Roberts on Discount Rates and Cute Otters

This was a quite-enjoyable article from David Roberts on how economic models factor into discussions about appropriate policies re: climate change: Discount rates: A boring thing you should know about (with otters!)

It’s true that there are many assumptions involved in determining a social cost of carbon. What’s also true is that many of those assumptions are based, in part, on moral judgments.

As cultures, as polities, how should we make those kind of judgments? Frank Partnoy, a professor of law and finance at the University of San Diego, makes the right point:

“Ultimately, we can’t rely on only numbers – we have to make really hard value judgments,” Dr. Partnoy said. “We should stop pretending this is a science and admit it is an art and talk about this in terms of ethics and fairness, not what we can observe in the markets.”

That, to me, is the key take-home message about discount rates: They are social and ethical disputes being waged under cover of math, as though they are nothing but technical matters to be determined by “experts.” But social and ethical judgments should be made in an open, transparent way, not buried in models as inscrutable parameters.

I mean, we’re talking about how much we value our children and grandchildren. Surely that’s a matter for democratic discussion and debate!

One Response to “Roberts on Discount Rates and Cute Otters”

  1. enkidu Says:

    The otters made that magical!

Leave a Reply

You must be logged in to post a comment.