Discounting risks in the far future

Niels Lind

Reliability Engineering and System Safety, 2007, vol. 92, issue 10, 1328-1332

Abstract: Risks to life and health in the future must be discounted in quantitative risk analysis. Yet, risks in the distant future become trivialized if any reasonable constant interest rate is used. Our responsibility toward future generations rules out such drastic discounting. A solution to this problem is proposed here, resting on the ethical principle that our duty with respect to saving lives is the same to all generations, whether in the near or far future. It is shown that when a choice between prospects involving different risks has a financing horizon T, then ordinary principles of discounting apply up to this time T, while no further discounting is justifiable after T. The principle implies that risk events beyond the financing horizon should be valued as if they occurred at the financing horizon.

Keywords: Discount; Far future; Risks; Financing horizon (search for similar items in EconPapers)
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reensy:v:92:y:2007:i:10:p:1328-1332

DOI: 10.1016/j.ress.2006.09.001

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