23 Pages Posted: 21 Oct 2002
Date Written: September 2002
The aim of this paper is to present an alternative methodology for discounting far distant future externalities generated by an investment project; time-declining discount rates. First I present the experimental evidence on Individuals' time-inconsistency. Second I consider the theoretical justification for using hyperbolic discounting in a simple uncertainty framework where marginal social utility is discounted hyperbolically if the investing Government believes that social wealth might increase or decrease over future period with a small probability that wealth will deteriorate below its current level.
Keywords: Environmental Effects, Project Appraisal, Social Discounting
JEL Classification: Q01, D61, H5
Suggested Citation: Suggested Citation
Percoco, Marco, Discounting Environmental Effects in Project Appraisal (September 2002). FEEM Working Paper No. 71.2002. Available at SSRN: https://ssrn.com/abstract=334984 or http://dx.doi.org/10.2139/ssrn.334984