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Environmental Discounting

In spite of the ubiquity of temporal components in environmental considerations, few empirical studies have examined intertemporal preferences for non-monetary outcomes, and only a handful have explicitly studied environmental outcomes. When policymakers need to make decisions about environmental goods, the standard practice is to "price them out," so that the models developed for monetary outcomes can be applied. This project seeks to test the validity of this assumption. In other words, how do people think about future environmental outcomes differently from immediate environmental outcomes? Is this different from how people think about present and future monetary outcomes? Environmental outcomes differ from monetary outcomes on many dimensions, including: the number of people affected, the quantifiability, the relative duration of the outcome, the timescale, and the personal relevance. Preliminary results indicate that when environmental scenarios are matched with monetary scenarios on these dimensions, discount rates are comparable. Future studies will isolate each of these factors one by one to determine their impact on discount rates.

Center for Decision Sciences

Columbia Business School
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