Valuing the Future: Intergenerational Discounting, Its Problems, and a Modest Proposal
Competing theories exist for how intergenerational investment projects, such as investments related to global warming, natural resources, energy, etc., should be undertaken. In particular, there are two popular prescriptions: (1) In making intergenerational investments, policymakers should use a zero discount rate; and (2) In making intergenerational investments, policymakers should use the market rate. Neither of these prescriptions is correct. Indeed, using present-value discounting at all is extremely problematic.