Revisiting public investment : consumption equivalent public capital and the social discount rate
The consumption equivalence method is the theoretical basis of public cost-benefit analysis. <br>Consumption equivalence public capital prices are explicitly introduces in order to sufficiently care for the opportunity cost of public expenditure. This can solve the dispute about the social rat...
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| Format: | Others |
| Language: | English |
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Universität Potsdam
2004
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| Online Access: | http://nbn-resolving.de/urn:nbn:de:kobv:517-opus-9025 http://opus.kobv.de/ubp/volltexte/2006/902/ |
| Summary: | The consumption equivalence method is the theoretical basis of public cost-benefit
analysis. <br>Consumption equivalence public capital prices are explicitly introduces in order
to sufficiently care for the opportunity cost of public expenditure. This can solve the
dispute about the social rate of discount within public cost-benefit analysis witch was
generated on a criterion looking similar to the capital value formula, known as Lind’s
approach. <br>The social rate of discount is liberated from opportunity costs considerations
and the discounting away of the effects for future welfare vanishes. The corresponding
question whether one should accept a positive value of the pure rate of social time
preference is an old issue. Its current state between the prescriptive and descriptive view
can also be interpreted as a consequence of the oversimplification of standard cost–
benefit analysis. But apart from an economic self-process the pure rate of social time
preference is also defined as a business-as-usual value of social distance discounting.<br>
Hence, a political choice has to be made about this rate which is free in principal. |
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