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Journal of Economic Perspectives: Vol. 13 No. 4 (Fall 1999)
JEP Volume. 13, Issue 4 | 
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Discounting Inside the Washington D.C. Beltway
Article Citation
Bazelon, Coleman, and
Kent Smetters. 1999. "Discounting Inside the Washington D.C. Beltway."
Journal of Economic Perspectives,
13(4): 213-228.
DOI: 10.1257/jep.13.4.213
DOI: 10.1257/jep.13.4.213
Abstract
This article focuses on how the choice of discount rate can dramatically affect policy choices. These policies include whether to build a bridge, whether to privatize a Power Marketing Administration which sells electricity generated by government-owned facilities such as dams, how much money should be spent on early-childhood education, or options for reforming Social Security. The ongoing challenge is to discount future costs or benefits in a way that matches the project's level of riskiness. We begin by discussing the underlying issues in choosing an appropriate discount rate. We then discuss the variety of different discount rates that are actually used by various Washington policymakers and the biases they often generate.
Article Full-Text Access
Full-text Article (Complimentary)
Authors
Bazelon, Coleman (Congressional Budget Office)
Smetters, Kent (U PA)
Smetters, Kent (U PA)
JEL Classifications
H43: Project Evaluation; Social Discount Rate
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