The cross-sectional implications of the social discount rate
Maya Eden (Brandeis University)
GPI Working Paper No. 12-2021, published in Econometrica
How should policy discount future returns? The standard approach to this normative question is to ask how much society should care about future generations relative to people alive today. This paper establishes an alternative approach, based on the social desirability of redistributing from the current old to the current young. Along the balanced growth path, bounds on the welfare gains from age-based redistribution imply bounds on the social discount rate. A calibration shows that an objective of maximizing the sum of utilities in each period implies social discount rates that are within a percentage point of the market interest rate.
Other working papers
Minimal and Expansive Longtermism – Hilary Greaves (University of Oxford) and Christian Tarsney (Population Wellbeing Initiative, University of Texas at Austin)
The standard case for longtermism focuses on a small set of risks to the far future, and argues that in a small set of choice situations, the present marginal value of mitigating those risks is very great. But many longtermists are attracted to, and many critics of longtermism worried by, a farther-reaching form of longtermism. According to this farther-reaching form, there are many ways of improving the far future, which determine the value of our options in all or nearly all choice situations…
Three mistakes in the moral mathematics of existential risk – David Thorstad (Global Priorities Institute, University of Oxford)
Longtermists have recently argued that it is overwhelmingly important to do what we can to mitigate existential risks to humanity. I consider three mistakes that are often made in calculating the value of existential risk mitigation: focusing on cumulative risk rather than period risk; ignoring background risk; and neglecting population dynamics. I show how correcting these mistakes pushes the value of existential risk mitigation substantially below leading estimates, potentially low enough to…
Tough enough? Robust satisficing as a decision norm for long-term policy analysis – Andreas Mogensen and David Thorstad (Global Priorities Institute, Oxford University)
This paper aims to open a dialogue between philosophers working in decision theory and operations researchers and engineers whose research addresses the topic of decision making under deep uncertainty. Specifically, we assess the recommendation to follow a norm of robust satisficing when making decisions under deep uncertainty in the context of decision analyses that rely on the tools of Robust Decision Making developed by Robert Lempert and colleagues at RAND …