The common practice consists in using a unique value of the discount rate for all public investments. Endorsing a social welfare approach to discounting, we show how different public investments should be discounted depending on: the risk on the returns on investment, the systematic risk on aggregate consumption, the distribution of gains and losses, and inequality. We also study the limit value of the discount rate for very long term investments. We highlight the type of information that is needed about long-term scenarios in order to evaluate investments.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics
- Social discounting