DISCOUNTING AND SAFETY

Discounting and Climate Change

Why has discounting been controversial, and why has the controversy been particularly acute in the environmental area? The environmental area forces one to consider long time horizons. In the climate change area, a century is the minimum time horizon to make sense. The same is true about species extinction and biodiversity loss and disposal of nuclear waste. Such time horizons are completely ou...

Discounting and Risk Neutrality

Let be a binary relation in which is a real vector space of vector-valued discrete-time Ð ¤ ß Z Ñ Z stochastic processes with as the sequence of zero vectors. If satisfies four axioms, then ! Ð ¤ ß Z Ñ there are unique discount factors such that preferences regarding stochastic processes induce prefences among present value random vectors. Three of the axioms are familiar: weak ordering, contin...

Discounting and Sustainability

Discounting and Confidence

The paper analyzes the social discount rate under uncertainty. It employs a preference representation that enriches the characterization of uncertainty by a degree of confidence into probabilistic descriptions of the world. Special cases of the model comprise discounting under smooth ambiguity aversion as well as discounting under a disentanglement of risk aversion and aversion to intertemporal...

Discounting and relative prices

Environmentalists are often upset at the effect of discounting costs of future environmental damage, e.g., due to climate change. An often-overlooked message is that we should discount costs but also take into account the increase in the relative price of the ecosystem service endangered. The effect of discounting would thus be counteracted, and if the rate of price rise of the item was fast en...