Discounting and Intergenerational Ethics

The question of social discounting is central in intertemporal cost-benefit analysis that often shapes economists’ recommendations regarding climate policy. The practice of discounting has been the object of heated debates among economists and philosophers, revolving around the issue of intergenerational ethics. In this chapter, we review the different arguments for and against specific values of social discounting. We show that there are actually two different ethical issues at stake: 1) the question of impartiality (or equal treatment of all generations); 2) the question of priority to the worse-off (aversion to inequality in resources, capabilities or welfare). These questions have emerged in the utilitarian approach and can be neatly separated in that case. They also have very different consequences for climate policy. We then argue that the question of social discounting is not confined to the utilitarian framework as it more generally describes the social value of income (or capability or welfare) transfers to future generations. Lastly, we discuss the many limitations of social discounting as a tool for policy analysis.