The social discount rate in cost benefit analysis: the British experience and lessons to be learned

Erhun Kula (ie.kula@ulster.ac.uk)

Departmental Working Papers from Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano

Abstract: Application of the social discount rate to public sector projects is one of the most crucial parameters in cost benefit analysis. Because of its importance some countries have a formal discount rate and method of discounting policies. The United Kingdom was one of the earliest to adopt a policy on discounting which started in 1967 and it is still evolving. This paper looks at the evolution of the British discounting policy with a number of constructive critical remarks focussing on the magnitude of the current rate as well as the method of discounting. It concludes that present 3. 5% figure is rather low and discounting by using the declining rate is almost totally ineffective to care for future generations as compared with an alternative modified discounting which treats all generations in the same manner

Keywords: Cost-Benefit Analysis; Discounting; Future Generations (search for similar items in EconPapers)
JEL-codes: D61 D70 D90 H50 O12 (search for similar items in EconPapers)
Date: 2006-10-13
New Economics Papers: this item is included in nep-ene and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:mil:wpdepa:2006-19

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