Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/89263
Authors: 
Vermeylen, Koen
Year of Publication: 
2013
Series/Report no.: 
Tinbergen Institute Discussion Paper 13-201/VI
Abstract: 
Gollier and Weitzman (2010) show that if future consumption discount rates are uncertain and persistent, the consumption discount rate should decline to its lowest possible value for events in the most distant future. In this paper, I argue that the lowest possible growth rate of consumption per capita in the distant future is zero (assuming that humans do not die out). Substituting in the Ramsey rule shows then that the lowest possible consumption discount rate for the distant future is equal to the lowest possible utility discount rate of the population (according to the descriptive approach to parameterizing the Ramsey rule) or to the utility discount rate of the social evaluator (according to the prescriptive approach). In both cases, there are strong reasons to set the consumption discount rate for the distant future at a value which is virtually zero.
Subjects: 
discount rate
climate change
cost-benefit analysis
prescriptive
descriptive
JEL: 
O4
Q5
Document Type: 
Working Paper

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