The Social Discount Rate

Andrew Caplin, John Leahy

NBER Working Paper No. 7983
Issued in October 2000
NBER Program(s):Public Economics

In welfare theory it is standard to pick the consumption stream that maximizes the welfare of the representative agent. We argue against this position, and show that a benevolent social planner will generally place a greater weight on future consumption than does the representative agent. Our analysis has immediate implications for public policy: agents discount the future too much and the government should promote future oriented policies.

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Document Object Identifier (DOI): 10.3386/w7983

Published: Andrew Caplin & John Leahy, 2004. "The Social Discount Rate," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1257-1268, December. citation courtesy of

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