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Tem­po­ral discounting

TagLast edit: 16 Jan 2022 14:30 UTC by Leo

Temporal discounting (also called time discounting) is the discounting of the value of a good the further into the future it is expected to be realized.

People often think that we should value goods in the future less than goods now. There are a variety of different reasons why we might discount the future: for instance, we might simply care less about the future than we do the present (this is known as pure time preference). Alternately, we might care just as much about my future, but think that there is some probability that it will not be possible to reap the benefits at that time (for instance, I might care less about my personal income in 40 years, simply because there’s a reasonable chance that I will be dead by then, and not able to enjoy the income). A variety of other reasons might apply, depending on the good under discussion.

A discount function shows how the value of a good decreases if it occurs at different times. A particularly common form of discount function is exponential. In this case, the discount rate (in annualized form) is the percentage decrease in the value of a good, one year into the future, compared to now. So if you value a sweet in a year 20% less than having a sweet now, you are using a discount rate of 20%.

It is generally thought that different discount functions should be used for different goods. This is because the reasons to discount apply to different extents for different goods. For instance, I might apply a lower discount rate for helping others than I do for myself, because it’s more likely that (some) other people will be around in 60 years time than it is that I will still be alive in 60 years time.

Members of the effective altruism community have often argued against pure time discounting, and so for lower discounting of future welfare. This has contributed to some people focusing on issues relating to the long-run future.

Further reading

Cotton-Barratt, Owen (2020) Discounting for uncertainty in health, in Nir Eyal et al. (eds.) Measuring the Global Burden of Disease: Philosophical Dimensions, Oxford: Oxford University Press, pp. 243–256.

Greaves, Hilary (2017) Discounting for public policy: a survey, Economics and philosophy, vol. 33, pp. 391–439.

Ord, Toby & Robert Wiblin (2013) Should we discount future health benefits when considering cost-effectiveness?, Giving What We Can, May 1.
Debate from researchers in the community.

Es­ti­mat­ing the Philan­thropic Dis­count Rate

MichaelDickens3 Jul 2020 16:58 UTC
71 points
21 comments40 min readEA link

On dis­count rates

William_MacAskill22 Jul 2013 4:00 UTC
1 point
0 commentsEA link

[Question] Cli­mate dis­count­ing: How do you value one tonne of CO2eq averted to­day ver­sus (say) 30 years from now?

Sanjay12 Feb 2020 16:41 UTC
15 points
3 comments1 min readEA link

In­com­pat­i­bil­ity of moral re­al­ism and time discounting

wuschel12 Dec 2020 18:47 UTC
16 points
6 comments8 min readEA link

Plain(er) English Rewrite of ‘Dis­count­ing for Public Policy: A Sur­vey’ by Hilary Greaves

Ilsze26 Apr 2020 3:34 UTC
13 points
0 comments2 min readEA link

[Link] Dis­count­ing for un­cer­tainty in health

Owen Cotton-Barratt7 May 2015 18:43 UTC
4 points
0 commentsEA link

EA read­ing list: re­place­abil­ity and discounting

richard_ngo3 Aug 2020 10:10 UTC
12 points
2 comments1 min readEA link

Against the So­cial Dis­count Rate (Cowen & Parfit) - Weak refutations

Jorgen_Ljones12 Aug 2020 15:06 UTC
29 points
3 comments5 min readEA link

Thoughts on “A case against strong longter­mism” (Mas­rani)

MichaelA3 May 2021 14:22 UTC
39 points
33 comments2 min readEA link

Re­v­erse-Eng­ineer­ing the Philan­thropic Dis­count Rate

MichaelDickens9 Jul 2021 18:32 UTC
30 points
0 comments25 min readEA link

[Link] Mo­ral In­ter­lude from “The Wizard and the Prophet”

Milan_Griffes27 Sep 2019 18:42 UTC
13 points
8 comments8 min readEA link

The Cry­on­ics re­duc­tio against pure time prefer­ence: a rhetor­i­cal low-hang­ing fruit—or “Do we dis­count the fu­ture only be­cause we won’t live in it?”

Ramiro3 Aug 2021 15:06 UTC
9 points
6 comments6 min readEA link