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The Discount Rate – A Small Number with a Big Impact


Roser, D (2009). The Discount Rate – A Small Number with a Big Impact. In: Center for Applied Ethics and Philosophy, Hokkaido University. Applied Ethics: Life, Environment and Society. Sapporo, JP: The Center for Applied Ethics and Philosophy, Hokkaido University, 12-27.

Abstract

Discussions of the discount rate have recently come to new prominence as a result of the growing importance of economic models of climate change. This text makes two claims about the appropriateness of discounting the utility of future generations. First, genuine discounting in the sense of ascribing a certain weight to the utility of future generations is not only wrong but primarily unnecessary; determining a discount rate in this genuine sense is only necessary within frameworks that implausibly prescribe weighing up the utility of present and future generations. Second, "non-genuine" discounting in the sense of taking into account opportunity costs, i.e. the fact that alternative investments to climate mitigation measures have positive rates of return, too, is justified. In addition, it is argued that normative reasoning cannot be escaped in the debate on discounting. To conclude, three reasons are suggested to explain why the discussion on the discount rate is so perplexing.

Abstract

Discussions of the discount rate have recently come to new prominence as a result of the growing importance of economic models of climate change. This text makes two claims about the appropriateness of discounting the utility of future generations. First, genuine discounting in the sense of ascribing a certain weight to the utility of future generations is not only wrong but primarily unnecessary; determining a discount rate in this genuine sense is only necessary within frameworks that implausibly prescribe weighing up the utility of present and future generations. Second, "non-genuine" discounting in the sense of taking into account opportunity costs, i.e. the fact that alternative investments to climate mitigation measures have positive rates of return, too, is justified. In addition, it is argued that normative reasoning cannot be escaped in the debate on discounting. To conclude, three reasons are suggested to explain why the discussion on the discount rate is so perplexing.

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Additional indexing

Item Type:Book Section, not refereed, original work
Communities & Collections:08 University Research Priority Programs > Ethics
Dewey Decimal Classification:170 Ethics
Language:English
Date:2009
Deposited On:30 Nov 2009 10:06
Last Modified:05 Apr 2016 13:35
Publisher:The Center for Applied Ethics and Philosophy, Hokkaido University
ISBN:978-4-9904046-1-1

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