Discounting For Public Policy: Theory And Recent Evidence On The Merits Of Updating The Discount Rate.pdf

201701_cea_discounting_issue_brief.pdf
Preview of Discounting for Public Policy: Theory and Recent Evidence on the Merits of Updating the Discount Rate
🔗 Source: obamawhitehouse.archives.gov
📊 Size: 634 KB
👤 Author: Ruffini, Krista
⬇️ Downloads: 49

Summary

Weighing benefits and costs that take place over time requires discounting those amounts to present value equivalents, necessitating selecting a discount rate. Current guidance from the Office of Management and Budget requires using both a 7 percent and 3 percent real discount rate in regulatory benefit-cost analyses. Empirical evidence suggests that real interest rates have come down since the last evaluation, and new theoretical advances likely suggest lower long-term rates. The evidence supports lowering these discount rates, with a plausible best guess being that the lower discount rate should be at most 2 percent and the upper discount rate should also be reduced.

Description

Weighing benefits and costs that take place over time requires discounting those amounts to present value equivalents, necessitating selecting a discount rate.

Technical Information

  • File Format: PDF
  • File Size: 634 KB
  • Pages: 16
  • Language: EN
  • Author: Ruffini, Krista
  • Total Downloads: 49
  • Last Updated: 1 month ago

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