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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://www.nber.org/papers/w7983.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7983.

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Date of creation: Oct 2000
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Publication status: published as Andrew Caplin & John Leahy, 2004. "The Social Discount Rate," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1257-1268, December.
Handle: RePEc:nbr:nberwo:7983
Note: PE
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  18. Peled, Dan, 1982. "Informational diversity over time and the optimality of monetary equilibria," Journal of Economic Theory, Elsevier, vol. 28(2), pages 255-274, December.
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