Discounting: The Importance and Implications

This lecture explores the concept of discounting and its implications, focusing on the importance of the discount rate in determining present values. It discusses examples of discounting at different rates and the mirror effect of compound interest. The cruel impact of discounting on future generations, particularly in the context of climate change mitigation, is highlighted. The lecture delves into the policy issues involving intergenerational trade-offs, the challenges of cost-benefit analysis for climate policy, and the limitations of such analyses. It also covers the determinants of discount rates, the pragmatic views on discount rates, and the concept of declining discount rates in practice, as seen in countries like France and the UK.