On the Appropriate Rate of Discount Public Deposited

http://ir.library.oregonstate.edu/concern/conference_proceedings_or_journals/cj82kc365

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  • Discount rates, it is well-known, play an important role in the determining optimal extraction paths for natural resources. In fisheries analysis, as well as other natural resource use, constant discount rates are customarily assumed. In practical applications, the constant discount rate is often taken to be the social rate of discount which is usually assumed to be quite low. Incorporating the fishery in a two-sector economic growth model, it is easy to show that this customary approach is inappropriate. The appropriate discount rate to use in the fishery is at all times the marginal production of capital in the other sector and vice versa. It immediately follows that the appropriate discount rate varies with the state of capital accumulation as well as over the business cycle. A further consequence is that in developing countries where the marginal product of capital is typically high, high fish stock exploitation levels may be perfectly compatible with what is socially social optimal.
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  • 097634324X

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