Decisions made today usually have impacts both now and in the
future. In the environmental realm, many of the future impacts
are benefits, and such future benefits — as well as costs — are
typically discounted by economists in their analyses. Why do
economists do this, and does it give insufficient weight to
future benefits and thus to the well-being of future
generations? This is a question my colleague, Lawrence Goulder,
a professor of economics at Stanford University, and I addressed
in an article in Nature. We noted that as economists, we often
encounter skepticism about discounting, especially from non-
economists. Some of the skepticism seems quite valid, yet some
reflects misconceptions about the nature and purposes of
discounting. In this post, I hope to clarify the concept and the
practice. It helps to begin with the use of discounting in
private investments, where the rationale stems from the fact
that capital is productive – money earns interest. Consider a
company trying to decide whether to invest