How much is the future worth relative to the present?
At the bottom of many environmental issues is the question of intergenerational justice. Are we passing on the planet to our descendants in as good a state as we inherited it from our ancestors (sustainability)? Or is my generation impoverishing the future? To try to answer this question one needs a way of comparing goods or harms occurring at different times.
The standard economic answer is given by the discount rate or time value of money. A discount rate of 10% means that a hundred dollars in my pocket now is just as valuable as a guaranteed payment of 110 dollars in a years time. Once the discount rate is set, once can compare economic impacts at different times. A high discount rate suggests that future events should have low influence on our present choices. The Stern Review of climate change, commissioned by the British government, recommended radical steps primarily because of its assumption of a much lower discount rate (I think 1.4%), which gave greater value to the impacts of climate change on long timescales. Critics of the review argued, among other things, that this discount rate was unrealistically low in the light of historical data.
But where does the discount rate come from? It reflects our belief that "resources today can be transformed into more resources later" - in other words, that we will keep growing. A high discount rate, which might tell us not to fret so much about climate change, means that we are committing to a high growth rate out into the future; and, things being as they are, that means more energy use, more fuel consumption, more carbon dioxide... and more climate change.
Applied Category Theory at UCR (Part 2) - I’m running a special session on applied category theory, and now the program is available: • Applied category theory, Fall Western Sectional Meeting of th...
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