Abstract:
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Benefit-cost analysis assumes that a future dollar is worth something less than a dollar today. The difference between the future value and the current value is called the discount rate. Economists, statisticians, and politicians routinely disagree over how to select the rate. Further, when performing a retrospective benefit-cost analysis, there is no clear method to apply social discounting in reverse. In this presentation, we will first develop the case for discounting retrospectively. Second, we will discuss potential rate selection regimes and develop a method based on historical borrowing. Third, we will give proposed values for the social discount rate for each year from 1961 through 2015. Finally, we will discuss the implications using this method and social discount rate on historical analyses.
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