INTERGENERATIONAL EQUITY AND
SOCIAL DISCOUNT RATES – A
REVIEW OF THE RECENT LITERATURE
Dr. Julian Roche
Hull University, May 26 2015

History of the Debate
• Bentham 1789 and Sidgwick 1874
• Ramsay, 1928
• Hotelling 1931
• Koopmans, 1960
• Tulloch 1964, Golding 1972
• Solow, 1974
• Chichilnisky 1993, Heal 1997
• Parfit – Theory X, 1984
• Climate change models: Cline 1992, Broome 1995

Theoretical and Practical
Developments in the 21st Century
• Key macro changes and their influence
• Influence of the Stern Report
• Key theoretical interventions e.g gamma
discounting (Weitzman 2001)
• Ethicists vs Positivists
• Widespread recognition by environmentalists

An Overview of the Debate

Losing more?

Stern vs Nordhaus

Ethicists Positivists
Cynics Realists
How the debate really shapes up

Realists Worldwide
Source: Emmerling 2007

Declining Discount Rates
US EPA now also an adherent

Stabilisation economics
Source: Stern 2006

Malthus, 1820

And what happened?

Jevons, 1865

Pigou 1932
• “We cut an hour off the
time of our passage to
New York at the cost of
preventing, perhaps,
one of our descendants
from making the
passage at all”
(1932:28)

And what happened?

And what happened?

Meadows, 1972

And what is happening

Stern, 2007

And what may happen

Conclusion
• Are we utilitarians? If so, of what sort?
• How much uncertainty do we have?
• Entrenched camps about discounting
• Declining discount rates now gaining ground
• Ideally we would discount for risk, not time – I
say.
• The private sector marches on regardless with
only regulation to stop it