The Normative Standard for Future Discounting

Perspectives on Discounting the Future

Discounting an uncertain future

The objective of this paper is to determine the socially optimal discount rate for public investment projects that entail costs and benefits in the very long run. We suppose that there is an exogenous process for the growth of consumption per capita, which is stochastic. We first evaluate the determinants of the discount rate for a specific horizon when the representative agent has a recursive ...

Future anhedonia and time discounting

The temporal location of an event influences the way people mentally represent that event. We suggest (a) that such representational differences can produce an affective forecasting error that we call future anhedonia, which is the belief that hedonic states will be less intense in the future than in the present, and (b) that future anhedonia plays a role in time discounting (i.e., the tendency...

Discounting the Distant Future with Uncertain Rates

Costs and benefits in the distant future have little consequence today when valued with conventional discount rates. This is particularly relevant for assessing policies with effects hundreds of years in the future, such as mitigating the damages from global warming. Many authors and analysts have responded by arguing for the use of lower discount rates over longer horizons, based primarily on ...

Discounting the Future in Systems Theory

Discounting the future means that the value, today, of a unit payoff is 1 if the payoff occurs today, a if it occurs tomorrow, a if it occurs the day after tomorrow, and so on, for some real-valued discount factor 0 < a < 1. Discounting (or inflation) is a key paradigm in economics and has been studied in Markov decision processes as well as game theory. We submit that discounting also has a na...