Timmy elsewhere

At the ASI.

Is the Stern discount rate wrong after all?

2 thoughts on “Timmy elsewhere”

  1. Discounting for leasehold is valuing the future for yourself and subsequently your genetic legacy, so naturally it’s going to be very conservative. It’s also going to be driven up by the fact that it really puts potential homeowners off.

    If this climate change guff means anything at all, the only discounting we should be doing is for economic growth that makes it easier to cope with the changes. And I’d say it’s fair enough to assume low, current western levels of such growth for the time from ~100 years from now covering most of the coming millennia in which it will be relevant.

  2. I read the article and had a look at a few pages of their huge paper.

    It seems to me that they’re a bit confused. Let’s say we have a 99 year lease. At year 89 that lease will be valued on the next ten years of rent. That means that a seller at year 89 must take account of what happens in the future even if he isn’t interested himself. The same is obviously true at year 79, since at that year there are 10 years of rent to consider and then the value at year 89. So, no one person need be interested in the distant future, rather each is interested in the near future and each near future is connected to the next.

    So, the research tells us that we do have a discount rate to use for the distant future, 2.6%, but it doesn’t tell us much about how forward-thinking humans are.

    The question of how we assess climate-change plans is separate again.

Leave a Reply

Your email address will not be published. Required fields are marked *