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Intergenerational discounting

Thomas C Schelling
School of Public Affairs, University of Maryland, College Park, MD 20742, USA

A 'discount rate' for the consumption of future generations from current investments for their benefit is typically composed of two parts: 'time preference' and an allowance for the lower marginal utility of consumption due to higher average levels of consumption in the future. Time preference would be involved if one were postponing one's own consumption; it has little or nothing to do with income redistribution, which is what greenhouse abatement is about. A lower marginal utility of consumption is an anomaly in income redistribution: we rarely deliberately transfer consumption from the less to the more well-to-do. Time may serve as a kind of measure of distance; we may prefer beneficiaries who are closer in time, in geographical distance, in culture, surely in kinship. Perhaps to keep our thinking straight we should use a term like 'depreciation', rather than 'discounting'.

Keywords: Global warming; Intergenerational equity; Discounting

 

 

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