Discounting the Long-Distant Future: A Simple Explanation for the Weitzman-Gollier-Puzzle

Wolfgang Buchholz () and Jan Schumacher

No 2357, CESifo Working Paper Series from CESifo

Abstract: In this paper, we reconsider the debate on Weitzman's (1998) suggestion to discount the long-run future at the lowest possible rate, referring to Gollier (2004) and Hepburn & Groom (2007). We show that, while Weitzman's use of the present value approach may indeed seem questionable, its outcome, i.e. a discount rate that is declining over time, is nevertheless reasonable, since it can be justified by assuming a plausible degree of risk aversion.

Keywords: discount rates; uncertainty; risk aversion (search for similar items in EconPapers)
JEL-codes: D40 E43 Q51 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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