On Discounting Regulatory Benefits: Risk, Money, and Intergenerational Equity

There is an elaborate debate over the practice of discounting regulatory benefits, such as environmental improvements and decreased risks to health and life, when those benefits will not be enjoyed until some future date. Economists tend to think that as a general rule, such benefits should be discounted in the same way as money; many philosophers and lawyers doubt that conclusion on empirical and normative grounds. The doubts have been countered with the suggestion that a failure to discount would lead to unreasonable or paradoxical results. Both sides frequently neglect a simple point: Once government has converted regulatory benefits into monetary equivalents, what is being discounted is merely money, not regulatory benefits as such. No one seeks to discount health and life - only the money that might be used to reduce threats to these goods. It is nonetheless true that cost-benefit analysis with discounting can create serious problems of intergenerational equity; those problems, involving the obligations of the present to the future, require an independent analysis. A morally adequate response to the underlying problems, not involving the question of whether to discount, is to ensure that future generations receive compensation for any risks that are imposed on them by their predecessors.