Matthew is right that uncertainty over the future is the main justification for discount rates, but another principled reason to discount the future is that future humans will be significantly richer and better off than we are, so if marginal utility is diminishing, then resources are better allocated to us than to them. This classically gives you a discount rate of ρ=d+ng where ρ is the applied discount rate, d is a rate of pure time preference that you argue should be zero, g is the growth rate of income, and n determines how steeply marginal utility declines with income. So even if you have no ethical discount rate (d=0), you would still end up with ρ>0. Most discount rates are loaded on the growth adjustment (ng) and not the ethical discount rate (d) so I don’t think longtermism really bites against having a discount rate. [EDIT: this is wrong, see Jack’s comment]
Also, am I missing something, or would a zero discount rate make this analysis impossible? The future utility with and without science is “infinite” (the sum of utilities diverges unless you have a discount rate) so how can you work without a discount rate?
Also, am I missing something, or would a zero discount rate make this analysis impossible?
I don’t think anyone is suggesting a zero discount rate? Worth noting though that that former paper I linked to discusses a generally accepted argument that the discount rate should fall over time to its lowest possible value (Weitzman’s argument).
Most discount rates are loaded on the growth adjustment (ng) and not the ethical discount rate (d) so I don’t think longtermism really bites against having a discount rate.
The growth adjustment term is only relevant if we’re talking about increasing the wealth of future people, not when we’re talking about saving them from extinction. To quote Toby Ord in the Precipice:
“The entire justification of the growth adjustment term term is to adjust for marginal benefits that are worth less to you when you are richer (such as money or things money can easily buy), but that is inapplicable here—if anything, the richer people might be, the more they would benefit from avoiding ruin or oblivion. Put another way, the ηg term is applicable only when discounting monetary benefits, but here we are considering discounting wellbeing (or utility) itself. So the ηg term should be treated as zero, leaving us with a social discount rate equal to δ.”
Yes, Ramsey discounting focuses on higher incomes of people in the future, which is the part I focused on. I probably shouldn’t have said “main”, but I meant that uncertainty over the future seems like the first order concern to me(and Ramsey ignores it).
Habryka’s comment:
applying even mild economic discount rates very quickly implies pursuing policies that act with extreme disregard for any future civilizations and future humans (and as such overdetermine the results of any analysis about the long-run future).
seems to be arguing for a zero discount rate.
Good point that growth-adjusted discounting doesn’t apply here, my main claim was incorrect.
Long run growth rates cannot be exponential. This is easy to prove. Even mild steady exponential growth rates would quickly exhaust all available matter and energy in the universe within a few million years (see Holden’s post “This can’t go on” for more details).
So a model that tries adjust for marginal utility of resources should also quickly switch towards something other than assumed exponential growth within a few thousand years.
Separately, the expected lifetime of the universe is finite, as is the space we can affect, so I don’t see why you need discount rates (see
a bunch of Bostrom’s work for how much life the energy in the reachable universe can support).
But even if things were infinite, then the right response isn’t to discount the future completely within a few thousand years just because we don’t know how to deal with infinite ethics. The choice of exponential discount rates in time does not strike me as very principled in the face of the ethical problems we would be facing in that case.
Matthew is right that uncertainty over the future is the main justification for discount rates, but another principled reason to discount the future is that future humans will be significantly richer and better off than we are, so if marginal utility is diminishing, then resources are better allocated to us than to them. This classically gives you a discount rate of ρ=d+ng where ρ is the applied discount rate, d is a rate of pure time preference that you argue should be zero, g is the growth rate of income, and n determines how steeply marginal utility declines with income. So even if you have no ethical discount rate (d=0), you would still end up with ρ>0. Most discount rates are loaded on the growth adjustment (ng) and not the ethical discount rate (d) so I don’t think longtermism really bites against having a discount rate. [EDIT: this is wrong, see Jack’s comment]
Also, am I missing something, or would a zero discount rate make this analysis impossible? The future utility with and without science is “infinite” (the sum of utilities diverges unless you have a discount rate) so how can you work without a discount rate?
I don’t think this is true if we’re talking about Ramsey discounting. Discounting for public policy: A survey and Ramsey and Intergenerational Welfare Economics don’t seem to indicate this.
I don’t think anyone is suggesting a zero discount rate? Worth noting though that that former paper I linked to discusses a generally accepted argument that the discount rate should fall over time to its lowest possible value (Weitzman’s argument).
The growth adjustment term is only relevant if we’re talking about increasing the wealth of future people, not when we’re talking about saving them from extinction. To quote Toby Ord in the Precipice:
“The entire justification of the growth adjustment term term is to adjust for marginal benefits that are worth less to you when you are richer (such as money or things money can easily buy), but that is inapplicable here—if anything, the richer people might be, the more they would benefit from avoiding ruin or oblivion. Put another way, the ηg term is applicable only when discounting monetary benefits, but here we are considering discounting wellbeing (or utility) itself. So the ηg term should be treated as zero, leaving us with a social discount rate equal to δ.”
Yes, Ramsey discounting focuses on higher incomes of people in the future, which is the part I focused on. I probably shouldn’t have said “main”, but I meant that uncertainty over the future seems like the first order concern to me(and Ramsey ignores it).
Habryka’s comment:
seems to be arguing for a zero discount rate.
Good point that growth-adjusted discounting doesn’t apply here, my main claim was incorrect.
Long run growth rates cannot be exponential. This is easy to prove. Even mild steady exponential growth rates would quickly exhaust all available matter and energy in the universe within a few million years (see Holden’s post “This can’t go on” for more details).
So a model that tries adjust for marginal utility of resources should also quickly switch towards something other than assumed exponential growth within a few thousand years.
Separately, the expected lifetime of the universe is finite, as is the space we can affect, so I don’t see why you need discount rates (see a bunch of Bostrom’s work for how much life the energy in the reachable universe can support).
But even if things were infinite, then the right response isn’t to discount the future completely within a few thousand years just because we don’t know how to deal with infinite ethics. The choice of exponential discount rates in time does not strike me as very principled in the face of the ethical problems we would be facing in that case.