Gamma Discounting

Weitzman, Martin L.

doi:10.1257/aer.91.1.260

Cited by 748 publications

(577 citation statements)

References 2 publications

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“…We have performed a sensitivity analysis over four different discount rate assumptions. First, we follow Weitzman (21) and use a discount rate of 4% for years 1-5, 3% for years 6-25, 2% for years 26-75, and 1% for years 76-500 (the limit of our projections). The other three discount rates applied are constant at 3%, 6%, and 9%.…”

Section: Methodsmentioning

confidence: 99%

“…To do this, an appropriate annual discount rate must be used to account for the decreased value placed on future events compared with events that occur in the present. After substantial debate over appropriate values for discount rates, it is now widely acknowledged that the rate used should match the process being modeled (21). Efforts to prevent the introduction of invasive species are similar to reducing greenhouse gas emissions to mitigate global warming; both represent attempts to prevent long-term environmental problems, and for both there is considerable uncertainty around predictions of impact and thus a high potential for surprise.…”

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confidence: 99%

“…Efforts to prevent the introduction of invasive species are similar to reducing greenhouse gas emissions to mitigate global warming; both represent attempts to prevent long-term environmental problems, and for both there is considerable uncertainty around predictions of impact and thus a high potential for surprise. A previous study took the results from a survey of 2,160 economists' opinions about the appropriate discount rate to apply to assessments of global warming and aggregated these into a gamma distribution such that the discount rate declines over time, commonly known as hyperbolic discounting (21). We have used this discount process, which declines from 4% at year 1 to 1% at year 76 and thereafter (see Methods).…”

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confidence: 99%

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Risk assessment for invasive species produces net bioeconomic benefits

Keller

Lodge

Finnoff

2007

Proc. Natl. Acad. Sci. U.S.A.

323

242

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International commerce in live organisms presents a policy challenge for trade globalization; sales of live organisms create wealth, but some nonindigenous species cause harm. To reduce damage, some countries have implemented species screening to limit the introduction of damaging species. Adoption of new risk assessment (RA) technologies has been slowed, however, by concerns that RA accuracy remains insufficient to produce positive net economic benefits. This concern arises because only a small proportion of all introduced species escape, spread, and cause harm (i.e., become invasive), so a RA will exclude many noninvasive species (which provide a net economic benefit) for every invasive species correctly identified. Here, we develop a simple cost:benefit bioeconomic framework to quantify the net benefits from applying species prescreening. Because invasive species are rarely eradicated, and their damages must therefore be borne for long periods, we have projected the value of RA over a suitable range of policy time horizons (10 -500 years). We apply the model to the Australian plant quarantine program and show that this RA program produces positive net economic benefits over the range of reasonable assumptions. Because we use low estimates of the financial damage caused by invasive species and high estimates of the value of species in the ornamental trade, our results underestimate the net benefit of the Australian plant quarantine program. In addition, because plants have relatively low rates of invasion, applying screening protocols to animals would likely demonstrate even greater benefits.invasion pathways ͉ species screening ͉ economics ͉ quarantine ͉ cost-benefit

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Section: Methodsmentioning

confidence: 99%

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confidence: 99%

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confidence: 99%

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Risk assessment for invasive species produces net bioeconomic benefits

Keller

Lodge

Finnoff

2007

Proc. Natl. Acad. Sci. U.S.A.

323

242

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“…climate change policies in Goulder and Williams (2012) and more generally to the related "gamma discounting" cost-benefit analyses in Weitzman (2001). 19…”

Section: Time Inconsistency In the Context Of Political Decisionsmentioning

confidence: 99%

Government Policy with Time Inconsistent Voters

Bisin

Lizzeri

Yariv

2015

American Economic Review

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This paper presents an analysis of how economic policy responds to the political demands of agents with self-control problems. The main result is that collective action may generate an amplification of individual self-control problems leading to excessive government debt. The analysis also provides some cautionary discussion of commonly advocated policies (such as facilitating investment in illiquid assets) in a world where government debt responds to the portfolios of private individuals.An important and influential approach to government policy has grown out of the field of behavioral economics. A number of contributors to this area argue that some form of government policy interventions can be justified by "paternalistic attitudes" even in cases outside the realm of the textbook approach to public policy, i.e., even absent externalities, public goods, and asymmetric information. 1 Within behavioral economics, a substantial body of work discusses self-control problems and their consequences within a consumption-savings environment. Some argue that there are inefficiently low savings when individuals are left to their own devices (e.g., Camerer, Loewenstein, and Rabin 2003;Hurst 2003;and Madrian 2012). These insights have been used for justifying paternalistic interventions by governments aimed at 1 See, for instance, Camerer, Loewenstein, and Rabin

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“…Relatively simple calculations suggest that we need initial discount rates of between 1% and 50% s À1 to explain non-human impulsiveness. By contrast, economists (Weitzman 2001) offer first-principles estimates for human discounting of ca. 4% per year, or 1.2 Â 10 À7 s À1 !…”

Section: (C) Related Models and Limitationsmentioning

confidence: 99%

Impulsiveness without discounting: the ecological rationality hypothesis

Stephens

Kerr

Fernández‐Juricic

2004

Proc. R. Soc. Lond. B

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Observed animal impulsiveness challenges ideas from foraging theory about the fitness value of food rewards, and may play a role in important behavioural phenomena such as cooperation and addiction. Behavioural ecologists usually invoke temporal discounting to explain the evolution of animal impulsiveness. According to the discounting hypothesis, delay reduces the fitness value of the delayed food. We develop an alternative model for the evolution of impulsiveness that does not require discounting. We show that impulsive or short-sighted rules can maximize long-term rates of food intake. The advantages of impulsive rules come from two sources. First, naturally occurring choices have a foreground-background structure that reduces the long-term cost of impulsiveness. Second, impulsive rules have a discrimination advantage because they tend to compare smaller quantities. Discounting contributes little to this result. Although we find that impulsive rules are optimal in a simple foreground-background choice situation in the absence of discounting, in contrast we do not find comparable impulsiveness in binary choice situations even when there is strong discounting.

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Gamma Discounting

Cited by 748 publications

References 2 publications

Risk assessment for invasive species produces net bioeconomic benefits

Risk assessment for invasive species produces net bioeconomic benefits

Government Policy with Time Inconsistent Voters

Impulsiveness without discounting: the ecological rationality hypothesis

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