“It Depends on How
We They Value Time”
Peter Dorman calls attention to a NYT Upshot column by Neil Irwin about the cost of climate change. For Irwin, the question can be framed as a matter of discounting, “A dollar today is worth more than a dollar tomorrow and a lot more than a dollar in 100 years. But what discount rate you set determines how much more.”
As Irwin admits, the discount rate is a “business concept.” His conclusion, then, follows exclusively from a business concept of “how, as a society, we count the value of time.” Why are we compelled, as a society, to count the value of time in accordance with the business concept of discounting? Because there is no other concept of time? No, there are other concepts of time. More specifically, there is a concept of time directly opposed to and critical of the business concept of time. Labor time.
What discounting is to the business concept of time, alienation is to the labor concept of time. Alienation refers not to “feelings” of alienation but to the sale of one’s own time — and consequently autonomy — to another.
For every human being — as for the wage worker — there are 24 hours in a day, 168 hours in a week, 8760 or 8784 hours in a year. These are fixed amounts. You can’t put it in a bank and get it back in 20 years with interest. You can’t take it with you and you can’t convey it to your heirs in a will. Today is here today and gone tomorrow.
The discount rate concept has nothing to do with the qualitative experience of time by humans and everything to do with the quantitative accumulation of money by property owners. Framing the cost of climate change as a contest between different discount rates is totalitarian. We live in a totalitarian society in which the non-business concept of time is invisible. Neil Irwin sounds like a thoughtful person. It simply didn’t occur to him that there was any other relevant concept of time than the business concept.
That is why the climate is changing. And that is why not enough will be done about it. Because it all depends on how capital values time.
NPV is not just a factor of time, or cost of funds, it’s also a factor of risk. The more uncertain an outcome, the higher the discount rate. That is why a government bond has a lower projected yield than a speculative startup venture capital play.
If business doesn’t understand the social cost of capital at this point, there’s probably not much hope for it. One might phrase it as “when the revolution comes, some business leaders may well be the first against the wall.”
SCC and SDR have been topics in business academia for well over two decades. Some people just won’t listen.
Another factor of time is technology. I’ll give you 2 choices. Accessible healthcare for John D Rockefeller, or accessible healthcare for the 5th percentile (0 being worst off) American 1 year before ObamaSure was enacted.
What is the topic of this post by Sandwichman?
Lack of concern for what current economic activity may produce in the environment of the earth in the future and the impact of that environment on the quality of life for those living then is, simply stated, selfishness and greed.
If you want to make the issue a moral one then clearly you have not sold a majority of the us population on the morality of the issue. To start with 1/3 or more of evangelical believe that the second coming of christ will occur in their lifetime, solving minor little problems in global climate change. The the hype cycle about destroying the planet is clearly overblown, it might mean a drastic reduction in human population, but as doomsday debunked points out even without modern technology humans managed to live in the humid tropics, deserts, and the arctic. If you want to assume that the human race will be wiped out the biosphere will survive, after all there have been at least 3 events that nearly wiped life out the Cretaceous impact that killed the dinosaurs, the end of the Permian event that killed even more species and the slush/iceball earth phase in the late Precambrian. If the biosphere survived thru this it will survive climate change. Yes modern society will not survive and at best the human population might be decimated, but all odds say humans would survive, and the biosphere would survive. (after all the earth was warmer than the predicted in the past in particular in the Cretaceous times when the central us was a big sea stretching from the gulf of Mexico to the Arctic ocean (the source BTW of the big Wyoming and Montana coal beds)
On a side note the best way to ensure that climate change does not occur is to not have any children. A person not born will not cause the emission of any Co2. So if your going to make it a moral crusade, (which if you reject economics is your other choice then not reproducing is a piece of this).
Lyle, I assume you’re practicing your stand up comedy routine.
There is no easy way to avoid the matter of using discount rates, even if implicitly. So, even if we were in a world of benevolent and democratic socialist central planning, in deciding what to do about climate change we would be comparing policies and their respective outcomes over time. We would ultimately be having to make judgments about the importance of what happens 300 years from now versus what happens 10 years from now. There is no escaping this, however we choose to do it, and when we do it, we shall end up inevitably using some sort of discount rate, even if implicitly.
One way out is to adopt the view of Frank Ramsey, who said that one must use a zero discount rate on moral grounds. This says 300 years from now is just as valuable today as today is. Using any discount rate above zero that says 300 years from now is less valuable than is today is suffering from the “myopic telescopic facility.” But, even if one follows Ramsey, one is in fact using a discount rate, although it happens to equal zero, but it is still a discount rate.
What can I say?
If a zero discount rate is still a discount rate then might not we also say that zero CO2 emissions are still emissions? Zero growth is still growth? Zero hours of work is still work and zero income is still income?
My late mathematician father was once asked at the end of a public lecture by a young woman whether or not zero is a real number. He replied, “One of the finest, my dear, one of the finest.”
That is funny.
But not helpful.
sorry that Barkley thinks PV has some relevance to the climate problem. It doesn’t. We have an existential problem and we don’t have time to put money in the magic Present Value Bank to make it cheaper to solve.
PV is just a way for people to diddle away the time. Their time. My time. The earth’s time. (yes, the earth will survive, and maybe even “we” will, but it won’t be as nice as it might have been. Life is not like a day at the beach.
you might want to contemplate a negative discount rate.
Actually it’s not even about anybody now living at all… it’s about those who will be living ( or not if global warming isn’t abated) in future generations. We .. those not living and the next generation, maybe two, and the prior generations from ~ WWII having created the warming that will occur and which will be the negative impact on those millennia of future generations.
So it’s not at all about the value of time in money in our time but the value of time in future generations well being or lack thereof. it extends for millennium into the future … not a couple or three hundred years.
Our economic system has no way, was not evolved, to deal with the longer term so it has no applicability to the real issue. It’s probably the reason in fact why air and water aren’t included in our economics — it didn’t apply to private property, ergo it’s free, ergo it’s not an economic cost, ergo economics doesn’t deal with anything that has no present value… and if it has no present value, then it can’t have future value.
“We .. those not living and the next generation, maybe two,…”
“We… those NOW living and the next generation, maybe two,…”
i agree with you about the important stuff. don’t want to argue about the metaphysics.
we could start to address global warming by simply finding ways to drive less, with less powerful cars. small electric slow short range cars for city driving would solve a lot of the problem. capitalism would provide those if we demanded them.
it is a pity that the oil interests have chosen to tell lies to the people who can’t think for themselves (that is most of us) so that we “will do something about global warming in the future when we can afford it, but first i need to make a lot of money.”
and, the “capitalists” are working on “owning” water. maybe they will get so greedy the people decide to just kill them. won’t solve anything but would certainly be “justice.”
short term thinking is not limited to “economics.” it is simply the way humans and all animals have evolved. you don’t have time to consider long term effects. you need to solve the immediate problem… where to find food and not get eaten. and if you are the first to “find food” you will be in a better position tomorrow to make the rules.
“all things arise out of chaos by injustice, the one against the other, and thither are they returned in retribution according to the order of time.”