Discounting and the Social Time Preference Rate
This paper shows that the emphasis on 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 the growth rate) in social evaluations where money values are discounted using the social time preference rate, is not advisable. It can give an entirely different, and arbitrary, 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).
|Date of creation:||2007|
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- William D. Nordhaus, 2006. "The "Stern Review" on the Economics of Climate Change," NBER Working Papers 12741, National Bureau of Economic Research, Inc.
- Friedrich Wu, 2006. "What Could Brake Chinaâ€™s Rapid Ascent in the World Economy?," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 7(3), pages 63-87, July.
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