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Calculating the Social Opportunity Cost Discount Rate

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  • Burgess, David F.
  • Zerbe, Richard O.

Abstract

Two comments in this issue of the Journal address our recent article in Volume 2, Issue 2. The fundamental issue with both comments is that they confuse the financial rate of return with the opportunity cost rate of return and therefore advocate for an inappropriate basis on which to calculate the government discount rate. That is, both comments confuse the financial cost of funds, or the borrowing rate, with the economic opportunity cost of funds. We hope that this exchange advances the subject by reducing confusion.

Suggested Citation

  • Burgess, David F. & Zerbe, Richard O., 2011. "Calculating the Social Opportunity Cost Discount Rate," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 2(3), pages 1-10, August.
    • Handle: RePEc:cup:jbcoan:v:2:y:2011:i:03:p:1-10_00
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    Cited by:

    1. Zerbe, Richard, 2023. "A foundation for benefit-cost analysis," MPRA Paper 121294, University Library of Munich, Germany, revised Jun 2024.

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