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Discounting the Long-Distant Future: A Simple Explanation for the Weitzman-Gollier-Puzzle

URN to cite this document:
urn:nbn:de:bvb:355-epub-96165
Buchholz, Wolfgang ; Schumacher, Jan



Abstract

In this paper, we reconsider the debate on Weitzman's (1998) suggestion to discount the longrun future at the lowest possible rate, referring to Gollier (2004) and Hepburn & Groom
(2007). We show that, while Weitzman's use of the present value approach may indeed seem questionable, its outcome, i.e. a discount rate that is declining over time, is nevertheless reasonable, since it can be justified by assuming a plausible degree of risk aversion.


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