{"title":"Li and Pizer in the short-run: A comment on discounting","authors":"Andrew R. Solow , Scott Farrow","doi":"10.1016/j.jeem.2024.103039","DOIUrl":null,"url":null,"abstract":"<div><p>Li and Pizer derived upper and lower bounds on the time-dependent social discount rate that both converge in the long run to the consumption rate of interest. They went on to recommend using the consumption rate of interest as the social discount rate for investments relating to climate change for which the bulk of the benefits accrue in the far future. However, the bounds can be quite wide in the short-run, providing little guidance for shorter term discounting. Here, we show that if uncertainty in the social discount rate is encoded in a uniform distribution, then its expected value converges much more rapidly to the consumption rate of interest. The implications of this for project evaluation are more complicated than in the deterministic case considered by Li and Pizer.</p></div>","PeriodicalId":15763,"journal":{"name":"Journal of Environmental Economics and Management","volume":"127 ","pages":"Article 103039"},"PeriodicalIF":5.5000,"publicationDate":"2024-07-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Environmental Economics and Management","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S009506962400113X","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS","Score":null,"Total":0}
引用次数: 0
Abstract
Li and Pizer derived upper and lower bounds on the time-dependent social discount rate that both converge in the long run to the consumption rate of interest. They went on to recommend using the consumption rate of interest as the social discount rate for investments relating to climate change for which the bulk of the benefits accrue in the far future. However, the bounds can be quite wide in the short-run, providing little guidance for shorter term discounting. Here, we show that if uncertainty in the social discount rate is encoded in a uniform distribution, then its expected value converges much more rapidly to the consumption rate of interest. The implications of this for project evaluation are more complicated than in the deterministic case considered by Li and Pizer.
Li和Pizer得出了与时间相关的社会贴现率的上限和下限，从长远来看，这两个贴现率都趋同于消费利率。他们进而建议将消费利率作为与气候变化有关的投资的社会贴现率，因为这些投资的大部分收益都是在遥远的未来产生的。然而，短期内的界限可能会很宽，对短期贴现没有什么指导意义。在这里，我们表明，如果将社会贴现率的不确定性编码为均匀分布，那么其预期值会更快地趋同于相关消费率。这对项目评估的影响比 Li 和 Pizer 所考虑的确定性情况更为复杂。
期刊介绍：
The Journal of Environmental Economics and Management publishes theoretical and empirical papers devoted to specific natural resources and environmental issues. For consideration, papers should (1) contain a substantial element embodying the linkage between economic systems and environmental and natural resources systems or (2) be of substantial importance in understanding the management and/or social control of the economy in its relations with the natural environment. Although the general orientation of the journal is toward economics, interdisciplinary papers by researchers in other fields of interest to resource and environmental economists will be welcomed.
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