Gamma Discounting

Martin Weitzman

American Economic Review, 2001, vol. 91, issue 1, 260-271

Abstract: By incorporating the probability distribution directly into the analysis, this paper proposes a new theoretical approach to resolving the perennial dilemma of being uncertain about what discount rate to use in cost-benefit analysis. A numerical example is constructed from the results of a survey based on the opinions of 2,160 economists. The main finding is that even if every individual believes in a constant discount rate, the wide spread of opinion on what it should be makes the effective social discount rate decline significantly over time. Implications and ramifications of this proposed "gamma-discounting" approach are discussed.

JEL-codes: D61 H43 (search for similar items in EconPapers)
Date: 2001
Note: DOI: 10.1257/aer.91.1.260
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Citations: View citations in EconPapers (296)

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Working Paper: Gamma Discounting (1998)
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