Understanding Discount Rates Under SFAS 87

Against High Discount Rates

In the economics of climate change, the future benefits of greenhouse gas emissions abatement are commonly discounted at a rate equal to the long-run return on corporate stocks, which averaged 6% per year during the 20 century. Since a 6% discount rate implies that one dollar of benefits obtained one century from the present attains a present value of less than one cent, this method implies tha...

Declining Discount Rates Maureen

In this paper we ask whether the US government should replace its current discounting practices with a declining discount rate schedule, as the UK and France have done, or should continue to discount the future at a constant exponential rate. To address the question, we briefly present the theoretical basis for a declining discount rate (DDR) schedule, but focus on how, in practice, a DDR could...

Discount Rates and Sustainability

On Multiple Discount Rates

We propose a theory of intertemporal choice that is robust to specific assumptions on the discount rate. One class of models requires that one utility stream be chosen over another if and only if its discounted value is higher for all discount factors in a set. Another model focuses on an average discount factor. Yet another model is pessimistic, and evaluates a flow by the lowest available dis...

Very Long-Run Discount Rates

We provide the first direct estimates of how agents trade off immediate costs and uncertain future benefits that occur in the very long run, 100 or more years away. We find that very longrun discount rates are low, much lower than implied by most economic theory. We estimate these discount rates by exploiting a unique feature of residential housing markets in England, Wales and Singapore, where...