Hi I’m struggling to understand the threshold analysis. Can anyone help?
It seems like ln(GDP) is the rate of change of GDP. If so, why isn’t this compounding? ie why isn’t the rate of change of GDP of after 5 years (1+.105*.96)^5 = 1.65 not .48. This would mean it would only need a 2% success chance to be the most effective intervention. I guess I’m missing something, please could someone help.
What is ln(GDP)? What does the ln mean in this context. I don’t think it can be natural log. Most naturally it seems to be the rate of change but I’m confused as to why they chose ln().
Why is a 4% discounting rate the right one to choose?
Hi Nathan, I think it is a log function (most likely natural log, but could have been shorthand for some other base).
People often use this when figuring out benefits of gdp, consumption growth etc (eg, I think Givewell assumes that a doubling of wealth is ~ equally good no matter what the baseline wealth is).
The approximate reasoning for this is that we expect there to be diminishing marginal returns to wealth per capita, and there is some weak empirical evidence that a log function specifically fits the data reasonably well.
Hi I’m struggling to understand the threshold analysis. Can anyone help?
It seems like ln(GDP) is the rate of change of GDP. If so, why isn’t this compounding? ie why isn’t the rate of change of GDP of after 5 years (1+.105*.96)^5 = 1.65 not .48. This would mean it would only need a 2% success chance to be the most effective intervention. I guess I’m missing something, please could someone help.
What is ln(GDP)? What does the ln mean in this context. I don’t think it can be natural log. Most naturally it seems to be the rate of change but I’m confused as to why they chose ln().
Why is a 4% discounting rate the right one to choose?
Thank you for your time.
Hi Nathan, I think it is a log function (most likely natural log, but could have been shorthand for some other base).
People often use this when figuring out benefits of gdp, consumption growth etc (eg, I think Givewell assumes that a doubling of wealth is ~ equally good no matter what the baseline wealth is).
The approximate reasoning for this is that we expect there to be diminishing marginal returns to wealth per capita, and there is some weak empirical evidence that a log function specifically fits the data reasonably well.