How to Aggregate Experts Discount Rates: An Equilibrium Approach

Jouini, Elyès; Napp, Clotilde

doi:10.2139/ssrn.1417413

Cited by 3 publications

(9 citation statements)

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“…For Groom et al (2007) the fall is from 4 per cent to 1.8 per cent. Therefore, although these papers are derived in a very different paradigm from those of Weitzman (2001) and Jouini and Napp (2010), the implications for valuation are similar.…”

Section: Declining Discount Ratesmentioning

confidence: 99%

“…They showed that if experts have varying beliefs about ρ and g, then the appropriate certainty equivalent discount rate declines similarly but from a higher starting point. Jouini and Napp (2010) then parameterise their approach using Weitzman's data and the resulting schedule can be seen in Figure 1 (J&N). By comparison, Weitzman's schedule falls to 2 per cent after 200 years, whereas J&N's schedule falls to 2.3 per cent, having started from around 5 per cent.…”

Section: Declining Discount Ratesmentioning

confidence: 99%

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Biodiversity valuation and the discount rate problem

Freeman

Groom

2013

Accounting, Auditing &Amp; Accountability Journal

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Citation: FREEMAN, M. and GROOM, B., 2013 Purpose: To demonstrate that the application of standard environmental accounting practices for estimating long-term discount rates is likely to lead to the rejection of biodiversity-sensitive projects that are in the greater societal good.Design/methodology/approach: We combine estimates of marginal ecosystem damages from two forestry case studies, one local, one global, with ten different term structures of discount rates taken from both the academic literature and policy choices to calculate present values. Findings:Standard environmental accounting approaches for estimating the long-term discount rate result in the under-valuation of projects that are sensitive to biodiversity conservation. Research limitations/implications: This paper is set within a Full Cost Accounting (FCA)framework, and therefore has the limitations that generally follow from taking this approach to biodiversity problems. Recommended extensions include looking at broader ranges of biodiversity costs and benefits.Practical/social implications: Unless environmental accountants engage with environmental economists over the issue of intergenerational discount rates, then it is likely that socially responsible managers will reject projects that are in the greater societal good. Originality/value: (i) To introduce both normative discount rates and declining discount rates to estimates of shadow environmental provisions within FCA and to contrast these with current environmental accounting practices, (ii) To provide two detailed case studies that demonstrate the extent to which biodiversity-sensitive investment choices are likely to be undervalued by managers who follow current accounting recommendations concerning the appropriate choice of discount rate.

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Section: Declining Discount Ratesmentioning

confidence: 99%

Section: Declining Discount Ratesmentioning

confidence: 99%

Biodiversity valuation and the discount rate problem

Freeman

Groom

2013

Accounting, Auditing &Amp; Accountability Journal

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“…Nevertheless, theoretical justi…cations do exist for the aggregation of expert opinions using equation 1, although these are not entirely general and the assumptions are often restrictive. In this context Jouini et al (2010) and Jouini and Napp (2014) imagine heterogeneous agents each with individual endowments w i . They assume that these agents are experts and show that if these experts were committed to trade inter-temporally within such an economy on the basis of these preferences and endowments, the equilibrium consumption path would be characterized by a social discount rate of the following form:…”

Section: The Theoretical Basis For Ddrsmentioning

confidence: 99%

“…Dasgupta (2008), for example, argues she has serious reservations about applying equation 3 because she remains unconvinced that setting w i = 1=N is a natural choice. Her views here are in ‡uenced by Gollier and Zeckhauser (2005), Jouini et al (2010), Heal and Millner (2014), Jouini and Napp (2014) and , all of whom argue that experts should only be weighted equally under very restrictive assumptions -we will return to this issue in the next section.…”

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confidence: 99%

How certain are we about the certainty-equivalent long term social discount rate?

Freeman

Groom

2016

Journal of Environmental Economics and Management

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Theoretical arguments for using a term structure of social discount rates (SDR) that declines with the time horizon have in ‡uenced Government guidelines in the US and Europe. The certainty equivalent discount rate that often underpins this guidance embodies uncertainty in the primitives of the SDR, such as growth.For distant time horizons the probability distributions of these primitives are ambiguous and the certainty equivalent itself is uncertain. Yet, if a limited set of characteristics of the unknown probability distributions can be agreed upon, 'sharp'upper and lower bounds can be de…ned for the certainty-equivalent SDR.Unfortunately, even with considerable agreement on these features, these bounds are widely spread for horizons beyond 75 years. So while estimates of the present value of intergenerational impacts, including the social cost of carbon, can be bounded in the presence of this ambiguity, they typically remain so imprecise as to provide little practical guidance.

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“…4 (2019), 195-210 197 Time value of money is particularly important for valuation of public investment projectseven if the future costs and benefits are known, decisions must be made today. Future costs and benefits need to be discounted, which requires selecting an appropriate discount rate (Brukas et al 2001;Frederick et al 2002;Gollier 2002;Gollier 2010;Grijalva et al 2014;Hepburn 2006;Jouini and Napp 2014;Price 2010). The issue of social benefits' measurement is controversial and full of criticism.…”

Section: Introductionmentioning

confidence: 99%

Comprehensive Measurement of Social Benefits Generated by Public Investment Projects

Baranauskienė¹,

Aleknevičienė²

2019

Montenegrin Journal of Economics

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Initiators of public investment projects and representatives of target groups seek to choose the best option ensuring the greatest benefits generated to the public. Measurement of social benefits is complicated due to a multifaceted character and complexity of monetary measures as well as other quantitative and qualitative measures. The issue of social benefits' measurement is controversial and full of criticism. Consequently, discussing it is highly relevant. We propose a model for comprehensive evaluation of social benefits generated by public investment projects. This model allows choosing the best option of a project irrespective of the areas of social environment, initiators and operators, target groups, size of initial investments, locations of implementation, as well as tangibility of investments. This model was tested by employing a method of case study analysis. SAW was applied for combining different social benefit indicators into one comparable indicator and TOPSIS -for determination of general indicator variation values. The model was developed for ex-ante evaluation of social benefits generated by public investment projects. It does not cover financial outcome, operating costs, risk appraisal and issues of determining the social discount rate. JEL classification:H40, H41, H43

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How to Aggregate Experts Discount Rates: An Equilibrium Approach

Cited by 3 publications

References 0 publications

Biodiversity valuation and the discount rate problem

Biodiversity valuation and the discount rate problem

How certain are we about the certainty-equivalent long term social discount rate?

Comprehensive Measurement of Social Benefits Generated by Public Investment Projects

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