Valuing the future: a MADA example involving nuclear waste storage

Abstract

Intertemporal decision making involves decisions that have consequences that span several periods of time and often extend far into the future. The purpose of this paper is to discuss and highlight the differences associated with different evaluation methods designed to cope with the long-term impacts of a decision including discounting. The concepts and ideas are illustrated in the context of a decision about a nuclear waste facility. We show how applying different discounting methodologies can greatly affect the decision made, especially over long time periods.

Individual and social discounting in a viscous population

“…It is normal in such public policy dilemmas to discount future social benefits (Goulder & Stavins 2002), with the effect that a potentially indefinite social benefit stream is given a finite present value. The choice of the social discount rate has a bearing on public policy decisions involving costs and benefits at different times (Dasgupta & Heal 1974;Gupta et al 1996;Atherton & French 1998;Pearce et al 2003). A lower social discount rate tends to favour more environmental protection and restoration (Gupta et al 1996).…”

Health care through the `lens of risk' and the categorisation of health risks – An editorial

“…For instance, a drug company seeking to promote one of its products might want to talk up the seriousness (negative value) of the health condition it is directed at, and emphasise its prevalence (probability) 4 . The nuclear power industry has argued for a relatively short time-frame of 500 years with respect to assessing its unwanted legacy, thereby pushing most of the period in which waste will continue to be radioactive outside a constructed temporal event horizon (Atherton and French, 1999). One advantage of viewing risk identification, assessment and management from an interpretive framework is that it allows their relationships to be problematised, challenging the 'identify-assess-manage' model of risk rationality.…”

Renewal Theory With Exponential and Hyperbolic Discounting

“…Exponential discounting and hyperbolic discounting are special cases of generalized hyperbolic discounting: (3) converges to exponential discounting with rate β as α → 0 and (3) simplifies to hyperbolic discounting for α = β. When decisions about a nuclear waste facility must be made, Atherton and French [1] claimed that hyperbolic discounting is more reasonable and justifiable than exponential discounting. Other environmental decision problems to which hyperbolic discounting might better be applied concern global climate change, loss of biodiversity, thinning of stratospheric ozone, groundwater pollution, minerals depletion, and many others (Weitzman [24]).…”