2026-04-19T16:15:26Zhttps://recercat.cat/oai/requestoai:recercat.cat:2445/964202025-11-19T20:25:21Zcom_2072_1057col_2072_478822col_2072_478917
RECERCAT
author
Farmer, J. Doyne
author
Geanakoplos, John
author
Masoliver, Jaume, 1951-
author
Montero Torralbo, Miquel
author
Perelló, Josep, 1974-
2016-03-14T07:50:26Z2016-03-14T07:50:26Z2015-05-282016-03-14T07:50:31Z
We analyze how to value future costs and benefits when they must be discounted relative to the present. We introduce the subject for the nonspecialist and take into account the randomness of the economic evolution by studying the discount function of three widely used processes for the dynamics of interest rates: Ornstein- Uhlenbeck, Feller, and log-normal. Besides obtaining exact expressions for the discount function and simple asymptotic approximations, we show that historical average interest rates overestimate long-run discount rates and that this effect can be large. In other words, long-run discount rates should be substantially less than the average rate observed in the past, otherwise any cost-benefit calculation would be biased in favor of the present and against interventions that may protect the future.
(c) American Physical Society, 2015 info:eu-repo/semantics/openAccess
Matèria condensada
Anàlisi cost-benefici
Interès
Condensed matter
Cost effectiveness
Interest
Value of the future: discounting in random environments
info:eu-repo/semantics/article info:eu-repo/semantics/publishedVersion