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Baffled by Ord's defence of discount rates. The transcript reads like a primer on the pure theory of discounting. In practice it's a cargo cult ritual that lea
by conjectures 9y ago
Baffled by Ord's defence of discount rates. The transcript reads like a primer on the pure theory of discounting.
In practice it's a cargo cult ritual that leads to the conclusion that we should give within epsilon of zero fucks about anything that happens N years from now for sufficiently large N (which you get to choose as the author of an analysis).
That's partly because there's no mathematical difference in exponential discounting for the role played by 'pure rate of time preference' and the 'good' discount rate. It's always just 3.5% for no particular reason other than that's what in the back of the Treasury handbook written before 2008 during the Great Moderation.
Oh, and is 3.5% a reasonable number? Sounds kinda like inflation/mortgage rates, right? But if you look at CPI $100 dollars in 1817 is, equivalent to roughly $2k dollars in 2017. But would I rather spend this 'same' amount of money in 1817 or 2017? It's a no-brainer as long as I prefer penicillin and smart phones to legal opiods and vintage mustache waxing. This is really hard stuff to model, which is a clue that it doesn't get done.
If Ord and Wiblin could pick one easy fight to change about government policy making and promote longtermism it would be savaging the use of discounting in long term policy decisions rather than beating around the bush.
- robertwiblin 9y agoWe're pretty negative about discount rates in the scheme of things. We have a paper on this which outlines why we think discount rates are worth using in some kinds of situations: https://www.givingwhatwecan.org/sites/givingwhatwecan.org/files/attachments/discounting-health2.pdf https://www.givingwhatwecan.org/sites/givingwhatwecan.org/fi...
- conjectures 9y agoApologies if I missed the nuance but in the paper's conclusions: > Instead we will try to: > 1. discount money in the normal way to take account of inflation and opportunity costs. This is one of the problems with discounting though. Inflation is measured very badly over time due to technological change. If you go back to a policy maker in 1817 would have no idea that 2017 dollars could treat schistosomiasis, or any number of other medical conditions, so they would undervalue a 2017 dollar. I think it's fair to assume this process will continue to some extent over the next few hundred years. This suggests that money is the wrong way to weigh up long term decisions. While problematic in their own way, something like QALYs and functions of QALYs could serve much better as a unit of account because their meaning is not relative with time. But you'd have to model how many you get in the future explicitly.
- robertwiblin 9y agoIt's a very subtle issue I can't go fully into here. I agree with a lot of your concerns. Personally I would usually go for cost-welfare analysis rather than cost-benefit analysis, which resolves many of the problems you're concerned about.
- conjectures 9y agoSure, I was just hoping to move you a little towards the position that lazy exponential discounting is generally not compatible with longtermism. In terms of behaviour change, giving a mixed message is just going to excuse people falling back into the default method. This is what thoughtless acceptance of the default means: http://www.heritage.org/environment/report/discounting-climate-costs http://www.heritage.org/environment/report/discounting-clima... http://www.heritage.org/government-regulation/report/questions-epas-cost-estimates-waxman-markey-climate-change-legislation http://www.heritage.org/government-regulation/report/questio... So I think there's a real cost and risk associated with not taking a clear position on this.