Rational discounting for regulatory analysis
By: W. Kip Viscusi.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series -- no. 12294.; Working paper series (National Bureau of Economic Research) -- working paper no. 12294.
Publisher: National Bureau of Economic Research
Published: 2006
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 51
Subjects: Environmental policy -- Economic aspects -- United States; Hazardous wastes -- Government policy -- United States
Description: This article examines the economic basis for what is termed "rational discounting," which entails full recognition of policy effects over time and exponential discounting at a riskless rate of return.  Policies often cannot be ranked unambiguously in terms of their present or future orientation.  Both failure to discount and preferential intergenerational discounting generate inconsistencies and economic anomalies.  Office of Management and Budget discounting guidelines now stipulate more reasonable discount rates than earlier guidelines, but err in permitting open-ended preferential rates for intergenerational effects.  The article presents a methodology for monetizing the value of statistical life for people of different ages and at different points in time.  Review of regulatory analyses indicates increased consistency of discounting practices.  However, examination of two policies with intergenerational effects, stratospheric ozone regulation and nuclear waste storage at Yucca Mountain, reveal failures to adopt a rational discounting approach.  The influence of behavioral anomalies such as hyperbolic discounting may make full recognition of intertemporal effects in benefit-cost analysis more consequential than the use of preferential discount rates"--National Bureau of Economic Research web site.
Notes: "June 2006."

Includes bibliographical references.

Also available in PDF from the NBER world wide web site (www.nber.org).