Valuing the Future: The Social Discount Rate in Cost-Benefit Analysis

192 Pages Posted: 11 May 2010

See all articles by Mark Harrison

Mark Harrison

affiliation not provided to SSRN

Date Written: April 22, 2010

Abstract

In August 2007, the Office of Best Practice Regulation (then part of the Productivity Commission) published its Best Practice Regulation Handbook, containing guidelines including use of a social discount rate of 7 percent real, with sensitivity testing over the range of 3 to 11 per cent (OBPR 2007, pp 129-132).

This Visiting Researcher Paper was initiated, as foreshadowed in the Handbook, to examine further the evidence on the parameters influencing the choice of discount rate. It was prepared by Dr Mark Harrison when a visiting researcher at the Commission. The paper reviews conflicting views on the issues influencing discount rate selection, and examines recent evidence of possible market benchmarks for discount rate derivation.

Keywords: financial analysis, economic analysis

JEL Classification: D9, H4

Suggested Citation

Harrison, Mark, Valuing the Future: The Social Discount Rate in Cost-Benefit Analysis (April 22, 2010). Available at SSRN: https://ssrn.com/abstract=1599963

Mark Harrison (Contact Author)

affiliation not provided to SSRN

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