Discount rates and sustainable development

This paper explores the relationship between discounting procedures and sustainable development in environmental economics. Sustainability criteria ensure that future generations enjoy a set of life opportunities that is undiminished relative to those of the present. Cost-benefit analysis may be used to detect potential improvements in economic efficiency, which make at least some members of society better off while leaving none worse off, if discount rates are equated with market rates of interest. Cost-benefit analysis and sustainability criteria are premised on value judgements that are complementary, not mutually exclusive, in the general framework of welfare economics. The paper outlines an integrated approach to long-term natural resource and environmental management that exploits the strengths of both sets of criteria.