Discounting and the Time Preference Rate:an introduction
AuthorCreedy, J.; Guest, R.
University of Melbourne Author/sCreedy, John
AffiliationEconomics and Commerce: Department of Economics
CitationsCreedy, J. and Guest, R. (2007) Discounting and the Time Preference Rate:an introduction.
Access StatusOpen Access
Research Paper Number. 993. ISBN 978 0 7340 2651 4.
This paper provides an introduction to the evaluation of alternativetime streams of consumption and the closely related concept oftime preference. The potential sensitivity of comparisons, especiallyto the choice of time preference rate and elasticity of marginal valuation,is demonstrated. The nature of time preference, based on anaxiomatic approach, is then discussed. The analysis of optimisationover time leads to the concept of the social time preference rate, and adifficulty with using this rate is highlighted. Finally, complications introducedby non-income differences between individuals are examined.Emphasis is placed on the central role of value judgements.
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