A Path Through the Wilderness: Time Discounting in Growth Models

Pedro Duarte

No 2013_18, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: Although economists have recognized long ago that “time enters into all economic questions”, the ways they treated and modeled time has varied substantially in the last century. While in the 1930s there was a distinctive Cambridge tradition against discounting utilities of future generations, to which Frank Ramsey subscribed, postwar neoclassical growth economists (of the “Ramsey-Cass-Koopmans model”) applied the discount factor either to individual’s or to social planner’s decision-making as a technical requirement of dynamic general equilibrium models. My goal in this article is to shed some historical light on how a practice that was condemned as ethically indefensible when applied to intergenerational comparisons became a technical requirement in dynamic models of either a consumer or a planner deciding the intertemporal allocation of resources.

Keywords: time discount; growth models; Ramsey-Cass-Koopmans model; economic dynamics (search for similar items in EconPapers)
JEL-codes: B22 B23 E32 (search for similar items in EconPapers)
Date: 2013-11-12
New Economics Papers: this item is included in nep-dge, nep-his, nep-hme, nep-hpe and nep-mac
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Citations: View citations in EconPapers (2)

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