A Note on Retrospective Social Discount Rates
14 Pages Posted: 31 Oct 2017
Date Written: July 26, 2017
In benefit-cost analysis, we accept that a future dollar is worth something less than a dollar today. However, we do not have a clear method to apply social discounting in retrospective benefit-cost analysis. In this note, we will first develop the case for using historical borrowing as the basis for a social discount rate (SDR) in retrospective benefit-cost analysis. Second, we will present a method for calculating the SDR using historical borrowing. Third, we will show an implementation of the method in the R programming language. Fourth, we will give proposed values for the SDR for the years from 1997 through 2016. Finally, we will discuss the implications of using this method and SDR on analyses.
Keywords: social discount rate, retrospective benefit-cost analysis
JEL Classification: H41, H43, O22, C01
Suggested Citation: Suggested Citation