Discounting for public policy: A survey

This article surveys the debate over the social discount rate. The focus is on the economics rather than the philosophy literature, but the survey emphasises foundations in ethical theory rather than highly technical details. I begin by locating the standard approach to discounting within the overall landscape of ethical theory. The article then covers the Ramsey equation and its relationship to observed interest rates, arguments for and against a positive rate of pure time preference, the consumption elasticity of utility, and the effect of various sorts of uncertainty on the discount rate. Climate change is discussed as an application