At a 5 percent discount rate, the Argentine-American economist Graciela Chichilnisky has calculated, “the present value of the earth’s aggregate output discounted 200 years from now is a few hundred thousand dollars.”
2019 Global GDP = around $88 trillion
Annual Real Growth Rate = assume 2.5%
Graciela’s discount rate = 5%
Present Value of 2219 GDP = (88*10**12)*((1.025)**200)/((1.05)**200) = $710,224,969,039 (over $700 billion)
Present Value of 2219 and thereafter: ((88*10**12)/(0.05-0.025))*((1.025)**200)/((1.05)**200) = $28,408,998,761,567 (over $28 trillion)
Huh yeah, weird. Here’s the source (Chichilnisky 1996), quote is on p. 5
Strangely they don’t actually lay out the “simple computation.”
I thought maybe they were getting down to a few hundred thousand by not factoring in a growth rate, but that still leaves you at a little over $3 billion.
So I’m not sure what’s going on. Maybe Chichilnisky 1996 started with a much lower global GDP estimate? It was done 23 years ago.
For her calculations to be correct, present world GDP, absent growth, would have to be USD ∼3×1050.95200≈8.5×109. Back in 1996, when the paper was published, world GDP was over USD 4×1013. Unclear what’s going on here.
I think the broader point is still important though.
It is weird that discount rates imply that a civilization hundreds of years in the future that’s not growing won’t be worth much in present decision-making (even if that civilization is very large).
2019 Global GDP = around $88 trillion
Annual Real Growth Rate = assume 2.5%
Graciela’s discount rate = 5%
Present Value of 2219 GDP = (88*10**12)*((1.025)**200)/((1.05)**200) = $710,224,969,039 (over $700 billion)
Present Value of 2219 and thereafter: ((88*10**12)/(0.05-0.025))*((1.025)**200)/((1.05)**200) = $28,408,998,761,567 (over $28 trillion)
Huh yeah, weird. Here’s the source (Chichilnisky 1996), quote is on p. 5
Strangely they don’t actually lay out the “simple computation.”
I thought maybe they were getting down to a few hundred thousand by not factoring in a growth rate, but that still leaves you at a little over $3 billion.
So I’m not sure what’s going on. Maybe Chichilnisky 1996 started with a much lower global GDP estimate? It was done 23 years ago.
For her calculations to be correct, present world GDP, absent growth, would have to be USD ∼3×1050.95200≈8.5×109. Back in 1996, when the paper was published, world GDP was over USD 4×1013. Unclear what’s going on here.
I think the broader point is still important though.
It is weird that discount rates imply that a civilization hundreds of years in the future that’s not growing won’t be worth much in present decision-making (even if that civilization is very large).