IDEAS home Printed from https://ideas.repec.org/p/mlb/wpaper/993.html
   My bibliography  Save this paper

Discounting and the Time Preference Rate: An Introduction

Author

Listed:
  • John Creedy
  • Ross Guest

Abstract

This paper provides an introduction to the evaluation of alternative time streams of consumption and the closely related concept of time preference. The potential sensitivity of comparisons, especially to the choice of time preference rate and elasticity of marginal valuation, is demonstrated. The nature of time preference, based on an axiomatic approach, is then discussed. The analysis of optimisation over time leads to the concept of the social time preference rate, and a difficulty with using this rate is highlighted. Finally, complications introduced by non-income differences between individuals are examined. Emphasis is placed on the central role of value judgements.

Suggested Citation

  • John Creedy & Ross Guest, 2007. "Discounting and the Time Preference Rate: An Introduction," Department of Economics - Working Papers Series 993, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:993
    as

    Download full text from publisher

    File URL: http://fbe.unimelb.edu.au/__data/assets/pdf_file/0004/802795/993.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Peter A. Diamond & Tjalling C. Koopmans & Richard E. Williamson, 1962. "Stationary Utility and Time Preference," Cowles Foundation Discussion Papers 142, Cowles Foundation for Research in Economics, Yale University.
    2. John Creedy, 2007. "Discounting and the Social Time Preference Rate," Department of Economics - Working Papers Series 989, The University of Melbourne.
    3. John Creedy, 2006. "Evaluating Policy: Welfare Weights And Value Judgements," Department of Economics - Working Papers Series 971, The University of Melbourne.
    4. André Decoster & Erwin Ooghe, 2002. "Weighting with individuals, equivalent individuals, or not weighting at all. Does it matter empirically?," Public Economics Working Paper Series ces0215, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.
    5. Glewwe, Paul, 1991. "Household equivalence scales and the measurement of inequality : Transfers from the poor to the rich could decrease inequality," Journal of Public Economics, Elsevier, vol. 44(2), pages 211-216, March.
    6. Pasquale Scaramozzino & Giancarlo Marini, 2000. "Social time preference," Journal of Population Economics, Springer;European Society for Population Economics, vol. 13(4), pages 639-645.
    7. Anthony Shorrocks, 2004. "Inequality and welfare evaluation of heterogeneous income distributions," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 2(3), pages 193-218, July.
    8. Sir Nicholas Stern, 2006. "What is the Economics of Climate Change?," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 7(2), pages 1-10, April.
    9. Anthony F. Shorrocks, 2004. "Inequality and Welfare Evaluation of Heterogeneous Income Distributions," WIDER Working Paper Series RP2004-01, World Institute for Development Economic Research (UNU-WIDER).
    10. Tjalling C. Koopmans, 1959. "Stationary Ordinal Utility and Impatience," Cowles Foundation Discussion Papers 81, Cowles Foundation for Research in Economics, Yale University.
    11. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, December.
    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. John Creedy & Ross Guest, 2008. "Discounting and the Time Preference Rate," The Economic Record, The Economic Society of Australia, vol. 84(264), pages 109-127, March.
    2. Creedy, John & Guest, Ross, 2008. "Population ageing and intertemporal consumption: Representative agent versus social planner," Economic Modelling, Elsevier, vol. 25(3), pages 485-498, May.
    3. John Creedy & Jesse Eedrah, 2014. "The Role of Value Judgements in Measuring Inequality," Treasury Working Paper Series 14/13, New Zealand Treasury.
    4. John Creedy & Cath Sleeman, 2005. "Adult equivalence scales, inequality and poverty," New Zealand Economic Papers, Taylor & Francis Journals, vol. 39(1), pages 51-81.
    5. John Creedy & Jesse Eedrah, 2016. "Income redistribution and changes in inequality in New Zealand from 2007 to 2011: Alternative distributions and value judgements," New Zealand Economic Papers, Taylor & Francis Journals, vol. 50(2), pages 129-152, August.
    6. John Creedy, 2013. "Alternative Distributions for Inequality and Poverty Comparisons," Treasury Working Paper Series 13/11, New Zealand Treasury.
    7. John Creedy, 2013. "Alternative Distributions for Inequality and Poverty Comparisons," Treasury Working Paper Series 13/11, New Zealand Treasury.
    8. Christopher Ball & John Creedy, 2015. "Inequality in New Zealand 1983/84 to 2013/14," Treasury Working Paper Series 15/06, New Zealand Treasury.
    9. Christopher Ball & John Creedy, 2015. "Inequality in New Zealand 1983/84 to 2013/14," Treasury Working Paper Series 15/06, New Zealand Treasury.
    10. Johannes König & Carsten Schröder, 2018. "Inequality-minimization with a given public budget," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 16(4), pages 607-629, December.
    11. repec:zbw:hohpro:331 is not listed on IDEAS
    12. John Creedy & Jesse Eedrah, 2016. "Income redistribution and changes in inequality in New Zealand from 2007 to 2011: Alternative distributions and value judgements," New Zealand Economic Papers, Taylor & Francis Journals, vol. 50(2), pages 129-152, August.
    13. Udo Ebert, 2008. "Living Standard, Social Welfare, and the Redistribution of Income in a Heterogeneous Population," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(5), pages 873-889, October.
    14. Udo Ebert, 2011. "The redistribution of income when needs differ," Working Papers V-331-11, University of Oldenburg, Department of Economics, revised Feb 2011.
    15. repec:old:wpaper:331 is not listed on IDEAS
    16. Udo Ebert, 2010. "Equity-regarding poverty measures: differences in needs and the role of equivalence scales," Canadian Journal of Economics, Canadian Economics Association, vol. 43(1), pages 301-322, February.
    17. Creedy, John & Quy, Ta, 2022. "Income Mobility in New Zealand 2007–2020: Combining Household Survey and Census Data," Working Paper Series 25797, Victoria University of Wellington, Chair in Public Finance.
    18. Capeau, Bart & Ooghe, Erwin, 2007. "On comparing heterogeneous populations: Is there really a conflict between welfarism and a concern for greater equality in living standards?," Mathematical Social Sciences, Elsevier, vol. 53(1), pages 1-28, January.
    19. Jan Schumacher & Wolfgang Buchholz, 2008. "Discounting and Welfare Analysis Over Time: Choosing the ç," CESifo Working Paper Series 2230, CESifo.
    20. Fleurbaey, Marc & Hagneré, Cyrille & Trannoy, Alain, 2014. "Welfare comparisons of income distributions and family size: An individualistic approach," Journal of Mathematical Economics, Elsevier, vol. 51(C), pages 12-27.
    21. John Creedy, 2017. "Alternative Distributions for Inequality Comparisons," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 50(4), pages 484-497, December.
    22. Rolf Aaberge & Audun Langørgen & Petter Lindgren, 2013. "The distributional impact of public services in," Discussion Papers 746, Statistics Norway, Research Department.

    More about this item

    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:mlb:wpaper:993. 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: Dandapani Lokanathan (email available below). General contact details of provider: https://edirc.repec.org/data/demelau.html .

    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.