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Peter Davis's avatar

One thing that is not discussed here is whether the discount rate is a contributor to the short-termism endemic in New Zealand public policy making. Why value policies that pay off in the future when the discount rate - indeed the entire theoretical and philosophical background to the rationale for a discount rate - is that we should and will prefer current expenditure pay-off versus a pay-off that may be quite a way down the track, including for future generations? Think infrastructure, think ferries, think national super, think water quality, think climate change, think urban sprawl. All of these, and more, ask us to defer immediate gratification for future generations and a desirable future state for New Zealand. Could it be that the discount rate as constituted is an ideological bias towards presentism that is foisted onto us by the great intellects of economics past and present? Yet the young will have to live through the future we are bequesting them (and which we will not have to face)!

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