Document Type
Preprint
Publication Date
7-19-2024
Journal / Book Title
Journal of Applied Business and Economics
Abstract
This paper describes how the discount rate used in present value calculations expresses the preference for sustainability in decision making, and its implication for sustainable economic growth. In essence, the lower the discount rate, the greater the regard for the future, and the more likely we choose behaviors that lead to long-term sustainability. The theoretical framework combines behavioral economics and holonomics, which involve limitations of regard for the future due to constraints on processing uncertainty. An alternative formulation for present value calculations, which includes a survival function, is developed. A taxonomy of institutions based on discount rate is proposed.
DOI
10.2139/ssrn.4895692
MSU Digital Commons Citation
Axelrod, David Allen, "Optimizing Discount Rates: Expressing Preferences for Sustainable Outcomes in Present Value Calculations" (2024). Department of Economics Faculty Scholarship and Creative Works. 114.
https://digitalcommons.montclair.edu/economics-facpubs/114
Rights
Copyright © 2024 Elsevier Inc.
Published Citation
Axelrod, David, Optimizing Discount Rates: Expressing Preferences for Sustainable Outcomes in Present Value Calculations (April 15, 2016). Journal of Applied Business and Economics, Vol. 19, No. 1. Pp. 9-19, Available at SSRN: https://ssrn.com/abstract=4895692 or http://dx.doi.org/10.2139/ssrn.4895692