Choosing the future: Markets, ethics and rapprochement in social discounting
Antony Millner (University of California, Santa Barbara and National Bureau of Economic Research) and Geoffrey Heal (Columbia University and National Bureau of Economic Research)
GPI Working Paper No. 13-2021, published in Journal of Economics Literature
This paper provides a critical review of the literature on choosing social discount rates (SDRs) for public cost-benefit analysis. We discuss two dominant approaches, the first based on market prices, and the second based on intertemporal ethics. While both methods have attractive features, neither is immune to criticism. The market-based approach is not entirely persuasive even if markets are perfect, and faces further headwinds once the implications of market imperfections are recognised. By contrast, the ‘ethical’ approach – which relates SDRs to marginal rates of substitution implicit in a single planner’s intertemporal welfare function – does not rely exclusively on markets, but raises difficult questions about what that welfare function should be. There is considerable disagreement on this matter, which translates into enormous variation in the evaluation of long-run payoffs. We discuss the origins of these disagreements, and suggest that they are difficult to resolve unequivocally. This leads us to propose a third approach that recognises the immutable nature of some normative disagreements, and proposes methods for aggregating diverse theories of intertemporal social welfare. We illustrate the application of these methods to social discounting, and suggest that they may help us to move beyond long-standing debates that have bedevilled this field.
Other working papers
In Defence of Moderation – Jacob Barrett (Vanderbilt University)
A decision theory is fanatical if it says that, for any sure thing of getting some finite amount of value, it would always be better to almost certainly get nothing while having some tiny probability (no matter how small) of getting sufficiently more finite value. Fanaticism is extremely counterintuitive; common sense requires a more moderate view. However, a recent slew of arguments purport to vindicate it, claiming that moderate alternatives to fanaticism are sometimes similarly counterintuitive, face a powerful continuum argument…
Will AI Avoid Exploitation? – Adam Bales (Global Priorities Institute, University of Oxford)
A simple argument suggests that we can fruitfully model advanced AI systems using expected utility theory. According to this argument, an agent will need to act as if maximising expected utility if they’re to avoid exploitation. Insofar as we should expect advanced AI to avoid exploitation, it follows that we should expected advanced AI to act as if maximising expected utility. I spell out this argument more carefully and demonstrate that it fails, but show that the manner of its failure is instructive…
In defence of fanaticism – Hayden Wilkinson (Australian National University)
Consider a decision between: 1) a certainty of a moderately good outcome, such as one additional life saved; 2) a lottery which probably gives a worse outcome, but has a tiny probability of a far better outcome (perhaps trillions of blissful lives created). Which is morally better? Expected value theory (with a plausible axiology) judges (2) as better, no matter how tiny its probability of success. But this seems fanatical. So we may be tempted to abandon expected value theory…