Discounting and Welfare Evaluation of Policies

Jean-François Mertens and Anna Rubinchik ()

No WP2015/7, Working Papers from University of Haifa, Department of Economics

Abstract: If policy discounting is to have any welfare relevance, it must be a derivative of a social welfare function. If that derivative is to have a net present value form, the baseline allocation must be stationary. Given a stationary baseline in an overlapping generations growth economy the inter-generationally fair discount rate under the relative utilitarian welfare function equals the growth rate of per-capita consumption, roughly, 2% for the U.S. This differs from the interest rate, even in the golden rule equilibrium unless population growth is null.

Keywords: policy evaluation; discounting; social welfare function; social discount rate; overlapping generations (search for similar items in EconPapers)
JEL-codes: D50 H43 H50 (search for similar items in EconPapers)
Pages: 17
Date: 2015-11-18
New Economics Papers: this item is included in nep-dge and nep-fdg
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Related works:
Journal Article: Discounting and welfare evaluation of policies (2017)
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