Discounting disentangled

Moritz Drupp, Mark C. Freeman, Ben Groom and Frikk Nesje

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: The economic values of investing in long-term public projects are highly sensitive to the social discount rate (SDR). We surveyed over 200 experts to disentangle disagreement on the risk-free SDR into its component parts, including pure time preference, the wealth effect and return to capital. We show that the majority of experts do not follow the simple Ramsey Rule, a widely-used theoretical discounting framework, when recommending SDRs. Despite disagreement on discounting procedures and point values, we obtain a surprising degree of consensus among experts, with more than three-quarters finding the median risk-free SDR of 2 percent acceptable.

Keywords: Social discount rate; project appraisal; expert opinions; simple Ramsey Rule; disagreement (search for similar items in EconPapers)
JEL-codes: D61 H43 Q58 (search for similar items in EconPapers)
Date: 2018-11-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (69)

Published in American Economic Journal: Economic Policy, 1, November, 2018, 10(4), pp. 109-134. ISSN: 1945-7731

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http://eprints.lse.ac.uk/87375/ Open access version. (application/pdf)

Related works:
Journal Article: Discounting Disentangled (2018)
Working Paper: Discounting Disentangled (2015)
Working Paper: Discounting disentangled (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:87375

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