EPG Spotlight – Discounting in public policy: Deconstruction of the Social Rate of Time Preference.

EPG Spotlight – Discounting in public policy: Deconstruction of the Social Rate of Time Preference.

In public policy investments, costs are often incurred in the short-term, with benefits accruing in the longer term. Whether a project is worth doing, or government action is justified, depends on the balance of these costs and benefits, in present value terms.

This article deconstructs the constituent components of the discount rate used in these calculations, using the economics of climate change as a case study.

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