Document Type
Article
Publication Title
University of Chicago Law Review
Publication Date
Winter 2007
ISSN
0041-9494
Page Number
209
Keywords
economic aspects, environmental policy, hazardous wastes, statistical life
Disciplines
Environmental Law | Insurance Law | Law
Abstract
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 ages and at different points in time. Review of regulatory analyses indicates increased consistency of discounting practices. However, an examination of two policies with intergenerational effects, stratospheric ozone regulation and nuclear waste storage at Yucca Mountain, reveals failures to adopt a rational discounting approach. The influence of behavioral anomalies such as hyperbolic discounting may make full recognition of intertemporal effects in benefit-cost analysis more consequential than the use of preferential discount rates
Recommended Citation
W. Kip Viscusi,
Rational Discounting for Regulatory Analysis, 74 University of Chicago Law Review. 209
(2007)
Available at: https://scholarship.law.vanderbilt.edu/faculty-publications/104