On the Discount Rate Controversy
Public Policy, Vol. 28, No. 2, Spring 1980
7 Pages Posted: 23 Apr 2013
Date Written: 1980
A history of cost-benefit procedures for water projects is presented, and the current discount rate controversy is reviewed. It is recommended that the discount rate should be based on estimates of the real opportunity cost of public funds, not nominal financial yields on long-term government securities. It is also recommended that projects should be reevaluated at the proper discount rate prior to receipt of appropriations. Estimates of the proper discount rates are made. They range from 8.5 to 10.5 percent. These discount rates are used to reevaluate authorized Bureau of Reclamation projects and to show the impact of the President's changing pork-barrel policies.
Keywords: Steve Hanke, Public Policy, Discount Rate, Controversy, Cost, Benefit, Water, Projects
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