Discounting and Intergenerational Equity (Johns Hopkins University Press), 1999
Publisher's blurb: It is clear that many public policy decisions have very significant long-term ramifications, in addition to their more obvious short-term effects. This is often true with environmental issues, such as climate change, where the costs and benefits of decisions made today will be felt across many generations. In such cases, economists may use discount rates to compare present with future costs and benefits. In this landmark book, a number of the world's foremost economists reconsider the appropriate use of discounting in decision making for the far future.
For years, the definitive treatment of this topic was Discounting for Time and Risk in Energy Policy (Robert Lind, ed.), published by Resources for the Future in 1982. In Discounting and Intergenerational Equity, Lind joins a sterling group of his colleagues to reconsider the purpose, ethical implications, and application of discounting in light of recent research and current policy concerns such as climate change and nuclear waste. Other contributors are Kenneth Arrow, Scott Barrett, David Bradford, William Cline, Maureen Cropper, Shantayanan Devarajan, Partha Dasgupta, Raymond Kopp, David Laibson, Karl-Goeran Maeler, Alan Manne, W. David Montgomery, William Nordhaus, Jerome Rothenberg, Thomas Schelling, V. Kerry Smith, Michael Toman, andMartin Weitzman.
Volume editors John Weyant and Paul Portney have produced a book that looks at discounting from many different perspectives. For example, Paul Portney and Raymond Kopp propose use of "mock referendums," a new paradigm for analyzing policies whose costs and benefits are spread out over hundreds of years. William Cline advocates the application of a social rate of time preference in social cost-benefit analysis; he offers an approach he feels will better protect the interests of future generations in long-term issues. And in a significant departure from traditional theory, Partha Dasgupta, Scott Barrett, and Karl-Goeran Maeler model how social rates of discount might be zero or even negative -- a notion that has important ethical as well as economic implications for future generations.
The work produced in Discounting and Intergenerational Equity should go a long way toward refining the economic dimensions of public policy, particularly in environmental matters. As with the policies it discusses, the impact of the book will be felt tomorrow as well as today.