Discounting under inequality and lobbyists disagreement

TL;DR

This paper introduces a new societal discount rate model that accounts for inequality and differing group preferences, aiding social planners in evaluating long-term policies.

Contribution

It presents a novel model for calculating discount rates considering societal inequality and group disagreement, enhancing policy evaluation tools.

Findings

Derived discount rate is lower when societal equality is considered.

Considering inequality may increase initial disagreement among high-consuming groups.

The model can be tailored to different wealth and discount rate distributions.

Abstract

The appropriate discount rate for evaluating policies is a critical consideration in economic decision-making. This paper presents a new model for calculating the derived discount rate for a society that includes different groups with varying desirable discount rates. The model takes into account equality in society and is designed to be used by social planners. The derived discount rate is a useful tool for examining the social planner's approach to policies related to the future of society. If the discount rate is determined correctly, it can help determine the amount of growth and equality in society, as well as the level of attention paid to long-term public projects. The model can be customized for different distributions of wealth and discount rates, allowing researchers to extract desired results. Analysis of the model shows that when equality in society is considered, the derived discount rate is lower than the result obtained using Hamilton's method. Social planners must consider that this may increase disagreement in more consuming groups of society at first.