samhällsdiskon

Samhällsdiskon is a Swedish term that translates to "societal discount" or "social discount." It refers to the concept of a reduced rate of return used when evaluating long-term public projects or investments, particularly those with significant social or environmental impacts. The underlying idea is that future benefits or costs are valued less than present ones, and this reduction is applied to account for various factors.

These factors can include a pure rate of time preference, reflecting the general tendency for people to prefer immediate gratification over future rewards, and a consumption rate of interest, which relates the value of resources to their potential use in consumption. Additionally, the societal discount rate can incorporate uncertainties about the future, such as the possibility of technological advancements that might mitigate future problems or the risk of unforeseen events.

The choice of an appropriate societal discount rate is a contentious issue in economic and policy debates. A higher discount rate means that future benefits are valued less, which can lead to underinvestment in projects with long-term payoffs, such as climate change mitigation or infrastructure development. Conversely, a lower discount rate gives more weight to future outcomes, potentially justifying larger upfront investments. Different countries and international organizations use varying methodologies and rates for calculating societal discount rates, reflecting different philosophical and economic perspectives. The application of this concept is crucial for making informed decisions about resource allocation and policy choices that have intergenerational implications.