From Here to Eternity: Environmental Law and Future Generations

In formulating environmental regulation, policy makers must often con-sider tradeoffs between current costs and benefits far in the future. One controversial technique for weighing future consequences is exponential discounting, which is used to convert future benefits into their equivalent present-day values. In this article, Professor Farber assesses the appro-priateness of using exponential discounting to place a present-day value on future harms, which often may have the effect of minimizing cata-strophic events far in the future. Professor Farber concludes that some form of discounting is appropriate, given that society cannot allocate fi-nite resources equally over an infinite number of future time periods.Professor Farber reaches this conclusion through a model which relies on three simple assumptions. The first is that we are always willing to invest something to obtain a future benefit. The second is that the value of a future time period is the sum of its parts. And finally, that the relative appeal of permanent versus temporary solutions remains the same. Based on these assumptions, Professor Farber argues that exponential discounting necessarily follows. Professor Farber then considers several other factors that can affect this model, such as the perpetuation value of environmental resources and the use of hyperbolic discounting, where the discount rate itself declines over time.

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