IDEAS home Printed from https://ideas.repec.org/a/spt/admaec/v7y2017i2f7_2_3.html
   My bibliography  Save this article

Kautilya, Fibonacci and Samuelson on Discounting

Author

Listed:
  • Balbir S. Sihag

Abstract

The concept of discounting plays an important role in allowing efficient inter-temporal choices. William Goetzmann (2004) claims that Fibonacci (1202/2002) introduced discounting. (i) It is shown that Fibonacci did not understand the concept of discounting or its relevance and his Liber Abaci is a book only of calculations and not of concepts. (ii) It is claimed that Kautilya (4th century BCE) originated the concept of discounting and inter-temporal analysis. (iii) More importantly, relevance of his insight to today’s world is brought out. According to Kautilya, it was possible to reduce the risk premium by making rare disasters rarer. Samuelson (1964) made the same point but Jensen and Bailey (1972) completely missed it.JEL classification numbers: B11, B31, G32Keywords: Discounting, Inter-temporal analysis, Rare disasters, Risk premium

Suggested Citation

  • Balbir S. Sihag, 2017. "Kautilya, Fibonacci and Samuelson on Discounting," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 7(2), pages 1-3.
    • Handle: RePEc:spt:admaec:v:7:y:2017:i:2:f:7_2_3
    as

    Download full text from publisher

    File URL: http://www.scienpress.com/Upload/AMAE%2fVol%207_2_3.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. William D. Grampp, 2000. "What Did Smith Mean by the Invisible Hand?," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 441-465, June.
    2. Robert J. Barro, 2006. "Rare Disasters and Asset Markets in the Twentieth Century," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(3), pages 823-866.
    3. William Goetzmann, 2003. "Fibonacci and the Financial Revolution," Yale School of Management Working Papers ysm432, Yale School of Management, revised 01 Mar 2004.
    4. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-648, July-Aug..
    5. Robert J. Barro & José F. Ursúa, 2012. "Rare Macroeconomic Disasters," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 83-109, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Aizenman, Joshua & Noy, Ilan, 2015. "Saving and the long shadow of macroeconomic shocks," Journal of Macroeconomics, Elsevier, vol. 46(C), pages 147-159.
    2. Reinhart, Carmen M. & Reinhart, Vincent & Rogoff, Kenneth, 2015. "Dealing with debt," Journal of International Economics, Elsevier, vol. 96(S1), pages 43-55.
    3. Jesús Fernández-Villaverde & Oren Levintal, 2024. "The Distributional Effects of Asset Returns," NBER Working Papers 32182, National Bureau of Economic Research, Inc.
    4. Eduardo Cavallo & Ilan Noy, 2009. "The Economics of Natural Disasters: A Survey," Research Department Publications 4649, Inter-American Development Bank, Research Department.
    5. Daniel Kapp & Marco Vega, 2014. "Real output costs of financial crises: A loss distribution approach," Cuadernos de Economía - Spanish Journal of Economics and Finance, Asociación Cuadernos de Economía, vol. 37(103), pages 13-28, Abril.
    6. Rangan Gupta & Tahir Suleman & Mark E. Wohar, 2019. "The role of time‐varying rare disaster risks in predicting bond returns and volatility," Review of Financial Economics, John Wiley & Sons, vol. 37(3), pages 327-340, July.
    7. Ivan Faiella & Filippo Natoli, 2018. "Natural catastrophes and bank lending: the case of flood risk in Italy," Questioni di Economia e Finanza (Occasional Papers) 457, Bank of Italy, Economic Research and International Relations Area.
    8. Bonato, Matteo & Cepni, Oguzhan & Gupta, Rangan & Pierdzioch, Christian, 2023. "Climate risks and state-level stock market realized volatility," Journal of Financial Markets, Elsevier, vol. 66(C).
    9. Nicholas Bloom & Fatih Guvenen & Sergio Salgado, 2016. "Skewed Business Cycles," 2016 Meeting Papers 1621, Society for Economic Dynamics.
    10. Max Gillman & Michal Kejak & Michal Pakoš, 2015. "Learning about Rare Disasters: Implications For Consumption and Asset Prices," Review of Finance, European Finance Association, vol. 19(3), pages 1053-1104.
    11. Jesús Fernández‐Villaverde & Oren Levintal, 2018. "Solution methods for models with rare disasters," Quantitative Economics, Econometric Society, vol. 9(2), pages 903-944, July.
    12. Anarkulova, Aizhan & Cederburg, Scott & O’Doherty, Michael S., 2022. "Stocks for the long run? Evidence from a broad sample of developed markets," Journal of Financial Economics, Elsevier, vol. 143(1), pages 409-433.
    13. Rafiq, Shuddhasattwa, 2022. "How did house and stock prices respond to different crisis episodes since the 1870s?," Economic Modelling, Elsevier, vol. 114(C).
    14. Robert Barro & Tao Jin, 2021. "Rare Events and Long-Run Risks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 39, pages 1-25, January.
    15. Funke, Manuel & Schularick, Moritz & Trebesch, Christoph, 2016. "Going to extremes: Politics after financial crises, 1870–2014," European Economic Review, Elsevier, vol. 88(C), pages 227-260.
    16. Alexis Louaas & Pierre Picard, 2014. "Optimal Insurance For Catastrophic Risk: Theory And Application To Nuclear Corporate Liability," Working Papers hal-01097897, HAL.
    17. Aizenman, Joshua & Noy, Ilan, 2013. "Public and private saving and the long shadow of macroeconomic shocks," Working Paper Series 2776, Victoria University of Wellington, School of Economics and Finance.
    18. James J. Choi & Adriana Z. Robertson, 2020. "What Matters to Individual Investors? Evidence from the Horse's Mouth," Journal of Finance, American Finance Association, vol. 75(4), pages 1965-2020, August.
    19. Eduardo Borensztein & Eduardo Cavallo & Patricio Valenzuela, 2009. "Debt Sustainability Under Catastrophic Risk: The Case for Government Budget Insurance," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 12(2), pages 273-294, September.
    20. Demirer, Riza & Gupta, Rangan & Suleman, Tahir & Wohar, Mark E., 2018. "Time-varying rare disaster risks, oil returns and volatility," Energy Economics, Elsevier, vol. 75(C), pages 239-248.

    More about this item

    Keywords

    discounting; inter-temporal analysis; rare disasters; risk premium;
    All these keywords.

    JEL classification:

    • B11 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Preclassical (Ancient, Medieval, Mercantilist, Physiocratic)
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spt:admaec:v:7:y:2017:i:2:f:7_2_3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Eleftherios Spyromitros-Xioufis (email available below). General contact details of provider: http://www.scienpress.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.