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Social Project Appraisal and Discounting for the Very Long Term

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  • D Evans

Abstract

This paper considers the issue of discounting in relation to the appraisal of very long-term social projects. This is an increasingly important matter given the growing concerns over the environmental and safety impacts of many projects on future generations. Standard discounting practice trivialises the welfare impacts of projected costs and benefits on future populations, so a credible alternative procedure is required to avoid this 'write-off'. The British Treasury bases its published long-term discount factors on uncertainty concerning the value of the discount rate, although the factor values it has published seem inappropriate. The nature of this problem is examined and an alternative set of discount factors is presented for consideration. Additionally, a further set of factors is proposed for possible policy application in developed countries in cases where social project welfare impacts are not related to income. This new set is based only on uncertainty in the utility discount rate.

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  • D Evans, 2008. "Social Project Appraisal and Discounting for the Very Long Term," Economic Issues Journal Articles, Economic Issues, vol. 13(1), pages 61-70, March.
    • Handle: RePEc:eis:articl:108evans
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    1. Michael Spackman, 2004. "Time discounting and of the cost of capital in government," Fiscal Studies, Institute for Fiscal Studies, vol. 25(4), pages 467-518, December.
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    3. David Pearce, 1999. "Economics and Environment," Books, Edward Elgar Publishing, number 354.
    4. Martin L. Weitzman, 2001. "Gamma Discounting," American Economic Review, American Economic Association, vol. 91(1), pages 260-271, March.
    5. Weitzman, Martin L., 1998. "Why the Far-Distant Future Should Be Discounted at Its Lowest Possible Rate," Journal of Environmental Economics and Management, Elsevier, vol. 36(3), pages 201-208, November.
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    3. Pollitt, M., 2010. "Green Values in Communities: How and why to engage individuals with decarbonisation targets," Working Papers wp398, Centre for Business Research, University of Cambridge.

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