On discounting – Geoff Mann in NY Books (thanks to my friend P):

‘The biggest return is not necessarily the fastest, and the fastest return is not necessarily the biggest. The solution is a process called “discounting,” the subject of Liliana Doganova’s Discounting the Future: The Ascendancy of a Political Technology. The story is more interesting, and the book more important, than its dry title suggests.
Doganova describes discounting as a mechanism through which “the present defeats the future.” The basic intuition behind this “political technology” is that people prefer something now, or sooner, to the same thing later.’

(…)

‘The Dutch mathematician and accountant Simon Stevin is sometimes credited with first working out what he called “a general rule for finding which is the most profitable of two or more conditions” in the 1580s, but it was only in the 1800s that it became standard practice outside of banking. Rudimentary discounting was used, for example, to determine compensation for slave owners when the British abolished slavery in 1834, and more modern techniques were used to analyze the enormous investments, especially in railway construction, of the early industrial era.
Discounting the Future begins in the mid-nineteenth century, when discounting was solidifying into its modern form, and traces its consolidation and eventual standardization as best practice for both firms and states in the second half of the twentieth century. Doganova uses some seemingly quite mundane examples—German forestry in the 1840s, US management consulting after World War II, mining revenues in Chile under Pinochet, and the contemporary biopharmaceutical industry—to show how discounting works, how it has changed, and why that matters.’

(…)

‘Discounting is how the government evaluates the costs and benefits of the infrastructure and policy essential to any public efforts to address climate change. But discounted at 3.5 percent—a rate common in climate-economy models—an investment that provides a $100 benefit a century from now is worth $3.21 today. If we think as far out as 2300—as many climate models do—then $100 dwindles to a present value of three quarters of a cent in our accounting. In other words, if it cost us one cent to provide a hundred dollars of benefit to the world in 2300, it would not be “worth it.”’

(…)

‘The SCC is calculated using a government-determined “social discount rate” that is (hopefully) lower than the rate based on short-term market thinking. There are two main rationales for why most modern governments use social discounting in policy analysis. The first is impatience, or what economists call the “pure rate of time preference.” This arises when the government understands itself as an investor, with concerns about the value of potential returns similar to those of private individuals, even if those returns are not necessarily monetary. The idea is that the government could do lots of things with its money; it is expected to choose what will provide the biggest bang for its buck, preferably before the next election cycle. The second is the explicitly “social” aspect of the social discount rate, which is the (increasingly dubious) assumption that people in the future will be wealthier, so an additional dollar will be less valuable to them than it is to us. On this logic, discounting allows policymakers to account for the “fact” that forgoing some destructive activity now, like restricting the use of fossil fuels in order to limit heat-driven disasters or ocean acidification, will hurt us relatively poor present-dwellers more than it will help those comparatively rich future-dwellers.’

(…)

‘This 7 percent discount rate—commonly used by the Trump administration despite the OMB’s recommendations—means our welfare today should be valued at six times that of people in 2050. Probably no one needs reminding, but 2050 is not that far away. In the era of climate change, biodiversity collapse, fraying democratic institutions, and crumbling infrastructure, hardly anyone endorses a rate so high, not even more conservative economists—but this is the rate the Trump administration used in calculations that supposedly showed that rolling back fuel efficiency standards allows the US economy to generate more than six billion additional dollars. Using a 3 percent discount rate, the Obama administration judged the same standards a net benefit.
In early November 2023, the Biden administration issued a revised version, “OMB Circular A-4.” The circular is not nearly so unremarkable as it sounds, because it is the document that provides “guidance to Federal agencies on the development of regulatory analysis.” In other words, it mandates the ways in which agencies assess the budgetary implications of government policy. Cass Sunstein calls the circular “the economic constitution of the United States.” Among other important changes, including the requirement that analysis take account of the distributional and international impacts, the 2023 revision reduced the social discount rate to 2 percent, a move the administration later described as nothing less than “a victory for the American people.” White House–designated victories for the American people happen quite often—they have been almost everyday events during the Trump presidencies—but this actually was an important development. A 2 percent discount rate values the welfare of people in 2050 at about 60 percent of our own, which is still unsettling but at least makes a much stronger case for the long-term and large-scale public investment and climate policy we so desperately need.’

(…)

‘One of the things that discounting makes it difficult to remember is that the people and other species at the far end of our calculations are not just later versions of us, experiencing the benefits or costs of our decisions to invest or consume as if they had been their own. They are different people, living in different communities, with different obligations, constraints, and commitments. Our choices are not substitutes for theirs, and despite the lies we tell ourselves with discounting, we have neither the capacity nor the right to judge their burdens as lesser than our own by any ethical, political-economic, or ecological measure.’

(…)

‘If we are to listen to an economist at this moment—it’s certainly not required—we are better served by A.C. Pigou, who once remarked that discounting is a sign that “our telescopic faculty is defective.”’

Read the article here.

In other words, the future is just too expensive, for that reason we might limit the choices of other creatures, of different people, but who cares?

Also, the election cycles make discounting so appealing.