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Future Generations and the Social Rate of Discount

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  • C A Nash

    (Department of Economics, University of Southampton, Southampton S09 5NH, England)

Abstract

This paper reexamines the case for discounting for time in public investment appraisal where long-term or irreversible effects on future generations are involved. It is concluded that—while, in the short-term, considerations of equity reinforce the commonly advocated case for discounting for time—in evaluating long-term or irreversible effects, current discounting procedures require the doubtful assumption of perpetual exponential growth of real income. However, if discounting were abandoned, use of the standard cost—benefit-analysis framework would require the forecasting of shadow prices for all future dates, unless an arbitrary time horizon is adopted. Thus cost—benefit analysis does not appear to be a satisfactory method for evaluating effects on future generations.

Suggested Citation

  • C A Nash, 1973. "Future Generations and the Social Rate of Discount," Environment and Planning A, , vol. 5(5), pages 611-617, October.
    • Handle: RePEc:sae:envira:v:5:y:1973:i:5:p:611-617
    DOI: 10.1068/a050611
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    Cited by:

    1. Gijsbers, D. & Nijkamp, P., 1986. "A varying social rate of discount : review of arguments," Serie Research Memoranda 0041, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    2. R. A. Sharma & M. J. McGregor, 1993. "The Social Discount Rate For Land‐Use Projects In India: Reply," Journal of Agricultural Economics, Wiley Blackwell, vol. 44(1), pages 166-167, January.
    3. Gijsbers, D. & Nijkamp, P., 1987. "Non-uniform social rates of discount in natural resource models : an overview of arguments and consequences," Serie Research Memoranda 0073, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.

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