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Rational Discounting For Regulatory Analysis, W. Kip Viscusi

Vanderbilt Law School Faculty Publications

This Article examines the economic basis for what is termed "rational discounting," which entails full recognition of policy effects over time and exponential discounting at a riskless rate of return. Policies often cannot be ranked unambiguously in terms of their present or future orientation. Both failure to discount and preferential intergenerational discounting generate inconsistencies and economic anomalies. Office of Management and Budget (OMB) discounting guidelines now stipulate more reasonable discount rates than earlier guidelines, but err in permitting open-ended preferential rates for intergenerational effects. This Article presents a methodology for monetizing the value of statistical life for people of different …