Download This PaperDiscounting the Long-Distant Future: A Simple Explanation for the Weitzman-Gollier-Puzzle
13 Pages Posted: 30 Jul 2008
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: Suggested Citation
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
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