting the distant future: how much do uncertain rates increase valuations?," Journal of Environmental Economics and Management, Elsevier, vol. 46(1), pages 52-71, July.
    14. David J. Evans & Haluk Sezer, 2005. "Social discount rates for member countries of the European Union," Journal of Economic Studies, Emerald Group Publishing, vol. 32(1), pages 47-59, January.
    15. Partha Dasgupta, 2011. "The Ethics of Intergenerational Distribution: Reply and Response to John E. Roemer," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 50(4), pages 475-493, December.
    16. Cropper, Maureen L & Aydede, Sema K & Portney, Paul R, 1994. "Preferences for Life Saving Programs: How the Public Discounts Time and Age," Journal of Risk and Uncertainty, Springer, vol. 8(3), pages 243-265, May.
    17. E Kula, 1985. "An Empirical Investigation on the Social Time-Preference Rate for the United Kingdom," Environment and Planning A, , vol. 17(2), pages 199-212, February.
    18. David Evans & Haluk Sezer, 2002. "A time preference measure of the social discount rate for the UK," Applied Economics, Taylor & Francis Journals, vol. 34(15), pages 1925-1934.
    19. Simon Dietz & Nicholas Stern, 2009. "On the Timing of Greenhouse Gas Emissions Reductions: A Final Rejoinder to the Symposium on "The Economics of Climate Change: The Stern Review and its Critics"," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 3(1), pages 138-140, Winter.
    20. Erhun Kula, 1984. "Derivation of Social Time Preference Rates for the United States and Canada," The Quarterly Journal of Economics, Oxford University Press, vol. 99(4), pages 873-882.
    21. Koichi Mera, 1969. "Experimental Determination of Relative Marginal Utilities," The Quarterly Journal of Economics, Oxford University Press, vol. 83(3), pages 464-477.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lsg:lsgwps:wp68. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (The GRI Administration). General contact details of provider: http://edirc.repec.org/data/grlseuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.