Discount rates: A boring thing you should know about (with otters!)
How much is it worth to us today to avoid climate disruption later this century? To understand how that question has typically been answered, you need to understand what economists call “discount rates,” key parameters in the economic models used to assess climate policy costs. Such models inform policymaking and shape conventional wisdom, but their use of discount rates has led them to lowball the threat and recommend insufficient action to meet it.
YAAAwwwnnn. “Hm? Parameterzzz…”
You see my problem here: You’re already bored as sh*t. And the literature on this is as voluminous as it is technical. You could be much more bored. Trust me.
But don’t give up! It really does matter. Understanding discount rates will help you understand the climate-policy landscape — not only the technical details, but the struggle over values that lurks underneath them.
So stick with me. To help counter the soporific effects of the subject, I shall endeavor to explain it in a lively, accessible fashion. Failing that, I’ll use otters.