An Environmental Economic Analysis of Social DiscountingKyle Stoddard Runyan Young
Program: Environmental Policy and Management: Capstone-Thesis: Master of Science (MS)
Awarded: November 2013
Capstone Instructor: Dr. Jason M. Siniscalchi
Abstract: By examining social discounting through a neoclassical economic lens, this study analyzes the ecological and resource impact, and the empirical flaws of contemporary discounting methods. This study then conducts a neoclassical analysis of economic data relevant to social discounting, including inflation rates, other-than-inflationary resource cost increases, supply/scarcity-derived cost increases, substitutability of money for resources, and intergenerational valuations. The shortcomings of contemporary discounting are quantifiably resolved using correction factors, which are derived from the aforementioned data analyses. The correction factors are incorporated into a modified social discounting equation. Ultimately, neoclassical economic principles are examined for suitability in improving ecological sustainability by reducing social discount rates. The data analyzed in this study indicate that contemporary discount rates are overvalued, leading to the undervaluation of future ecological benefits for present day cost-benefit decisions. Additionally, the modified social discounting equation yields a successful means of improving social discount rates towards ecological sustainability, through a descriptive, neoclassical economic approach.