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Pricing the Planet's FutureThe Economics of Discounting in an Uncertain World$
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Christian Gollier

Print publication date: 2012

Print ISBN-13: 9780691148762

Published to Princeton Scholarship Online: October 2017

DOI: 10.23943/princeton/9780691148762.001.0001

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Discounting Non-monetary Benefits

Discounting Non-monetary Benefits

Chapter:
(p.149) 10 Discounting Non-monetary Benefits
Source:
Pricing the Planet's Future
Author(s):

Christian Gollier

Publisher:
Princeton University Press
DOI:10.23943/princeton/9780691148762.003.0010

This chapter addresses issues regarding the use of cost-benefit analyses in shaping environmental policies. It defines an ecological discount rate compatible with social welfare when the representative agent cares about both the economic and ecological environments faced by future generations. This ecological rate at which future environmental damages are discounted may be much smaller than the economic rate at which economic damages are discounted, because of the integration of a potentially increasing willingness to pay for the environment into the ecological discount rate. This increased interest in environmental assets is modeled in this chapter by the potential for increased scarcity of these assets, which drives their value upward through time. The chapter shows that the uncertainties surrounding the future evolution of environmental quality and the economy tend to reduce the discount rates, in particular if they are positively correlated.

Keywords:   environmental policies, ecological discount rate, social welfare, ecological environments, future environmental damages, environmental assets, environmental quality, non-monetary benefits

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