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Recent work: Publications

with Geoffrey Heal

Forthcoming, Journal of Economic Literature (2022)

This paper provides a critical review of the literature on choosing social discount rates (SDRs) for public cost-benefit analysis.  We discuss two dominant approaches, the first based on market prices, and the second based on intertemporal ethics.  While both methods have attractive features, neither is immune to criticism.  The market-based approach is not entirely persuasive even if markets are perfect, and faces further headwinds once the implications of market imperfections are recognised.   By contrast, the `ethical' approach -- which relates SDRs to marginal rates of substitution implicit in a single planner's intertemporal welfare function -- does not rely exclusively on markets, but raises difficult questions about what that welfare function should be.  There is considerable disagreement on this matter, which translates into enormous variation in the evaluation of long-run payoffs.  We discuss the origins of these disagreements, and suggest that they are difficult to resolve unequivocally.  This leads us to propose a third approach that recognises the immutable nature of some normative disagreements, and proposes methods for aggregating diverse theories of intertemporal social welfare.  We illustrate the application of these methods to social discounting, and suggest that they may help us to move beyond long-standing debates that have bedevilled this field.

with Niko Jaakkola

Journal of the Association of Environmental and Resource Economists (2022)

Disagreements about normative aspects of social time preferences have led to estimates of the Social Cost of Carbon (SCC) that differ by orders of magnitude. We investigate how disagreements about the SCC change if planners are nondogmatic, i.e., they admit the possibility of a change in their normative views, and internalise the preferences of future selves. Although nondogmatic planners may disagree about all the contentious aspects of social time preferences, disagreements about the SCC reduce dramatically. Admitting the possibility of a change in views once every 40 years results in a 4.6-fold reduction in the range of recommended SCCs.

 

American Economic Review (2020)

Preprint.

The long-run social discount rate has an enormous effect on the value of climate mitigation, infrastructure projects, and other long-term public policies. Its value is however highly contested, in part because of normative disagreements about social time preferences. I develop a theory of ‘nondogmatic’ social planners, who are insecure in their current normative judgments and entertain the possibility that they may change. Although each nondogmatic planner advocates an idiosyncratic theory of intertemporal social welfare, all such planners agree on the long-run social discount rate. Nondogmatism thus goes some way towards resolving normative disagreements, especially for long-term public projects.

with Geoffrey Heal

Journal of Economic Theory (2018)

Recent work on collective intertemporal choice suggests that non-dictatorial social preferences are generically time inconsistent. We argue that this claim conflates time consistency with two distinct properties of preferences: stationarity and time invariance. While time invariance and stationarity together imply time consistency, the converse does not hold. Although non-dictatorial social preferences cannot be stationary, they may be time consistent if time invariance is abandoned. If individuals are discounted utilitarians, revealed preference provides no guidance on whether social preferences should be time consistent or time invariant. Nevertheless, we argue that time invariant social preferences are often normatively and descriptively problematic.

with Geoffrey Heal

Journal of Public Economics (2018)

We study a dynamic social choice problem in which a sequence of committees must decide how to consume a public asset. A committee convened at time t decides on consumption at t, accounting for the behaviour of future committees. Committee members disagree about the appropriate value of the pure rate of time preference, but must nevertheless reach a decision. If each committee aggregates its members’ preferences in a utilitarian manner, the collective preferences of successive committees will be time inconsistent, and they will implement inefficient consumption plans. If however committees decide on the level of consumption by a majoritarian vote in each period, they may improve on the consumption plans implemented by utilitarian committees. Using a simple model, we show that this occurs in empirically plausible cases. Application to the problem of choosing the social discount rate is discussed.

 

with Daniel Heyen

American Economic Journal: Microeconomics (2021)

American Economic Association Research Highlight

Preprint

Commentators often lament forecasters’ inability to provide precise predictions of the long-run behaviour of complex economic and physical systems. Yet their concerns often conflate the presence of substantial long-run uncertainty with the need for long-run predictability; short-run predictions can partially substitute for long-run predictions if decision-makers can adjust their activities over time. So what is the relative importance of short- and long-run predictability? We study this question in a model of rational dynamic adjustment to a changing environment. Even if adjustment costs, discount factors, and long-run uncertainty are large, short-run predictability can be much more important than long-run predictability.

with Leo Simon and Helene Ollivier

Journal of Public Economics (2020)

Preprint

How do voters’ behavioural biases affect political outcomes? We study this question in a model of Downsian electoral competition in which candidates have private information about the benefits of policies, and voters may infer candidates’ information from their electoral platforms. If voters are Bayesian, candidates ‘anti-pander’ – they choose platforms that are more extreme than is justified by their private beliefs. However, anti-pandering is ameliorated if voters’ inferences are subject to confirmation bias. Voter confirmation bias causes elections to aggregate candidates’ information better, and all observers, whether biased or Bayesian, would like the voters in our model to exhibit more confirmation bias than they do themselves.

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