Social Discounting Research Articles

How Can Pure Social Discounting be Ethically Justified?

The evaluation of long-term effects of climate change in cost-benefit analysis has a long tradition in environmental economics. Since the publication of the Stern Review in 2006 the debate about the appropriate discounting of future welfare and utility levels was revived and the most renowned scholars of the profession participated in this debate. In two recent contributions in Environmental and Resource Economics, there was dispute about intertemporal welfare economics between Partha Dasgupta and John Roemer about the correct interpretation of the topic. The aim of this work is to bring together economic and philosophical reasoning about justice and intergenerational equity in the context of climate change. So we adopt the normative view in order to present the most important ethical issues that, particularly in the context of climate policy, are most relevant for the choice of intertemporal discounting. Subsequently we explore whether ethical considerations may also be helpful to justify pure social discounting per se.

主要先進国等の公共事業評価に適用される社会的割引率

主要先進国等の公共事業評価に適用される社会的割引率

SOCIAL DISCOUNTING AND THE PRISONER'S DILEMMA GAME

Altruistic behavior has been defined in economic terms as "…costly acts that confer economic benefits on other individuals" (Fehr & Fischbacher, 2003). In a prisoner's dilemma game, cooperation benefits the group but is costly to the individual (relative to defection), yet a significant number of players choose to cooperate. We propose that people do value rewards to others, albeit at a discounted rate (social discounting), in a manner similar to discounting of delayed rewards (delay discounting). Two experiments opposed the personal benefit from defection to the socially discounted benefit to others from cooperation. The benefit to others was determined from a social discount function relating the individual's subjective value of a reward to another person and the social distance between that individual and the other person. In Experiment 1, the cost of cooperating was held constant while its social benefit was varied in terms of the number of other players, each gaining a fixed, hypothetical amount of money. In Experiment 2, the cost of cooperating was again held constant while the social benefit of cooperating was varied by the hypothetical amount of money earned by a single other player. In both experiments, significantly more participants cooperated when the social benefit was higher.

Social discounting and incentive compatible fiscal policy

This paper considers a representative agent model of linear capital and labor income taxation in which the government cannot commit ex-ante to a sequence of policies for the future. In this setup, if the government is more impatient than the households, the capital income tax will be positive in steady state. Thus, impatience and lack of commitment are able to generate positive capital taxes in the long run, although each of these characteristics individually was not. Furthermore, the steady state to which the economy converges is independent of initial conditions.

How much do you give to friend of your friend? : social discounting in n degree of separation

How much do you give to friend of your friend? : social discounting in n degree of separation

Restricted psychological horizon in active methamphetamine users: future, past, probability, and social discounting.

Methamphetamine users (MAU) exhibit an exaggerated bias for immediate rewards that reflects a restricted time horizon, where outcomes in the future are excessively discounted. An accumulating literature indicates that time in the future shares features with other dimensions of psychological distances including time in the past, probability, and social distance, suggesting that bias for immediacy may be reducible to a more general restriction of psychological horizon. The purpose of the present study was to explore generalized restricted psychological horizon in active MAU by assessing future, past, probability, and social discounting. Compared with nonusing controls, MAU preferred psychologically proximal outcomes, resulting in higher rates for all types of discounting, which supports the conceptualization that MAU insufficiently integrate outcomes of psychological distance (i.e. in the future, the past, probabilistic, for others) into the valuation of current behavioral alternatives. The present results are suggestive of a more fundamental process of problematic decision-making associated with methamphetamine use, indicating the necessity of more comprehensive approaches to address the generalized limitations of restricted psychological horizon.

Energy Policy and the Social Discount Rate

Recent debates over the economics of climate change underscore the importance of what at first blush is a narrow technical issue in welfare economics and cost-benefit analysis (CBA). Yet even befor...

Climate Change and the Theory of Social Discounting

Climate Change and the Theory of Social Discounting

Now for Me, Later for Us? Effects of Group Context on Temporal Discounting

Delayed rewards are less valuable than immediate rewards. This well-established finding has focused almost entirely on individual outcomes. However, are delayed rewards similarly discounted if they are shared by a group? The current article reports on three experiments exploring the effect of group context on delay discounting. Results indicate that discount rates of individual and group rewards were highly correlated, but that respondents were more willing to wait (decreased discounting) for shared outcomes than for individual outcomes. An explanatory model is proposed suggesting that decreased discount rates in group contexts may be due to the way the effects of both delay and social discounting are combined. That is, in a group context, a person values both a future reward (discounted by delay) and a present reward to another person (discounted by the social distance between them). The results are explained by a combined discount function containing a delay factor and a factor representing the social distance between the decision maker and group members. Practical implications of the fact that shared consequences can increase individual self-control are also discussed.

Effect of delay and social distance on the perceived value of social interaction

Temporal discounting is a process by which the perceived value of an outcome decreases as delay increases. Social discounting is a process by which the perceived value of an outcome decreases as the social distance between the decision-maker and recipient increases. Both temporal and social discounting are well established for monetary outcomes. However, little is known regarding the effect of delay-to-occurrence or increased social distance on the perceived value of social interactions. The current study demonstrates that the decrease in perceived value for delayed social interactions is well described by the same hyperbola-like function used for monetary outcomes and that the rate of discounting decreases (indicating increased preference for larger, more delayed outcomes) as social distance increases. Conceptualizing the current discounting procedure as entailing both potential gains and losses, suggest that under certain circumstances, higher discount rates may not reflect increased preference.

Sharing with others and delaying for the future in preschoolers

This study explored age differences in preschoolers’ temporal and social discounting and the association of these abilities. Research indicates that 4-year-olds are sensitive to rewards of differing magnitude ( Lemmon & Moore, 2007). However, it is unclear whether preschoolers are able to consider length of time when making a choice to delay ( Mischel, Masters, & Grusec, 1969). In this study, 66, 3- and 4-year-olds were presented a delay of gratification task in which length of delay was manipulated. Additionally, they were given a sharing task in which they distributed toys between themselves, a friend, and another peer. Results suggested sensitivity to delay differences only in the oldest group. Furthermore, delay sensitivity was associated with sharing more preferred toys with friends compared to another peer, suggesting that favoring the “self” closer in time overlaps with favoring “another” who is closer socially.

Justifying social discounting: The rank-discounted utilitarian approach

The discounted utilitarian criterion for infinite horizon social choice has been criticized for treating generations unequally. We propose an extended rank-discounted utilitarian (ERDU) criterion instead. The criterion amounts to discounted utilitarianism on non-decreasing streams, but it treats all generations impartially: discounting becomes the mere expression of intergenerational inequality aversion. We show that more inequality averse ERDU societies have higher social discount rates when future generations are better off. We apply the ERDU approach in two benchmark economic growth models and prove that it promotes sustainable policies that maximize discounted utilitarian welfare.

Impulsiveness and selfishness using a framework of delay and social discounting

Impulsiveness and selfishness using a framework of delay and social discounting

Social dilemma and discounting of shared reward in elementary school children

Social dilemma and discounting of shared reward in elementary school children

Approaches to Measuring Social Discount Rate: A Bangladesh Perspective

Social discount rate (SDR) reflects a society’s relative valuation on today’s well-being versus well-being in the future. This paper reviews various methods of measuring social discount rate, with particular emphasis on Social Rate of Time Preference (SRTP) and Social Opportunity Cost of Capital (SOC) framework. The author then employs Monte Carlo Simulation to calculate SRTP value for Bangladesh followed by one using SOC framework. The final result suggests that the Government of Bangladesh should use a value between 9-11% as optimal Social Discount Rate for various long term projects. The discount rate is similar to the ones used by Government of Pakistan, India and China

The evolution of social discounting in hierarchically clustered populations

The expression of a social behaviour may affect the fitness of actors and recipients living in the present and in the future of the population. When there is a risk that a future reward will not be experienced in such a context, the value of that reward should be discounted; but by how much? Here, we evaluate social discount rates for delayed fitness rewards to group of recipients living at different positions in both space and time than the actor in a hierarchically clustered population. This is a population where individuals are grouped into families, families into villages, villages into clans, and so on, possibly ad infinitum. The group-wide fitness effects are assumed to either increase or decrease the fecundity or the survival of recipients and can be arbitrarily extended in space and time. We find that actions changing the survival of individuals living in the future are generally more strongly discounted than fecundity-changing actions for all future times and that the value of future rewards increases as individuals live longer. We also find that delayed fitness effects may not only be discounted by a constant factor per unit delay (exponential discounting), but that, as soon as there is localized dispersal in a population, discounting per unit delay is likely to fall rapidly for small delays and then slowly for longer delays (hyperbolic discounting). As dispersal tends to be localized in natural populations, our results suggest that evolution is likely to favour individuals that express present-biased behaviours and that may be time-inconsistent with respect to their group-wide effects.

Comment on Burgess and Zerbe: On Bank Market Power and the Social Discount Rate

In this note we discuss how to estimate the social discount rate when banks have market power. Some data from Sweden are used to illustrate the approach. If other investments are crowded out, the implied social discount rate is around 7 percent, i.e. more or less equal to the one suggested by Burgess and Zerbe (2011) for the U.S. but similar to those often used in the EU (3-4 percent) if private consumption is crowded out by the considered investment.

Social Discounting and Cigarette Smoking During Pregnancy

In this study we examined the association between social discounting and smoking status in a cohort of pregnant cigarette smokers (n=91), quitters (n=27), or never-smokers (n=30). The smokers and quitters were participants in clinical trials on smoking cessation and relapse prevention, while the never-smokers were controls in a study on nicotine withdrawal during pregnancy. Social discounting was assessed using a paper and pencil task that assesses the amount of hypothetical money a person is willing to forgo in order to share with individuals in their social network ranging from the person who is emotionally closest to them to a mere acquaintance. The amount that women were willing to forgo in order to share decreased hyperbolically as a function of social distance, with smokers exhibiting steeper discounting functions (i.e., less generosity) than quitters or never-smokers; discounting functions of quitters and never-smokers did not differ significantly. In multivariate analyses controlling for potential sociodemographic and other confounds, social discounting remained a significant predictor of smoking status among smokers versus quitters. Overall, these results suggest that individual differences in social discounting may be a factor influencing the choices that women make about quitting smoking upon learning of a pregnancy.

Real and hypothetical rewards in self-control and social discounting

AbstractLaboratory studies of choice and decision making among real monetary rewards typically use smaller real rewards than those common in real life. When laboratory rewards are large, they are almost always hypothetical. In applying laboratory results meaningfully to real-life situations, it is important to know the extent to which choices among hypothetical rewards correspond to choices among real rewards and whether variation of the magnitude of hypothetical rewards affects behavior in meaningful ways. The present study compared real and hypothetical monetary rewards in two experiments. In Experiment 1, participants played a temporal discounting game that incorporates the logic of a repeated prisoner’s-dilemma (PD) game versus tit-for-tat; choice of one alternative (“defection” in PD terminology) resulted in a small-immediate reward; choice of the other alternative (“cooperation” in PD terminology) resulted in a larger reward delayed until the following trial. The larger-delayed reward was greater for half of the groups than for the other half. Rewards also differed in type across groups: multiples of real nickels, hypothetical nickels, or hypothetical hundred-dollar bills. All groups significantly increased choice of the larger delayed reward over the 40 trials of the experiment. Over the last 10 trials, cooperation was significantly higher when the difference between larger and smaller hypothetical rewards was greater. Reward type (real or hypothetical) made no significant difference in cooperation on most measures. In Experiment 2, real and hypothetical rewards were compared in social discounting—the decrease in value to the giver of a reward as social distance increases to the receiver of the reward. Social discount rates were well described by a hyperbolic function. Discounting rates for real and hypothetical rewards did not significantly differ. These results add to the evidence that results of experiments with hypothetical rewards validly apply in everyday life.

The Social Discount Rate Under Intertemporal Risk Aversion and Ambiguity

The social discount rate crucially determines optimal mitigation policies. This paper examines two shortcomings of the recent debate and the models on climate change assessment. First, removing an implicit assumption of (intertemporal) risk neutrality reduces the growth effect in social discounting and significantly amplifies the importance of risk and correlation. Second, debate and models largely overlook the difference in attitude with respect to risk and with respect to non-risk uncertainty. The paper derives the resulting changes of the risk-free and the stochastic social discount rate and points out the importance of even thin tailed uncertainty for climate change evaluation.