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1998•RePEc: Research Papers in EconomicsOpen access

Intergenerational Discounting: A new Approach

Stefan Bayer, Dieter Cansier

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Abstract

In this paper, we analyze how to utilize discount rates in intergenerational projects. Firstly, neoclassical decision-making is depicted in Ramsey and overlapping-generations models (OLG-models). Afterwards we investigate the utilization of time preference rates and opportunity cost rates in an intergenerational framework. The results lead us to the formulation of an adjusted OLG-discounting method of consumption units, taking into consideration intra- and intergenerational aspects. At the end of our paper, we draw some conclusions concerning environmental and resources policy, and sustainability.

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What this paper is about

In this paper, we analyze how to utilize discount rates in intergenerational projects. Firstly, neoclassical decision-making is depicted in Ramsey and overlapping-generations models (OLG-models). Afterwards we investigate the utilization of time preference rates and opportunity cost rates in an intergenerational framework. The results lead us to the formulation of an adjusted OLG-discounting method of consumption units, taking into consideration intra- and intergenerational aspects. At the end of our paper, we draw some conclusions concerning environmental and resources policy, and sustainability.

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Available abstract

In this paper, we analyze how to utilize discount rates in intergenerational projects. Firstly, neoclassical decision-making is depicted in Ramsey and overlapping-generations models (OLG-models). Afterwards we investigate the utilization of time preference rates and opportunity cost rates in an intergenerational framework. The results lead us to the formulation of an adjusted OLG-discounting method of consumption units, taking into consideration intra- and intergenerational aspects. At the end of our paper, we draw some conclusions concerning environmental and resources policy, and sustainability.

Key concepts: Overlapping generations model, Discounting, Time preference, Economics, Consumption (sociology), Intergenerational equity, Sustainability, Microeconomics

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