Discounting the Long-Distant Future: A Simple Explanation for the Weitzman-Gollier-Puzzle

13 Pages Posted: 30 Jul 2008

See all articles by Wolfgang Buchholz

Wolfgang Buchholz

Universitaet Regensburg; CESifo (Center for Economic Studies and Ifo Institute)

Jan Schumacher

University of Regensburg

Date Written: July 2008

Abstract

In this paper, we reconsider the debate on Weitzman's (1998) suggestion to discount the long-run future at the lowest possible rate, referring to Gollier (2004) and Hepburn & Groom (2007). We show that, while Weitzman's use of the present value approach may indeed seem questionable, its outcome, i.e. a discount rate that is declining over time, is nevertheless reasonable, since it can be justified by assuming a plausible degree of risk aversion.

Keywords: discount rates, uncertainty, risk aversion

JEL Classification: D40, E43, Q51

Suggested Citation

Buchholz, Wolfgang and Schumacher, Jan, Discounting the Long-Distant Future: A Simple Explanation for the Weitzman-Gollier-Puzzle (July 2008). CESifo Working Paper Series No. 2357, Available at SSRN: https://ssrn.com/abstract=1187622 or http://dx.doi.org/10.2139/ssrn.1187622

Wolfgang Buchholz (Contact Author)

Universitaet Regensburg ( email )

D-93040 Regensburg, 93053
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Jan Schumacher

University of Regensburg ( email )

93040 Regensburg
D-93040 Regensburg, 93053
Germany

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
234
Abstract Views
2,094
Rank
237,334
PlumX Metrics