THE REASONABLENESS OF NONCONSTANT DISCOUNTING

The typical method for valuing the future goods and harms of a public policy alternative is by means of a constant annual discount rate. This paper examines the reasonableness for public policy analysis of non-constant discounting methods that, unlike constant discounting, can accord considerable importance to outcomes in the distant future. We examine temporal consistency and economic efficiency as reasons for the use of constant discounting - and we argue that these reasons do not apply for a public policy choice whose effects are long-range and irreversible.