Cost benefit analysis of future change and possible policy responses to it have been shown to rely heavily upon the rate at which human wellbeing is discounted over time. Advocates of differing discount rates assume that 1) the same discount rate can be used when analysing situations in which long term climate change occurs and those in which it is prevented and 2) that the same discount rate that is used to analyse long term change can also be useful in analysing current behaviours. In this paper, I shall examine and reject this proposition in relation to discount rates derived from the standard Ramsey formula. Instead, I will argue that nonzero Ramsey discount rates must take into account certain features of the context set by each differently modelled outcome, and cannot be used outside of that context unless the two are shown to be similar in all relevant respects. In particular, I shall argue that attempts to produce a single, context independent, non-zero discount rate fall upon the horns of a dilemma. They must either be derived positively, with reference to observed human behaviour, or normatively, with reference to our moral duties.
How to Cite:
Beard, S., 2011. The Dilemma of Discounting: The Impossibility of Setting a Context Independent Ramsey Discount Rate for Human Wellbeing. Rerum Causae, 3(1), pp.11–21.