Yes, we should discount the far-distant future at its lowest possible rate: a resolution of the Weitzman-Gollier puzzle

Arbeitspapier

In this paper the author proves that the Expected Net Future Value (ENFV) criterion can lead a risk neutral social planner to reject projects that increase expected utility. By contrast, the Expected Net Present Value (ENPV) rule correctly identifies the economic value of the project. While the ENFV increases with uncertainty over future interest rates, the expected utility decreases because of the planner's desire to smooth consumption across time. This paper therefore shows that Weitzman (1998) is right and that, within his economy, the far-distant future should be discounted at its lowest possible rate.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Economics Discussion Papers ; No. 2009-42

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Allocative Efficiency; Cost-Benefit Analysis ; Interest Rates: Determination, Term Structure, and Effects ; Asset Pricing; Trading Volume; Bond Interest Rates ; Capital Budgeting; Fixed Investment and Inventory Studies; Capacity ; Valuation of Environmental Effects
• Thema: Discount rates ; term structure ; capital budgeting ; interest rate uncertainty ; environmental planning ; Umweltplanung ; Soziale Diskontrate ; Investitionsrechnung ; Zinsstruktur ; Zinsrisiko ; Theorie

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Freeman, Mark C.
• Ereignis: Veröffentlichung
• (wer): Kiel Institute for the World Economy (IfW)
• (wo): Kiel
• (wann): 2009

Weitere Informationen

• Handle: http://hdl.handle.net/10419/28104
• Letzte Aktualisierung: 10.03.2025, 11:46 MEZ