Jump to Navigation
Jump to Content

Valuing the Future: Intergenerational Discounting, Its Problems, and a Modest Proposal

July 2011

Citation: 41 ELR 10615

Issue: 7

Author: Stephen Marks

Competing theories exist for how intergenerational investment projects, such as investments related to global warming, natural resources, energy, etc., should be undertaken. In particular, there are two popular prescriptions: (1) In making intergenerational investments, policymakers should use a zero discount rate; and (2) In making intergenerational investments, policymakers should use the market rate. Neither of these prescriptions is correct. Indeed, using present-value discounting at all is extremely problematic. Instead, the best we can probably do is to adopt a simple algorithm: set certain minimal goals for future generations: clean air; potable water; sufficient energy supplies; a nontoxic environment; etc.; and then analyze the most cost-effective way of achieving those goals.

Stephen Marks is a Professor of Law and former Associate Dean, Boston University School of Law.

Download Article >>>