The Sign of Risk for Present Value of Future Losses

In the ongoing debate over discount rates and climate change, William Nordhaus has championed a higher discount rate to account for risk. Nicholas Stern has championed a lower rate. Here we prove that in the case of a stream of future losses, risk can only be represented by a lower discount rate, ne...

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Hauptverfasser: Hanley, Brian P, Keen, Steve
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Sprache:eng
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Zusammenfassung:In the ongoing debate over discount rates and climate change, William Nordhaus has championed a higher discount rate to account for risk. Nicholas Stern has championed a lower rate. Here we prove that in the case of a stream of future losses, risk can only be represented by a lower discount rate, never a higher one.
DOI:10.48550/arxiv.2209.06654