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Dynamic choices, temporal invariance and variational discounting (2408.05632v1)

Published 10 Aug 2024 in econ.TH

Abstract: People often face trade-offs between costs and benefits occurring at various points in time. The predominant discounting approach is to use the exponential form. Central to this approach is the discount rate, a unique parameter that converts a future value into its present equivalent. However, a universally accepted discount rate remains a matter of ongoing debate and lacks consensus. This paper provides a robust solution for resolving conflicts in discount rates, which recommends considering all discount rates but aims to assign varying degrees of importance to these rates. Moreover, a considerable number of economists support a theory that suggests equal consideration of future and present utilities. In response to this debate, we introduce a general criterion capable of accommodating situations where it is feasible not to discount future utilities. This criterion encompasses and extends various existing criteria in the literature.

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