Public Debt and Intergenerational Justice

In order to guarantee intergenerational justice to prevail, we as a society should “keep” a certain amount of accumulated debt and pass it on to future generations.

This sounds rather counter-intuitive, doesn’t it? In public debate debt of whatever kind, but public debt especially, is mostly seen as something bad and running counter the ideal of intergenerational justice. In a recent discussion I took part in, however, this counter-intuitive argument has been made by one of my colleagues (whom I esteem for his ethical and scientific intuitions). I initially had rejected it, but after thinking about it for a while, I came to the conclusion that he might be right. Let me explain why. Continue reading

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Discounting in the Economics of Climate Change

It was frequently argued that the discount rate is the most important single figure in the economics of climate change. Due to this figure we observe large differences in policy recommendation between different economists of climate change (most notably, the choice of the discount rate determines the difference in what William Nordhaus on the one hand, and Nicholas Stern, on the other, call for). There is no concrete recommendation in standard economics how to discount long run benefits and losses. But it is clear that, if you want to compare benefits from the future with costs today, you need a discount rate. So far agreement prevails. The problem is the definition (or: choice) of the “right” discount rate, which involves economic forecasts as well as ethical decisions. In the following I shall present an overview about the main arguments in the discussion. Continue reading