IDEAS home Printed from https://ideas.repec.org/a/ids/ijsusd/v6y2003i1p1133-149.html
   My bibliography  Save this article

Generation-adjusted discounting in long-term decision-making

Author

Listed:
  • Stefan Bayer

Abstract

This paper analyses the choice of an inter-generational discount rate as well as a method for inter-generational discounting. It is shown that the pure time preference rate is irrelevant for inter-generational comparisons. However, the application of the growth time preference rate - with respect to consumption - is a necessary condition for inter-temporal utility maximisation. Opportunity costs should be taken into account not by discounting with their internal rate of return, but by calculating consumption equivalents (shadow prices of capital). Thus, an intergenerational discount rate has to be based on the time preference approach. These considerations lead us to the formulation of a new discounting technique, "Generation Adjusted Discounting" (GAD). It takes into account intra- as well as inter-generational aspects. Compared with conventional discounting techniques, we find that the present values obtained by using the GAD noticeably exceed those derived conventionally.

Suggested Citation

  • Stefan Bayer, 2003. "Generation-adjusted discounting in long-term decision-making," International Journal of Sustainable Development, Inderscience Enterprises Ltd, vol. 6(1), pages 1133-1149.
    • Handle: RePEc:ids:ijsusd:v:6:y:2003:i:1:p:1133-149
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=4187
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Price, Colin, 2010. "Low discount rates and insignificant environmental values," Ecological Economics, Elsevier, vol. 69(10), pages 1895-1903, August.
    2. Stefan Bayer, 2004. "Nachhaltigkeitskonforme Diskontierung: das Konzept des "Generation Adjusted Discounting"," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 73(1), pages 142-157.
    3. Stefan Bayer, 2003. "Generelle Nichtdiskontierung als Bedingung für eine nachhaltige Entwicklung?," IAW Discussion Papers 13, Institut für Angewandte Wirtschaftsforschung (IAW).
    4. Colin, Price, 2011. "Optimal rotation with declining discount rate," Journal of Forest Economics, Elsevier, vol. 17(3), pages 307-318, August.
    5. Brazee, Richard J., 2018. "Impacts of declining discount rates on optimal harvest age and land expectation values," Journal of Forest Economics, Elsevier, vol. 31(C), pages 27-38.
    6. Lee, Ji Yun & Ellingwood, Bruce R., 2017. "A decision model for intergenerational life-cycle risk assessment of civil infrastructure exposed to hurricanes under climate change," Reliability Engineering and System Safety, Elsevier, vol. 159(C), pages 100-107.
    7. Price, Colin, 6. "Optimal Rotation under Continually – or Continuously – Declining Discount Rate," Scandinavian Forest Economics: Proceedings of the Biennial Meeting of the Scandinavian Society of Forest Economics, Scandinavian Society of Forest Economics, issue 42, April.
    8. Stefan Bayer & Claudia Kemfert, 2002. "Reaching National Kyoto Targets in Germany and Sustainable Development," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 4(4), pages 371-390, December.
    9. Stefan Bayer & Jacques Méry, 2009. "Sustainability gaps in municipal solid waste management: a case study for landfills," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 11(1), pages 43-69, February.
    10. Damien J.A. BAZIN & Sylvie FERRARI & Richard B. HOWARTH, 2018. "Introducing Environmental Ethics into Economic Analysis: Some insights from Hans Jonas’ Responsibility Principle," Cahiers du GREThA (2007-2019) 2018-17, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).

    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:ids:ijsusd:v:6:y:2003:i:1:p:1133-149. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=25 .

    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.