Generalized Cost-Benefit-Analysis and Social Discounting with Intertemporally Dependent Preferences
نویسندگان
چکیده
We derive a general framework for cost-benefit analysis and social discounting in a setting with intertemporally dependent preferences. Here, the marginal contribution of an additional unit of consumption in some period depends on what is consumed in the other periods. We use a simple model of history dependent preferences to analyze how habit formation affects the social rate of discount. Getting used to good life before a potential decline in growth as well as getting used to bad life during a decline in growth both affect social discount rates, not only during the time of the growth rate change but also before and after. JEL Codes: D01, D61, D91, H43, Q01, Q20, Q30, Q51, Q54
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