Future Generations and the Social Rate of Discount

C A Nash
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C A Nash: Department of Economics, University of Southampton, Southampton S09 5NH, England

Environment and Planning A, 1973, vol. 5, issue 5, 611-617

Abstract: This paper reexamines the case for discounting for time in public investment appraisal where long-term or irreversible effects on future generations are involved. It is concluded that—while, in the short-term, considerations of equity reinforce the commonly advocated case for discounting for time—in evaluating long-term or irreversible effects, current discounting procedures require the doubtful assumption of perpetual exponential growth of real income. However, if discounting were abandoned, use of the standard cost—benefit-analysis framework would require the forecasting of shadow prices for all future dates, unless an arbitrary time horizon is adopted. Thus cost—benefit analysis does not appear to be a satisfactory method for evaluating effects on future generations.

Date: 1973
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Persistent link: https://EconPapers.repec.org/RePEc:sae:envira:v:5:y:1973:i:5:p:611-617

DOI: 10.1068/a050611

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