Discounting Discounting

ABSTRACT Policy analysts typically presume that future payoffs should be discounted relative to present ones, and that this discounting should proceed at the same rate for all goods and all periods. Closer inspection of four arguments for discounting, however, shows these practices to be problematic. Only two of those arguments provide plausible justifications for time-discounting at all; and neither of those justify a constant rate throughout all periods or for all goods. Indeed, there is an important class of ‘nontradable’ goods which can be discounted only in their own terms. The overall conclusion is that policymakers ought, logically as well as morally, to weight the interests of the future far more heavily than in ordinary discounting procedures.