Social Project Appraisal and Discounting for the Very Long Term

This paper considers the issue of discounting in relation to the appraisal of very long-term social projects. This is an increasingly important matter given the growing concerns over the environmental and safety impacts of many projects on future generations. Standard discounting practice trivialises the welfare impacts of projected costs and benefits on future populations, so a credible alternative procedure is required to avoid this 'write-off'. The British Treasury bases its published long-term discount factors on uncertainty concerning the value of the discount rate, although the factor values it has published seem inappropriate. The nature of this problem is examined and an alternative set of discount factors is presented for consideration. Additionally, a further set of factors is proposed for possible policy application in developed countries in cases where social project welfare impacts are not related to income. This new set is based only on uncertainty in the utility discount rate.