Template-Type: ReDIF-Article 1.0

Author-Name: Márta Somogyvári
Author-Workplace-Name: University of Pécs
Author-Email: somogyv@ktk.pte.hu

Title: Ethical Aspects of Intertemporal Discounting and the Social Discount Rate

Abstract: The paper examines the ethical aspects of discounting during the preparation
of intertemporal decisions, and the influence of this on the cost-benefit analysis
of community investments. It focuses on the economic philosophy and ethical
considerations that underlie discounting as a daily financial activity. The author
attempts to resolve the apparent logical contradiction between the cardinal and
discounted utilitarian ethical approaches. By analysing the preconditions related to
the definition of the values of the parameters included in the Ramsey formula, it is
presented that neither the social discount rate applied in the case of intertemporal
investments nor the current practice of establishing the market discount rate used
for investments representing a potential burden on the environment is suitable for
the assessment of the long-term community investments and private investments
burdening the environment.

Classification-JEL: A13, D63, H43, Q58
Keywords: discounting, social discount rate, Ramsey formula, utilitarianism, economic ethics
Pages: 109-132
Volume: 17
Issue: 3
Year: 2018
File-URL: http://english.hitelintezetiszemle.hu/letoltes/fer-17-3-st5-somogyvari.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:17:y:2018:i:3:p:109-132