EconStor >
Institut für Weltwirtschaft (IfW), Kiel >
Economics: The Open-Access, Open-Assessment E-Journal - Discussion Papers >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/28104
  
Title:Yes, we should discount the far-distant future at its lowest possible rate: a resolution of the Weitzman-Gollier puzzle PDF Logo
Authors:Freeman, Mark C.
Issue Date:2009
Series/Report no.:Economics Discussion Papers 2009-42
Abstract: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.
Subjects:Discount rates
term structure
capital budgeting
interest rate uncertainty
environmental planning
JEL:D61
E43
G12
G31
Q51
Creative Commons License:http://creativecommons.org/licenses/by-nc/2.0/de/deed.en
Document Type:Working Paper
Appears in Collections:Economics: The Open-Access, Open-Assessment E-Journal - Discussion Papers

Files in This Item:
File Description SizeFormat
609705318.PDF240.72 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/28104

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.