Discounting Across Generations: Necessary, Not Suspect

ABSTRACT

Periodically, ethical objections are raised against the practice of discounting for future effects. Concerns about potentially involving effects on distant future generations from activities such as long-term nuclear waste disposal and phenomena such as global climate change have caused these ethical objections to reoccur. This article rebuts various ethical objections on practical, ethical and analytic grounds. First, discounting for distant-future effects is a ubiquitous practice that cannot be practically prevented. Even if an enforceable decision could be made to refrain from distant-future discounting in public decisions, such a constraint could never be successfully imposed on markets. Market values will always reflect the full, discounted streams of future effects even if governments prohibited the practice among individuals. Second, there is no basis for choosing an upper-bound time horizon beyond which discounting should be ethically rejected. Any proposed horizon is arbitrary and has no obvious ethical foundation. Third, all decisions are fundamentally irreversible, so opponents of distant future discounting also must define a degree of irreversibility beyond which normal discounting should not apply, and defend on ethical grounds the basis for this demarcation. This task will be further complicated by the likelihood that choices are rarely, if ever, as irreversible as opponents suggest they are in theory. Typical examples that ostensibly show far distant discounting is inappropriate overstate the degree of irreversibility actually present and understate subsequent opportunities to modify them. Finally, opposition to distant-future discounting on the ground that it permits burdens to be shifted to future generations must confront the fact that such shifts are characteristic of intergenerational transfers now practiced widely and with great public support.